Managing Your Assets

MICHIGAN’S SCHOOL FUNDING STRUCTURE

The amount of school aid funds to be received by a charter public school is determined by the State School Aid Act.

As with traditional public schools, charter public schools receive funding based on the number of students attending the school. Therefore, student counts are critical budget assumptions that require realistic estimates. State aid revenues are calculated based on a “blended student count,” which is calculated by taking 90 percent of the Academy’s adjusted current year October headcount and 10 percent of the Academy’s current year February headcount, unless a new grade is added or a new school is opened. In these situations, state aid is calculated based on 50 percent of the October count and 50 percent of the February count during the first two years of operation.

As with traditional public schools, charter public schools receive funding based on the number of students attending the school. Therefore, student counts are critical budget assumptions that require realistic estimates.

The Michigan Department of Education (MDE) will report the payments on the Financial Status Reports (FSR) to your administration monthly. The FSR and the actual state aid payment are sent to the Center. Generally, state aid is processed on the 20th of the month by the MDE. Although the Charter Contract allows for 10 days processing, the Center makes every attempt to process the state aid the same day it is received from the MDE.

The state’s payment schedule provides for 11 payments, beginning in October and ending the following August. Total state aid includes the per-pupil state foundation allowance as well as categorical funding such as At Risk and Special Education. Although allowed by statute to assess a 3 percent administrative oversight fee on total state aid, CMU only assesses the administrative oversight fee on the general operating funds.

BUDGET RESPONSIBILITIES

Your board is required by law to annually adopt a budget prior to July 1. The board-approved budget must comply with the Uniform Budget and Accounting Act.

The Uniform Budget and Accounting Act requires the board to designate, by resolution, a Chief Administrative Officer (CAO). The CAO has the final responsibility for the budget preparation, the budget presentation to your board and the control of expenditures under the budget and the general appropriation act. Prior to adopting the budget, your board is required to hold a public hearing as mandated by the Budget Hearings of Local Governments statute.

The State School Aid Act prohibits a charter public school board from passing a deficit budget. It is permissible to use an unassigned fund balance to cover a current year deficit.

FINANCIAL REPORTING RESPONSIBILITIES

Your school is required by law and by its Charter Contract to follow the Michigan Department of Education’s prescribed chart of accounts (Michigan School Accounting Manual) and public sector accounting principles.

You should receive the following information for both types of funds before each regularly scheduled board meeting:

  1. Statement of revenues, expenditures and changes in fund balance – budgeted vs. actual
  2. Balance sheet
  3. Cash flow statement (not required for special revenue funds)

The school has financial statements for its general fund and special revenue funds. The general fund is the school’s primary operating account, through which most of its revenues and expenditures will flow. A special revenue fund is a separate account which has been earmarked for a specific purpose, such as a Student Lunch Fund. You should receive the following information for both types of funds before each regularly scheduled board meeting:

  1. Statement of revenues, expenditures and changes in fund balance – budgeted vs. actual
  2. Balance sheet
  3. Cash flow statement (not required for special revenue funds)

Copies of the first two statements must be submitted to the Center on a quarterly basis, as required by the Oversight, Compliance and Reporting Agreement in the school’s Charter Contract.

To help ensure state and CMU-required documents and reports are submitted according to law and the Charter Contract, the Center develops and issues a Master Calendar of Reporting Requirements (MCRR). The MCRR, issued annually, is a comprehensive calendar that outlines the deadlines for all required documents and/or reports. The MCRR can be found on the Center’s website and imported into Microsoft Outlook.

NOTE: Additional financial resources, including sample budgets, are available on our website at: www. TheCenterForCharters.org, under the “Resources” tab.

ACCESS TO FINANCIAL CAPITAL

The financial market and access to facility financing has evolved greatly since the inception of charter public schools. Lenders have credited much of this access and availability to the stability and success of schools as well as strong oversight by the authorizer community.

If your school needs to obtain a loan from a financial institution, the school must first receive approval from the Michigan Department of Treasury because the loan is secured by the school’s future state aid payments. Information and forms can be found on the Department of Treasury’s website: www.michigan.gov/treasury.

Because Central Michigan University is widely known for its solid oversight practices as an authorizer, being chartered by CMU increases a charter public school’s access to financing. CMU offers the ability to intercept and redirect state aid. Upon request by the charter public school board, CMU can deduct the payment from the school’s state aid payment and transfer the loan set-aside to the lender on behalf of the charter public school. This provides comfort to the lenders as they are first to get paid. In order to facilitate direct transfers to lenders, the Center requires a complete copy of the charter public school’s loan agreement.

If your school needs to obtain a loan from a financial institution, the school must first receive approval from the Michigan Department of Treasury because the loan is secured by the school’s future state aid payments.

Once an executed state school aid payment agreement and direction is received, the Center, as limited fiscal agent, is obligated to make the required payments upon receipt of state aid unless explicitly stated in writing by both the lending institution and the charter public school board.
 

BOARD ESSENTIALS

Knowing Where You are Headed
Being Prepared
Knowing the Terrain
Managing Your Assets
Sending and Receiving Messages
Laying the Trail
Administering First Aid
Seeking Help if You’re Lost
Building the Team
Knowing When You Have Arrived
Communicating with Base Camp

Download PDF of Essentials