Calculating Charter FIRST

Calculating Charter FIRST

September 16, 2019 | Financial Management

Charter FIRST is the Financial Integrity Rating System of Texas (FIRST)
Texas Education Code 39.082 

This rating system (originally known as School FIRST) was implemented for charter schools during the 2008-09 school year as a ways and means of monitoring their financial accountability. It has evolved significantly over the years to include solvency indicators and several other financial metrics such as average daily attendance, net assets, and administrative cost ratios. 

The number of indicators used to calculate your score has also increased from three indicators in 2008-09, to twenty-one indicators in the 2019-20 school year.  In addition to simply increasing the number of indicators, there are now “ceiling indicators” assigned to certain questions, which means if you fail that indicator, a charter’s points can not go above the indicator’s allowable rating. 

This drastic movement further solidifies that having a good ‘financial report card’ is just as important as having a good academic rating for your charter school. 

The primary goals of Charter FIRST are to:

  • Implement a rating system that fairly and equitably evaluates the quality of financial management practices in Texas public schools.
  • Hold open-enrollment charter schools accountable for their financial decisions.
  • Ensure that charter schools continually strive to improve the management of their financial resources.
  • Provide transparency and openly report results to the general public.
  • Measure and report the extent to which financial resources in Texas schools assure the maximum allocation possible for direct instructional purposes.

Districts are rated on various performance metrics (called “indicators”) relating to financial management.  Your 2020-21 Charter FIRST rating will be based on fiscal year 2020 data. 

These indicators are broken out into the following categories (the changes are below):

  • Critical indicators (1 – 5) Must ALL be “Yes” to Pass Charter FIRST
    • Indicator #2 – Auditor’s opinion – revised – now a separate indicator
    • Indicator #4 – Timely payments – revised – A ceiling indicator
    • Indicator #5 – Total net assets – revised – A ceiling indicator
  • Solvency indicators (6 – 15)
    • Indicator #6 – Average change in net assets – New
    • Indicator #9 – Revenues to expenses – Revised – maximum points from 10 to 5
    • Indicator #10 – Budget to actual revenues – New 
    • Indicator #13 – Debt to capitalization % – New
    • Indicator #16 – Actual Average Daily Attendance (ADA) to estimated ADA – New
  • Financial Competence indicators (16 – 21)
    • Indicator #17 – PEIMS to AFR – Revised– A ceiling indicator
    • Indicator #18 – Material weakness – Revised– A ceiling indicator
    • Indicator #20 – Financial transparency – New
    • Indicator #21 – Approved geographic boundaries – New
    • Adjusted repayment schedule – Deleted

 Can Charter FIRST only be calculated and monitored annually?

Although Charter FIRST is calculated annually for TEA purposes, it can be calculated and monitored as the school year progresses. Charter School Success’ finance team prepares a monthly financial reporting packet that includes a report of several of your FIRST indicators.  The recommendation for charter schools and their board of trustees is to set goals for each indicator and monitor those that can be calculated throughout the year.  Always be sure and communicate financial challenges with your board in a timely manner, this way there are no surprises as to how your charter school will score for the year.  Waiting until year-end to monitor the indicators is not recommended as it could be too late to make the adjustments needed to reach an acceptable score. 

Not achieving an acceptable rating (score) on your Charter FIRST report could have some negative implications on your charter school such as the revocation of your charter, it can affect the ability to renew your charter, or cause TEA to order a hearing to be held before the commissioner or the commissioner’s designee at which the board president must explain the school’s low performance and/or lack of improvement.  This in turn could affect your school’s accreditation status. A charter school that is not accredited may not receive funds from the agency or present itself as operating a Texas public school. 

For more information about calculating your Charter FIRST score, register for newly updated course on Calculating Charter FIRST online course here.