Fall/Winter 2009 Charter School Fiscal Management Presented by: Fiscal Crisis and Management Assistance Team (FCMAT)

Fall/Winter 2009 Charter School Fiscal Management Presented by: Fiscal Crisis and Management Assistance Team (FCMAT) California School Information Services (CSIS) California Department of Education (CDE)

Did you Know? Nationwide, California has the largest number of charter schools serving the largest number of students There are currently more than 800 charter schools with over 285,000 students enrolled 85% of charter schools are start-up; 15% are conversion 77% of charter schools are site-based and 23% are nonclassroom based Of the 58 counties in California, 50 have charter schools. Los Angeles County has the largest number of charter schools (193), followed by San Diego County (74) 71% of California charter schools are direct funded; 29% are funded through their authorizing agency

So What’s the Problem? Charter schools, though successful in raising student achievement,are closing their doors due to their lack of knowledge about managing the business and fiscal requirements of their schools. As of 2007-08, 949 charter schools had been created in California since 1992-93; only 692 charters, or 72%, were still active in 2007-08. CDE data shows nearly two-thirds (65%) of all charter schools that closed since 2004 reported positive trends in API growth and failed for reasons unrelated to successful academic performance. Both the authorizers with oversight responsibility and the charter schools they serve need to better understand and meet their respective responsibilities.

What Can We Do? Make sure there is an understanding that: Effective financial management of charter school resources is as important to the success of a charter school as the strength of the curriculum or the dedication of its founders. Collaborative efforts between public schools and charter schools are in the best interest of all of our students; it is essential to understand each other’s regulatory and reporting environments. The need for effective site-based financial management at charters has never been greater. Sharing best practices to build capacity for effective financial management is a win-win situation.

Laws and Regulations
What California Laws and Regulations are Applicable to Charter Schools?

Laws and Regulations, cont. A charter school is a public school that is deregulated from most laws and regulations governing traditional public schools in exchange for a performance-based accountability contract. Charter schools, like all public schools, shall not charge tuition, shall not discriminate against any pupil on the basis of the characteristics listed in Education Code section 220. A charter school shall be nonsectarian in its programs, admission policies, employment practices, and all other operations.

Laws and Regulations, cont. Except where otherwise specifically required, charter schools in California are generally exempt from state laws governing school districts, whether or not these laws are in the California Education Code.

Laws and Regulations, cont. Charter schools must comply with: State and federal constitutions. The California Charter Schools Act of 1992 (Education Code Section 47600 et. eq.). State laws establishing minimum annual instructional minutes State pupil testing programs (API, PSAA, STAR, CAHSEE) State criminal background screening for employees

Laws and Regulations, cont. Charter schools must comply with: All federal laws (e.g., Individuals with Disabilities Education Improvement Act, No Child Left Behind Act). Laws that generally apply to governmental entities, but not specifically to school districts (e.g., open meeting laws). All laws that are specifically a condition of funding for a specific program in which the charter school chooses to participate. Laws governing privacy.

Laws and Regulations, cont. Charter schools must comply with: Laws establishing a minimum age for school attendance. Laws governing nonclassroom-based independent study programs (independent study, home schooling, distance learning, etc.) Educational Employees Relations Act. Specific provisions of law related to teacher retirement and employee relations.

Memorandum of Understanding (MOU)

Memorandum of Understanding It’s important to develop a comprehensive Memorandum of Understanding (MOU) as a framework for the relationship and to supplement the charter provisions. The purpose is to clarify financial and operational issues. MOU is an agreement between the authorizing agency and the charter school. Allows the chartering agency to identify expectations. Not required by charter law but highly recommended. The MOU is a binding legal agreement once approved.

Memorandum of Understanding, cont. The MOU should define specific expectations and responsibilities of the two parties, such as: student performance expectations of educational programs special education frequency of school site visits financial reporting requirements services that are being provided by the sponsoring agency.

Memorandum of Understanding, cont. Elements of a comprehensive MOU outline the expectations of oversight roles and responsibilities and a well defined periodic review process through: An expanded business plan A facilities plan regarding the use and payment for space that also reflects the terms and conditions for use of district property. 3. An administrative and support services plan

Memorandum of Understanding, cont. It is critical to clearly spell out the relationship between charter schools and their chartering agencies. The MOU is traditionally enforced as part of the charter, and replaces any inconsistent language in the charter. The State Board of Education and Department of Education have a form of MOU available.

Miscellaneous Things to Remember

Ongoing Charter Obligations Meet all statewide standards and conduct the pupil assessments applicable to pupils in noncharter public schools. Consult regularly with parents, legal guardians, and teachers regarding the school’s educational programs. Notify the superintendent of the school district of the pupil’s last known address within 30 days if a pupil is expelled or leaves the charter school without graduating or completing the school year for any reason, and, upon request, provide that school district with a copy of the cumulative record of the pupil, including a transcript of grades or report card, and health information.

Ongoing Charter Obligations, cont. Promptly respond to all reasonable inquiries, including, but not limited to, inquiries regarding its financial records, from its chartering authority, the county office of education that has jurisdiction over the school's chartering authority, or from the Superintendent of Public Instruction and consult with the chartering authority, the county office of education, or the Superintendent of Public Instruction regarding any inquiries.

County Office Authority To monitor or conduct an investigation into the operations of the charter school based on written complaints by parents or other information that justifies such actions. To review or audit the expenditures and internal controls of a charter school at any time during the fiscal year if there is reason to believe that fraud, misappropriation of funds, or other illegal fiscal practices have occurred.

County Office Authority, cont. May request the County Office Fiscal Crisis and Management Assistance Team (FCMAT) to review the fiscal or administrative condition of a charter school.

Pupil Enrollment

Attendance Boundaries Verify residency of students upon enrollment and annually thereafter State will only fund ADA generated by California residents Classroom-based charter schools: student may reside anywhere in California regardless of where the charter school is located or sponsored Nonclassroom-based charter schools: student must reside in the county that sponsored the charter or an immediately adjacent county

Admission and Enrollment Policies Student body of the charter school should be: Racially and ethnically diverse and/or Reflective of the general population residing within the school district Charter schools MAY establish admission requirements May not discriminate and must be applied consistently to all prospective students

Admission and Enrollment Policies, cont. Charter schools must admit all students who wish to attend unless insufficient capacity to meet demand Should establish an enrollment policy when demand exceeds the school’s capacity Must be fair, nondiscriminatory and consistent with the law Preference extended to currently enrolled pupils and pupils now residing in the district Chartering authority may also permit other preferences on an individual school basis if consistent with law Required to use a public random drawing when enrollment exceeds capacity Have a clear process to minimize the potential for controversy

School Calendar and Attendance

Minimum Instructional Minutes and Days Charter schools are required to operate a minimum of 175 days of actual instruction between July 1 and June 30 each fiscal year to receive full apportionment. Required minimum annual instructional minutes: Kindergarten: 36,000 minutes Grades 1-3: 50,400 minutes Grades 4-8: 54,000 minutes Grades 9-12: 64,800 minutes

Minimum Instructional Minutes and Days, cont. At various times, verify compliance with instructional minutes requirements. At a minimum: Prior to the school calendar and bell schedules being approved Prior to the school year beginning Verification halfway through the school year Whenever changes to the school calendar and/or the school day occurs This requirement is part of the annual audit

Attendance Accounting Charter School ADA = Number of days of Pupil Attendance (divided by) Number of days taught Must maintain written contemporaneous records that document pupil attendance and make those records available for inspection and audit Contemporaneous means existing, occurring, or originating during the same time Evidence is a charter employee certifying the accuracy of the ADA No minimum day requirement for charter schools Cannot claim more than one day of ADA per pupil per day regardless of classroom and nonclassroom program combinations

Attendance Accounting, cont. CDE Principal Apportionment Attendance Software must be used to report ADA and other related data to calculate principal apportionment http://www.cde.ca.gov/fg/sf/aa/attendance0809.asp Software and related information updated annually by CDE All attendance data submitted to CDE must be certified by: A designated charter school official that all of the attendance reported is for pupils whose attendance is eligible for public funding Authorizer district (if applicable) County office of education (if applicable) Information must be timely and accurate

Attendance Accounting, cont. 2009-10Due Dates for Attendance Reports to CDE: First Principal (P-1) Apportionment: by January 15 For full school months between July 1 and December 31 Second Principal (P-2) Apportionment: by May 1 For full school months between July 1 and April 15 Annual Apportionment: by June 30 For entire school year If the school misses a deadline, there is a serious risk that the school will be excluded from that apportionment’s certification and funding period

Attendance Accounting, cont. Charter MOU may require that other attendance documents be submitted, such as: Hard copies of all back-up documents Weekly attendance sheets signed and dated by teachers Hourly attendance sheets signed and dated by teachers for any supplemental hours claimed Evidence of contact made with parents when students are absent from school Annual independent audit verifies reported ADA to ensure applicable state and federal compliance requirements are met

Classroom-Based Instruction To claim classroom-based ADA, the following must occur: Pupils must engage in required educational activities Pupils must be under immediate supervision and control of a charter school certificated employee Pupils are required to be in attendance at the school site at least 80% of the minimum required instructional time The charter’s school site must be a facility used principally for classroom instruction

Independent Study To offer independent study (IS), a detailed description of the program must be included in the charter Charters must meet the same requirements as traditional schools except the 5-day minimum does not apply Can’t provide funds or things of value to the IS students or parents not provided to pupils who attend regular classes Participation must be voluntary Written board policies and regulations must be adopted to qualify for IS funding

Independent Study, cont. Written master agreement must be in place for every participating pupil PRIOR to absence Signed and dated by the student, parent, supervising teacher and all other persons responsible for providing assistance to the student IS programs must comply with all state testing and high school graduation laws Credentialed teacher must be assigned the overall responsibility to coordinate, evaluate and provide general supervision of the pupil’s IS IS agreements cannotbe valid for more than one semester (or half year if on a year-round calendar)

Nonclassroom-Based Instruction Nonclassroom-based instruction occurs when a student is not scheduled for at least 80% of the instructional time in a classroom. It includes, but is not limited to: Independent Study Home Study Work Study Distance and computer based education Charter school teacher to ADA ratio for nonclassroom-based pupils shall not exceed 1:25 or the equivalent ratio of the largest unified school district in the county of sponsorship Ratio is done at P-2 No funding for ADA above the ratio

Nonclassroom-Based Instruction, cont. SB 740 authorized SBE to establish rules for nonclassroom-based ADA Title 5, CCR, sections 11963 to 11963.7 Charter schools that don’t offer classroom-based instruction for at least 80% of the required instructional time are subject to reductions of up to 30% of state funding for nonclassroom-based ADA All charter schools that offer nonclassroom-based instruction should file a Funding Determination Form with CDE Charter Schools Division, as reductions may be waived.

Student Attendance Review General Review - Student Attendance: Are there approved policies addressing student attendance? What attendance accounting system is used? Is there an approved school calendar? Is there an approved class (bell) schedule? Is there a process to monitor compliance with the minimum instructional minute requirement? Is there a minimum of 175 instructional days? Does the school maintain a class list for all students? Is attendance taken daily by the classroom teacher?

Annual Audits

Annual Audits Must contract for an audit by April 1st of each year Contract with an auditor from the Certified Public Accountants Directory published by the State Controller’s Office Must submit an annual independent financial audit by December 15 of each year to: State Controller’s Office CDE’s Charter Schools Division CDE Audit Resolution Office Authorizing Agency County office of education where the school is located

Annual Audits, cont. The audit shall be conducted in accordance with General Accounting Office (GAO) standards for financial and compliance audits and in accordance with the audit guide adopted by the Education Audit Appeals Panel (EAAP) Delays: There is no provision in the law for an extension on a charter school audit

Annual Audits, cont. Audit findings: To ensure a favorable recommendation for renewal, each audit must be free of material findings and exceptions, or corrective action plans must have been implemented in a timely manner. The auditor is required to review the correction, or plan of correction, to determine if the exceptions have been resolved in the subsequent year audit.

Annual Audits, cont. Auditor Rotation: EC 41020 (f)(2) states that: It is unlawful for a public accounting firm to provide audit services to a local educational agency if the lead audit partner, or coordinating audit partner, having primary responsibility for the audit, or the audit partner responsible for reviewing the audit, has performed audit services for that local agency in each of the six previous fiscal years.

Internal Controls

Internal Controls Internal controls are the foundation of sound financial management Strong internal controls provide reasonable assurance that: Operations are effective and efficient Financial information is reliable The charter is operating in compliance with all applicable laws and regulations

Internal Controls, cont. A strong internal control structure includes: Policies and procedures used by staff Accounting and information systems The work environment The “tone” set by management The professionalism of employees

Internal Controls, cont. Basic Components include: Segregation of duties System of checks and balances Staff cross training Use of pre-numbered documents Asset security Timely reconciliations Inventory records Comprehensive annual budget Position control Data management

Internal Controls, cont. Segregation of duties is a key factor in a reliable internal control system. Proper segregation of duties distributes functions so that one person does not handle a transaction from beginning to end Example of a properly segregated function: Employee who initiates or authorizes a transaction versus the employee who executes the transaction

Internal Controls, cont. A system of checks and balances includes formal procedures for transactions to: Initiate Approve Execute Record Reconcile

Internal Controls, cont. To help ensure adequate internal controls, charter schools should do the following: Ensure that employees are aware of the proper internal accounting control expectations Provide assurance to management that the internal control system is sound Ensure ongoing state and federal compliance Help identify and correct inefficient processes

Effective Financial Management

Effective Financial Management Cash Flow Management Budget Controls Revenue Enhancement Expenditure Controls

Cash Flow Management Cash is King! Cash flow management – most important thing you do Match receipts with expenditures Meet payroll timely Pay vendors timely Running out of cash = quickest way to fail financially!

Cash Flow Management, cont. State’s Cash Flow Crisis Continues into 2009-10 New apportionment schedule Deferrals are permanent, including “old deferrals” No impact to in lieu tax allocations more on that later

Cash Flow Management Cash management tools Cash flow projection By month, week or day Review sample cash flow projection Short term cash flow debt instruments Line of credit Revenue Anticipation Notes (RAN)

Cash Flow Management, cont. Revenue Anticipation Notes (RAN) Certain financial institutions are willing to work with charter schools to arrange for short-term cash flow financing Refer to FCMAT’s web site at www.fcmat.org and review information on interim cash flow financing

Cash Flow Management, cont. A sample cash flow projection is included in the binder materials.

Budget Controls Budgets Budget Development Budget Monitoring Multiyear Financial Projections

Budget Development Enrollment and ADA Projections Staffing Projections/Position Control Fund Balance Budget Reductions Budget Reporting Budget Report Format – forms and narrative

Budget Development, cont. California law requires charter schools to report financial data four times each year: Adopted Budget by July 1 First Interim Report for transactions through October 31 Second Interim Report for transactions through January 31 Unaudited Actuals for final transactions for the entire fiscal year

Budget Development, cont. Budget Report Format – Forms Districts & COEs Ed Code requires budgets, interim reports, and the unaudited actuals to be prepared on format prescribed by the Superintendent of Public Instruction (SPI) SACS format is the only financial reporting format prescribed by the SPI Charter Schools May use an alternative form for their financial reports; however, the unaudited actuals report must be in electronic format

Budget Development, cont. Budget Report Format - Narrative How the budget aligns with the goals of the board How it supports student learning Significant assumptions used to develop the budget Budget reduction detail Response to reduced funding, declining enrollment or other factors

Budget Development, cont. Enrollment Projections ADA Projections – Revenue Estimates Staffing Allocations Expenditure Allocations Facility Needs

Budget Development, cont. Enrollment Projections – Techniques Rollover Current students Waiting list May be sufficient for charter school’s needs Cohort Survival Evaluates the longitudinal relationship of the number of students passing from one grade to the next in the subsequent year More closely accounts for retention and in- and out-migration May be more accurate

Budget Development, cont. ADA Projections Apply historical attendance rates to projected enrollment amounts Yield = projected ADA The charter should develop historical attendance rates based on its own experience If historical data is not available then industry standards should be utilized until the charter school has developed its own history

Budget Development, cont. Staffing Projections Between 80% and 90% - or more - of the charter school budget is committed to salaries and benefits Based on formulas driven by: student enrollment square footage number of classrooms other data that is logically connected to the service being provided

Budget Development, cont. Position Control System of internal control that ensures all positions funded by the charter school were properly authorized Check and balance between: Business office – authorizes/eliminates positions Human Resources department – fills vacancies

Budget Development, cont. Position Control - Process Charter school administration recommends establishment of positions to charter school board Business office creates authorized position Human Resources department fills position Human Resources department vacates/fills positions - retirement or resignation Business office terminates positions no longer authorized by the charter board

Budget Development, cont. Fund Balance Beginning fund balance Estimated at budget adoption Use amounts budgeted for ending balances of the previous year Adjusted to match the actual prior year ending fund balance amount once the books are closed Each September Per unaudited actuals report

Budget Development, cont. Fund Balance Ending fund balance Components : Reserve for Non-expendable Assets Reserve for Economic Uncertainties Legally restricted balances Board-designated balances Undesignated balance

Budget Development, cont. Fund Balance Consistent with CCR, Title 5, Section 15443, charter schools should maintain prudent economic uncertainty reserves at least equivalent to those required of a school district of similar size: School ADAEconomic Uncertainty Reserve 0 – 300 greater of 5% or $50,000 301 – 1,000 greater of 4% or $50,000 1,001 – 30,000 3%

Budget Development, cont. Economic Uncertainty Reserve Guidance should be provided in charter document or MOU with authorizing agency Consider building reserves in difficult fiscal times Establish a base (use chart on previous slide as a base) and add for: enrollment fluctuation staffing/program fluctuation equipment/facility failure

Budget Reductions Economic Hard Times Are Here to Stay Unprecedented reductions in education funding Economic indicators suggest 2-3 more years of financial doldrums Budget reductions are inevitable – for charter schools and their sponsoring agencies Nobody will escape the wrath

Budget Reductions Plan for the Worst, Hope for the Best Review priorities & commitments Update MYFP Make adjustments now, don’t wait Savings have a multiplier effect Match expenditures to projected funding levels Implement new plan ASAP

Budget Reductions Develop list of reductions that exceeds your reduction target … … and then prioritize Board authorization to implement list by priority Avoids necessity of constant, never-ending budget cutting sessions Revisit priority at budget reporting intervals and as information changes Budget adoption, interim reports, year-end closing, audit report

Budget Reductions Involve Stakeholders Need their support, buy-in Significantly increases opportunity for success Minimizes political infighting But expect some and plan accordingly; it’s not entirely avoidable

Budget Monitoring Enrollment, ADA and Staffing Update projections monthly as actual counts are taken Budget adjustments should be implemented immediately if actual data indicates a material difference from the projected amounts Mid-year staffing adjustments may also be necessary to prevent fiscal distress as a result of overstaffing

Budget Monitoring, cont. Budget Overages Identify overages Actual amounts that exceed budget “Hard-stop” on purchase orders that exceed budget Use position control system to prevent overspending of budgets Overages can still occur Modify the budget when overages occur Present budget modifications monthly

Multiyear Financial Projections Education Code section 47604.32 identifies the duties of a charter authorizing entity Charter authorizing entity must monitor the fiscal condition of charter schools A budget and a multiyear financial projection (MYFP) are integral information for the oversight function 2-5 years after budget year

Multiyear Financial Projections, cont. Any forecast has inherent limitations Estimates of: enrollment trends cost-of-living increases projected deferrals forecasts of costs for utilities, fuel and other consumables local, state and national economic conditions MYFP = trend, not prediction of exact numbers Updated at each interim financial reporting period

Multiyear Financial Projections, cont. Projection Tools Spreadsheet programs lend themselves very well to financial analytics Be careful when using a spreadsheet file developed by a third party The risk for error can increase Prove it works before relying on it!

Multiyear Financial Projections, cont. Projection Tools Financial software programs may contain financial projection analysis These programs would be better suited for the development of the MYFP Source data is found within the same program Reduces data-transfer errors

Multiyear Financial Projections, cont. MYFP Focus Focus of MYFP meet required reserve for economic uncertainty positive unappropriated fund balance Deficit spending trends? Must: increase revenue decrease expenditures or both

Multiyear Financial Projections, cont. MYFP Methodology - Base Year Begins with base year of data Current year budget Historical data may also be useful Identify trends that would help evaluate the base year data

Multiyear Financial Projections, cont. Assumptions A basic list: Beginning fund balance Ending fund balance of the base year budget Revenues: Enrollment and related ADA Cost-of-living adjustments for general purpose and categorical block grants and categorically funded program revenues Competitive grant funding details Flexibility transfers/ending balance sweeps

Multiyear Financial Projections, cont. Assumptions Expenditures: Staffing allocation factors Cost-of-living adjustments for staff Average salary schedule step and column movement Increases for contracted health and welfare costs Increases in statutory benefit rates CPI for operating costs, such as utilities and insurance Indirect cost rate

Multiyear Financial Projections, cont. Factors derived from the above assumptions are then applied to the base year data at the object code at the resource level Yields projection year data This process would be repeated for each year of the MYFP

Multiyear Financial Projections, cont. A sample multiyear financial projection is included with the binder materials.

Revenue Enhancement Student attendance incentives Increase attendance rates = increased funding Offer rewards/prizes to students for: Best attendance rate Most improved attendance rate Use donated funds to fund prizes/rewards

Revenue Enhancement School calendars Evaluate daily student attendance patterns Identify timeframes where attendance is low Adjust school calendar accordingly P2 reporting period is basis for ADA funding Eliminate days that “drag down” P2 ADA

Revenue Enhancement Categorical programs - outside the block grant Apply Funding could complement/support existing programs Funding could provide for new programs Understand all compliance requirements Don’t be caught by surprise – could be an expensive lesson Charge maximum indirect costs – but no more!

Revenue Enhancement Grants Apply….but: Be wary of match requirements! Can create financial burden if not properly understood Key Questions What programs can we fund with this grant? Can we fund this program once the grant expires? Will this grant fund my cost increases over time and my indirect costs?

Revenue Enhancement Donations Make sure it’s a donation, not a fee Identify how the donation will be utilized when collected Donor should always know how their donations are used Do not use donations to fund ongoing programs Allocate as though they are one-time funds

Revenue Enhancement Indirect Costs That portion of costs associated with the overhead of operating a charter school Every resource contributes to the need for indirect costs Thus, every resource should be charged Each resource has specific limitations on indirect cost charges See CDE website for more info

Expenditure Control Compensation and Staffing Costs Non-Compensation Expenditure Controls Contributions to Restricted Programs

Compensation Largest portion of budget Average = 84% statewide, 2007-08 Salaries = 65%, Benefits = 19% Components of increased cost: Salary schedule increases/bonuses Step and column salary schedule movement Benefit rate increases (statutory) Benefit program changes (contracted)

Compensation Know Your Compensation Data Cost of 1% increase for staff Statutory %’s vs. contracted benefit components Relationship of benefits % increase to cost of 1% i.e., does 10% benefits increase = 1%? 2%? Benefits to salary % for average salary Certificated, classified and management With and without contracted benefits

Compensation Identify Available Dollars Available new revenue dollars COLA, growth Less increased fixed costs Step and column salary schedule movement Statutory benefit rate increases, utilities, insurance Increased staffing needs Less discretionary allocations New/expanded/restored programs Other board-established priorities Equals amount available for compensation

Compensation Do Not Overcommit Total compensation increase should always be <= available dollars Work in dollars, not percentages Match ongoing dollars with ongoing compensation increases Use one-time dollars for one-time compensation e.g., bonuses

Compensation Desperate Fiscal Climate Traditional budget reduction approaches may not be sufficient Creative solutions may be needed to stay afloat Consider: Compensation deferrals Can’t pay now, but may be able to later Compensation rollbacks New hires compensated differently than existing staff

Compensation - Statutory Benefits Workers Compensation Rate increases ready to spike! Consider purchasing jointly with other public school agencies JPAs Implement cost control programs Return to Work, Designated Doctor Show an interest in the injured worker

Compensation - Contracted Benefits Health & Welfare Health care reform may not provide timely solutions Increase purchasing power Join a JPA Offer HMOs, Health Savings Accounts (HSAs) Review benefit caps on premiums, co-pays, deductibles Validate dependent enrollments

Compensation - Contracted Benefits Retiree Health & Welfare Benefits Huge unfunded liability across the state If not offered, be careful before committing If offered, consider: Limiting eligibility to retiree-only Limiting coverage to “gap” between retirement and Medicare Capping charter schools contribution to premium

Staffing Costs Staff to meet program needs of charter school But no more Overstaffing - and unfunded compensation agreements - are largest components of financial failures! Consider options before creating permanent positions Use substitutes/extra duty/overtime Contract out Short-term cost < permanent cost

Non-Compensation Expenditure Controls Funding cuts hit non-compensation budgets hard More important than ever to get “bang for your buck” Utilize purchasing co-ops Tighten controls around purchasing processes Credit cards – tighten access Travel costs – getting best rates? Revolving checking accounts – limit use

Non-Compensation Expenditure Controls Use purchase requisitions/purchase orders Reduce unauthorized purchasing Institute controls around significant purchases Multiple approvals for large-dollar purchases Conduct inspections of classrooms, facilities and grounds Look for waste, exposure to liability Reduce number of cell phones

Non-Compensation Expenditure Controls Postpone/rethink capital equipment purchases Buy used vs. new Lease vs. purchase Repair vs. replace Seek donations/grants Provide incentives for good behavior Allocate portion of utility/copier/printer savings to school/office budget

Contributions to Restricted Programs Restricted programs may require contributions from unrestricted funding sources Typical programs: Special Education Transportation Class Size Reduction Manage contributions Limit contributions to amount that is necessary, but no more If contribution occurs, investigate Modify to limit contribution

Contributions to Restricted Programs Grants May Also Require Contributions May require matching in cash or in-kind Understand commitment before submitting application May not pay for all your cost increases over multiple years, for example: compensation increases changes in indirect cost rates Write language into grant to allow for these

Class Fees, Deposits and Other Charges

Free School System California Constitution provides for a free school system Since 1874, the California Supreme Court has interpreted this to mean that this entitles students to be educated at the public’s expense. Title 5, California Code of Regulations, Section 350, specifically states: “A pupil enrolled in a school shall not be required to pay any fee, deposit, or other charge not specifically authorized by law.”

Non-Allowable Fees Public schools, including charter schools, cannot levy fees as a condition for participation in any class, whether elective or compulsory. This includes: Security deposits for locks, lockers, books, class apparatus, musical instruments, uniforms or other equipment. Fees for participation in either curricular or extra-curricular activities. All supplies, both necessary and supplemental, must be provided free of charge whenever a particular curricular or extracurricular program is adopted.

Non-Allowable Fees, cont. Gym or Physical Education Clothes EC Section 49066 states that “No grade of a pupil participating in a physical education class may be adversely affected due to the fact that the pupil does not wear standardized physical education apparel where the failure to wear such apparel arises from circumstances beyond the control of the pupil,” such as lack of sufficient funds.

Non-Allowable Fees, cont. CDE has stated the position that schools may require students to purchase their own gym clothes of a district specified design and color so long as the design and color are of a type sold for general wear outside of school. Once the required gym uniforms become specialized in terms of logos, school name or other similar characteristics not found on clothing for general use outside of school, they are considered school supplies and the district must provide the uniforms free of charge.

Allowable Fees The following fees can be levied based on the Education Code: Transportation to and from school Transportation to places of summer employment Charges for food, limited by the free and reduced program Insurance for field trips Lost or damaged books or other district supplies Direct cost of materials for property the student has fabricated in class for their own use (if board policy in place)

Allowable Fees, cont. Fees for school camp programs (i.e. outdoor science camp). The fee cannot be mandatory. Fees for field trips and excursions may be charged in connection with courses of instruction or school-related social, educational, cultural, athletic, or school band activities. The fee cannot be mandatory. Optional fingerprinting program for kindergarten or newly enrolled students, if offered. Actual cost of duplication of public records or student records. Charges for medical and accident insurance for athletic team members, except for those members who cannot afford to pay.

Gift of Public Funds

Gift of Public Funds California Constitution, Article 16, section 6 addresses the subject: Prohibits making any gift of public money to any individual (including public employees), corporation, or other government agency. “ ... the Legislature shall have no ... power to make any gift, or authorize the making of any gift, of any public money or thing of value to any individual … whatever …”

Gift of Public Funds, cont. Expenditures of school funds must be for a direct and primary public purpose to avoid being a gift. Expenditures that most directly and tangibly benefit students’ education are more likely justified. Must be within the scope of a school entity’s jurisdiction and purpose. The Governing Board must determine that the expenditure will benefit the education of its students. Expenditures driven by personal motives are not justified even if they have been a long-standing local custom or are based on benevolent feelings.

Gift of Public Funds, cont. Expenses CANNOTbe considered a gift of public funds Must have a direct or substantial purpose Misappropriation of public funds is considered a criminal act, with no monetary limit specified Better to be safe than sorry

Are gifts allowable? Not allowable, even if small in amount Many think that “de minimus” gifts, those of trivial or little value, would be okay (under $20/person) Most courts would disagree

Are Awards Allowed? Authorized by E.C. 44015 To employees for exceptional contributions / to students for excellence Board required to adopt rules and regulations about awards if no policy or regulations, no awards allowed Can’t exceed $200 unless in board policy Awards to community members not considered authorized Birthdays, weddings, funerals and holidays not considered an award

Are Awards Allowed?, cont. Awards to employee allowed if they: Propose procedures or ideas that are adopted and result in eliminating or reducing district expenditures or improving operations Perform special acts or special services in the public interest Make exceptional contributions to the efficiency, economy or other improvement in operations of the district

Is Employee Clothing/Attire Allowed? No specific statutory or case authorizing such expense Could definitely be considered a gift of public funds Not allowable unless required to perform his or her duties as a coach, club advisor, etc. or if considered an “award” under E.C. 44015

Are Employee Appreciation Meals Allowed? Appreciation meals do not qualify as awards Attorney General says not “actual and necessary” per E.C. 44032 Don’t provide a direct and/or substantial purpose -- so would be a gift of public funds

Good Business Practices to have in place: Establish board policy and administrative regulations on what is considered allowable/unallowable Establish procedures to follow if questions arise Set parameters for determining appropriateness Assign specific employee in the business office to provide assistance Provide annual training

Overview of Funding Sources

Funding Sources Topics: Legislative Intent Funding Mechanisms Block Grants Categorical Programs Local Resources Other Topics Facilities

Legislative Intent Charter Funding per Pupil = District Funding Per Pupil Serving a similar student population Using a simple model

Funding Mechanism - Direct or Local Funding Election Direct funded = from the state Locally funded = through chartering authority Election made annually Charter Schools Information Sheet and Funding Survey (“Survey”)

Direct or Local Funding, cont. Direct Funded Funds deposited directly to county treasury In name of charter school Local Funded Funds deposited directly to county treasury in name of sponsoring LEA LEA must then apportion to charter school

Direct or Local Funding, cont. Applies to: Charter school eligible for block grant funding model charter general-purpose entitlements categorical block grant other state and federal categorical aid lottery funds

Direct or Local Funding, cont. Does not apply to: Certain all-charter districts County Office of Education authorized schools

Block Grants

General Purpose Entitlement Largest source of unrestricted charter school revenue Funded on current year P2 ADA no protection for declining enrollment 2009-10 funding reduced by 18.355% deficit and one-time $250 per pupil reduction

General Purpose Entitlement Funded at the statewide average amount of general-purpose funding per unit of ADA received by school districts at four different grade levels: K-3 4-6 7-8 9-12

General Purpose Entitlement

General Purpose Entitlement, cont. Funded by a combination of: state aid local property taxes (“in lieu of property tax”) In lieu of property tax: property tax dollar amount per ADA of the sponsoring LEA times the charter school’s total ADA

In Lieu of Property Tax Payments from the charter school’s sponsoring LEA In lieu of the charter school’s share of the LEA’s local property taxes

In Lieu of Property Tax, cont. The “sponsoring local educational agency” is defined as: District-approved charter Sponsoring district District-denied charter If COE approves, then sponsoring district County-office approved charter Sponsoring LEA is county office SBE-approved charter Any LEA that agrees to be the sponsor, or if none, The LEA that denied the charter County office-approved county community school charter For students who are referred by parental request pursuant to ECSection 1981(b), the sponsoring LEA is the district of residence of each pupil in the school

In Lieu of Property Tax, cont. The annual amount is the lesser of: Property taxes per ADA Multiplied by the charter school’s ADA OR The charter school’s general purpose entitlement

In Lieu of Property Tax, cont. Transfers are to be made monthly no later than the 15th of each month August through February Actual property taxes of prior year Actual P2 ADA of prior year March through June Estimated property taxes of current year Actual current year P1 ADA Less amounts transferred August through February

In Lieu of Property Tax – Apportionment Schedule

In Lieu of Property Tax, cont. July = settle-up month Actual property taxes of prior year Actual P2 ADA of prior year Less amounts transferred August through June February Final adjustments to the prior year In conjunction with the final reconciliation of annual apportionments to schools

In Lieu of Property Tax, cont. For in lieu taxes, a basic aid school district pays either: the district’s average property taxes per ADA, or the charter general purpose block grant per ADA whichever is less

Categorical Block Grant Unrestricted funds Consolidated from individual restricted categorical programs Not eligible to apply separately for these programs See handout for list

Categorical Block Grant, cont. Funding level: Based on the programs that comprise the block grant $423 per ADA for 2008-09 (after deficit) $401 per ADA for 2009-10 (after deficit)

Categorical Block Grant, cont. Programs included in the categorical block grant include: Any state categorical program that is supported with funds that count toward meeting the Proposition 98 guarantee, and Meet one of the criteria described below: Program is named in Education Code Section 47634(a) as being in the block grant Program was established on or after July 1, 1999, and statute does not expressly permit or require charter schools to apply separately to participate in the program Only those funds for “included” programs that are allocated directly to school districts are incorporated in the block grant Program funds that are allocated to other education agencies, for example, county offices, are not incorporated and distributed in the block grant

Categorical Programs

Categorical Programs - State

Categorical Programs Programs excluded from the categorical block grant: To the extent they are not listed inEducation Code Section 47634(a), and Meet one of the following program categories: Programs that charter schools may apply for separately Programs for which participation by charter schools is explicitly mandated by statute, for example: the state’s STAR testing program Programs that are funded with money that does not count toward meeting the Proposition 98 guarantee, for example: state bond-funded programs federally funded programs

Categorical Programs Programs excluded from the categorical block grant (cont’d) Other programs that are excluded by name or category in statute, including: Special Education programs Court Ordered and Voluntary Desegregation programs, and successor programs Lottery funds Economic Impact Aid program Programs that support or are provided in lieu of capital expenses, for example: school construction and modernization programs year-round school grant deferred maintenance programs

Categorical Programs To the extent they are eligible: Locally funded charter schools may apply through their chartering agencies direct-funded charter schools may apply directly to the appropriate state or federal agency

Categorical Program Flexibility 2009-10 budget provides flexibility options for categorical programs Three tiers – I, II & III I – no flex, no cuts II = no flex, 19% cut (over two years ended 2009-10) III = flex, 19% cut See handout for more information

Categorical Program Flexibility Balances must be kept in: Special Education Child Nutrition Child Development Economic Impact Aid (charters excluded – EIA is unrestricted) QEIA English Learner Acquisition Language Professional Development Program

Categorical Program Flexibility Education trailer bill clarifies that 2007-08 will be used as base year for calculating funding for the following Tier III programs: 9th Grade Class-Size Reduction Adult Education Regional Occupational Centers/Programs Supplemental Instruction California School Age Families Education (Cal-SAFE) Community Day School (nonmandatory only) Peer Assistance and Review (PAR) Advanced Placement Fee Waiver Program

K-3 Class Size Reduction Revised CSR Graduated Penalties for 2008-09 to 2011-12 Up to 20.44 = No penalty 20.45 to 21.44 = 5% penalty 21.45 to 22.44 = 10% penalty 22.45 to 22.94 = 15% penalty 22.95 to 24.94 = 20% penalty 24.95 or more = 30% penalty

K-3 Class Size Reduction LEAs may take advantage of the K-3 CSR flexibility, but may not receive funding for more classrooms than were applied for as of January 31, 2009 Funding for K-3 CSR continues to be based on a classroom-by-classroom average daily enrollment calculation (daily average from the beginning of school through April 15) Funding is not based on the amount received in 2008-09 An LEA may add or subtract grade levels that participate in K-3 CSR year-to-year and school-to-school, but it must continue to abide by grade level implementation priorities—Grade 1 must be implemented, then Grade 2, followed by Grade 3 or kindergarten

K-3 Class Size Reduction Penalty has two levels For classes more than 20.44 students, the penalty is imposed resulting in LEAs retaining from 95% down to 70% of the full incentive funding of $1,071 for Option 1 and $535 for Option 2 K-3 CSR incentive funding per classroom is limited to 20 students This means that a school that has a classroom with 25 students would receive 70% of the funding for only 20 of the students, not for 25 students

In Lieu of Economic Impact Aid (EIA) Funding to support additional programs and services for English learners (EL), and Compensatory education services for educationally disadvantaged students (ED) Block-grant funded charter school EIA funding = unrestricted supplement to Categorical Block Grant Spend EIA funds for any purpose EIA funding rate = average per-pupil EIA funding provided to school districts

In Lieu of Economic Impact Aid (EIA), cont. Data for this funding is collected via the CBEDs and R30-LC Prior year ED counts = basis for EIA funding for continuing charter schools New charter schools will continue to receive funding in their first year of operation based on current year counts

In Lieu of Economic Impact Aid (EIA), cont. All-charter districts funded through revenue limit receive EIA funding through special purpose apportionment Their EIA pupil counts and funding will be determined through the same formula But their ED pupil counts will be based on their Title I formula child counts Title I counts are almost exclusively made up of census counts of pupils residing with families whose income is at or below the federal poverty level

Special Education Statewide special education funding model (AB 602) Combines funds from several different sources: State Federal Local property taxes SELPAs Confederations of districts and counties joined together to more easily develop the programs and services necessary to provide full educational opportunities to students with disabilities Special education funding Generated by the total ADA reported by districts and combined at the SELPA level

Special Education, cont. For special education purposes: Education Codesections 47640 through 47647 assume that each charter school is a public school of the LEA that granted its charter Unless the charter school takes the steps necessary to be considered an LEA in the SELPA Charter schools that are deemed public schools of the LEA that granted their charters generate special education revenue by reporting ADA

Special Education, cont. The LEA that granted the charter is responsible for: ensuring that all students with disabilities enrolled in the charter school receive specialized instruction and related services in a manner that complies with all provisions of federal law regardless of the student’s district of residence

Special Education, cont. Education CodeSection 47646 requiresLEAs to provide charter schools with: An “equitable” share of funds or services or a combination of both Support for the educational needs of students with disabilities enrolled in the charter school

Special Education, cont. “Equitable” will depend on agreements reached by each LEA and charter school Special education funding does not cover the total costs of special education services Therefore, as a starting point for reaching agreement, charter schools should be assigned a level of encroachment equal to that experienced by the district Adjusted based on estimates of disproportionately higher or lower special education costs that are likely to be incurred by the charter school

Special Education, cont. A charter school that does not want to receive special education funding and services through a district can be deemed an LEA for special education purposes It must apply for admission to a SELPA as an LEA The process for securing participation in a SELPA as an LEA may differ from SELPA to SELPA A charter school that applies for admission as an LEA cannot be treated differently from other districts based on its status as a charter school Charter schools may also apply to the SBE for approval as a new SELPA, in conjunction with other charter schools or districts

Special Education, cont. A charter school that is deemed an LEA will: receive special education funds through its SELPA, as determined by the SELPA’s allocation plan participate in SELPA governance as an LEA, consistent with the policy-making process described in its SELPA’s local plan assume responsibility for ensuring that all students with disabilities enrolled in the charter school receive special education and related services in a manner that complies with federal law

Special Education, cont. Education Code Section 47641 (c) provides that: a charter school that has been granted a charter by the State Board of Education, and for which the board has delegated its supervisorial and oversight responsibilities, shall be deemed a public school of the LEA to which the board has delegated its supervisorial and oversight responsibilities Education Code Section 47641 (d) provides that: a charter school that has been granted a charter by the State Board of Education, and for which the board has not delegated its supervisorial and oversight responsibilities, may not be deemed a LEA unless the charter school applies for and is granted such status with a SELPA

Lottery Education CodeSection 47638 provides that each charter school shall be deemed a school district for purposes of receiving lottery funds, regardless of funding mechanisms: funded under the block grant funding model or through the revenue limit local or direct funding As a result, lottery funds will be calculated independently for each charter school These funds will be deposited in the appropriate account of the charter school

Lottery, cont. Throughout the year, the allocation of lottery funds is based on estimated annual ADA for that year An estimate is necessary because actual ADA is not certified until a few months after the close of the year The estimate is based on prior year ADA Because new charter schools - which are not conversion schools - have no prior year ADA, lottery funds will first be received by these charter schools after the close of the first year of operation However, in the second year of operation, these charter schools will receive their first and second year entitlements

Categorical Programs - Federal

No Child Left Behind (NCLB) Act NCLB provides federal funding to LEAs for a variety of programs Direct-funded charter schools must apply for NCLB funding on its own behalf Locally funded charter school may receive funding for NCLB programs through its chartering authority

No Child Left Behind (NCLB) Act, cont. LEA Plans Direct-funded charter school must have an approved LEA plan Submit a plan for review to the CDE The LEA Plan describes how the LEA will use NCLB program funds

No Child Left Behind (NCLB) Act, cont. CDE has two plan templates Help schools ensure that their plan meets applicable reporting requirements Both are located on CDE’s Web page at www.cde.ca.gov/nclb/sr/le Many charter school administrators use a template developed for single school districts provides better opportunity to develop comprehensive plan for focus on student achievement

No Child Left Behind (NCLB) Act, cont. Consolidated Application Direct-funded charter schools must also complete a Consolidated Application (ConApp) each year Part I must be submitted in June of each year Part II must be submitted each January New charter schools should submit both Part I and Part II of the ConApp at the same time The application is available on CDE’s Web page at www.cde.ca.gov/fg/aa/co/index.asp

No Child Left Behind (NCLB) Act, cont. Federal and state categorical program funds administered through the ConApp: California School Age Families Education (Cal SAFE) Middle and High School Supplemental School Counseling Program Peer Assistance and Review (PAR) School Safety & Violence Prevention Act California High School Exit Exam (CAHSEE) Title I, Neglected or Delinquent Title I, Part A, Basic Grant Title II, Part A, Teacher & Principal Training & RecruitingTitle III, LEP StudentsTitle IV, Part A, Safe & Drug-Free Schools & CommunitiesTitle VI, Part B, Rural Education AchievementTobacco-Use Prevention Education

No Child Left Behind (NCLB) Act, cont. SBx3 4 2008 Budget Act Changes (Flexibility) Education Code Section 42605 authorizes complete flexibility in use of funds appropriated in 39 budget act items For 2008-09 through 2012-13, charter schools may use funds from these 39 items for any educational purpose Funds are unrestricted Program or funding requirements are not in effect Five programs from the ConApp are specifically listed in the flexibility provision: California School Age Families Education (Cal SAFE) Middle and High School Supplemental School Counseling Program Peer Assistance and Review (PAR) School Safety & Violence Prevention Act California High School Exit Exam (CAHSEE)

No Child Left Behind (NCLB) Act, cont. Since these programs are specifically listed in the flexibility provision, there is no need to apply for funding or report the results of these programs Legal assurances for these programs have been removed LEAs will automatically receive funding if they previously participated in these programs

American Recovery and Reinvestment Act The Federal American Recovery and Reinvestment Act of 2009 (ARRA) was signed into law in February 2009 This legislation has provided significant one-time funds to: Save jobs Stimulate the economy Improve academic outcomes and support school reform

American Recovery and Reinvestment Act, cont. Programs funded by ARRA include (bold indicates those with greatest funding impact): Education & Human Resources Directorate, National Science Foundation Child Nutrition Equipment Program Child Care and Development Block Grants Head Start and Early Head Start Elementary and Secondary Education Act Title I(Education for Disadvantaged Students) School Improvement Grants Impact Aid Construction Enhancing Education Through Technology (EETT) Education for Homeless Children and Youth Statewide Data Systems Teacher Incentive Fund Teacher Quality Enhancement, State Grants Individuals with Disabilities Education Act Special Education, Part B, 611 ( Ages 3 – 21) Special Education, Part B, 619 (Ages 3 – 5) Special Education, Part C (Birth – 2) State Fiscal Stabilization Fund (SFSF) Qualified Zone Academy Bond Program (QZAB) Qualified School Construction Bonds (QSCB)

American Recovery and Reinvestment Act SFSF State has distributed $2.5 billion of the anticipated $3.2 billion for K-12 education Provided based on the 2008-09 level of reductions to school district revenue limits and categorical programs Funds may be used for any ESEA purpose Method used to allocate remaining funds will depend on resolution of QEIA funding issue

American Recovery and Reinvestment Act Title I USDE accelerated next payment to states from end of September to early September CDE has submitted nine waiver requests associated with Title I Set asides for Program Improvement schools and districts,15% carryover All LEAs receiving funds must report the per-pupil expenditures by site to CDE by December 1, 2009

American Recovery and Reinvestment Act IDEA One-time money (as are all ARRA funds) May be difficult to find new one-time uses in Special Education If ongoing, increases MOE Opportunity to offset encroachment with up to 50% of the new funding Must meet all program compliance requirements “Freed up” local general fund dollars must be directed to activities allowed under NCLB

Public Charter Schools Grant Program Federal funds for charter school development in areas of high need Two areas: charter school creation best practices dissemination Primary focus Create high quality charter schools that will provide public school choice to students in attendance areas of chronically low performing traditional public schools

Public Charter Schools Grant Program, cont. Planning and implementation grants awarded to newly established or conversion charter schools for the purpose of supporting the final planning and initial operations of the charter school Grant awards are made year-round can be awarded once a school is approved by a charter authorizing entity Preference: serve students whose home attendance area contains a traditional public school that is in Program Improvement (PI) Years 3, 4, or 5, and has an Academic Performance Index (API) state decile rank of 1 or 2

Public Charter Schools Grant Program, cont. Maximum award: $250,000 for: charter schools that are not in PI Years 3, 4, or 5, and propose to serve 50-99 students Up to $600,000 for: charter schools in PI Years 3, 4, or 5 with API ranks of 1 or 2, and propose to serve 100 students or more

Public Charter Schools Grant Program, cont. Dissemination grant Competitive basis Disseminate best practices likely to: significantly improve academic achievement, and reduce achievement gaps Beneficiaries of the program are required to include charter and non-charter schools The PCSGP awards dissemination grants once every three years

Local Resources

Donations Donation requests can be appropriate if: Provided without any expectations on the part of donor Does not equate to a “fee” Do not place in separate bank account Out of sight of sponsoring LEA Consider setting up a foundation to receive donations

Grants Grants can be a good source of supplementary income But be wary of: Matching requirements Restrictions on charging charter school increased costs to grant funds Limits on indirect costs charged to the grant by the charter school Grant Application Understand how the charter school will sustain grant-funded programs once the grant has expired

Other Topics

New Charter Schools Each new school, including new conversion charter schools, must make a funding method election Funding for non-block grant programs is based on prior-year enrollment or requires a separate application process new charter school may not be able to access these funds in a timely manner CDE encourages funding locally through the district in the first year of operation

New Charter Schools, cont. A new charter school must commence instruction between July 1 and September 30 to be eligible for any state apportionment in the fiscal year

Special Apportionment for Newly Operational Charter Schools Start-up charter schools opening by September 30 May be eligible to receive an advance apportionment First payment in late September 34%of state aid and categorical block grant based on estimated P2 ADA projections per Information Sheet and Funding Survey Second payment in late November 58%of the recalculated state aid and categorical block grant based on ADA reported from first 20 days of operation minus the amount paid in the first payment

Special Apportionment for New Grade Level Expansion Special advance apportionment for adding a new grade level Beginning with 2nd or later year of operation Based on: grade level ADA projections from the charter school’s survey, and “New Grade Level Expansion, Charter School Advance Apportionment, 20-Day Actual Certification of District Charter School” ADA funded for a new grade level shall not exceed the portion of the certified P2 ADA for the prior year attributable to the pupils in the highest grade served by the charter school

Special Apportionment for New Grade Level Expansion, cont. Continuing charter schools significant expansion (25% or more) Submit estimated enrollment for determining federal entitlements Advance federal funding based on estimated counts adjusted to actual counts that are reported to the CDE Any funds overpaid will be recaptured through invoice process or reduced from a future apportionment Locally funded charter schools notification must be provided to the authorizing entity at least 120 days before the charter school is scheduled to significantly expand its enrollment

All-Charter Districts EC Section 47664 Allows all-charter school districts option of being funded via the block grant funding model Election is irrevocable If charter schools are funded pursuant to the block grant prior to the district converting all of its schools to charter status, the district may then elect to be funded under the revenue limit calculation Only option where the election to be block grant funded can be changed Regardless of funding model, all schools in the school district must be funded under the same funding method

All-Charter Districts, cont. Funding for all-charter school districts electing the revenue limit can be limited Education CodeSection 47664 provides that ADA increases resulting from pupils who reside outside of the district will be funded at the lesser of: the statewide average base revenue limit per ADA for districts of similar type, or the district's own base revenue limit per ADA Increases in ADA shall be measured relative to: the 1998-99 fiscal year, or the fiscal year in which all schools in the district were converted to charter schools whichever fiscal year is later

Declining Enrollment Education Code Section 47661 Requires sponsoring school district to calculate declining enrollment independent of enrollment changes in the charter school A district will not receive declining enrollment funding as a result of a decline in enrollment due to pupils who change attendance from a district non-charter school to a district charter school

Basic Aid District Charter Schools A charter school sponsored by a basic aid district will receive in lieu property taxes capped at the charter school block grant entitlement

Basic Aid District Charter Schools, cont. Education Code Section 47663 provides that if: a charter school pupil resides in a district other than a basic aid district, and the pupil attends a charter school in a district other than his or her district of residence, and that district of attendance is a basic aid district, then: the district of attendance will receive from the state an amount equal to 70% of the revenue limit of the district of residence

County Office of Education Approved Charters A charter school approved by a county office after denial by a school district may be funded pursuant to the block grant model However, the funding model cannot be used by county office of education charter schools for county office programs with one exception: the model must apply to any charter school pupil attending a community school at the request of the parent per Education Code Section1981(b) County office authorized block grant funded charter schools may choose direct or local funding

Classroom/nonclassroom Based Instruction and Funding Determinations SB 740 requires charter schools to seek a funding determination from SBE before they can receive apportionment funding for nonclassroom based instruction attendance Required of all charter schools whose enrollment: isnot under the immediate supervision of an employee of the charter school at a school site exceeds 20%of the school’s ADA at P-2 Failure to submit a funding determination will result in loss of funding for the charter school’s nonclassroom-based programs

Classroom/nonclassroom Based Instruction and Funding Determinations, cont. SBE regulations define classroom-based instruction as occurring when all of the following four conditions are met: Pupils are engaged in education activities required of those pupils under the immediate supervision and control of an employee of the charter school who is authorized to provide instruction to the pupils Pupils are in attendance at the school site at least 80% of the instructional time required Charter school facility is used principallyfor classroom instruction At least 80% of the annual instructional minutes offered at the charter school are at the school site

Classroom/nonclassroom Based Instruction and Funding Determinations, cont. Regulations define “at the school site” as satisfied if the facility meets any of the following: Facility is owned, rented, or leased by the charter school principally for classroom instruction Facility is provided to the charter school by a school district pursuant to EC Section 47614 (Prop 39) principally for classroom instruction Facility is provided to the charter school free of charge principally for classroom instruction pursuant to a written agreement

Classroom/nonclassroom Based Instruction and Funding Determinations, cont. Any charter school that does not meet: all of the requirements for classroom-based instruction, and at least one of the school site conditions is considered to offer nonclassroom-based instruction and must submit a determination of funding request form

Classroom/nonclassroom Based Instruction and Funding Determinations, cont. Funding Determination forms for new schools in their first year of operation are due on or before December 1 Funding Determination forms for continuing schools are due on or before February 1

Annual Information Sheet and Funding Survey Each charter school must complete the “Charter Schools Annual Information Sheet and Funding Survey” form each year Survey will be used to update general information on each charter school Funding information will be used as the basis for: advance apportionment of the funding for new schools schools that are changing their funding selection for the current fiscal year

Annual Information Sheet and Funding Survey, cont. Continuing schools that are not changing their funding selection for the current fiscal year: Need only verify the accuracy of the information on the pre-populated form and make any necessary changes, additions and deletions

Facility Funding

Facility Funding Charter School Facility Grant Program SB 740, Education Code Section 47614.5 Provides assistance with facilities rent and lease expenditures for charter schools that meet eligibility criteria Reimbursement for facilities rent and lease costs up to $750 per ADA But no more than 75% of total annual facilities rent and lease costs

Facility Funding, cont. If there are insufficient funds to reimburse all eligible charter schools at the maximum level, the funding provided to each eligible school will be reduced on a pro-rata basis

Facility Funding, cont. To be eligible for reimbursement, the charter school must: Have 70% or more free and reduced meal eligibility, or be geographically located within the attendance area of a public elementary school that meets this criteria Charter schools are ineligible if they: occupy existing school district or county office of education facilities that are reasonably equivalent

Facility Funding, cont. Eligibility must be established annually Multi-site charters must submit a separate application for each site for which they are seeking reimbursement Determined by Free and Reduced Price Meals data on file at CDE Reimbursements for 2009-10 will be paid in 2009-10 Paid in arrears in prior years Awards for the 2009-10 year will be announced in October 2009

Facility Funding, cont. Charter Schools Facilities Program In 2002, AB 14 established the Charter School Facilities Program (CSFP) pilot program to provide charter schools with funding to construct new facilities Proposition 47 added $100 million in bond funding Proposition 55 provided an additional $300 million Proposition 1D provided an additional $500 million 50/50 matching program

Facility Funding, cont. The CSFP provides a preliminary apportionment (reservation of funds) for construction of new facilities and/or rehabilitation of existing district owned facilities at least 15 years old Charter must be deemed financially sound by the California School Finance Authority (CSFA) The preliminary apportionment must be converted within a four-year period to an adjusted grant apportionment meeting all the School Facilities Program (SFP) criteria unless a single one-year extension is granted

Facility Funding, cont. CSFP Funding Status On May 27, 2009 the SAB approved a new filing round for approximately $50.9 million that has returned to the program Application filing period was July 1, 2009 through September 28, 2009 See Section 6 of OPSC’s State Facilities Program Handbook for more information regarding the Charter Schools Facilities Program

Facility Funding, cont. Qualified School Construction Bond Program (QSCB) $73 million reserved for use by charter schools through issuance of conduit revenue bonds by California School Finance Authority (CSFA) QSCB allocations are not grants rather an authorization to seek out and utilize a low interest rate loan from investors that may be interested in receiving a federal tax credit in lieu of interest income from the borrower Typically limited to approximately 15 years

Facility Funding, cont. Can be used to fund construction, rehabilitation and repair of public school facilities “Shovel ready” projects from charter schools that are best able to demonstrate they will be capable of accessing the capital markets

Facility Funding, cont. Eligibility - meet all of the following: operated as, or is operated by, a nonprofit entity approved charter in place in good standing with its chartering authority the charter school or its operator (if the operator also will be obligated to repay the loan) applicant has completed at least three full school years of instructional operation experience as of June 30, 2009

Facility Funding, cont. Applications were due September 14, 2009 CSFA will notify applicants who are awarded QSCB borrowing authority by October 23, 2009

Data Management for Charter Schools

Data Management Topics Data management and charter schools CALPADS purpose, benefits, and timeline CALPADS security requirements CALPADS implementation Data management services provided by FCMAT/CSIS

Importance of Data Management All local education agencies (LEAs) are required to assign and maintain Statewide Student Identifiers (SSIDs) Official reporting of enrollment, dropout, graduate and other data is now based on CALPADS data Funding and public views on efficacy of your school are impacted by local data management practices

Importance of Data Management Data management practices impact the quality of local and CALPADS data CALPADS data feeds into the CDE DataQuest system DataQuest is the public access for reports on your charter CALPADS data is used in the AYP and API calculations

Charter School Reporting Responsibilities Charter schools can elect to report through their authorizing LEA or independently Reporting method can be changed each May See CDE CALPADS Website:http://www.cde.ca.gov/ds/sp/cl/charterschools.asp

Charter School Reporting Responsibilities Not meeting CALPADS reporting requirements may result in zero enrollment counts Zero enrollment counts will result in a loss of any funding based on official enrollment

California Longitudinal Pupil Achievement Data System (CALPADS) Purpose, Benefits, and Timeline

CALPADS Purpose Provide local education agencies (LEAs) and CDE access to data necessary to comply with NCLB reporting requirements Provide a better means of evaluating educational progress and investments over time Provide LEAs information that can be used to improve pupil achievement Provide an efficient, flexible, and secure means of maintaining longitudinal statewide pupil level data

CALPADS Benefits Streamlined data collection and maintenance process Immediate access to information on new students captured by previous LEAs Visible data to support school performance improvement

CALPADS Benefits Extraction and download of data from CALPADS to conduct analyses using local analysis tools Print and download reports Filter report data with user-selected filters (e.g., district, school site, grade level, demographics, program participation) View summary and detail reports (e.g., student demographic, program participation, enrollment history, enrollment exit History, assessment history) View assessment test results(e.g., CAHSEE, CELDT)

CALPADS Benefits Provides the ability to maintain at least 20 years of data in a production environment Is designed to enable expanded capabilities over time

CALPADS Collections Timeline Which Data are Expected?

CALPADS Collections Timeline

CALPADS SecurityRequirements

CALPADS Security The LEA CALPADS Administrator creates and maintains accounts for CALPADS users. The account controls access to data based on: User Security Level Group - determines the level of data that the user can see in CALPADS School Level LEA Level User Roles - give the users access to specific data and functions in CALPADS

CALPADS Security If you report through your authorizing LEA, you should coordinate with your authorizing LEA to establish: Staff accounts in CALPADS for your charter User roles and access levels for your charter’s data

CALPADS Implementation

Leadership for Data Management Know the requirements and deadlines and work to meet them Provide staff sufficient time to get the work done Allocate resources for staff training and SIS maintenance Monitor implementation Help resolve problems Encourage collaboration

CALPADS Training Overview of CALPADS Objectives and Requirements Training 1 – Full version Training 1A – Advanced (no longer available) Training 2: CALPADS Key Features, Key Concepts, and System Administration Training 3: CALPADS SSID Enrollment and Anomalies Training 4: CALPADS State Reporting and Anomalies Training 2-4 – All day regional training Other TBD (Fall 2, Spring, End of Year)

Requirements References Review CALPADS Documentation: File specifications Code sets Enrollment procedures Data guide Valid Code Combinations Error List Located at: http://www.cde.ca.gov/ds/sp/cl/systemdocs.asp CALPADS User Manual (Available within the CALPADS application.)

New Federal Requirements for Race and Ethnicity A two-part question will be required to collect race and ethnicity information from students and staff There is no category for “Unknown” or “Decline to State” Requirements apply ONLY to new student enrollments and staff hires Frequently asked questions posted at: http://www.cde.ca.gov/ds/td/lo/refaq.asp Other resources posted on CSIS website: http://www.csis.k12.ca.us/library/calpads/ Sample student and staff forms NCES document

Data Auditing Procedures Elements of a Data Audit: Analysis of findings Error determination or exception Error replication Sources of errors and sources of correct data Notify appropriate staff of errors detected and how they will be corrected Correction of problems

Best Practices for Data Quality Establish Standards Evaluate local and state requirements Correlate state codes Identify system of record Implement Standards and Expectations Document standards Conduct training Provide support Designate Data Stewards

CSIS CALPADS Support Tools Found under the CALPADS documents item off the CALPADS tab on the CSIS web page (www.csis.k12.ca.us)

CSIS CALPADS Support Tools CALPADS Readiness Questionnaire – 2 Charter versions SSID - Only elementary districts and independently reporting charters with only self-contained classrooms SSID - Only unified and high school districts and independently reporting charters with schedules CALPADS Readiness Questionnaire Task List

CSIS CALPADS Support Tools CFS Gap Analysis and Planning Tool – 2 Versions CFS Aligned Gap Analysis Tool Preparing to Submit Elementary Course Data Preparing to Submit Scheduled Course Data

Data Reporting Responsibilities and Collaboration Coordinate with your district if you report with them Create or expand your data management team Define clear roles and responsibilities with respect to CALPADS Encourage communication and collaboration

Local Staff Training IBM CALPADS Trainings 2-4 are “train the trainer” based Establish local policies for CALPADS enrollment updates and anomaly resolution Train staff on CALPADS and local policies Train staff on new CALPADS functionality in local SIS

FCMAT/CSIS Data Management Services

FCMAT/CSIS Data Management Services Academic Records Transfer Direct Certification Address Validation On-site Technical Assistance (fee based)

Academic Records Transfer Service for sending student records from: K-12 to K-12 K-12 to postsecondary Visit http://www.csis.k12.ca.us/rt/default.asp for more information and to register for training

Direct Certification Free, secure process that allows students to be directly certified as eligible for free school meals LEAs are required to participate in a direct certification process — either a local process or through CSIS Available until CALPADS implements direct certification To register for training, go to: http://www.csis.k12.ca.us/e-learning/rt-registration/default.asp

Address Validation Free service to support submission of student addresses to CALPADS and for direct certification Will allow LEAs to standardize their address data and to be notified of errors in addresses Designed to: Increase matching for direct certification Help LEAs maintain correct addresses to facilitate communications with parents/guardians

On-site Technical Assistance Fee-based service Interested LEAs can obtain individual assistance in: Local data management practices CALPADS implementation

Contact Information CSIS Support support@csis.k12.ca.us 916.325.9210 Gary Quiring gquiring@csis.k12.ca.us 916.325.9241

CALPADS Resources CDE CALPADS: http://www.cde.ca.gov/calpads Sign up for CALPADS listserv: http://www.cde.ca.gov/ds/sp/cl/listservs.asp CSIS CALPADS: http://www.csis.k12.ca.us/library/calpads/ Education Data Newsletter http://www.cde.ca.gov/ds/sd/cs/

CALPADS Resources CDE Race and Ethnicity FAQs http://www.cde.ca.gov/ds/td/lo/refaq.asp NCES’ Managing an Identity Crisis - Forum Guide to Implementing New Federal Race and Ethnicity Categories http://nces.ed.gov/pubs2008/2008802.pdf

CALPADS Resources Charter School CALPADS and CBEDS-OPUS Data Reporting Policy:http://www.cde.ca.gov/ds/sp/cl/charterschools.asp CALPADS Training Registration page:http://www.csis.k12.ca.us/e-learning/calpads-registration/

Financial Reporting and Timelines

Reporting Requirements Education Code section 47604.33(a) requires a series of annual financial reports to be submitted to: the chartering authority the county superintendent of schools of the county in which the charter is located

Reporting Requirements, cont. Preliminary budget on or before July 1 (Note: the chartering authority may request a revised budget to address any concerns identified during the review of the preliminary budget.)

Reporting Requirements, cont. On or before December 15, a first interim financial report that reflects changes through October 31 On or before March 15, a second interim financial report that reflects changes through January 31

Reporting Requirements, cont. On or before September 15, a final unaudited actual report for the full prior year in a format prescribed by the Superintendent of Public Instruction.

Report Format The format of the adopted budget and interim reports should be determined by the charter school in consultation with the chartering authority

Report Format, cont. Adopted Budget Report should contain: beginning fund balance revenue detail by major object and resource code expenditure detail by major object code ending fund balance

Report Format, cont. Ending fund balance information should provide: amounts reserved and designated by the charter school board – including the economic uncertainty reserve any undesignated balance

Report Format, cont. Interim Budget Reports Interim budget reports should be presented in the same format as adopted budget reports, with the following comparative data: Adopted budget Most recent board-approved budget Year-to-date actual transactions Projected budget

Report Format, cont. The projected data represents the budget that staff recommends to the charter school board for approval with the interim report

Report Format, cont. Unaudited Actuals Report Format prescribed by the Superintendent of Public Instruction As approved by the State Board of Education May be periodically amended to accommodate changes in statute or government reporting standards [EC section 42100]

Report Format, cont. Not using a SACS compliant accounting system? May use the Charter Schools Unaudited Actual Financial Report – Alternative Form [5 CCR § 15071] Access the form at the CDE web site (including a helpful Users Guide that should be reviewed prior to preparing the report)

Report Format, cont. Supplemental Information Charter school should provide chartering authority: Supplemental information to provide the chartering authority all the necessary information to monitor the charter school’s financial condition as required by Education Code section 47604.32(d) Chartering authority should provide charter school: list of supplemental information required

Report Format, cont. Typical List of Supplemental Information Budget assumptions for revenues and expenditures Analysis of enrollment and average daily attendance (ADA) trends An organizational chart Statement of cash flow for the current and subsequent fiscal year Profit and loss statement Disclosure of all multiyear fiscal obligations, such as loans, lines of credit, etc., for the next three years

Financial Reporting Calendar See handout for 2009-10 financial reporting calendar

Apportionment Funding - Reporting Apportionment Funding Charter schools receive apportionment funding from the state of California per prescribed schedules These apportionments are derived from attendance and pupil count reports filed by charter schools See handout for apportionment funding calendar for 2009-10

Categorical Program Reporting Charter schools receiving funding for certain categorically funded programs require additional reporting: K-3 Class Size Reduction program Free & Reduced Meal Reimbursements Consolidated Application (ConApp)

Categorical Program Reporting See handout for categorical program reporting calendar for 2008-09 (2009-10 calendar not available)

Charter School Annual Funding Survey Each charter school must complete an online funding survey each year and submit to CDE Purpose: determine basis for advance apportionment for new schools change funding election for the fiscal year Continuing school not changing funding election? need only verify the accuracy of the information on the pre-populated form and make any necessary changes

Charter School Annual Funding Survey, cont. The survey is due to CDE by June 1st The survey can be found on CDE’s website at www.cde.ca.gov

Where to Go for Help

Fiscal Crisis and Management Assistance Team (FCMAT) Website: www.fcmat.org Management Assistance On-site Technical Assistance AB139 Extraordinary Audit Fiscal Crisis Fiscal Advisor/Fiscal Expert Online Help Desk Professional Development

FCMAT Contact Information Bakersfield Office1300 17th Street - City CentreBakersfield, CA 93301661-636-4611 Petaluma Office422 Petaluma Blvd. North, Suite CPetaluma, CA 94952707-775-2850 CSIS Office770 L Street, Suite 1120Sacramento, CA 95814916-325-9220

Charter School Division Contact Information Charter Schools Division California Department of Education, 1430 N Street, Suite 5401, Sacramento, CA 95814 Phone: 916-322-6029 Fax: 916-322-1465 email: charters@cde.ca.gov Web site: www.cde.ca.gov/sp/cs

Charter School Division’s Website Administration & Support Information about charter school funding model options, funding opportunities, and funding determinations for nonclassroom-based instruction. Announcements & Current Issues Current and upcoming events, time-sensitive issues, and hot topics Laws, Regulations, & Policies State and federal legislation, laws and regulations, policy guidance and legal opinions for charter schools Resources Information about obtaining a charter school number, questions and answers about charters, and other state, federal, and private resources

Questions and Answers

Thank you for attending!

Fall/Winter 2009 Charter School Fiscal Management Presented by: Fiscal Crisis and Management Assistance Team (FCMAT)