Family & Community Alternative Learning
Charter Schools

State Auditor's Report
On Establishing Standardized Accounting and Reporting Methods
for Massachusetts Charter Schools

Introduction

Background

Section 89 of the Education Reform Act (Massachusetts General Laws Chapter 71) authorized the establishment of charter schools and required these schools to submit to the Secretary of Education and other interested parties, by no later than August first of each year, an annual report for the preceding year in a form prescribed by the Secretary. This annual report was to include the following:

1. Discussion of progress made toward the achievement of the goals set forth in the charter, and
2. A financial statement setting forth by appropriate categories, the revenues and expenditures for the year just ended.

Subsequently, Chapter 46 of the Acts of 1997 amended this legislation by inserting Subsection (hh), which states:

Each charter school shall keep an accurate account of all its activities and all its receipts and expenditures and shall annually cause an independent audit to be made of its accounts. Such audit shall be filed annually on or before January 1 with the Department of Elementary and Secondary Education and the State Auditor and shall be in a form prescribed by said auditor. Said auditor may investigate the budget and finances of charter schools and their financial dealings, transactions and relationships, and shall have the power to examine the records of charter schools and to prescribe methods of accounting for the rendering of periodic reports.

In order to comply with the requirements of Chapter 71, the Massachusetts Department of Elementary and Secondary Education promulgated 603 Code of Massachusetts Regulations 10.03, which requires charter schools to submit to ESE a Pupil and Financial End of Year Report (ESE-Schedule 19). The first of these reports, which is the same report that ESE requires all public school districts within the Commonwealth to file, was due September 15, 1997.

Audit Scope, Objectives, and Methodology

The scope of our review included an examination of the recordkeeping and reporting procedures being utilized by ESE relative to its administration of Massachusetts charter schools. Our overall objective was to assess the effectiveness of these procedures and to develop standardized recordkeeping, accounting and reporting requirements for charter schools to implement. In order to meet our objectives, we held discussions with ESE officials and officials from other states that operate charter schools. We also reviewed the charter school recordkeeping, accounting and reporting requirements being utilized in three other states--Alaska, Michigan, and Arizona--and reviewed various financial reports submitted by Massachusetts charter schools to ESE as well as the financial reports currently being provided to ESE by the Commonwealth's public schools (ESE-Schedule 19).

On September 23, 1998, we met with ESE's Associate Commissioner for Charter Schools to review our proposed charter school recordkeeping, accounting and reporting requirements. Based on our audit work and the information we obtained during our September 23, 1998 meeting, the attached Chart of Accounts and pro forma financial reports were developed for implementation throughout the Charter School system.

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