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Charter School Board of Directors:Fiduciary ResponsibilitiesCHARTER SCHOOL PLANNING YEAR: SESSION 2OCTOBER 31, 2018Division of School BusinessLeigh Ann Kerr, Assistant Director
Objectives Understand how CRITICAL the role of charterschool Board of Directors is to the success of theschool Understand the fiduciary roles and responsibilitiesof being a charter school board member Be able to recognize financial warning signswithin your school and minimize risk Identify top 10 financial mistakes for the board toavoid
Why is it “critical”? “Less than 1 in 5 charter schools have closedfor academic reasons, but two-thirds closedbecause of financial or managementfailure.” Source: Center for Education Reform “42% of charter school failures to financialreasons, including low student enrollment,and 24% due to mismanagement, includingfraud.” Source: The State of Charter Schools
Why is it “critical”? (concluded) Substantial public money is being spent Great educators are not necessarily greatbusiness people. Financial failure can prevent the deliveryof great student education andachievement.
BoardCompositionNational Association of Charter SchoolAuthorizers (NACSA) - Model boardincludes members with skills, expertiseand experience in the following areas: Financial Legal Human resources School operation Academic oversight Fundraising Public relations / marketing Strategic planning Real estate
Board of Directors CompositionEvery Board should have afinancially literate member, withan understanding of: Budgeting Financial processes Financial Statements Financial Audits
Board Roles and Responsibilities(concluded)The roles and responsibilities of a charter schoolboard include developing and maintaining theschool’s: Mission and purpose Relationship with school administrator Effective organizational structureFinancial sustainabilityIntegrity of the academic programPublic relations strategySelf-evaluation
Principles of Sound FinancialManagement1. Establishing internal controls (through policy)2. Monitoring compliance with fiscal policies3. Developing financial reporting interpretation skills4. Developing accurate budgets5. Recognizing red flags6. Minimizing risk7. Hiring independent auditor*Develop finance and audit committees to monitorfinancial activity in greater detail.
Fiduciary Responsibilities Understand financial condition of school. Oversee the operating budget to protect theresources of school. Hold school staff accountable for budgetmanagement. Ensure that the necessary financial policies are inplace to prevent fraud, waste and misappropriation. Identify strategic and long-term financial issues toaddress before they become urgent issues Serve as an ongoing resource and advisor to staff onfinancial issues Work closely with staff on financial issues/oversight
Fiduciary Responsibilities (continued) Develop internal control systems, including fiscalpolicies and procedures Budget approval Banking decisions Vendor contract approval Hiring and evaluation of school director/administrator/principal Approve monthly and annual financial reporting Annual audit Select and contract with independent auditor Approve management response and ensure corrective actionfor any audit findingsAnnual tax return
Fiduciary Responsibilities(continued)Contracted Services and Procurement Fiscal policies and procedures Conflict of Interest Related party Financial Interest Nepotism Methods of procurement and thresholds Vendor selection Board approval / signature
Fiduciary Responsibilities (concluded)Financial ReportingBoards should receive, review and discussmonthly and annual financial reportingpackages from school administrator orfinance officer that include: Balance SheetRevenues vs. expenditures statementBudget vs. actual expensesCash Flow ForecastAttendance Reporting Update
Financial ResponsibilitiesTaskFrequencyBank Accounts – Opening/Signatory/ClosingAs neededLoans - Review and recommend applications andagreementsAs neededReview financial statementsEach meetingReview student enrollment and ADMEach meetingUnderstand revenue sourcesAnnuallyUnderstand state and federal reporting requirements AnnuallyReview and update fiscal policies and proceduresAnnuallyReview salary schedule/applicable contracts forhighest compensated employeesAnnually
Audit Responsibilities
AnnualBoardCalendarSample
Financial Red FlagsDirector orPrincipalAppears offended when questioned aboutschool’s finances and/or cannot give clearexplanations to questions about financesFinancialReportsIrregularity in receipt from schooladministrationCashLow or negative balanceAccountsreceivableRemains constant throughout the year with nodecreaseAccountspayableRemains constant throughout the year orsteadily increasesFund balance Declines (unless special project) or negativeOperatingexpensesHigher than budgetedADM /EnrollmentLower than projected
Minimizing Financial RiskControlsCredit CardsHave the bank place limits on the amount allowed to be charged ina transaction. Two copies of statements – one sent to school forTaskpayment, one sent to Board member at either home or officelocation.Bank AccountsCopy front and back of signature cards and place in official minuteswhen authorizing establishment of any bank accountCell phonesOffer employee stipends as appropriate instead of providingphones/contractChecksNever sign a check for school expenses without reviewing clearsupporting documentation and evidence of inclusion in approvedbudgetBank statementsRequire the bank to send out two copies of the monthly bankstatements (one to the school and one to a designated boardmember at his/her home or place of business)
Top 10 Financial Mistakes to Avoid1.Absence of financial expertise on Board2.Absence of guiding discipline around purchasing andcontracts3.Absence of understanding of grants4.Relying on one person to handle finances and operations5.Allowing school administration too much control6.Entering into bad facility deals7.Late reporting8.Failure to budget contingencies and build reserves9.Lack of fiscal internal controls10.Failure to adjust
Questions?Leigh Ann KerrAssistant DirectorDivision of School Business919.807.3553LeighAnn.Kerr@dpi.nc.gov
Resources Creating and Sustaining High-Quality Charter School GoverningBoards. National Charter School Resource Center.http://www.charterschoolcenter.org/ National Association of Charter School Authorizers (NACSA) Charter Friends Network - Creating an Effective Charter SchoolGoverning Board .uscharterschools.org/gb/governance/ National Charter Schools Institutewww.nationalcharterschools.org National Resource Center on Charter School Finance &Governance http://www.charterresource.org/index.cfm/Fr National Alliance for Public Charter Schools http://www.publiccharters.org
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