School Finance: Charter Schools
FY08 Charter School End of Year Financial Report Summary
Last Updated: 6/30/09
Introduction
This release of standardized, FY08 financial data for Massachusetts charter schools follows the inaugural release of FY07 financial data last year. This continues the Department's effort to present Massachusetts school spending data in a way that is comprehensive, comparable, and transparent to the general public.
This data was collected from each charter school on the FY08 Charter School End of Year Financial Report (CSEOYFR). See http://finance1.doe.mass.edu/charter/charter08_eoy.html. The CSEOYFR collects a standardized balance sheet for each charter school as well as revenue and expenditure information for the fiscal year.
The CSEOYFR was designed to capture charter school financial data in a standardized format for the following reasons:
To meet grant compliance requirements applicable to all local educational agencies. The data previously provided by charter schools in their independent audit reports had been inconsistent due to the lack of standardized financial definitions for charter schools.
To address issues raised by the State Auditor's report of June 15, 2004 on charter school financials (  http://www.mass.gov/sao/Audit%20Reports/2004/2004511017c.pdf), as well as new Government Accounting Standards Bureau (GASB) requirements.
To create consistency in the report-out of charter school financials in order to allow for comparison and analysis between charter schools, and to the extent possible, between charter schools and traditional public schools and districts.
Data presented in the FY08 CSEOYFR Summary
The data presented in the  FY08 Charter School End of Year Financial Report Summary include the following:
Balance Sheet (for selected charter school or total);
Income Statement (for selected charter school or total);
Schedule of Functional Expenses (for selected charter school or total).
In addition, statewide summary data is available for the following:
Expenditures Per Pupil (summary);
Average Teacher Salaries (summary).
Differences between accounting standards and financial rules that govern charter public schools versus traditional public school districts
Wherever possible, the CSEOYFR was developed to parallel the District End of Year Financial Report (EOYR) (http://finance1.doe.mass.edu/account/eoy08.html) submitted annually by traditional public school districts to ESE. However, it is important to keep in mind that several important distinctions between the accounting standards and finance rules that govern charter schools and those that govern traditional public school districts affect the interpretation of data on their respective end of year financial reports.
| | Traditional District Public Schools | Charter Public Schools |
Accounting
reporting
type in
accordance
with the
Government
Accounting
Standards
Board
(GASB)
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Report as governmental entities conducting government-type activities on a modified-accrual basis:
Revenues are recognized when they become measurable (amount can be reasonably estimated) and available (revenues are collected during the current year or soon enough thereafter to pay current liabilities).
Encumbrances (commitment of funds for contracts not yet performed or goods and services not yet received) which are created when a contract is signed or a purchase order is issued are recorded as expenditures on the EOYR.
Transactions are generally recorded in multiple funds and account groups that must be reconciled with the municipality's financial statements.
Capital expenses are recorded as expended in the fiscal year in which the payment is made, either as a capital acquisition cost if no borrowing is involved, or when long-term debt interest and principal payments are made.
Depreciation is not used to record capital expenses except in limited circumstances as determined by ESE (e.g. transportation vehicles).
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Report as special purpose governmental entities conducting business-type (or enterprise) activities on a full accrual basis:
Revenues are recognized when earned;
Encumbrances are not recorded as expenditures; expenditures are recorded when the liability is incurred.
Transactions are generally recorded in one proprietary fund.
Long-term debt interest is recorded as an expense, but long-term debt principal payments are not.
Depreciation is used to record capital expenses, generally using a straight-line method over the useful life of the assets acquired.
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In-kind
services | The value of goods and services provided in-kind are generally not recorded. | In accordance with Generally Accepted Accounting Principals (GAAP), the value of goods and services provided in-kind by the school's host district or other organizations/individuals (e.g., transportation or food services) must be recorded as revenue and a corresponding expense if the goods or services would otherwise have to be procured by the charter school.
Approximately $6 million dollars (out of $315 million total revenue) was recorded as in-kind contributions in FY08. |
Capital
facilities
costs | Districts are generally provided facilities by their respective municipalities and are eligible for up to 80% reimbursement from the state's School Building Authority for capital costs related to school buildings. These costs are not included in the per-pupil expenditure reports. | Commonwealth charter schools must pay for capital costs from tuition received from sending districts (which includes a per-pupil facilities aid amount) in addition to accessing privately-raised funds. They are not eligible for reimbursement from the state's School Building Authority. The majority of Commonwealth charter schools lease (rather than own) their primary facilities. For this reason, costs associated with building leases are considered non-operating capital costs. Horace Mann charter schools are generally provided facilities by their host municipalities. These costs are not included in the per-pupil expenditure reports. |
| Surpluses | Unspent funds in municipal districts revert to the municipality's general fund at the end of each fiscal year. Regional districts may retain up to 5% of their operating budget in an excess & deficiency account. | Allowed to retain annual surpluses from one year to the next. |
"Component Unit"
Supporting
Organizations | In general, foundations and fundraising groups set up to support local public school districts are operated fully independently of the district. These organizations are general not considered "component units" of the school district or municipality. | Many foundations set up to support charter schools are considered "component units" of the charter school under GASB rules and are, therefore, presented alongside the charter school in the school's financial statements. |
| Audit | Independent audit report-either separate from or as part of a general municipal audit-including ESE Compliance Supplement, must be submitted to ESE and DOR by March 31 of the next fiscal year. | Independent audit report, which adheres to the Massachusetts Charter School Audit Guide compliance requirements, must be submitted to ESE and the State Auditor by January 1 of the next fiscal year. |
Expenditures Per Pupil by Function
The expenditures per pupil summary by functional spending category show all school operating expenditures including those from charter tuition, grants, and private donations. As well as showing the overall cost per pupil, they provide detail about how much schools spend in specific functional areas, such as teaching, maintenance, and administration.
The following funding sources are all included in the expenditure per pupil summary.
tuition from sending districts (host districts in the case of Horace Mann charter schools);
federal grants and reimbursements;
state grants and reimbursements;
special education circuit breaker reimbursements;
Medicaid reimbursements;
private grants and contributions;
program fees;
other receipts such as rental or investment income.
The ten categories of functional spending reported in the expenditures per pupil summary follow the order of the standardized expenditure categories contained in the CSEOYFR, which generally align with the district per pupil expenditures report found at http://finance1.doe.mass.edu/statistics/function08_note.html. These ten functional spending areas also match those incorporated in the changes to the Chapter 70 foundation budget calculations that occurred in FY08 for all public schools.
| Code | Functional Spending Category |
| 100 | Administration |
| 210 | Instructional leadership |
| 220 | Classroom and specialist teachers |
| 230 | Other teaching services |
| 240 | Professional development |
| 260 | Instructional materials, technology and equipment |
| 250 | Guidance, counseling, and testing |
| 300 | Pupil services |
| 400 | Operations and maintenance |
| 500 | Employee benefits, retirement and fixed charges |
For non-charter districts, the following categories are excluded from per pupil expenditure comparisons: community services (civic activities, recreation, health services to non-public schools, transportation to non-public schools); acquisition, improvement and replacement of fixed assets; and debt retirement and debt service for school construction and other purposes. There is so much variation in districts' building programs that counting these large expenses in the total would unfairly skew the results.
Charter school community services costs are correspondingly excluded from per pupil expenditure comparisons. However, because charter school facilities costs are the subject of much interest and discussion, two categories of costs are presented for reference in the charter school expenditure per pupil summary. First, because most charter schools lease their facilities, expenditures for the rental/lease of building and grounds is presented. In addition, capital facilities costs are also presented. Capital facilities costs include facilities-related long-term interest; depreciation of equipment, buildings, and grounds; bad debt or loss on disposal of assets; and other costs related to capital facilities acquisition. Charter schools that report significant costs in this category either own their buildings or have invested heavily in leasehold improvements.
Measuring enrollment: the concept of full-time equivalent average membership
The per pupil spending calculations published here compare spending, which occurs throughout the school year, to the average number of pupils, which normally fluctuates throughout the school year. The enrollment statistic used is called "full-time equivalent average membership."
Full-time equivalency refers to the percentage of time that students are enrolled during the school year. A pupil who arrives on November 1st and is still enrolled at the end of the year, for example, would be assigned full-time equivalency of somewhere in the range of eight-tenths.
Charter school spending data in the context of all public school spending
Most school spending in Massachusetts goes toward educating local resident pupils in local schools. However, about five percent of the nearly one million public school children in Massachusetts are enrolled in publicly-funded settings outside the district. Local school districts pay tuition for pupils at special education schools, charter schools, and other placements. This is reported on the District End of Year Financial Report in a lump-sum eleventh functional category called "Payments to Out-of-District Schools." In FY08, about half of the students educated outside of local district schools (representing about 2.6% of all public school students) were educated in charter schools.
The Commonwealth imposes a strictly enforced total spending requirement on traditional school districts called "net school spending" (see http://finance1.doe.mass.edu/statistics/function08_note.html). However, there are no spending requirements imposed by the Commonwealth on charter schools.
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State Government · State Services 
