FINANCIAL CONCEPTS ALL
CHARTER BOARD MEMBERS NEED
TO KNOW
JOHN TARVIN
SESSION 5 - TUE, JULY 2, 2013
2:15 – 3:30
Agenda
1) CHARTER SCHOOL FUNDING BASICS
2) ACCOUNTING 101
3) FINANCIAL SCENARIOS
4) YOUR RESPONSIBILITIES
5) QUESTIONS AND ANSWERS
$$ Show Me the Money $$
P E R P U P I L R E V E N U E
Local
Taxes vs. State Aid
F E D E R A L E D U C A T I O N F U N D I N G
C O N T R I B U T E D I N C O M E
E A R N E D I N C O M E / F E E S
Funding Inequities
C H A R T E R S C H O O L S O V E R A L L A R E S I G N I F I C A N T L Y
UNDERFUNDED RELATIVE TO DISTRICT SCHOOLS:
The
average state disparity was 19.2 percent, $2,247
per pupil
Ball
State Study May 2010 (using 2006-07 Data)
Funding Equity by States
25
23 23
# of States
20
15
Equitable Access to
Funding
11
10
9
8
5
4
5
3
0
0
1
2
NAPCS Model Law Rating
3
Equitable Access to
Capital/Facility
0
AK
DC
IA
KS
MS
NH
OK
OR
WY
Equitable Access to Funding
NAPCS Rating
1
2
AZ
MD
TN
CO
AR
MO
UT
CT
DE
NV
VA
IL
FL
NJ
WA
SC
GA
NY
WI
MA
HI
NC
MI
ID
OH
MN
LA
PA
TX
ME
RI
3
CA
IN
NM
0
IA
KS
MS
NV
AK
AR
DE
HI
ID
IL
LA
ME
MD
Equitable Access to Capital/Facility
NAPCS Rating
1
2
MI
SC
AZ
TN
MO
VA
CT
TX
NH
WA
FL
NJ
WI
GA
NY
WY
MA
NC
MN
OH
NM
OK
PA
OR
RI
3
CA
CO
DC
IN
UT
Federal Funds – ESEA Act 1965
T I T L E I
Funding
schools in need (40% low-income)
T I T L E I I
Libraries,
textbooks, instructional materials
T I T L E I I I
Supplementary
Aid
Language instruction LEP and immigrants
T I T L E I V
College
research for school training
T I T L E V
State
DOE support for reforms, languages, arts, gifted
SEAs to
LEAs
Federal Funds – Other
I N D I V I D U A L S W I T H D I S A B I L I T I E S E D U C A T I O N A C T
(IDEA)
Special
Education – Goal was 40% national average
N A T I O N A L S C H O O L L U N C H P R O G R A M ( N S L P )
School
lunches, food, summer program
E - R A T E ( F C C )
Voice,
video, data at reduced costs
M E D I C A I D R E I M B U R S E M E N T S
Other Funding
C O N T R I B U T E D I N C O M E
Foundation
grants
Corporate partnerships
Individual contributions
Fundraisers
F E E S F O R S E R V I C E
Activity
fees
Transportation fees
Uniform sales
Where the $$ Are Spent
E X P E N S E C A T E G O R I E S – S T A T E - S P E C I F I C B R E A K O U T S
Functional
(MA)
Administration
Benefits
and Other Fixed Charges
and Civic Activities
Financing, Capital, Lease Expenses
Instructional Services
Operation & Maintenance of Plant
Student Service
Dissemination
Categorical
(MA)
Salaries
Benefits,
Taxes, Retirement
Contracted Services
Financing, Capital, Lease Expenses
Others …….
Functional Expense Sample
MA Charter Schools 2008 as consolidated by state DESE
0.1%
Instructional Services
6.2%
Financing, Capital, Lease
Expenses
8.3%
Administration
9.4%
Benefits and Other Fixed
Charges
54.9%
9.8%
11.3%
Student Services
Operation & Maintenance of
Plant
Dissemination and Civic
Activites
Category Expense Sample
MA Charter Schools 2008 as consolidated by state DESE
Salaries
19.2%
Benefits, Taxes, Retirement
Contracted Services
11.3%
55.2%
5.7%
Financing, Capital, Lease
Expenses
Other Expenses
8.6%
69.5% - Total Personnel
Accounting 101 –
Financial Statements
B A L A N C E S H E E T
Assets
Liabilities
Net
Assets
I N C O M E S T A T E M E N T
Revenues
Expenses
Net
Income
S T A T E M E N T O F C A S H F L O W S
Sources
of Cash
Uses of Cash
Assets – What’s Owned
C U R R E N T
Cash
Receivable
Prepaid
Expenses
F I X E D
Buildings,
Equipment, Autos
(Depreciation)
Investments/Endowments
O T H E R
Security
Deposits
Liabilities- What’s Owed
C U R R E N T
Payables
Payroll
Liabilities
Accrued Expenses
L O N G T E R M
Mortgage
Bonds
Other
Debt
Net Assets – What’s
Accumulated
U N R E S T R I C T E D N E T A S S E T S
Flexible
Use
T E M P O R A R Y R E S T R I C T E D N E T A S S E T S
Donor
Restricted
Time or Use
P E R M A N E N T L Y R E S T R I C T E D N E T A S S E T S
Endowments,
Scholarship Funds
Use of interest gains
ABC Charter School
Statement of Income and Expenses
Fiscal Year Ended June 30, 2012
Total
Revenue:
Per Pupil Tuition
4,200,000
State Grants
200,000
Federal Grants
500,000
Food Program
125,000
Program Fees
75,000
Grants
200,000
In-kind
30,000
Contributions
Total Revenue
73%
400,000
1
5,730,000
Expenses:
Personnel
Salaries
2,000,000
Taxes
400,000
Benefits
500,000
Total Personnel
2a
2,900,000
53%
Operating
Contracted Services
750,000
Testing and Assessment
50,000
Instructional Supplies and Materials
Rent
50,000
350,000
Health services
60,000
Transportation
70,000
Expense Item 7-20
Total Other Types of Expenses
Total Expense
Net Income
1,200,000
2b
2,530,000
2
5,430,000
1-2
300,000
5%
ABC Charter School
Statement of Income and Expenses
Fiscal Year Ended June 30, 2012
Unrestricted
Temporarily
Permanetly
Restricted
Restricted
Total
Revenue:
Per Pupil Tuition
4,200,000
-
-
4,200,000
State Grants
200,000
-
-
200,000
Federal Grants
500,000
-
-
500,000
Food Program
125,000
-
-
125,000
-
-
75,000
-
200,000
Program Fees
Grants
In-kind
Contributions
Total Revenue
75,000
125,000
30,000
75,000
-
-
30,000
125,000
175,000
100,000
400,000
5,380,000
250,000
100,000
5,730,000
Foundation
Grant received
in FY12 to fund
program
starting in FY13
Bequest to fund
scholarships to
cover sports
fees for lowincome students
Expenses:
Personnel
Salaries
2,000,000
-
-
2,000,000
Taxes
400,000
-
-
400,000
Benefits
500,000
-
-
500,000
2,900,000
-
-
2,900,000
750,000
-
-
750,000
50,000
-
-
50,000
Total Personnel
Other Expenses
Contracted Services
Testing and Assessment
Instructional Supplies & Materials
50,000
-
-
50,000
350,000
-
-
350,000
Health Services
60,000
-
-
60,000
Transportation
70,000
-
-
70,000
1,200,000
-
-
1,200,000
2,530,000
-
-
2,530,000
5,430,000
-
-
5,430,000
Rent
Expense Item 7-20
Total Other Types of Expenses
Total Expense
Net Income
(50,000)
250,000
100,000
300,000
Donations to
Capital
Campaign to
buy furniture
for new building
ABC Charter School
Balance Sheet
as of June 30, 2012
Current Ratio =
Current Assets /
Current
Liabilities
2.5
ASSETS
Current Assets:
Cash
Accounts Receivable
Grants Receivable
Prepaid Expenses
Total Current Assets
500,000
60,000
100,000
5,000
665,000
Noncurrent Assets:
Buildings, net Depreciation
Investments
Total Noncurrent Assets
TOTAL ASSETS
ABC Charter School
8,000,000
Statement of Income and Expenses
Fiscal Year Ended June 30, 2012
500,000
8,500,000
9,165,000
1
Unrestricted
Current Liabilities:
Accrued Expenses
Accounts Payable
Payroll Liabilities
Total Current Liabilities
40,000
Non Current Liabilities:
Note Payable
1,000,000
Bond Payable
6,000,000
Total Non Current Liabilities
TOTAL LIABILITIES
-
-
4,200,000
200,000
-
-
200,000
Federal Grants
500,000
-
-
500,000
Food Program
125,000
-
-
125,000
Program Fees
75,000
-
-
75,000
-
200,000
125,000
30,000
Contributions
265,000
-
-
175,000
100,000
400,000
Total Revenue
5,380,000
250,000
100,000
5,730,000
Total Expense
5,430,000
(50,000)
2
NI - FY12
Bal - FY11
Unrestricted Net Assets
450,000
-50,000
500,000
Temporarily Restricted Net Assets
350,000
250,000
100,000
100,000
1,000,000
300,000
1,600,000
1,100,000
TOTAL NET ASSETS
1,900,000
3
TOTAL LIABILITIES & NET ASSETS
9,165,000 (2+3)
30,000
125,000
Net Income
NET ASSETS
Permanently Restricted Net Assets
75,000
250,000
100,000
7,000,000
7,265,000
Total
4,200,000
In-kind
75,000
Restricted
State Grants
Grants
150,000
Permanetly
Restricted
Revenue:
Per Pupil Tuition
LIABILITIES
Temporarily
In total, Net
Assets increased
by $300,000 so
last year’s Net
Assets had to be
$1,600,000
5,430,000
300,000
ABC Charter School
Cash Flow Projections
Fiscal Year Ended June 30, 2012
Jan
Cash on Hand:
Feb
400,000
471,001
Mar
Apr
102,001
849,001
May
Jun
481,001
56,001
Receipts
Per Pupil
State Grants
500,000
-
Federal Grants
-
Contributions
-
Total Receipts
40,000
1
Food Program
15,000
-
1,050,000
125,000
-
1,050,000
40,000
-
125,000
-
15,000
-
-
4,000
-
15,000
-
500,001
55,000
1,175,000
59,000
1,190,000
240,000
240,000
240,000
240,000
240,000
240,000
Expense Item 1
4,000
4,000
4,000
4,000
4,000
4,000
Expense Item 2
5,000
4,000
3,000
1,000
-
Paym ents
Personnel
Expense Items Other
180,000
180,000
180,000
180,000
180,000
180,000
Average
Monthly
Expense
Total Paym ents
429,000
424,000
428,000
427,000
425,000
424,000
365,286
(369,000)
747,000
(368,000)
(425,000)
766,000
471,001
102,001
849,001
481,001
56,001
Net Change in Cash
Ending Cash Position
71,001
822,001
Balance Sheet Cash
Checking
Savings
Total Balance Sheet Cash
Months Cash on Hand
15,000
12,000
20,000
15,000
25,000
14,000
456,001
90,001
829,001
466,001
31,001
808,001
471,001
102,001
849,001
481,001
56,001
822,001
1.3
0.3
2.3
1.3
0.2
2.3
Months Cash on
Hand = Ending
Cash / Average
Monthly
Expense
Other Financial Concepts
A C C R U A L V S . C A S H A C C O U N T I N G
I N T E R N A L C O N T R O L S
B U D G E T I N G
12-month
vs. rolling
FY End is 6/30
Paid $12,000 annual lease
in Jan 2012 for all of 2012
Cash – Expense 12,000
F O R E C A S T I N G
Reset
– perhaps quarterly
B U D G E T T O A C T U A L R E P O R T I N G
Accrual – Expense 6,000
Prepaid – 6,000
Balance Sheet
as of June 30, 2012
School A
School B
School C
School D
ASSETS
Current Assets:
Cash
500,000
20,000
100,000
50,000
60,000
30,000
300,000
5,000
Grants Receivable
100,000
20,000
100,000
15,000
Prepaid Expenses
5,000
10,000
125,000
20,000
665,000
80,000
625,000
90,000
40,000
25,000
40,000
5,000
150,000
80,000
140,000
10,000
75,000
20,000
75,000
15,000
265,000
125,000
255,000
30,000
2.5
0.6
2.5
3.0
Accounts Receivable
Total Current Assets
LIABILITIES
Current Liabilities:
Accrued Expenses
Accounts Payable
Payroll Liabilities
Total Current Liabilities
Current Ratio
Same Current
Ratio, but
what’s
different?
Infusion of Cash
Needed – Line
of Credit?
Enviable ratio,
but what if
annual budget
was $10
million?
1.8 Days COH
ABC Charter School
Balance Sheet
Net Asset Trends 2009 to 2012
2009
2010
2011
2012
TOTAL ASSETS
9,165,000
9,100,000
8,350,000
8,150,000
TOTAL LIABILITIES
7,265,000
7,350,000
7,075,000
7,250,000
Unrestricted Net Assets
450,000
500,000
150,000
-200,000
Temporarily Restricted Net Assets
350,000
150,000
25,000
0
1,100,000
1,100,000
1,100,000
1,100,000
TOTAL NET ASSETS
1,900,000
1,750,000
1,275,000
900,000
TOTAL LIABILITIES & NET ASSETS
9,165,000
9,100,000
8,350,000
8,150,000
NET ASSETS
Permanently Restricted Net Assets
•Stable
Operations
• Less Grants
•Spending
down Funds
•Loss of
350,000 in
general
operations
•Less Grants
•Spending
down Funds
•No reserves
•Structural
problems
# of Students:
School A
School B
420
250
Revenue:
Per Pupil Tuition
3,360,000
State Grants
100,000
Federal Grants
420,000
Food Program
125,000
Program Fees
Grants
In-kind
Contributions
Total Revenue
8,000
3,000,000
10,000
1,000
15,000
60
-
-
30,000
200,000
15,000
30,000
30,000
400,000
75,000
4,635,000
12,000
11,036
3,175,000
•Wealthier
District
•Facility Issue
•Structural
Issue
•Less on
Teaching
12,700
Expenses:
Personnel
Salaries
Taxes
Benefits
Total Personnel
1,900,000
1,300,000
300,000
221,000
344,000
2,544,000
179,000
57%
1,700,000
50%
Operating
Contracted Services
400,000
250,000
Testing and Assessment
50,000
30,000
Instruct Supplies & Materials
50,000
35,000
Rent and Occupancy
50,000
Health services
60,000
60,000
Transportation
70,000
70,000
1,276,000
805,000
1,956,000
1,700,000
4,500,000
3,400,000
Expense Item 7-20
Total Other Types of Expenses
Total Expense
Net Income
135,000
1%
3%
450,000
(225,000)
13%
-7%
•Title I District
•Diverse
Funding
•Owns Building
•More on
Teaching
•Net Income
Your Responsibilities
F I N A N C I A L O V E R S I G H T
Public
Entity
Scrutiny
Closures due to finance
R E C R U I T F O R F I N A N C I A L A C U M E N
R E G U L A R R E V I E W O F F I N A N C I A L D A T A
Monthly
ASK
QUESTIONS
???
Your Responsibilities
A U D I T
Interview
and Hire Auditor
Meet independently with auditor
U N D E R S T A N D E C O N O M I C P A R A M E T E R S
Funding
Formula for your state
Resource Development Needs
Salary and Benefits Structure
Cash Position - Debt, Borrowing, Cash Flow
Financial implications of Strategic Priorities
Q&A
John Tarvin
617.304.8436
jtarvin@claremontconsulting.org