Introduction to Charter School Budgeting BMN - January 27, 2017 Business Managers’ Orientation Meeting

Why have a Budget? The annual budget is required by statute The Board must formally appropriate the funds to fund the budget they approve The Board has a fiduciary duty to oversee the school’s financial activities Staff may not exceed the total appropriated annual expenses Budgets provide a plan to finance planned programs and expenditures Annual and multi-year budgets Keep reality front and center Provide an effective tool to manage the budget The process of developing a balanced budget forces you to prioritize the school’s objectives It is not possible to fund everything that everyone wants and/or believes to be essential The annual time-line Authorizers have statutory due dates that drive the due dates they impose on their charter schools James Irwin’s is due to HSD2 by April 1st; (although CDE’s estimate of PPR is due by June 1st!) Amended budget (January …..and July!?!) PPR payments begin in July; the calculation for per pupil revenue includes many assumptions PPR is revised after the October count Usually takes until January for the ‘true-up’ Throughout the year, when/if the state revenue budget is amended, PPR can be amended A few years ago, PPR was retroactively reduced after the fiscal year had ended!

Set Staff up for Success Ownership of budget Board CEO/Executive Director Business Manager Principal Any employee who has been delegated authority to pre-approve purchases Budget Detail Sheets for budgeted line items Salaries and benefits: Itemized list of employees, salaries and employee benefits Textbooks: itemized list of title, quantity and cost of planned textbook purchases Instructional equipment: list of planned classroom purchases and estimated costs Professional Development: list the names of the attendees, and the conferences and trainings that are planned along with related costs (registrations, travel, hotel, food, etc.) Extra Duty stipends: list the employee, project and amount of any anticipated extra pay Technology: list of annual licenses; software; hardware requirements Athletics: list of anticipated athletic expenses (entry fees; uniforms; payments for coaches, officials and referees; field and gym rentals, etc.) Advertising/marketing; identify planned activities and associated costs Special Education Expenses; list planned purchased services and related costs Schedule of Insurance with annual premiums (Eric will speak more to the school’s insurance requirements)

Management of the Budget Managing the schools financial activity Use Purchase Orders for pre-approval of every single purchase! Before a PO is approved, refer to the budget detail sheets Was this a planned purchase? If not, what expenses will be reduced to offset this unplanned event? How much has been charged to this budgeted line item this year? Will this purchase still fit in this budget? Blanket purchase order for routine purchases Example: maintenance supplies Example: $100 expense reimbursement for teachers’ classroom expenditures Monthly financial reports Actual vs Budget Budget does not change until Board approves an amended budget Insert a column for your year-end projections Your projections can change all day long! Constantly update the total revenue and expense you expect for each budgeted line item Actual costs compared to estimates Example: Utilities Example: Heath premiums Compare year to date expenses to outstanding purchase orders

Other Accounting Regular Review of Financial Reports According to GAAP (Generally Accepted Accounting Principles) Use CDE 21 digit Chart of accounts Use CDE format for statements Beginning Fund Balance Budgeted ending Fund Balance Enrollment #’s Per pupil expenses (FTE divided by total expenses) Regular Review of Financial Reports Financial background?? Board of Directors Finance Committee School Administration Financial Transparency Encourage questions of staff and Board CDE reporting requirements

Other Best Practices Salary and Benefits should be between 50% and 70% of PPR Justifications for variances MLO Substantial donor support Lease payments/debt service should be less than 12% of PPR Variances should be justified Well balanced staffing: Administration salary is between 8%-15% of total expenses Instructional salaries are between 50%-60 % of total expenses The board should adopt an annual Budget Timeline Codifies a deadline for the Board to approve the budget Drives when staff begins working on the budget Deadline for finance committee approval Ensures the authorizer will get the budget on time Ensures that the President will get budget approval on correct board meeting agenda Establishes dates through out the year when it will be on a board agenda to confirm or amend the current budget October count and other regular dates

Other Best Practices Use caution when projecting student enrollment Error on the side of conservative! It is VERY hard to cut an approved expense budget in response to a shortfall in enrollment Does annual PPR cover your annual expenses? Don’t rely on other sources of revenue to support normal operating expenses Fund balance Tabor Other reserves: 60 days of operating expenses is best practice James Irwin wants 90 days The Auditor Is a resource Recommendations to improve checks and balances

Conclusion Resources: Questions ? Business Managers’ Meetings (quarterly) Financial Policies and Procedures On line resource documents Quarterly meetings CDE Department of School Choice Department of School Finance Your authorizer Other Charter School Business Managers Questions ?