Staff has reviewed the schools fourth quarter financial reports that - PDF document

J OHN S.S. K IM D AVID Y. I GE C HAIRPERSON G OVERNOR STATE OF HAWAII STATE PUBLIC CHARTER SCHOOL COMMISSION (ʻAHA KULA HOʻĀMANA) 1111 Bishop Street, Suite 516, Honolulu, Hawaii 96813 Tel: (808) 586-3775 Fax: (808) 586-3776 DATE OF SUBMITTAL: September 11, 2019 MEETING DATE: September 12, 2019 TO: John Kim, Chairperson State Public Charter School Commission FROM: Sione Thompson, Executive Director State Public Charter School Commission AGENDA ITEM: IV. Presentation/Action on Charter Schools Fourth Quarter Financial Performance Report SY 2018-2019 I. DESCRIPTION Presentation on financial performance of charter schools for fourth quarter of school year 2018- 2019 II. AUTHORITY Hawaii Revised Statutes §302D-17 provides that “(a) An authorizer shall continually monitor the performance and legal compliance of the public charter schools it oversees, including collecting and analyzing data to support ongoing evaluation according to the charter contract.” The State Public Charter School Contract requires schools to prepare and submit quarterly financial reports to the Commission, which includes a balance sheet, income statement, and statement of cash flows. The quarterly financial reports are key documents that provide the necessary financial information needed by the Commission to perform periodic financial monitoring of a school, which is a component of its general oversight function. Staff has reviewed the schools’ fourth quarter financial reports that involved analyzing the schools’ financial statements and measuring its performance against the financial performance framework.

III. BACKGROUND The Commission’s Financial Performance Framework utilizes six ratios included in a risk assessment model that measures annual financial performance. Each indicator is given a score of 1 to 5 according to the framework metrics and those scores are utilized to determine an overall risk assessment score ranging from “low” to “significant.” The information provided by the of schools for this risk assessment is unaudited, self-reported financial information. The formula to calculate the weighted aggregate assessment score for each school and a description of each measure are represented in the tables below: Ratio What it Means Current Ratio Identifies if a school has enough current assets to pay off its current liabilities Year-end Unrestricted Indicates how many days a Days’ Cash on Hand school can pay its expenses without another inflow of cash Identifies whether or not a Budget Variance school is accurately projecting revenues, and consequently, budgeting appropriately Total Margin Measures the surplus or deficit a school yields out of its total revenues Debt to Assets Ratio Measures the amount of liabilities a school owes versus the assets it owns Cash Flow Measures a school’s change in cash balance from one year to another

IV. PRESENTATION The Fourth Quarter Financial Statement Template (Exhibit 1) utilized by the schools in reporting for Fiscal Year 2018-2019 introduced the Financial Performance Framework Risk Assessment Calculator as a tool incorporated into the reporting template workbooks. This tool allows schools to see their Financial Performance Risk Assessment results by automatically populating the financial information provided by the school in the workbooks of the template into a calculator embedded into the final workbook of the template to illustrates how the schools’ reported data translates into the Financial Performance Framework Risk Assessment indicators and metrics. The calculator allows both the Commission and the schools the ability to monitor Financial Performance using the same methodology and fiscal indicators as approved by the Commission and prescribed in the charter contract. The calculator also eliminates any uncertainty in Financial Performance Framework Risk Assessment standing for schools and the Commission. Exhibit 2 incorporates financial information provided by the charter schools utilizing the template provided in Epicenter for the period ending June 30, 2019 of the fiscal year into a Compiled Financial Performance Risk Assessment that illustrates the financial health of all schools using the metrics and formulas outlined in the tables. As represented in the Financial Performance Framework Fourth Quarter Fiscal Year 2019 Risk Assessment (Exhibit 2 ) , based on the self-reported fiscal data provided by the schools, all schools received a score of “Low,” “Acceptable,” or “Moderate.” Further analysis reveals that charter schools as a whole received a score of “Low,” “Acceptable,” or “Moderate” on 204 of 216 total individual indicators, a rate of 94%. These results are encouraging as they indicate that all schools in the portfolio are in position to comply with these requirements of the Financial Performance Framework of their contracts for fiscal year 2018-19 if validated through finalized independent audit reports due November 1 st , 2019 to the Commission. Currently, there is one school that received a Notice of Concern for their risk assessment results for fiscal year 2018 and provided a Corrective Action Plan to ensure compliance for the Financial Performance Framework. Risk assessment results for the fourth quarter fiscal year 2018-19 indicate this school is in a reasonable position to fall within the range of “Acceptable” under the risk assessment model of the Financial Performance Framework.

EXHIBIT 1 Financial Performance Framework 4 th Quarter Reporting Template for Fiscal Year 2018-2019

The DUE DATE for transmitting this COMPLETED FORM to the Commission Office for the Twelve Months Ended June 30, 2019 is: July 31, 2019 Please see the following web address to view Presentation to Charter Schools: www.youtube.com/watch?v=v288aVVpYG8&t=2386s The Every Student Success Act (ESSA) implemented a new per-pupil expenditure (PPE) reporting requirement. Each Charter School must prepare an annual State report card that includes the per-pupil expenditures of F Per Pupil Expenditures Calculation : by Fiscal Year 2018-19 Instructions/Notes Expenditures State / Local Funds [1] No need to enter information in this cell. Information is pulled from another schedule or based on a formula. Federal Funds Enter Information in this cell. [2] Total $0.00 [3] Please use accrual accounting for expenditure reporting and only enter data into the yellow highlighted areas. Official : Data to be provided by DOE [4] PPE State / Local Funds #DIV/0! PPE Federal Funds #DIV/0! Total #DIV/0! Data to be provided by Charter Schools: [1] Expenditures of State / Local Funds, [2] Expenditures of Federal Funds, and [3] Total Expenditures Data to be provided by DOE: [4] Official Enrollment Count EXCLUDE INCLUDE Exclude all of the following cost items: Include all other cost items, including, but not limited to: ● Nonimposed Fringe for State (General) Funded Payroll ● Instruction, Instructional Support, Student Support Services for Regular ● Community services (After School Programs, etc.) Education, Special Education, Early Learning ● Student Activity Funds (Local School Funds) ● School Administration ● Private Donations/Grants (OHA, Kamehameha Schools, etc.) ● School Food Services ● Capital Outlay (Capital Improvement Projects) ● Student Transportation Services ● Debt Service ● Facility Operations and Repair & Maintenance OTHER SPECIAL GUIDELINES ● Expenditures of Impact Aid funds must be included in State/Local, as Impact Aid is considered Federal funds intended to replace local tax revenue ● Expenditures for the School Food Service program must be included in Federal, as school food service program revenue is considered part of the nonprofit school food service account (NSFSA), which has a Federal identify (per 7 CFR 210). For questions, please contact Scott Hall, SPCSC Financial Performance Officer, at (808) 586-3835 or email scott.hall@spcsc.hawaii.gov. HAWAII STATE DEPARTMENT OF EDUCATION HawaiiPublicSchools.org

Page 1 Org ID NAME: Statement of Net Assets (Balance Sheet) June 30, 2019 The DUE DATE for transmitting this COMPLETED FORM to the Commission Office for the Twelve Months Ended June 30, 2019 is: July 31, 2019 ASSETS School Component Unit Current Assets 1 Cash and Cash Equivalents 2 Accounts Receivable net of doubtful accounts 3 Grants Receivable - State 4 Grants Receivable - Federal 5 Grants Receivable - Private 6 Contributions Receivable 7 Due from related parties 8 Prepaid Expenses 9 Short-Term Investments 10 Other: 11 Other: 12 TOTAL CURRENT ASSETS - - Noncurrent Assets Capital Assets 13 - Land and Buildings 14 - Building/Leasehold Improvement 15 - Furniture and Equipment 16 - Less Accumulated Depreciation 17 Net Capital Assets - - 18 Restricted cash and cash equivalents 19 Long-Term Investments 20 Other: 21 Other: 22 - - TOTAL NONCURRENT ASSETS 23 TOTAL ASSETS - - LIABILITIES AND NET ASSETS Current Liabilities 24 Accounts Payable 25 Accrued Expenses 26 Deferred Revenue 27 Due to related parties 28 Current Debt Payable 29 Current Lease Obligations Payable 30 Other: 31 Other: 32 TOTAL CURRENT LIABILITIES - - Noncurrent Liabilities 33 Noncurrent Lease Obligations 34 Long-Term Debt 35 Other: 36 Other: 37 - - TOTAL NONCURRENT LIABILITIES 38 TOTAL LIABILITIES - - NET ASSETS 39 Investment in capital assets (net of related debt) Restricted: 40 - Temporarily: 41 - Permanently: 42 Unrestricted: 43 - - TOTAL NET ASSETS 44 TOTAL LIABILITIES AND NET ASSETS - -