Terence WashingtonFinancial and Operational Accountability Manager
10 Ways to Fail at Charter School Operations and Finance2017 GCSA Annual Conference
March 14, 2017
1. Weak policies2. Lack of internal controls3. Bad budgeting4. Inadequate staff5. Not knowing your funding6. Data reporting7. Not evaluating financial performance8. Branding and marketing plan?9. Bad facility/debt financing10.Not reaching out to the people with the answers
Presentation Overview
1. Weak Policies2. Lack of internal controls3. Bad budgeting4. Inadequate staff5. Not knowing your funding6. Data reporting7. Not evaluating financial performance8. Branding and marketing plan?9. Bad facility/debt financing10.Not reaching out to the people with the answers
Presentation Overview
¡ Financial policies are guidelines or a plan of action for decisions as they relate to financial matters§ Provides direction to staff for handling day-to-day financial business
§ Provides historical basis for future direction by encouraging stability and continuity
§ Establishes consistent guidelines for financial activities
§ Sets a foundation for financial planning and decision making
§ Minimizes risk and safeguards assets
WHY HAVE FINANCIAL POLICIES?
¡ Policy§ Guiding principle put in place to give employees direction
§ Set by governing body
§ Reflect the mission statement of the school
§ Sets out what staff can do
¡ Procedure§ Set of actions that staff perform
§ Step by step instruction that tell employees what to do and when to do it
§ Spells out how staff are going to do it
POLICY VS PROCEDURE
¡Clear, Specific
¡Current
¡Centrally available
¡Comprehensive§ Who, what, when, where (not how!)
EFFECTIVE POLICY CHARACTERISTICS
¡Determine needed policies
¡Obtain sample policies§ other schools, GCSA
¡Create a draft policy§ Template for policies
¡ Legal review
¡ Board approval
¡Distribute and train on policy§ All relevant staff need to be aware of the policy
§ Without proper training, policies can often be meaningless!
STEPS TO DEVELOP POLICY
1. Weak policies2. Lack of internal controls3. Bad budgeting4. Inadequate staff5. Not knowing your funding6. Data reporting7. Not evaluating financial performance8. Branding and marketing plan?9. Bad facility/debt financing10.Not reaching out to the people with the answers
Presentation Overview
WHAT ARE INTERNAL CONTROLS
BASIC INTERNAL CONTROLS
Performance Reviews
Information Processing
ControlsPhysical Controls
Segregation of Duties
Authorization and Document Based Controls
INTERNAL CONTROLS
Protect Resources• Assets• Employees
Ensure Accuracy and Reliability• Prevents/
Detects Errors and Misuse
• Financial Statements Accurate
Ensure Compliance• State/Federal Law
Requirement• GAAP/GASB Compliance
Evaluate Levels of Performance• I/C Present
and Functioning
INTERNAL CONTROLS
INTERNAL CONTROLS FRAMEWORK
Control Environment
Risk Assessment
ControlActivities
Information & Communication
MonitoringActivities
1. Demonstrates commitment to integrity and ethical values2. Exercises oversight responsibility3. Establishes structure, authority and responsibility4. Demonstrates commitment to competence5. Enforces accountability
1. Assesses fraud risk2. Identifies and analyzes significant change3. Specifies relevant objectives4. Identifies and analyzes risk
1. Selects and develops control activities2. Selects and develops general controls over technology3. Deploys through policies and procedures1. Uses relevant information2. Communicates internally3. Communicates externally
1. Conducts ongoing and/or separate evaluations2. Evaluates and communicates deficiencies
¡ Tone at the top
¡ Integrity and ethical values
¡ Standards of conduct with consequences for violations
¡Organizational structure – Board is independent from management in their oversight responsibilities
¡Commitment to competence by attracting, developing, and retaining competent individuals
¡Assignment of authority and responsibility
CONTROL ENVIRONMENT
¡ Review of processes to determine what could go wrong in achieving§ Operational objectives – performance
§ Financial reporting objectives§ External and internal
§ Compliance with laws and regulations
RISK ASSESSMENT
¡Actions to ensure management objectives are achieved§ Segregation of duties
§ Control activities at various levels of the organization
§ Controls over technology
§ Policies and procedures
CONTROL ACTIVITIES
¡ Information is necessary to carry out internal control responsibilities
¡Communication must be internal and external
¡Communication helps people understand their responsibilities
INFORMATION AND COMMUNICATION
¡ Policies and procedures accessible
¡ Information to perform job responsibilities is available
¡ Information is communicated between different levels of management
¡ Information is communicated
¡with parties outside the government- vendors and citizens
¡Whistleblower hotline
INFORMATION AND COMMUNICATION
¡ Ensuring that internal controls are working as planned-
¡ Review of processes to make sure they are working as designed
¡Adjustment of processes not working as planned
¡ Serious matters reported to management and the Board
MONITORING
¡ Should be performed annually during the audit process
¡Deficiency in internal control§ Exist when the design or operation of a control does not allow management or
employees to prevent, or detect and correct misstatements on a timely basis
2 Types:
1. Significant deficiency (Bad)§ Is a deficiency or a combination of deficiencies in internal control important
enough to merit attention by those charged with governance
2. Material Weakness (Worst)§ A deficiency or a combination of deficiencies in internal control such that there
is a reasonable possibility that a material misstatement of the school’s financial statements will not be prevented, or detected and corrected on a timely basis
AUDIT OF INTERNAL CONTROLS
¡Resources§http://www.gao.gov/greenbook/overview
§https://www.gao.gov/assets/80/76615.pdf
§http://www.coso.org/IC.htm
§http://www.gfoa.org/
§https://register.cviog.uga.edu/ecsprod2/CourseListing.aspx?master_id=491&master_version=1&course_area=CHAR&course_number=103&course_subtitle=00
INTERNAL CONTROLS
1. Weak policies2. Lack of internal controls3. Bad Budgeting4. Inadequate staff5. Not knowing your funding6. Data reporting7. Not evaluating financial performance8. Branding and marketing plan?9. Bad facility/debt financing10.Not reaching out to the people with the answers
Presentation Overview
COMMON BUDGET MISTAKES
Overestimating Funding
Underestimating Expenses
Including Unsecured Donations as a
Source of Revenue
Budget Deficits w/o Eliminating
the Deficit in Subsequent Years
Not Amending the Budget
Not Following the Budget
¡Monthly budget reports§ Budget vs actual comparison
§ Monthly projections for the remainder of the year
§ Monthly performance updates
¡Adherence to O.C.G.A. § 20-2-167.1(State Charters)§ Must hold two public meetings to approve budget
§ The public must have the opportunity to give input
§ Applies to initial budget and amended budgets
§ The charter must advertise the meetings in the local paper
§ Summary of the proposed and adopted budget must be publicly available on the school’s website
BUDGETING BEST PRACTICES
1. Weak policies2. Lack of internal controls3. Bad Budgeting4. Inadequate staff5. Not knowing your funding6. Data reporting7. Not evaluating financial performance8. Branding and marketing plan?9. Bad facility/debt financing10.Not reaching out to the people with the answers
Presentation Overview
§ CFO§ Must meet the legal requirement§ Governmental accounting experience§ Ongoing professional development§ Should report directly to the board§ Procedure manual should adequately explain duties
§ Registrar§ Must attend GADOE annual data collections conference§ Should have adequate knowledge of FTE, CPI, and periodical data submission requirements
§ Federal Programs Manager§ Should attend all training opportunities offered by the district and/or GADOE
§ Bookkeeper§ Governmental accounting knowledge or training§ Should receive annual accounting software professional development§ Needed so school can appropriately segregate duties
Ops Staff Best Practices
CFO REQUIREMENT
State Requirements
Documentedexperienceoftenormoreyearsinthefieldofbusinessandfinancialmanagement
Abaccalaureateorhigherdegreeinbusiness,accounting,orfinancefromanaccreditedcollegeoruniversityandaminimumoffouryearsexperienceinafieldrelatedtobusinessorfinance;or
1. Weak policies2. Lack of internal controls3. Bad budgeting4. Inadequate staff5. Not knowing your funding6. Data reporting7. Not evaluating financial performance8. Branding and marketing plan?9. Bad facility/debt financing10.Not reaching out to the people with the answers
Presentation Overview
§ Know the calculations behind your school’s 3 main sources of funding
§ QBE/State§ Local or local supplement(SCSC)§ Federal
§ Know where to access the source documents for each calculation§ Allotment sheets§ Local funding calculations§ S.B.O.E. board item attachments
§ Verify everything!
Tips
1. Weak policies2. Lack of internal controls3. Bad budgeting4. Inadequate staff5. Not knowing your funding6. Data reporting7. Not evaluating financial performance8. Branding and marketing plan?9. Bad facility/debt financing10.Not reaching out to the people with the answers
Presentation Overview
§ State Charter Schools§ Attend the annual GADOE data collections conference each
August/September§ Have a complete understanding of FTE and CPI§ Find and utilize a reliable contact at GADOE for questions
§ Local Charter Schools§ Request FTE and CPI data submission reports from your
district and compare to your records
Tips
1. Weak policies2. Lack of internal controls3. Bad budgeting4. Inadequate staff5. Not knowing your funding6. Data reporting7. Not evaluating financial performance8. Branding and marketing plan?9. Bad facility/debt financing10.Not reaching out to the people with the answers
Presentation Overview
¡ Fundamental Question/Meeting Goals
¡Near-Term Measures
¡ Sustainability Measures
¡Determination of Compliance
Financial Performance
Fundamental Question:§ Is the school fiscally responsible and financially viable?
Meeting Goals:§ In any year of the charter term, a state charter school will satisfy
annual financial accountability requirements by meeting the standards presented in Indicators1-2 below (near-term measures as well as sustainability measures).
-----------------------------------------1. Near Term Measures include current ratio, unrestricted days
cash, and enrollment variance.2. Sustainability Measures include efficiency margin and debt to
asset ratio.
CPF: Finances
Fundamental Question:§ Is the school able to project enrollment in a way that
enables them to adequately budget?§ Student enrollment is the #1 driver of revenue for a
charter school.
What is an Enrollment Variance
¡ https://scsc.georgia.gov/sites/scsc.georgia.gov/files/related_files/site_page/SCSC_Comprehensive_Performance_Framework_Indicators_and_Weights_Approved.pdf
Financial Performance
1. Weak policies2. Lack of internal controls3. Bad budgeting4. Inadequate staff5. Not knowing your funding6. Data reporting7. Not evaluating financial performance8. Branding and marketing plan?9. Bad facility/debt financing10.Not reaching out to the people with the answers
Presentation Overview
Branding-Who You Are• School Mission & Values• School Services• Target Families• Competitive Edge
Marketing-How You Sell Your Vision• Advertising• Community Events• Community Outreach
BRANDING & ENROLLMENT PROJECTIONS
§ Stick to your board approved budget (Finance/Budget Committee)§ Know your parents (Administration)§ Know your students (Adminsitration)§ Branding! Branding! Branding! (Marketing Committee)§ Solid Brand Story§ Establish brand values: vision, mission, and promise§ Create brand guidelines and make them known to all employees and
contractors§ Try never to depart from established guidelines...consistency is key!
Tips
1. Weak policies2. Lack of internal controls3. Bad budgeting4. Inadequate staff5. Not knowing your funding6. Data reporting7. Not evaluating financial performance8. Branding and marketing plan?9. Bad facility/debt financing10.Not reaching out to the people with the answers
Presentation Overview
§ Loans§ Do not use assets purchased with federal funds as collateral§ Do not sign a promissory note without investigating the lender§ Have your legal counsel review the loan documents§ Loans should be for special programs/projects and not for regular operating
cost§ Facility Financing
§ Try not to finance the purchase of a facility until after your first charter renewal§ Use the appropriate professional counsel during the process
§ Choose individuals who do not have connections to any other entity involved§ Only finance a facility if you are reasonably sure that you will be in a better
financial position afterwards
Tips
1. Weak policies2. Lack of internal controls3. Bad budgeting4. Inadequate staff5. Not knowing your funding6. Data reporting7. Not evaluating financial performance8. Branding and marketing plan?9. Bad facility/debt financing10.Not reaching out to the people with the answers
Presentation Overview
§ District Level§ Charter school liaison§ Budget/Finance Office§ Data collections specialist§ Federal programs manager
§ State Level§ GADOE
§ Charter School Division§ Finance and Budget Office§ Help Desk§ Data Collections§ Federal Programs
§ SCSC§ Non-Government
§ GCSA
Ask Questions!