Fiscal Compliance
New Charter School Leadership Institute
NC DPI – School Business Services
Monitoring & Compliance Section
June 17, 2014
Monitoring & Compliance Section
What is the role of Monitoring & Compliance Section related to
charter schools?
Provide quality support to charter schools and their stakeholders through
timely and accurate oversight and monitoring of charter school grants,
programs and related initiatives.
Under what authority does Monitoring and & Compliance
operate?
34 CFR 80.40 - Grantees (DPI) must monitor grant and subgrant
supported activities to assure compliance with applicable Federal
requirements.
Monitoring & Compliance Section
Oversight activities include (but are not limited to) the
following:
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Fiscal monitoring
Indirect Cost Rates
21st Century Community Learning Center grants bond compliance
Administrative Cost Limitation compliance
Carryover Limitation compliance
Audit resolution
GS 143C-6-23 compliance
DUNS and SAM compliance
Technical Assistance
Charter School Financial Guide
Monitoring & Compliance Section
What is fiscal monitoring?
What are some examples?
Review and analysis of the
charter school’s activities to
ensure Federal awards are used
for authorized purposes in
compliance with laws, regulations,
and the provisions of contracts or
grant agreements.
• On-site reviews
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Time and Effort
Inventory
Contracted Services
Internal Controls
• Desk reviews
Fiscal Expectations
What is the expectation for fiscal responsibility for charter
schools?
• Charter schools are required to meet generally accepted
standards of fiscal management. (NC Gen. Stat. 115C238.29G(a)(2)). (Handout A)
• Charter schools receiving federal funds must comply with
applicable statutes, regulations, and approved applications; and
must use Federal funds in accordance with those statutes,
regulations, and applications.
Legislation, Statutes & Guidance
• Federal
– No Child Left Behind Act of 2001 (NCLB)
– Education Department of General Administrative Requirements
(EDGAR)
– General Education Provisions Act (GEPA)
– OMB Circulars
• A-133
• A-87
• A-122
• North Carolina General Statute (GS115C-238.29A – GS115C-238.29K)
• North Carolina State Board of Education (SBE) Policy
Compliance Requirements
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Allowable Costs
Budget
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Due by mid-July each year
In format specified in grant application
DUNS number and SAM registration
(Handout B)
Conflict of Interest Policy (Handout C)
Cash Management Improvement Act
(CMIA)
Audited Financial Statements
Record Retention
Contracts
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Inclusion of state language per GS115C238.29H
Suspension and debarment
(www.pandc.nc.gov/actions.aspx - state
and www.sam.gov –federal)
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Administrative Cost Limitations
Carryover Limitations
Equipment Disposition
Documentation (Handout D)
– Audit
– Monitoring
Monitoring
– Federal agencies
– DPI Monitoring and Compliance
Section fiscal monitoring
– DPI Program monitors
– Office of State Budget and
Management (OSBM)
– Office of the State Auditor (OSA)
Financial Statements
North Carolina Education Law requires an annual audit
in accordance with:
• GS 115C-238.29F(f)(1) The school is subject to the financial
audits, the audit procedures, and audit requirements adopted by
the State Board of Education for charter schools. These audit
requirements may include the requirements of the School
Budget and Fiscal Control Act.
• Generally Accepted Auditing Standards (GAAS)
• Generally Accepted Government Auditing Standards (GAGAS)
Financial Statements
Responsibilities:
• Coordinate audit firm selection process
• Contract with selected independent auditor according to
standard procurement guidelines
• Respond to audit findings and develop and implement corrective
action plans to resolve identified issues
• Ensure audits are submitted to the Local Government
Commission (LGC) by October 31st
– LGC will analyze financial data from audit reports, and submitted
report approved will forward report to the pass through entity (DPI)
– DPI Monitoring & Compliance staff:
• Reviews all audits to identify and track findings and corrective action,
• Follows up on all proposed responses and corrective action plans to
verify implementation
Financial Statements (continued)
Financial Statement Red Flags:
• Low or negative cash balance
• Accounts receivable remain constant throughout year without
decrease
• Payroll tax liabilities constant or increase
• Failure to pay health insurance and/or employee retirement plan
payments
• Current & Long Term Debt excessively high
• Fund Balance decline or negative
• Operating expenses higher than budget
• Student count decline
Financial Statements (continued)
Charter School Financial Performance Framework Includes:
– Charter School Financial Performance Framework
Guide
– Charter School Ratio Analysis
– Charter School Financial Summary
Financial Statements (continued)
Financial Performance Framework Uses:
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Intervention
Renewal
Revocation
General Monitoring
Financial Statements (continued)
Component
Definition
Example
Indicators
General categories of financial performance
Near Term
Measures
General means to evaluate an aspect of an indicator
Current Ratio
Metrics
Method of quantifying a measure
Current ratio is the school’s current liabilities
over current assets
Targets
Thresholds that signify success in meeting the
standard for a specific measure
Current ratio greater than 1.1
Ratings
Assignment of charter school performance into one of three
rating categories, based on how the school performs against the
framework targets
If school meets the target of 1.1 the rating
category is “Meets Standard”
Financial Statements (concluded)
Most Common Audit Findings
• Absence of Conflict of Interest Policy
• Absence of Required Language on Contracts
– No indebtedness of any kind shall constitute an indebtedness of the State or
its political subdivisions, and no indebtedness of the charter school shall
involve or be secured by the faith, credit, or taxing power of the State or its
political subdivisions.
• Internal Control Deficiencies
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Segregation of Duties*
Procurement - suspension and debarment
Review and signoff
Claims in excess of eligible cost
Costs claimed lacked supporting documentation
Financial Noncompliance
• G.S.115C-238.29G - Causes for nonrenewal or
termination include “failure to meet generally accepted
standards of fiscal management”
• SBE Policy TCS-U-006 - further defines the “standards of
fiscal management” under which a charter school is held
accountable.
Financial Noncompliance (continued)
What are three stages of noncompliance for charter
schools?
• LEVEL 1 = Cautionary Stage (30days)
Minimal level warning to encourage immediate compliance.
• LEVEL 2 = Probationary Stage (30days)
State funds may be allotted on a monthly basis.
• LEVEL 3 = Disciplinary Stage (10 days)
10 days to respond to noncompliance issues. Last step before
recommendation revocation of charter.
Financial Noncompliance (concluded)
Financial Noncompliance:
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Failure to respond to requests for data (UERS or other).
Showing signs of financial insolvency or weakness.
Having material audit findings which remain unresolved.
Receiving NSF notifications from the State Treasurer’s office.
Having a declining student count
Monitoring & Compliance Section
Contact Information
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Leigh Ann Kerr, Assistant Director, School Business Services;
LeighAnn.Kerr@dpi.nc.nc.gov ; (919)807-3553
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Curtis Terry, Fiscal Analyst;
Curtis.Terry@dpi.nc.gov ; (919)807-3720
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Keisha Davis, Fiscal Monitor;
LaKeisha.HallDavis@dpi.nc.gov ; (919)807-3682
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Karen Frazier, Fiscal Monitor;
Karen.Frazier@dpi.nc.gov ; (919)807-3738
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Gene Bruton, Accountant (Single Audit, DUNS/SAM, Certification);
Gene.Bruton@dpi.nc.gov ; (919)807-3726
Resources
• NC Department of Public Instruction Financial and
Business Services
– http:www.ncpublicschools.org/fbs
• US Department of Education Guidance
– http://www2.ed.gov/policy/landing.jhtml
• Office of Budget and Management
– OMB Circular A-87, Attachment B
– OMB Circular A-133
• OMB Circulars/Cost Principles
– http://www.ncpublicschools.org/fbs/finance/federal/