Family & Community Alternative Learning
Charter Schools

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

Audit Results

Charter Schools Need Standardized Accounting and Financial Reporting Requirements

During fiscal year 1998, the Office of the State Auditor (OSA) began an audit of Massachusetts Department of Elementary and Secondary Education's administration of charter schools. During our audit field work, ESE's Associate Commissioner for Charter Schools informed the audit staff that only six of the 25 charter schools operating within the Commonwealth during fiscal year 1997 had filed an end-of-the-year report (ESE-Schedule 19). The Associate Commissioner also stated that, in his opinion, this prescribed reporting method for non-charter public schools is not readily adaptable to charter school operations. Based on our review of reports submitted to ESE by charter schools during fiscal year 1997, we determined that the format of the financial information being provided to ESE by charter schools is inconsistent and its usefulness is therefore limited.

Recommendation: In regard to the lack of a uniform format for financial reporting for charter schools, and in accordance with the authority granted by Chapter 46 of the Acts of 1997, the OSA has developed for implementation a basic chart of accounts, pro forma budgets and financial reports in addition to those required by generally accepted accounting principles (GAAP) for charter schools to utilize. This chart of accounts prescribes the minimum accounts that are necessary to develop consistent and meaningful financial reports. Certain charter schools should modify this chart of accounts as necessary to accommodate their unique operational situations.

In order to better ensure proper administration of charter schools, ESE should amend its current regulations to require charter schools operating within the Commonwealth to maintain their financial records in accordance with GAAP. Also, all independent annual audits of these schools should be performed in accordance with generally accepted government auditing standards (GAGAS) issued by the Comptroller General of the United States and should comply with Office of Management and Budget Circular A-133 requirements, if appropriate. Further, ESE should require that all charter schools submit a copy of the independent auditor's management letter with the financial reports. As appropriate, ESE should provide further guidance to charter schools relative to the utilization of this information.

In our opinion, this information is necessary to establish a consistent and comprehensive financial accounting and reporting system for charter schools to ensure proper accountability of the funds provided for the operation of these schools by the Commonwealth. A uniform financial reporting structure is essential to properly monitor the use of tax dollars and to ensure that a child's education is not disrupted by a school's financial deficiencies.