Budget Reporting
Some of the most important duties that a school board preforms are discussing and finalizing budgets for the charter each year, monitoring spending activity to ensure it meets budgetary guidelines, and making tough decisions when cuts are necessary. The board may also consider any opportunities for the charter to generate additional revenue.
What exactly is the board’s responsibility to approve for a budget?
Charters have many different fund accounts. The General Fund 420 accounts for most salaries, benefits, and other day-to-day operational costs of the charter. However, there are many other funds that account for various special purpose activities within the charter. There are numerous federal grant programs, debt service and capital project funds, internal service, agency and activity funds and fund groups that exist for accounting purposes. The only funds that require a legally adopted budget are the General, Debt Service and Food Service funds. These budgets must be prepared and approved at least at the fund and function levels to comply with the state’s legal level of control mandates.
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A major purpose of following the accounting code structure is to establish the standard charter school fiscal accounting system required by law. Although certain codes within the code structure may be used at local option, the sequence of the codes, and the funds and chart of accounts, are to be uniformly used by all charters in accordance with generally accepted accounting principles.
In addition to state legal requirements, individual charters may establish their own requirements for annual budget preparation. Local fiscal policies may dictate budgetary requirements which go beyond those required by the Texas Education Code and TEA.
Other funds may utilize a managerial budget, or one which does not necessarily require legal approval by the Board of Trustees. Note: charters may prepare and approve budgets for other funds and/or with even greater detail at their discretion. Such local decisions may affect the need for budget amendments and financial reporting requirements.
A charter must amend the official budget before exceeding a functional expenditure category, i.e., instruction, administration, etc., in the total charter budget. The annual financial and compliance report should reflect the amended budget amounts on the schedule, comparing budgeted and actual amounts. The requirement for filing the amended budget with TEA is satisfied when the school district files its Annual Financial and Compliance Report.
Since charters are public agencies, their raising and spending of money must be reviewed and audited on a yearly basis and on an as-needed basis, as determined by the governing body. In addition, an effective management system would include internal reviews and audits on a continuous basis to ensure accuracy and prevent fraud. Thus, two broad categories of audits (external and internal) are important in holding schools accountable for the use of public funds.
Internal Audits
A charter can conducts its own internal audit on an as-needed basis. This could address the economy and efficiency of the charter and examine internal controls for weaknesses, which would also expose possible mismanagement or fraud.
External Audits
An external audit is an objective, systematic review of resources and operations, followed by a written or oral report of findings. Annual Financial Review compliance audit addresses the “fairness of presentation of basic financial statements in conformity with Generally Accepted Accounting Principles (GAAP)”. This type of audit is most associated with the annual independent audit for charters.
A charter may also be subject to a program compliance audit which is a review of a Texas Education Agency’s (TEA) adherence to the educational and financial requirements of a specific funding source, such as a discretionary federal grant.
Need some assistance?
- Email CFO Jackie Hernandez: jhernandez@charterschoolsuccess.com
- Register now for the Budget Reporting Online Course.
Questions?