School Finance: Charter Schools

MEMORANDUM

This memo provides additional information regarding good faith estimates of quarterly tuition payment described in my February 8, 2005 memo, "Important Notice Regarding Advance Certification of Quarterly Tuition Payments to Commonwealth Charter Schools."

Good Faith Estimates of Quarterly Tuition Payment

Beginning in FY06, the Department will provide "Good Faith Estimates of Quarterly Payment" to eligible charter schools upon request. Such requests should be sent to the Charter School Office and accompanied by an updated month-by-month cash flow statement for the current fiscal year that includes details regarding any anticipated use of borrowed funds. Please allow for at least 10 business days to process these requests.

Upon receipt of formal request and an updated month-by-month cash flow statement for the current fiscal year from the charter school, the Department will analyze the data to determine eligibility by ascertaining the school's financial solvency through the end of the fiscal quarter for which an estimate is being requested.

Factors considered in analyzing a school's financial solvency include but are not limited to:

• Timely submission of required data, including the most recent

  • August 1 Annual Report

  • October 1 SIMS Data Collection

  • January 1 Financial Audit

  • February 15 Charter School Claim Form

  • April 1 Charter School Pre-enrollment Report

• Stability of enrollment number reported on the April 1 Charter School Pre-enrollment Report and the October 1 SIMS Data collection;

• Findings and corrective action plans contained in recent fiscal audits;

• Reasonableness of projected amounts and timing of revenue receipt-namely, tuition payments, grant disbursements, and fundraising-in the cash flow statement;

• A plan for the drawdown and repayment of any anticipated line of credit, including interest, within the cash flow statement;

• Positive month-by-month bottom lines in the cash flow statement;

• Indications of organizational problems including but not limited to BOE votes stating intention to revoke or non-renew the school's charter or pending investigations by other government agencies (e.g., Office of the State Auditor, Inspector General, etc.).

If the Department is satisfied that the charter school has demonstrated financial solvency through the end of the fiscal quarter, the Department will send a "Good Faith Estimate of Quarterly Tuition Payment" stating the projected quarterly tuition payment. In cases where a charter school's financial solvency is in question, the Department will communicate with the school to discuss the issues. The school may be asked to provide a board-approved contingency plan if necessary. Ultimately, schools that cannot demonstrate financial solvency through the end of the fiscal quarter may be denied a good-faith estimate of quarterly tuition payment.

Acknowledgement of Irrevocable Instructions

As stated in the February 8, 2005 memo, the Department will continue to honor "irrevocable instructions" in loan agreements which require the Commonwealth to deposit the charter school's quarterly tuition payments into a blocked account that is controlled by the lending institution. Upon receipt in the Charter School Office of an executed copy of irrevocable instructions, the appropriate Commonwealth representatives will sign an "Acknowledgement of Irrevocable Instructions" (which should also be provided to the Commonwealth by the charter school or lending institution) if requested.

If you have any questions about these matters, please feel free to contact Cliff Chuang in the Charter School Office at 781-338-3228 or cchuang@doe.mass.edu.