The main reason for charter school failure is not academic mismanagement or low test scores. It isn’t lack of parental involvement or increases in bullying. The main reason for failing charter schools is financial mismanagement.
Financial mismanagement comes in two flavors. The first is intentional mismanagement. Directors or principals defraud the school. They buy themselves nice cars and pay themselves high salaries, then close the school. While I have heard of these cases, fortunately they seem to be relatively rare.
The second and more likely type of financial mismanagement occurs when schools focus so much on their educational philosophy and providing educational programs and buildings that they fail to emphasize financial forecasting, internal controls and budget management.
Here are a couple of tips:
Hire a financial professional with good forecasting and budgeting experience. If you can’t afford to hire someone full time, allocate funds for a consultant.
Plan some cushion into the budget. Most financial results turn out worse that the plan, even when you think you are being realistic.
Look out over a few years to determine the long term result of short term decisions. Salary increases today create ongoing obligations for the future.
Use conservative assumptions for pupil count. You can always spend more, but it’s difficult to spend less.
Make sure money is handled by the right people and segregate duties.
Purchases an accounting system that allows you to track encumbrances against budget in real time. This allows you to report to principals appropriately as well as catch requests before you exceed your budget.
Make sure you track cash as well as accounting expenses. Sometimes cash goes out before an item is recorded as an expense. Make sure you have adequate reserves.
There is no way to absolutely ensure economic success for a charter school, but adhering to these basic principles can mean the difference between failure and long term success.
Financial mismanagement comes in two flavors. The first is intentional mismanagement. Directors or principals defraud the school. They buy themselves nice cars and pay themselves high salaries, then close the school. While I have heard of these cases, fortunately they seem to be relatively rare.
The second and more likely type of financial mismanagement occurs when schools focus so much on their educational philosophy and providing educational programs and buildings that they fail to emphasize financial forecasting, internal controls and budget management.
Here are a couple of tips:
Hire a financial professional with good forecasting and budgeting experience. If you can’t afford to hire someone full time, allocate funds for a consultant.
Plan some cushion into the budget. Most financial results turn out worse that the plan, even when you think you are being realistic.
Look out over a few years to determine the long term result of short term decisions. Salary increases today create ongoing obligations for the future.
Use conservative assumptions for pupil count. You can always spend more, but it’s difficult to spend less.
Make sure money is handled by the right people and segregate duties.
Purchases an accounting system that allows you to track encumbrances against budget in real time. This allows you to report to principals appropriately as well as catch requests before you exceed your budget.
Make sure you track cash as well as accounting expenses. Sometimes cash goes out before an item is recorded as an expense. Make sure you have adequate reserves.
There is no way to absolutely ensure economic success for a charter school, but adhering to these basic principles can mean the difference between failure and long term success.
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