Charter School Financial Reporting Requirements
April 5, 2004
Dear County and District Superintendents, County and District Chief Business Officials, and Charter School Administrators:
CHARTER SCHOOL FINANCIAL REPORTING FOR 2003–2004
AND SUBSEQUENT FISCAL YEARS
In a March 5, 2003, letter titled, "Financial Reporting for Charter Schools," the California Department of Education (CDE) informed districts, counties, and charter schools it was continuing to implement the requirements of Assembly Bill (AB) 1994, Chapter 1058, Statutes of 2002, regarding charter school financial reporting. Since that time, CDE developed regulations authorizing the standardized account code structure (SACS) as a financial reporting format available to school districts, county offices of education, joint powers agencies, and charter schools. Additionally, CDE developed regulations for an alternative format (hereinafter referred to as the Alternative Form) that may be used by those charter schools that choose not to report in the SACS format.
After a 45-day public comment period and a public hearing, the regulations and the Alternative Form for charter school reporting were approved at the September 2003 meeting of the State Board of Education (SBE). Subsequently, the Office of Administrative Law approved the regulations in November 2003, and they are now published in sections 15060, 15070, and 15071 of Title 5 (Education) of the California Code of Regulations (CCR). The CCR can be accessed from the Office of Administrative Law Web site at http://www.oal.ca.gov or http://ccr.oal.ca.gov. Also, the regulations and the Alternative Form are available for viewing on CDE's Web site at www.cde.ca.gov/regulations/, under School Finance. (Please note: CDE will be launching a new Web site in late April. Once the new Web site is active, the regulations and the Alternate Form will be at http://www.cde.ca.gov/re/lr/rr/.)
Required Charter School Financial Reporting
The submission of charter school financial data to CDE has been optional for the past two fiscal years. Now that the regulations and reporting formats required by Education Code sections 1628 and 42100 (as amended by AB 1994) are in place, charter school financial reporting is required for fiscal year 2003–2004 and for subsequent fiscal years. These year-end reports are due to each charter school's authorizing agency on or before September 15 each year. As previously mentioned, charter schools may choose to submit their financial data either in the SACS format or in the Alternative Form prescribed in the regulations. In either case, the data must be submitted to the charter school's authorizing agency, forwarded to and reviewed by the county office of education, and electronically submitted to CDE.
The specific reporting options for 2003–2004 are as follows:
- Charter school financial data can be reported in SACS, in the authorizing agency's General Fund (SACS Fund 01), Charter Schools Special Revenue Fund (SACS Fund 09), or a new Charter Schools Enterprise Fund (SACS Fund 62), which allows full accrual accounting for not-for-profit charter schools.
- Charter school financial data can be reported in SACS by the charter school, separate from the authorizing agency, by using the charter school's county-district-school (CDS) code to access the applicable forms, including the Charter Schools Enterprise Fund form.
- Charter school financial data can be reported by the charter school using the Alternative Form.
We encourage charter schools to thoroughly review the charter school financial reporting options (SACS and the Alternative Form) before choosing the format to use in submitting the 2003–2004 financial reports. We also suggest that charter schools discuss the options with their authorizing agencies and independent auditors before making a decision. To assist charter schools with this decision, here are some thoughts to consider about using SACS or the Alternative Form for financial reporting.
Many charter schools are already using SACS, either on their own or with the help of their authorizing agency. We encourage these charter schools to continue using SACS for a variety of reasons, including: SACS allows charter schools to take advantage of various automated software features, such as the ability to create program reports and automatically calculate an indirect cost rate; SACS allows charter schools to easily respond to requests for information needed to comply with federal special education maintenance of effort compliance requirements; and SACS provides CDE, the Legislature, other state and federal agencies, and the public with the most complete and comparable financial data.
For 2003–2004 reporting, we plan to modify the SACS software to accept a charter school's data separate from the charter school's authorizing agency. We will accomplish this by modifying the "LEAID" field in the Preferences menu in the SACS software. The specific details of this modification have been included in a separate SACS software letter, but briefly this means that for those school districts and county offices whose charter schools wish to report their data separately, the extract file will have to be amended to add an additional seven digits for a school code. For local education agencies whose charter schools do not report separately, no change is required to the extract program, because CDE will automatically backfill the seven-digit school code field with zeroes. The SACS software letter referred to above is on CDE's Web site at www.cde.ca.gov/fiscal/financial/corresp.htm. On CDE's new Web site, the letter will be at http://www.cde.ca.gov/fg/ac/co/.
Although the entire SACS package may look daunting to charter schools, keep in mind that charter schools need only complete the data elements that apply to them. For instance, it is not likely that a charter school will have more than one fund, so there is no need to report data in multiple funds. Also, compared to traditional school districts, charter schools will have fewer funding sources (due to block grant funding) and fewer instructional settings, which should simplify the use of SACS for charter schools.
In addition to the SACS software changes planned for 2003–2004, we hope to build into SACS, to the extent possible, the Senate Bill 740 (Chapter 892, Statutes of 2001) nonclassroom-based funding determination form. The SACS software will automatically pull most, if not all, of the data needed to complete the form. Because of the volume of changes being made this year, however, we may not be able to add this new feature until next year.
Using the Alternative Form
The Alternative Form is an option available for charter schools to prepare their unaudited actual financial reports without using the SACS format. Because the Alternative Form is less complex than the SACS reporting format, it may be easier for charter schools to use. However, charter schools using the Alternative Form may need to separately provide additional information, such as the information needed to determine a charter school's compliance with federal special education "maintenance of effort" requirements.
An indirect cost rate cannot be generated from data reported using the Alternative Form. CDE has asked the United States Department of Education (USDE) to grant the department authority to approve indirect cost rates for individual charter schools. Depending on the outcome of these negotiations with USDE, charter schools using the Alternative Form that request an indirect cost rate will need to provide CDE with additional information before a rate can be calculated. If a charter school does not request an indirect cost rate, this additional data will not be required.
The Alternative Form is currently available only for viewing and printing; however, it will soon be available in a downloadable Excel spreadsheet format that will be posted on CDE's Web site with other financial software. We expect the form will be posted on CDE's new Web site at http://www.cde.ca.gov/fg/sf/ by the end of April.
If charter schools use the Alternative Form for financial reporting to CDE, the Excel spreadsheet version must be used, and the data must be submitted to CDE electronically, via either disk or Internet (see Education Code sections 1628 and 42100 and CCR Title 5 Section 15071); hard copies of the Alternative Form will not be accepted. Details about transmitting the Alternative Form to CDE will be provided with the release of the electronic version of the form.
Budgets and Interim Reporting
Beginning January 1, 2004, charter schools are required by Education Code Section 47604.33 (Assembly Bill 1137, Chapter 892, Statutes of 2003) to submit budgets and interim reports to their chartering agency for review. Because no particular format is required, CDE will not be developing the associated budget and interim forms. However, charter schools reporting as separate agencies in SACS will have access to existing budget and interim forms.
Charter School Accounting and Financial Reporting Guidance
In 2004–2005, CDE will be revising the California School Accounting Manual (CSAM) to include accounting and financial reporting guidance that is specific to charter schools. In the meantime, the latest edition of CSAM provides a wealth of information about school district accounting and financial reporting, much of which is applicable to charter schools. Both the CSAM and information about SACS are available on CDE's Web site at www.cde.ca.gov/fiscal/sacs/. On CDE's new Web site, CSAM and SACS information will be located at http://www.cde.ca.gov/fg/ac/.
For more information about financial accounting and reporting, and CDE's financial reporting software, charter school personnel should first contact their authorizing district or county office of education. If additional help is needed, contact our Financial Accountability and Information Services Office by calling 916-322-1770 or by email to firstname.lastname@example.org.
Scott Hannan, Director
School Fiscal Services Division
Marta Reyes, Director
Charter School Division