10 ways to fail atgeorgiacharterconference.org/wp-content/uploads/10... · § stick to your board...

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


¡ 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

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


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


§ 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

§ 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

§ 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

¡ 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

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

§ 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

§ 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!

Terence Washington: State Charter Finances

[email protected]

Questions? Visit SCSC.GEORGIA.GOV

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