Fiscal Policies

Operating a Charter School is engaging for administrators but can also be very rewarding on many levels. It is also serious business. Charter Schools should have internal controls in place to provide reasonable assurance that their goals and objectives are accomplished. Internal control is all the policies and procedures management use to achieve the following:

• Safeguard the Charters assets
• Ensure the reliability and integrity of financial information
• Ensure compliance
• Promote efficient and effective operations
• Accomplishment of goals and objectives

The following internal controls and policies and procedures are best practice to for a charter to implement and maintain.

Administration

The Charter school should establish minimum policies and procedures concerning operations. The charter school administrators must be cognizant of their duties.  Administrator’s should be familiar with the charter school’s finances and activities and participate regularly in its operations.

Annual Budget

School administration prepares an annual operating budget of revenues and expenses for approval. The Board approves a final budget for the operation of the charter for the next fiscal year. Both budgets are to be approved no later than the end of the fiscal year. Budgets are reviewed and modified as necessary.

Budget Amendments

Funds of the Charter may not be spent in any other manner than as presented in the adopted budget, but the Board may amend a budget to cover necessary unforeseen expenses. The Charter should present the amendment to the Board with the appropriate documentation for approval. Approval will only be sought for any additions or transfer of funds between different budget functions. Only after Board approval will the amendment request become effective.

Bank Accounts/Signatory Authority

A charter school must have a depository bank into which the Texas Education Agency (TEA) can deposit funds for the charter.  The Board may authorize bank accounts for general and specific purposes. The Texas Education Code (Sections 45.201 – 45.209) provides that a bank or savings and loan serving as a school depository may use pledged securities in an amount to secure the balance of all deposits. Charter assets shall be kept at any bank or financial institution that is protected by the Federal Deposit Insurance Corporation.

The Charter Board will establish who has signatory authority. According to the separation of duties principals, any signatories should be preformed by the same individual each time to protect the Charter from fraudulent use of funds.

Finance/Business Operations

The school should operate its finances according to all applicable state and federal laws in regard to financial responsibility and competence. The Charter’s financial books and records should be kept by accounting software that uses modified accrual basis of accounting, meets all specifications for TEA, TRS, and PEIMS reporting. The charter’s accounting software should be maintained to ensure that adequate internal controls and security measurers are established to minimize unauthorized access to charter data. The system’s accounting data should be backed up daily to ensure the recoverability of financial information in case of failure. The backup files must be stored separately in a fire safe area that is properly secured.

Cash Management

The establishment of strong internal controls for cash collections is necessary to prevent mishandling of funds and to safeguard against loss. Strong internal controls are also designed to protect employees from inappropriate charges of mishandling funds by defining his/her responsibilities in the cash handling process. A Charter should designate specific personnel to be responsible for handling the majority of the cash, receipts and disbursements for the charter.  Wherever possible, duties such as collecting funds, maintaining documentation, preparing deposits and reconciling records should be segregated among different employees.  When segregation of duties is not possible due to the small size and limited staffing, compensating controls such as management supervision and review of cash receipting records should be implemented.  Receipts should be issued at the time of the transaction. All charter money should be deposited in the designated depository no later than one (1) business day after the funds were collected and should be deposited in the same form in which the funds were received.  Timely receipts and deposits are required to provide the Charter School Administration with current information necessary for all financial decisions.

Petty cash funds may be established for incidental, non-recurring cash advances and local expense reimbursement. Proper documentation must be furnished with each request. Each petty cash account should be balanced monthly by the Business Office.

Cash and other deposits are to be kept in a secured, locked location at all times.

Separation of Duties

The charter’s separation of duties policy should require that the approval function, the accounting/reconciling function, and the signatory function are all separated among employees. The separation of accountabilities and duties are put into place to ensure fiscal control. Financial practices on these controlled environments will protect the Charter from fraud and mishandling of funds.

Debt

Short-term debt consists of financing expected to be paid within one year of the date of the annual audited financial statements. Long-term debt consists of financing that is not expected to be repaid within one year. All short-term and log-term debt must be approved by the Board.  Loan agreements approved by the Board should be in writing and specify all applicable terms, including the purpose of the loan, the interest rate, and the repayment schedule. Charter administration may not enter into loan agreements without Board approval.

Investment Policy

Investments in the State of Texas are governed by Section 2256 of the Texas Government Code. All investments made by the Charter should comply with the Public Funds Investment Act and all federal, state, and local statutes and regulations. The Financial Director or other person designated by Board resolution shall serve as the investment officer of the Charter and should invest District funds as directed by the Board and in accordance with the Charter’s written investment policy and generally accepted accounting procedures In addition to quarterly investment reports required by law and signed by the Charter’s investment officer, a comprehensive report on the investment program and investment activity is required to be presented annually to the Board.

Inventory Policy

In order to provide for the proper control and conservation of charter property, the Board directs the Charter to maintain inventory records and account for capital expenditures. An inventory is an itemized list for tracking and controlling property. Capitalization is an accounting treatment whereby an item is recorded as a long-term asset on the balance sheet rather than as a consumable expense of the current period. Inventories should be performed annually and monitored for disposal items that are no longer owned by the Charter.

Annual Audit

As a recipient of public funds, a charter school must be audited once a year by an outside independent auditor or firm. The audit is to be done in accordance with TEA rules and regulations and generally accepted auditing standards.

While we trust that this information will be useful for your Charter it is only a small beginning. There are many other fiscal policies to consider and we encourage you to also make use of a larger framework of documentation and tools that are specific to your Charter.

Have questions? Please contact us!

• Email CFO Jackie Hernandez: jhernandez@charterschoolsuccess.com