Understanding Charter School Finance

1. Understanding Charter School Finance For LSB Members (and school staff that want help in working with their LSBs) Presented by: Bob Roberts December 6, 2010

2. Agenda • Responsibilities of LSB Members • Statutory Responsibilities • DIP Responsibilities • General Responsibilities • Fiscal Overview • Where Does the Money Come From? • When Do We Get the Money? • What are Our Reporting Obligations? Charter School Administrative Office

3. Statutory Responsibilities HRS 302B-7 Charter Schools Local School Boards; Powers and Duties - • (c) The local school board shall be the autonomous governing body of its charter school and shall be responsible for the financial and academic viability of the charter school, implementation of the charter, and the independent authority to determine the organization and management of the school, the curriculum, virtual education, and compliance with applicable federal and state laws.  The local school board shall have the power to negotiate supplemental collective bargaining agreements with the exclusive representatives of their employees. •      (d)  Local school boards shall be exempt from chapter 103D, but shall develop internal policies and procedures for the procurement of goods, services, and construction, consistent with the goals of public accountability and public procurement practices.  Charter schools are encouraged to use the provisions of chapter 103D wherever possible; provided that the use of one or more provisions of chapter 103D shall not constitute a waiver of the exemption from chapter 103D and shall not subject the charter school to any other provision of chapter 103D.  •      (e)  Charter schools and their local school boards shall be exempt from the requirements of chapters 91 and 92.  The local school boards shall: •      (1)  Make available the notices and agendas of public meetings: •           (A)  At a publicly accessible area in the local school board's office or the charter school administrative office so as to be available for review during regular business hours; •           (B)  On the local school board's or charter school's internet website not less than six calendar days prior to the public meeting, unless a waiver is granted by the executive director in the case of an emergency; and •      (2)  Make available the minutes from public meetings on a timely basis in: •           (A)  The local school board's office or the charter school administrative office so as to be available for review during regular business hours; and •           (B)  On the local school board's or charter school's internet website. •      (f)  The State shall afford the local school board of any charter school the same protections as the State affords the board. Charter School Administrative Office

4. Statutory Responsibilities • Financial & Related Responsibilities • Responsible for the financial viability of the school • Implementation of the charter (DIP) • Authority to determine the organization and management of the school • Compliance with applicable Federal & State Laws • Negotiate Supplemental Collective Bargaining Agreements • Exempt from Chapter 103D; however, Responsible for the development of procurement policies Charter School Administrative Office

5. DIP Responsibilities 302B – 6 Conversion charter schools – establishment: • An application to become a conversion charter school shall include a detailed implementation plan that meets the requirements of this subsection and section 302B-9.  The plan shall include the following: •      (1)  A description of employee rights and management issues and a framework for addressing those issues that protects the rights of employees; •      (2)  A plan for identifying, recruiting, and retaining highly-qualified instructional faculty; •      (3)  A plan for identifying, recruiting, and selecting students that is not exclusive, elitist, or segregationist; •      (4)  The curriculum and instructional framework to be used to achieve student outcomes, including an assessment plan; •      (5)  A plan for the assessment of student, administrative support, and teaching personnel performance that: •          (A)  Recognizes the interests of the general public; •          (B)  Incorporates or exceeds the educational content and performance standards developed by the department for the public school system; •          (C)  Includes a system of faculty and staff accountability that holds faculty and staff both individually and collectively accountable for their performance, and that is at least equivalent to the average system of accountability in public schools throughout the State; and • (D)  Provides for program audits and annual financial audits; •      (6)  A governance structure for the charter school that incorporates a conflict of interest policy and a plan for periodic training to carry out the duties of local school board members; •      (7)  A financial plan based on the most recent fiscal year's per-pupil charter school allocation that demonstrates the ability to meet the financial obligations of one-time, start-up costs and ongoing costs such as monthly payrolls, faculty recruitment, professional development, and facilities costs; and •      (8)  A facilities plan. Charter School Administrative Office

6. DIP (Charter) Responsibilities • Fiscal & Related Responsibilities • These are ongoing responsibilities • they are not completed upon approval of the school’s DIP • Maintaining a system of accountability • Providing for program audits and annual financial audits • A governance structure that incorporates: • A conflict of interest policy • A plan of periodic training to carryout the duties of the LSB • A financial plan • A facilities plan Charter School Administrative Office

7. General Responsibilities • Setting Policy for the Organization • Monitoring the Organization’s Operations • Serving as the Public Face of the Organization • Fulfilling other LSB responsibilities • E.g. evaluating the principal/director • Fundraising • Providing expertise in particular areas Charter School Administrative Office

8. Fiscal Overview • Where does the money come from to operate our charter school? • Primarily from the State of Hawaii • Per Pupil – Operating Funds • Per Pupil – Facilities Funds • Federal Sources • ARRA Funds (ending after 2010-11) • Federal Categorical Sources • If qualified – Title I • Title IIa • Safe & Drug Free Schools (2010-11 s/b last year) • Title III • Migrant Ed & ESL • SPED – mostly supply funds, small amounts • NSLP/NSBP • Charter School Planning Grant • Federal Impact/DOD Impact Aid • Local Sources • KSBE • OHA • Other non-profits including non-profits created to support your school • Fundraisers/donations • Fees • Reimbursements • FICA/Medicare Charter School Administrative Office

9. Fiscal Overview • When do we get the money? • Some timing is dependent on Statute • - State Per Pupil (July 20 – 60%; Dec. 1 – 30%; after Jan. 1- 10%) • Some timing is (partially) dependent on the charter school • Submitting proper applications/reports • Title I, Title IIa, ARRA Funding • Some timing is dependent on others • FICA/Medicare reimbursements • quarterly, usually 2 months after end of quarter • Federal Impact Aid • Usually in January • Accounting staff should prepare a monthly cash flow projection • This is an important cash management tool Charter School Administrative Office

10. Reporting Obligations • Annual Self Evaluation • Required by statute and reviewed by the CSRP • Standardized Budget & Financial Reports • Audits • Enrollment (Projections and Actual) • Enrollment is an input into much of the revenue going to a charter school • Legislative Budget Forms • Data Required by Budget Proviso • Internal Reporting Charter School Administrative Office

11. Annual Self Evaluations • Report on how the school is progressing • Academically, organizationally and financially • Usually due to the CSRP Oct, 15 each year • Date may change based on CSRP decisions • This is also your chance to tell your story Charter School Administrative Office

12. Budget and Financial Reports • Now required by statute • Budget due in June – for upcoming fiscal year • May be moved up in 2011 • Financial reports due in October – for prior year • Because of budget proviso requirements also need a financial projection for the upcoming year • Standardized report format • To improve external readers comprehension • To improve comparability between periods and between schools Charter School Administrative Office

13. Audits • Required by statute • Look at the audit as a tool • Points out areas that could be improved in the financial management of the school • Auditors provide assurance that management’s representations are reasonable/fair • Now required to consider fraud in designing audit procedures • Can be useful financial advisors • Be careful of inexperienced auditors Charter School Administrative Office

14. Enrollment Reporting • DOE OEC is the tenth day of school – usually in August • Becomes the basis for SPED allocations – teachers, etc. • Used to determine eligibility and funding for Federal programs • CSAO requests in Sept/Oct for upcoming budget request • October 15 is the OEC for charter schools • Used for Per Pupil operating and facilities funding • Statute now requires reporting November 15 enrollment as well • May 15, used to estimate enrollment for the coming year • Can weigh in on legislative decision making regarding charter school funding • Becomes the basis for the July per pupil allocation amount • Recently, some schools are overestimating this amount to front load the first allocation amount • Not a well advised strategy Charter School Administrative Office

15. Legislative Budget Forms • Used by the legislature in weighing fiscal needs among various State Departments • In past years this has included (among others prepared by the CSAO): • Table of Non-general Funds (funds received by the school other than state and federal sources) • Table of Vacant Positions • Table of Separations (changes in employees) • Table of New Hires Charter School Administrative Office

16. Budget Proviso Reports • Fiscal Data • PY actual, CY budget, next year projection • Facilities resources and expenses • Collective Bargaining Supplemental Agreements • Procurement Policies and changes, if any • Enrollment Charter School Administrative Office

17. Internal Reporting • Each charter school is different; therefore internal reporting needs are also different • However, in general, in order for LSB members to meet their duties in fiscal oversight of the charter school • A comprehensive budget should be submitted by management & adopted by the LSB • Regular comprehensive financial reports, including budget v. actual analysis and recommended budget revisions should be submitted by management and reviewed and approved by the LSB • Frequency is up to the LSB, should be at least quarterly • Cash Flow Projections • Enrollment information • Audit report should be presented to the LSB by the auditors Charter School Administrative Office

18. Reports, Reports, Reports • “We became a charter school so that we wouldn’t have to do all this stuff…..” When will this reporting overload end? • Unfortunately the answer is NEVER! • Well at least not while you are a charter school • Charter schools are funded with State and Federal money • A sad fact of life is that the real golden rule is that…. • “He who has the gold, rules! • All of us have reporting obligations, being a charter school does not change that • Accountability is the new buzz word…in the Hawaii State Capitol and in Washington D.C. Charter School Administrative Office

19. Discussion/Questions Charter School Administrative Office