New York State Education Department Charter School Office (CSO)

1. New York State Education DepartmentCharter School Office (CSO) Fiscal Oversight Guidebook A Guide for Charter School Leaders, Employees and Board of Trustees December 2013

2. Presenters • Jamal L. Young, NYSED • David Hruby, CSBM • Gretchen Liga, CSBM

3. Purpose of the Guidebook • To provide a comprehensive fiscal resource for charter schools authorized by the Board of Regents and the New York State Education Department (NYSED) as well as for prospective charter school applicants • To offer charter school leaders and applicants extensive, detailed information on the expectations related to financial accountability, per the New York State Charter Schools Act • To detail policies and practices related to sound fiscal management and internal controls, management of federal and state funding streams, and the continual monitoring and oversight of a school’s financial health and stability by school leaders and Trustees • To provide substantial information on the processes and criteria used by the Charter School Office (CSO) to understand and determine if the school is operating in a fiscally sound manner and progressing toward a charter renewal, from the point of application continuously through the term of the charter • To provide a summary of the specific guidelines for independent financial detailed in the Charter School Audit Guide, found at http://www.p12.nysed.gov/psc/documents/NEWYORKSTATEEDUCATIONDEPARTMENTAUDITGUIDE-12.31.12-F.pdf

4. Overview of Presentation • Purpose, Procedures, and Activities for Fiscal Oversight • Review of the Initial Proposal to Establish a Charter School • Funding and Grants • Initial Statement Process and Review • Annual Budget and Financial Reporting • Audits • Fiscal Dashboard • Site Visits • Charter Renewal • Internal Control Practices for Charter Schools • Required Charter School Policies • Reporting Deadlines Calendar

5. Purpose, Procedures, & Activities for Fiscal Oversight • The application process to operate a charter school culminates with the actual creation of the school’s charter -- a formal contract between the school’s Board of Trustees and its authorizer • As detailed in Charter Schools Law Article 56 Section 2853(a), the Board of Regents, upon approval of a charter, incorporates the school as an education corporation for an initial term not to exceed five years • All education corporations must apply to renew their charters • While the primary purpose of a charter school is the education of children, compliance with the charter and applicable law as well as fiscal stability, are necessary facets of each school’s viability

6. Purpose, Procedures & Activities for Fiscal Oversight Cont.… • NYSED focuses fiscal oversight on several interrelated concepts that relate to fiscal soundness. These include: • Effective financial oversight by the school’s Board of Trustees; • Realistic budgeting and ongoing budget monitoring; • Maintenance of appropriate internal controls and procedures; • Timely and accurate financial reporting; and • Maintenance of adequate financial resources to ensure stable operations. • In conducting ongoing fiscal oversight and in making initial renewal recommendations, NYSED considers the totality of evidence to determine whether a school is operating in a fiscally sound manner.

7. Review of the Initial Proposal to Establish a Charter School • Purpose • To recommend that the Board of Regents approve a charter school proposal, NYSED must make a legal finding that the charter school applicant has demonstrated the ability to operate the school in a fiscally sound manner • Procedure • The Proposed School Program • Required Disclosures • Fiscal Soundness • Approval or Non-Approval • Based on the totality of the findings by all reviewers (internal and external, where appropriate), NYSED will recommend for approval to the Board of Regents those proposals which are both legally sufficient and which provide the greatest likelihood of academic success and fiscal and organizational soundness

8. Funding and Grants • Per Pupil Funding • Regular Education • Special Education • Charter School Planning and Implementation Grant (CSP) • Planning and program design of the charter school educational program (prior to the arrival of students) • Initial implementation of the charter school (after doors open to students) • No Child Left Behind (NCLB) • Title Funding (I, II, III) • State Stimulus Fund (SSF) • Expenses associated with 1) charter school facilities or 2) technology, depending on specific RFP • Other

9. Initial Statement Process and Review • Purpose • Procedure • Initial Statement Letter • Audit Engagement Letter • Commencement of Audit Engagement • The Accountant’s Report • Waiver of Agreed Upon Procedures Engagement

10. Annual Budget and Financial Reporting • Purpose • A school’s annual budget should be balanced and should account for all program needs described in the approved charter application and charter contract • Procedure and Review • Each charter school newly approved and starting its first operational year (“YR 1”) must submit the school’s annual budget for YR 1 along with quarterly interim reports, which include an unaudited statement of activities and statement of financial position • Schools after operational YR 1 are not required to submit annual budgets and quarterly reports unless requested • NYSED, at its discretion, may request the submission of these reports at any point for any given charter year • Sample School Budget Development Timeline • Cash Flow Projection

11. Audits • Purpose and Procedure • Annual Financial Statements • Independent audit report is received by the due date of November 1 • Each financial audit should consist of a management letter, the type of independent auditor opinion (unqualified, qualified or adverse), financial statement footnotes and the FOUR standard schedules: • Statement of Financial Position • Statement of Activities • Statement of Cash Flows • Statement of Functional Expenses • Federal Single Audits • Audits by the New York State Office of the State Comptroller • NYSED State Aid Intercepts

12. Fiscal Dashboard Report • Purpose • Serves as a resource tool for schools and school boards • Provides transparent financial information that NYSED will review at the time of charter renewal • Means of comparison to similar schools • General Design • Dashboard • Evaluation Master • Indicator Evaluation Groups • Near-Term Evaluation • Financial Composite Score • Long-Term Evaluation • Graphs of School Fiscal Performance

13. Additional Reporting Requirements • Board of Regents‐authorized charter schools must ensure a timely response to all NYSED and CSO requests for information and reports. The charter school’s failure to do so will be grounds for action under §2855 of the Education Law. • All Board of Regents-authorized charter schools are required to maintain certain records for inspection by the Regents and/or their agents, including but not limited to the Charter School Office staff, throughout a school’s charter term. • A list of Additional Reporting Requirements can be found on pages 42-43 of the Guidebook.

14. Site Visits • Purpose • In-depth fiscal reviews are conducted during school site visits only when warranted by a school’s Composite score on the Fiscal Dashboard or by a specific desk audit • Procedure • School Visit • Feedback • Sample School Visit Questions

15. Charter Renewal Site Visit • Overview and Purpose • The charter renewal decision is based on the school’s performance over the term of the charter in three areas: • The school’s academic success and ability to operate in an educationally sound manner; • The school’s organizational viability and its ability to operate in a fiscally sound manner; and • The school’s faithfulness to the terms of its charter and adherence to the applicable laws and regulations. • Example of a Charter Renewal Site Visit Schedule

16. Internal Control Practices for Charter Schools • Governance • Accounting and Reporting • Revenue and Cash Management • Purchasing and Expenditures • Facilities, Equipment and Inventory Control • Student Services • Student Related Data

17. Required Charter School Policies • A list of Required Charter School Policies on various issues such as School Records, Open Meetings Law, and Hiring and Personnel Policies can be found on pages 71-73 of the Guidebook.

18. Reporting Deadlines Calendar Yearly Reporting Summary

19. Questions? Email: charterschools@mail.nysed.gov with the subject line: Fiscal Oversight Guidebook Question OR Call: Your school liaison at (518) 474-1762