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Budgets and Financial Management Guide For Charter School Operators, Robert Di Bacco



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Budgets and Financial Management Guide For Charter School Operators, Robert Di Bacco

  2. 2. Welcome to Charter Land . . . Enjoy the ride!
  3. 3. WHY IS IT CRITICAL TO FOCUS ON FINANCES? •Because less than 1 in 5 charter schools have closed for academic reasons, but two-thirds closed because of financial or management failure.
  4. 4. WHY IS FINANCIAL MANAGEMENT CRITICAL? •Substantial public money is being spent. •Great educators are not necessarily great business people. •Because the ultimate goal of any charter school is delivering great student achievement, and a financial failure can deny students that opportunity.
  5. 5. TODAY’S OBJECTIVES •Examine three major pillars of the charter application and running a successful business. •Contracted Services •Budgets •Financial Management
  6. 6. APPLICATION ALIGNMENT Contracted Services Budgets Financial Management B.3.1 Education Service Providers B.3.2 Contracted Services C.4 Start-Up Budget C.5 Three Year Operational Budget CHARTER APPLICATION ALIGNMENT
  8. 8. •Delineate all areas, if any, which may require the applicant to seek outside expertise. •Discuss the professional qualifications expected of those to be retained to perform each listed contracted service. •Identify all costs associated with each listed contracted service. •Provide sources for costs of each listed contracted services. •Ensure costs are described in the Budget Narrative and included in the Start-Up and Three-Year Operational Budget as appropriate. B.3.2. CONTRACTED SERVICES
  9. 9. •Payroll, accounting, financial management •Food services •Building Maintenance •Janitorial Services •Marketing • Technology Services • Special Education • Professional Development • Grant Writing & Reporting • Fundraising WHAT WILL YOU OUTSOURCE?
  10. 10. • Save Money –Does it cost less than hiring a full time staff member? –Will you bring it in-house later? • Gain Expertise –What are your areas of weakness? –Is someone else more knowledgeable and/or more experienced? • Ease operations –Do you have staff capacity? –Does the saving of time translate into higher performance in other areas? WHY OUTSOURCE?
  11. 11. SELECTING THE BEST VENDOR The Arizona Charter Association has already vetted vendors and negotiated discounted rates for Arizona charter schools. • Experience in the field • Competency • Professionalism • Mission alignment • In Compliance • Flexibility • Availability az.chartermarketplace.org
  12. 12. •Who on staff will oversee the vendor? •What are your performance expectations? •How will you evaluate? •How often will you conduct a review? •How will you ensure the vendor is compliant? –Ultimately you are responsible! –Keep a copy of all vendor’s fingerprint clearance cards at the school MANAGING & EVALUATING VENDORS
  13. 13. •Must have a replacement policy in place •Only applies to purchases with state funds •Maintain financial documentation/records •Demonstrate you followed policies and procedures •Maintain copies of contracts and agreements •Keep receipts and invoices PROCUREMENT EXCEPTION
  14. 14. BUDGET
  15. 15. Show me the money!
  16. 16. CRITICAL CONSIDERATIONS FOR HIRING TEACHERS •What drives teacher staffing? •How many teachers do I really need? •Education & staffing efficiency collide. •Staffing of other positions •Scenario with financial constraints
  17. 17. HOW MANY TEACHERS DO YOU NEED? •You are the principal of a middle school with 100 students per grade for grades 6-8 •Welcome to Math 101 . . .
  18. 18. CLASS SIZE MATTERS •What does your charter application say about class size and teacher-student ratio? •Need to figure out desired class size per grade (if it varies •Differentiate between core subjects and specialty subjects •Remember students do not come in convenient groups and therefore some classes are inevitably larger than others
  19. 19. WHAT IS THE AVERAGE CLASS SIZE? • XYZ High School has the following students in grades 9-12: 160; 150; 140; 125. • They have an 8 period day, with each teacher teaching 6 periods. Target class size is 28, but can go up to 32. • They have 1 ELA, math, history, science and foreign language teacher per grade (4 of each). They have 2 Physical education, 1 ROTC, 1 remedial english, 1 remedial math, 1 chorus, 1 band, 1 orchestra, 1 welding, 1 drama, 2 art, 1 culinary/home ec, 1 business and 1 economics/law. • Is this under-staffed/over-staffed or just right? • What is the average class size?
  20. 20. WHY IS CLASS SIZE IMPORTANT? •In the 300 student example, reducing from 25 to 20 students per class increases the # of sections by 3, which will increase the # of teachers even more •3 teachers x $60,000/teacher  $180,000 budget hole
  21. 21. PREP TIME •Most schools have one or two periods/blocks per day where teachers do not teach –Prepare lessons –Meet with other teachers to review individual students –Attempt to integrate lessons with each other –Professional Development –Random duties
  22. 22. WHY DOES PREP TIME MATTER? •Each period that a teacher is not teaching means that another teacher needs to be hired to fill that slot •If teachers teach 6 out of 8 periods in the 300 student, 25 student/class example, then you would need to cover 24 extra periods (2 periods/section x 12 sections)  4 more teachers (24/6)
  23. 23. OTHER POTENTIAL DRIVERS •Length of day - if teachers have a fixed # of minutes, the longer the day, the more teachers you need •Teachers teaching multiple grades - the more flexibility, the easier it is to optimize a schedule •Shared prep time - Another flexibility issue •Graduation requirements - may force HS to add staff •Certifications - Multiple certifications increase flexibility
  24. 24. A Budget is a projection for the future based on certain assumptions Example of Assumption Annual Budget for salaries is based on 10 employees at an average of $35,000 = 350,000 BUDGETING
  25. 25. WHY BUDGET? •To ensure $$ are being spent in the most effective way for your organization •To ensure you live within your means If your assumptions are wrong, you may need to modify your budget
  26. 26. •Salary and employee related expenses (ERE/benefits) •Building, utilities, property taxes & insurance •Purchased & Professional services •Supplies •Furniture, Equipment & Repair •Other (liability insurance) TYPICAL MONTHLY SCHOOL EXPENSES
  27. 27. EXPENSES Understand how your school model impacts budget: •How many students does it take to sustain your expenses? •Be prepared to change your model as needed •Know the acceptable range of monthly expenses •Compare to your monthly reports to ensure there is sufficient cash flow & that there are no surprises •Investigate if numbers don’t match your expectations MANAGING EXPENSES
  28. 28. •Budget to actual •Profit loss (Income Statement) TYPES OF REPORTS TO HELP MANAGE BUDGET
  29. 29. BUDGET TO ACTUAL This school spent beyond most budget categories but still came out with higher net income. Why?
  30. 30. Questions to Ask When Viewing Reports Like these: • Are these the numbers I expected? • If not, why not? • Did something happen during the quarter that would explain the deviation? PROFIT AND LOSS STATEMENT (SIMPLE)
  31. 31. •More accurate to break your annual budget into quarters •This allows you to consider your business cycle. BUDGETING AND TIMING
  32. 32. •When should we start budgeting talks? •What information do we need to collect? •When are utilities highest? •When are salaries lowest? •When are supply costs the highest? •What are the highest & lowest revenue months? •Is it OK to budget for a loss? TABLE TALK: BUDGETING AND TIMING
  33. 33. QUESTIONS? Robert Di Bacco Chief Operating & Financial Officer robert@azcharters.org

Notas do Editor

  • Contracted Services – where you turn for all the information you don’t know. I.E. I am a teacher, not a network specialist, I will need to hire a service to set up my servers and maintain them.

    -Budgets –. Ensuring you have enough money to make payroll, pay for unexpected expenses, and continue to operate.
    Financial Management – how you put everything together
  • Understanding the AZ Charter School Application, what we will be discussing today will help you refine or approach the items listed. 
  • Contracted services will be one of the most important areas that you will need to look at. Remember as we walk through this section to think about what you know and what you are the expert in. If you are a teacher for example do you need to hire someone that is a curriculum coach or can you handle this? Keeping in mind as well as you start you will not have the funds to hire every desired position and you will indeed have to fill multiple positions.
  • These are just a few of the areas that you should look at outsourcing too. Remember if you have grant funding, or special funding there may be requirements around different things, make sure you understand what those requirements truly are. 
  • If you go to the marketplace and do not see someone that you need please reach out to Damon (damon@azcharters.org) we work with many different vendors and our past experience we may know someone who is not a member that can help you out.
  • Some vendors will not have to be fingerprinted. Make sure you have a policy in place – example, an escort policy.  Check out our webinar on Finger Print Clearance Cards. Understand what vendors will and will not have access to and when. If they are there when no kids are there they do not need to have a card or escort.
    Remember finger print clearance cards are not required for vendors if you have an escort policy in place. 
    Reviewing vendors is important but it should not become a full time job! Good rule of thumb is to run a simple bid get three quotes, and stick with the same person. Every few years re-bid if you have reason to. Remember RELATIONSHIPS matter if you find a firm you can deal with and trust the more business you give the better your pricing will become. Remember to REVIEW their work if they are not doing good work you need to find someone who will.
    Keep in mind if you contract with someone to come on your campus and do work you are responsible! If they do not follow the law you are responsible. Building codes etc must be followed.
  • -Was it applied for?
    -Were you approved?
    -What does it mean?
    -IT does not exempt you from Federal Procurement Laws! If you get any federal funds, you must prove you are following FPL!
    -How to document policies and procedures
    -ALWAYS get a copy of a contract and/or agreement. DO NOTHING with out one! Protect yourself! Define the scope of work, what is to be done, how and pricing. Do not sign an open ended contract, do not sign a vague contract. This is your protection if things go south.
    -Make sure you keep all your receipts and invoices!
  • Any expense or income should be based on an assumption and fact.Projections should assume like the statement on the screen, actuals should be based on fact. You need to compare the two and adjust. If you stated it would be 350,000 but you came in at 250,000 why is this? Did you only 7 teachers?If so are you going to hire more?If not do you need to budget for 10 in future years? If you budget based off of an assumption and it comes out to a different total you need to be asking yourself why.
  • Budgeting helps you prioritize things. It keeps you organized and keeps you on the straight and narrow when it comes to doing business. The if you budget for something you know if the income is there you will have the money for spending it.Same as why we all budget for groceries at home,your paycheck only covers so much, so you have to know what you can spend on movies, food, etc. The same is true for businesses if you know what you have to pay for payroll you can budget the pieces you need for insurance,facilities,etc. 
  • Understand your break even point. This means all your expenses added up, how many kids do you need from an ADM stand point to get funded?For example lets say you run a school with $500,000 in expenses. You need an ADM of 62.5 (assuming state paid $8000 an ADM). When doing your break even if you need 62.5 remember you need at least 75 kids, not every child will show up to school every day and it averages! Anything above a 62.5 would be considered profit which can be used to increase your facilities, or make them better. Remember the more you add to your student base, your expenses will rise as well!
  • As discussed before you need to look at your budget to actual. Your assumption(budget) and your actual(fact) of what is going on. You should be familiar with your P & L Statement or Income Statement as well so you know what is coming and goig in your business. Let's dive in to these.
    Why is it that this school spent beyond most budget categories but still came out with higher net income?

    Don’t focus on certain sections only and miss the big picture

    Give example of being within budget but having a net loss

  • Profit-Loss Statement should hold no surprises! You should know these numbers by heart and be able to understand why you are running a  deficit or running a surplus. If you're running a surplus are you retiring debt or planning for expansion or improvements? In this example the school is running a deficit, what would you do here? 
  • Some quarters have summer months – no income. Important to plan accordingly. Remember to know WHEN you will be paid.Consider this your pay check,you know when you're being paid now so you can pay your mastercard bill, well in a business you must know when income is coming in so you can pay your bills. Bigger than bills pay roll runs every two weeks, or twice a month do you have the cash flow to pay this?
  • With your table, discuss these questions.
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