Finance

6.1: FINANCIAL PLAN

The school effectively plans for long and short-term financial health and ensures that expenditures of school funds are closely aligned with the mission and the academic goals of the school.

KEY QUESTIONS

• Do management and the Board work to optimize student enrollment to maximum per pupil revenues?
• Do management and the Board use the school’s projected enrollment as a basis to establish expenditure budgets?
• Does the finance committee and/or full board track longitudinal demographic, funding and expenditure trends and utilize data to formulate or review budget projections?
• Has the budget taken into consideration any recent or anticipated cuts in state or federal funding and does it include contingency plans for reduced funding or unanticipated expenditures?
• Does the budgeting process include projections for cash flows and balances?
• Are all budget line items based on clearly stated and realistic assumptions?
• Does the finance committee or full board review 3-5 year financial projections?
• Do management and/or the Board identify several similar schools and compare revenues and expenses?
• Has the Governing Board of school management established the educational and operational spending priorities for the school?
• Does management understand how to use the budget as a tool to support the school’s priorities and its mission, and to effectively allocate the school’s financial resources?
• Has the Board established minimum priorities for allocation of financial resources to key mission-aligned programs and activities?

• Approved strategic plan
• Approved annual budget and expenditure v. budget reports
• Historical financial data report
• Approved organizational chart and staffing levels
• Enrollment trend and projection charts
• 3-5 year financial projections, annually revised
• Multiple school financial comparison charts
• Cash flow and balance projections
• Detailed assumptions for significant budget line items
• Board meeting minutes documenting annual budget approvals and revisions and ongoing board oversight of fiscal results and trends

6.2: LAWS AND REGULATIONS

The school aligns financial practices with state and federal laws, charter contracts, applicable regulations and standard accounting principles.

KEY QUESTIONS

• Do management and the Board know what laws and regulations related to financial reporting and accounting apply to the school?
• Are current business and financial practices in alignment with the school’s charter contract and authorizer requirements?
• Have any changes to the management or governance structure been reflected by amendments to the charter contract and/or governing documents such as by-laws, articles of incorporation, 501(c)(3) designation, etc.?
• Has the Board developed, reviewed, and approved formal business, financial and personnel policies and procedures?
• Do management and the Board actively monitor the school’s compliance with laws and regulations?
• Has management and the Board received training regarding compliance with relevant laws and regulations?
• Has the school consulted legal counsel and a certified public accountant regarding compliance with laws and regulations, and maintaining financial records in accordance with generally accepted accounting principles?
• Does the management team actively seek out training on any new regulations and best practices for the finance department?
• Does the board have an active finance committee and/or an internal audit committee to regularly receive and approve annual independent auditor-prepared financial statements, to review compliance-related, internal controls, or other findings and management letters, and to revise compliance related policies and procedures?

EVIDENCE

• Formal business, financial and personnel policies and procedures
• Job descriptions
• Organizational chart
• Articles of incorporation
• Current By-laws
• Conflict of interest policy
• Employee handbook
• The Board and management training syllabi Indicating relevant training
• Whistleblower policy
• Annual Audit and Management’s Discussion and Analysis
• Unqualified, no material findings independent annual audit reports
• Report of Good Standing from the authorizer
• Contracts to engage legal counsel and engagement letters with certified public accountant performing independent audits

6.3: INTERNAL CONTROLS

The school establishes strong internal financial controls to ensure operational integrity and safeguarding of school assets and financial resources, maximizes accuracy and reliability of financial records, and develops procurement policies and procedures.

KEY QUESTIONS

• Are financial duties adequately separated?
• Does the finance department use controls over cash disbursements?
• Are bank reconciliations done monthly?
• Are employees or other individuals who have access to checks denied signing authority?
• Are all internal financial control policies documented and regularly reviewed by the Board?
• Has the school board created finance and/or audit committees to regularly review and revise compliance related policies and procedures?
• Does the Board receive training related to financial matters?
• Does the school appropriately safeguard business and financial records (e.g. by using safes, locked drawers, or shredding when appropriate)?
• Has the school developed robust information technology security measures?
• Is there a process to regularly back up electronic records and store those backups off-site?
• Does the school use effective anti-virus and firewall protection with its technology?
• Does the school conduct periodic records and information technology risk assessments?
• Does the management or Board at least annually evaluate all record retention and protection policies and procedures and make revisions, as needed?
• Does the school have written policies and procedures for procurement?
• If needed, has the school received approval for an exemption to procurement laws?
• Does the school understand its responsibilities regarding purchases made using federal funds?
• Does the school have a clear set of criteria for selecting vendors?
• Has the Board formally approved the procurement policies and procedures?
• Does the Board monitor the procurement policies and procedures for compliance?
• Do the school’s actions align with the written policies and procedures for procurement?
• Is there a designated person on the management team to oversee each service provider?
• At least annually, does the school evaluate service providers based on clear performance criteria?
• At least annually, does the Board review and revise, if needed, the procurement policies and procedures?

EVIDENCE

• Board approved Internal control policies and procedures
• Timely Bank reconciliations
• Minutes to the Board meeting documenting the review and approval of internal controls
• Resumes for the Board indicate members with financial training or experience
• Board training syllabi includes training for financial practices
• Annual financial and compliance audits demonstrate no repeat findings
• Board approved Procurement Policies and Procedures and expenditure controls
• Governing board meeting minutes that show approval of all applicable financial related policies and procedures
• Approved exemption from procurement laws
• Board minutes and organization chart delineating oversight responsibility and oversight practices
• Evaluation criteria for service providers
• Completed service provider evaluations
• Contracts with service providers
• Safes and other physical safeguards
• Record retention policies and procedures
• Information technology security policies and procedures
• Information technology vendor agreements
• Information technology risk assessments

6.4: ADEQUATE FINANCIAL RESOURCES

The school ensures ongoing financial viability and sustainability by engaging in accurate reporting to optimize enrollment and special programs support, monitoring financial performance and trends and actual results vs. budget projections, and seeking out additional funds, if needed.

KEY QUESTIONS

• Does the school plan for and sustain an ongoing positive operating margin?
• Does the school plan for and achieve annual positive operating margins or proactively develop and approve deficit budgets for specific reasons or needs?
• Are enrollment targets consistently achieved and, if not, are enrollment targets underlying approved budgets accordingly revised (along with planned expenditures)?
• Does the school understand per pupil funding levels and how enrollment drives revenues?
• Does the school regularly monitor its enrollment and demographic trends?
• Does the school understand the importance of budgeting for annual surpluses, cash reserves, and balance sheet strength?
• Does the school have policies in place to review and revise budget approved annual expenditures if enrollment does not achieve targets or drops during a school year?
• Has the school identified key financial ratios to measure financial performance and trends?
• Does the Board monitor cash flow results monthly?
• Does the budgeting process take into consideration future expenditures, such as future facility needs, additional staff and/or curriculum resources needed, technology and equipment replacement, etc.?
• Has the Board developed a long-term strategic plan, including multi-year financial projections?
• Do annual budgets or long-term financial projections identify the amount of additional revenues needed to ensure financial viability and sustainability?
• Does management actively seek out additional revenue sources, such as tax credits and grant opportunities?
• Is the Board involved in fundraising and/or identifying and obtaining additional revenue?
• Has management or the Board prioritized efforts to obtain additional revenue in order of the importance of need or school mission?
• Does the Board seek out opportunities to interact with funders and key stakeholders in the community and state and national charter school sector to identify and pursue potential new funding streams?

EVIDENCE

• Monthly enrollment reports
• Approved budget and financial reports to Board including enrollment data and key financial ratios.
• Long-term strategic plan
• 3-5 year financial projections
• Tax credit receipts
• Prioritized list of grant opportunities
• Strong and/or improving financial ratios and trends and balance sheet strength.

6.5: FINANCIAL REPORTING AND OVERSIGHT

The school regularly and accurately records and reports financials activity, results and status, uses and reports restricted funds appropriately, and undergoes a thorough annual independent financial audit.

KEY QUESTIONS

• Does the school close its financial books monthly?
• Does the school prepare monthly financial statements (to include budget v. actual comparisons)?
• Does the school leader and the Board regularly review financial statements and reports?
• Do school leadership and the Board investigate significant budget vs. actual variances?
• Has the Board received training in how to review financial documents?
• Is the business manager and school leader aware of restricted funds requirements and conditions and do they ensure that such funds are used only for the acceptable purposes?
• Is the Governing Authority aware of any restricted funds requirements and conditions and does it regularly receive reports allowing it to monitor and verify that such funds are used only for the acceptable purposes?
• Does the school business office properly inventory tangible goods purchased with grant funds?
• Is the auditor’s opinion unqualified and the report free of significant material findings and recommendations for improvement?

EVIDENCE

• Monthly recurring closing journal entry and checklist
• Monthly closing procedures checklist
• Monthly bank reconciliations.
• The school’s check registers
• Governing Authority board packet that includes the school’s financial statements and budget to actual comparisons
• Board meeting minutes that include a discussion of financial reports
• Required restricted funds reporting
• Independent audit report with unqualified opinions and free of significant material or recurring findings

6.6: QUALIFIED EXPERTISE

The school has appropriate financial planning and management expertise.

KEY QUESTIONS

• Is the school’s finance department adequately staffed or services contracted with a qualified, credible financial services provider?
• Does the school conduct background checks when it hires accounting department personnel?
• Has the school developed minimum qualifications for all Finance department positions?
• Does the Governing Authority possess the expertise or contract with professional evaluators when interviewing and hiring a CFO or Business Manager?
• Are monthly budget vs. actual financial statements presented to the Governing Authority?
• Is ongoing professional development provided for mid-level and finance support staff?

EVIDENCE

• CFO/Business Manager qualifications including degree, CPA certification, industry prior management and/or charter sector experience.
• Updated job descriptions and qualifications for all Finance department positions.
• Hiring and background check policy and procedures
• Finance department flow chart of duties, responsibilities, and approvals