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should govern the conduct of audits.
TABLE 18 Independent Financial Auditing of Charter Schools
1 Arizona, Connecticut,
Delaware, District of
Columbia, Florida, Illinois,
Minnesota, New Jersey, North
Carolina, Pennsylvania, Rhode
Island, South Carolina, Texas Part of School District Audit
2 Alaska, California,
Colorado,2 Georgia, Hawaii,
Kansas, Louisiana,3 New
Mexico, Wisconsin 1 Milwaukee Only state-authorized charter schools must provide audit. 2 Not Required Independent audit can be negotiated in charter. 3 State-authorized charter schools must have separate audits. Independent audits have at least three objectives:
§ Financial statements. Present the school’s financial position (assets and liabilities)
and results of operations (revenue and expenditures) at the end of the fiscal year.
§ Internal control system. Assess the school’s implementation of internal controls (e.g.,
who can sign checks) for authorizing financial transactions and safeguarding assets.
§ Compliance. Determine the school’s compliance with applicable laws, regulations,
administrative rules and guidelines governing the school.
Audits usually present revenues and expenditures in a highly aggregated form. In Florida
for example, audits of charter schools conducted by the state’s auditor general aggregate all
federal funds, so it is impossible, for example, to distinguish start-up funds from Title I
funds. In Massachusetts, one school financial statement presented 75 percent of
expenditures in a single line item for its payment to a management company (Boston
Renaissance Charter School, 1997). Traditional public schools (and some charter schools)
are almost always audited as components of school districts. In this sense, independently
audited charter schools are subjected to a higher level of accountability than traditional
schools, because they undergo an individual school-level audit. The presentation of 64 Charter School Financial Structure and Accountability independent audits varies greatly from one charter school to another. Lack of detail and/or
lack of uniformity seriously limit the usefulness of financial audits for research and policy
analysis purposes. Debt
An essential financial question is whether charter schools can acquire debt for start-up,
cash flow or facilities acquisition. The following discussion focuses on laws, regulations
and practices specifically addressing charter school debt. In states with very independent
charter schools, however, issues of charter school debt may be determined as much by the
laws governing nonprofit corporations as by charter school laws.
The table below indicates the states where charter schools are not allowed to go into debt.
Many states where school districts award charters—such as California, Colorado and
Florida—also allow charter school indebtedness.
TABLE 19 Charter School Acquisition of Debt
Allowed Not Allowed Hawaii, Kansas, New
Alaska, Arizona, California, Colorado, Connecticut,
Delaware, District of Columbia, Florida, Georgia,
Illinois, Louisiana, Massachusetts,2 Michigan, Milwaukee,
Minnesota, New Jersey, North Carolina, Pennsylvania,
Rhode Island, South Carolina, Texas
1 The law is silent on this issue, but in practice, short-term borrowing occurs. 2 Horace Mann schools may also acquire debt w...
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This note was uploaded on 02/11/2013 for the course ECON 101 taught by Professor Smith during the Spring '09 term at Harvard.
- Spring '09