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Using Your Charter School Finance Committee for Impact and Sustainability

Written by Afton Group on . Posted in Charter Schools, Effective Governance, Financial Sustainability, Leadership Development.

At Afton Partners, we advise our charter school partners to follow the framework of the “5 Cs” when developing and evolving their organization’s financial governance. The “5 Cs”– Charge, Composition, Content, Collaboration, and Cadence– provide a roadmap for cultivating strategic thinking and effective decision-making with your board, all meant to elevate and sustain what’s working in your schools.

The 5 Cs of Charter School Financial Governance

The 5 Cs of school financial governance are arranged in a line.

Charge: Who is responsible for the financial decision-making process for charter schools?

To ensure a seamless sharing of responsibility, it’s an important first step to define everyone’s roles clearly. For instance, the leadership team is primarily responsible for the daily leadership and execution of the priorities set in collaboration with the Board. The Board provides oversight and accountability and ensures fidelity to the plan, including the financial plan. Blurred lines can lead to the co-managing of the budget–not an optimally effective or desirable approach. On the other hand, administrators should feel supported and not solely responsible for the organization’s financial strategy and health. Everyone has an equally important and distinct role in the stewardship of the school’s financial resources.

Setting shared expectations– with an understanding that roles will grow and evolve as the school network grows– builds trust and lessens confusion around how decisions are made and who will execute which pieces.

For example, when it comes to financial decision-making, the school board finance committee serves as a consultant, ambassador, and governing body. The CFO has the important role of collaborator, content creator, and guide to strategic decision-making. And, contrary to what some may believe, the CEO has an important role in ensuring a strong board composition, board engagement and collaboration, and guide in strategic decision-making alongside the finance committee.

Composition: Who should be on a charter school finance committee?

A charter school board finance committee carries out the principal aspects of the board’s financial duties. They set fiscal policies and expectations, continually assess the financial health and direction of the school or network, and make strategic financial decisions in alignment with the broader strategic plan.

To carry out these duties, a strong board finance committee should consist of diverse professional backgrounds and skills, including business strategy and operations; banking; fiscal planning, management, and analysis; and real estate. Board members leverage their expertise and connections in their respective areas to strengthen and sustain the school or network’s financial standing.

In our practice, we find that taking care to build and sustain your board’s financial skillsets and engagement translates to high impact.

Content: What information is important for effective financial governance?

The Finance Committee should have the materials and data needed to make decisions that support long-term sustainability and align the budget to the overall priorities. Examples include:

  • Year-to-date financial statements, compared to budget
  • Long-term financial projections
  • Cash flow monitoring
  • Current key performance indicators and up-to-date financial reporting on those metrics
  • Metrics on debt compliance and authorizer standards

With this information, the committee can then develop or revise standard metrics criteria across key performance areas (e.g., cash, enrollment, fundraising, net assets, etc.) and decide on targets. Part of each meeting should be devoted to evaluating progress towards the targets.

To mitigate challenges toward those goals, the committee should also monitor the organizational risks related to financial planning and decision-making.

The table details types of risks charter school finance committees encounter and examples of those risks.
Example categories that can be adapted to suit your school context, as each will affect financial position and forecast.

Collaboration: How should finance committee members work together?

First and foremost, the ability to collaborate well requires everyone to understand their roles regarding the organization’s financial management. Leveraging their various skill sets, committee members work together to build ongoing conversations with one another, the CEO, the CFO, and the full board. Engaging each member’s background and insights facilitates healthy discussion, leading to actionable strategic plans and informed decision-making. Effective finance committees should also commit to making adequate time for the work at hand, earning one another’s trust, and coming prepared to fully engage.

For best results, CFOs and Finance Committee Chairs should plan to work together one-on-one in advance of committee meetings. This ensures that the right priorities and information are presented to the group for productive discussion and strategic decision-making. Working in close consultation with the CEO, this trio provides leadership for the larger board to consider academic investments with respect to financial guardrails. Especially amid complexity during the budget cycle, their collaboration with one another and the meaningful incorporation of their respective vantage points is critical to impact and sustainability.

Cadence: What is an effective meeting plan for a finance committee?

Finance committees should meet regularly, with an eye toward the seasonal “arc of the year”.

A sequenced meeting calendar notifies the board of decision-making timelines. It also mitigates the risk of smaller–but no less important–agenda items getting crowded out by a waterfall of more discussion-heavy priorities.

Prescheduling board meetings for the year can aid in the planning process for each meeting and provide predictability for committee members. Prescheduling also allows the committee to allocate the proper amount of time to items requiring a deep dive, ensuring that multiple major discussions or approvals do not end up on the same agenda.

Putting Effective Financial Governance in Action

Intentional financial governance increases impact and improves sustainability. If you don’t have an engaged, effective finance committee, it’s not too late to make it happen. Use the 5 Cs to help you determine where to invest your time. Want more hands-on support? Reach out to our team!

As the national leader in charter school financial planning services, we understand the unique challenges charter management organizations commonly face. We have partnered with more than 80 networks of all sizes, from single-site operators just getting started to the largest charter school organizations in the country. Our services for charter schools build finance capacity, strengthen financial sustainability inform school resource allocation, and strategically inform organizational decision-making on growth, facility affordability, debt financings, mergers, and restructurings. To learn more, contact Fulton Breen.

*Check out this article.

Financial Stewardship in a Time of Elevated Pressures

Written by Afton Group on . Posted in Charter Schools, Effective Governance, Financial Sustainability.

We believe effective financial stewardship consists of three major pillars:

  • Enacting your mission through resource allocation,
  • Protecting your money with controls and governance, and
  • Making good resource decisions that can be sustained and leveraged toward achieving your desired long-term impact.

Leaning into your strategic fiscal oversight and operations is in tune with the moment – many public schools face elevated pressures related to enrollment uncertainty, ESSER funding expiration, student needs, and talent, all of which have significant financial implications. Further, charter schools have disproportionately complex funding and financial reporting and overarching public policy circumstances. Getting rigorous with your financial stewardship can be an enabler to navigating those waters, fending off sustainability problems and threats to your mission.

So, let’s unpack some practical ways to be more rigorous in your financial oversight…

Reflect the Mission: To do this well requires a thoughtful perspective on your instructional and operational priorities. Each year, the budget should highlight specific investments that are intended to make progress toward the school’s goals and achievement of its mission while sustaining a strong foundation. Given that personnel is likely to be your biggest investment, are proposed annual adjustments in talent aligned to your priorities for the year and the long-term mission? Which schools and grade levels require particular intervention, and how is that reflected in the budget?

Protecting Money Through Controls and Governance: The board, CEO, and CFO are responsible for providing a high-quality education for your students AND ensuring good stewardship of public funds. This includes ensuring financial health and sustainability day-to-day and week-after-week, as well as preventing fraud and misfeasance. So first, we’ll give a reminder you probably don’t need: you must do everything you can to prevent a crisis. Governance, controls, reporting, and compliance build your organization’s foundation for success, and must be a recurring focus. Let’s dig into what that looks like…

First, clearly delineate which aspects of financial reporting are led by senior management and what role the board plays in overseeing the financials of the organization. The roles must evolve as your organization grows, matures, and becomes more complex. Regardless of the approach, your money and resources must be protected, so the finance department will require resources. Additionally, enacting engaged board financial governance is a critical fiscal control and an enabler of sound financial decision making. As a rule of thumb, you’ll want at least three engaged board members who are well versed in financial statements and fiscal planning. The finance committee, made up of staff and board members, should meet monthly or bi-monthly and cover a standing agenda of monthly reports on cash position, budget variance, enrollment, other dashboards, risk management, and seasonally appropriate topics.

Making impactful resource decisions: Can you identify what you need now and later to generate your desired impact? Use your student data to inform prioritization of investments at each of your schools. Balance your instructional priorities with some financial planning, checking your assumptions on operational matters like:

  • Expected growth rates in state per pupil funding and/or federal funding shifts.
  • Enrollment data by grade-level.
  • Wage increases and any changes in the cost of benefits.
  • Needs for technology, curricula, professional development, maintenance, transportation, food insurance, audit, and legal expenses.

There’s a reciprocal relationship between focusing on the present and future of your finances: your fiscal health today will determine what you’re capable of tomorrow, and today’s decisions must be based on what you hope to afford in the long-term.

As a general guideline, you should utilize at least 2-3 years of historical trends to build a 3-5 year model that reflects your cash position and conservatively forecasts costs that might arise. With all this in hand, you’ll be prepared to navigate your work of delivering high-quality education with strong fiscal stewardship.

Download Afton’s slide deck on Financial Stewardship

FOX Fellowship’s Support for Strong Charter School Management

Written by Afton Group on . Posted in Financial Sustainability, Leadership Development.

Introduction

Afton’s co-founder and Managing Partner, Carrie Stewart, has been a coach for all three cohorts of the FOX Fellowship, a program for Chief Operating and Financial Officers of public charter schools around the country. A few weeks ago, we spoke with the fellowship’s co-founders, Irma Muñoz and DeRonda Williams, to hear about the intent and impact of the program. In our view, the FOX Fellowship represents an important investment in professionals who are great enablers of high-quality public education. Below we share Irma and DeRonda’s powerful perspectives on the work.

Guest Contribution: FOX Fellowship’s Support for Strong Charter School Management

Operations and finance functions are critical to the success of public school systems. While there are significant time and resources dedicated to high-quality instruction (and rightly so!), chronic underfunding in our public education systems leads to charter schools and public school districts alike being unable to fully invest in high-quality finance and operations functions. Therefore, in the charter school sector, we wanted to develop something that supported CEOs and organizations as they scale, not just in recruiting the right talent, but also in onboarding them and providing them an infrastructure of support, particularly in their first year in the roles. There are not many professional development programs for operations and finance leaders and not many networking opportunities other than Charter School Growth Fund’s CFO and COO community of practice. Outside of that, there really aren’t many opportunities for charter school finance and ops leaders to network and share strategies and tools. We also wanted to prioritize building the capacity and improving the retention of COOs and CFOs who are women and leaders of color. Charter schools serve Black and Brown children, so it is important to have the appropriate representation in our schools and in the C-suite.

Fortunately, Charter School Growth Fund recognized the need for a program and wanted to support a program like FOX. They provided funding to support our pilot in June 2022 and for subsequent cohorts. In October 2023, we kicked off our third cohort and plan to launch cohort 4 in September 2024.

Key Components of the Program

At the onset, we set very specific measures of success and committed to responding to data. One of them was around retention of leaders in their role because of the trends that we were seeing in the sector. I’m happy to say we have increased the retention rate within the organizations we’re working with. The early numbers point to retention in a leader’s role in the first year and beyond, which is rewarding and exactly why we developed this fellowship.

To plan for each cohort, we start by collecting a lot of data from the Fellows and their CEOs. We survey three times during the fellowship, beginning with a needs assessment, and tailor our offerings based on the needs of the cohort. We also do ad hoc things like focus groups if we see there is a particular need. We take the data as well as learnings from prior cohorts and embed them in the next cohort programming so that we’re responding to a defined cycle of continuous improvement.

As we were developing the fellowship program, another important thing to us was including coaching as a key component. We were fortunate to pull together a roster of top-notch, diverse coaches, many of whom have sat in the operator seat at high-performing networks. A unique aspect of our coaching is what we call the success triad (fellow, coach and CEO). The fellowship fosters a success triad, which develops a supportive environment that facilitates the work of each fellow. Coaches work with fellows on a dedicated one-on-one basis, while ensuring the deliberate and active involvement of a fellow’s CEO or Executive Director. There are three success triad touchpoints during the fellowship. We see the coaching component of the fellowship to be the linchpin of our offering and it has been very successful at helping Fellows accomplish that shift.

In terms of specific needs for the Fellows, there’s a mix of adaptive and technical needs to address. On the adaptive side, we help them clearly define roles and responsibilities, manage change, and manage up. We dedicate time at our in-person kick-off toward setting SMART goals that measure the success of the work they’re responsible for and ensure that the goals are responsive to the needs of the organization. This work often seems foundational and assumed. It really isn’t. A lot of our fellows throughout the three cohorts are spending a lot of time doing goal definition to drive change and impact throughout the fellowship and beyond. We also did a session ‘Get off the balcony and get on the dance floor.’ The programming provided strategies on how the fellows can get out of the weeds to focus more on strategy and impact. In terms of the technical side, our programming focuses on topics such as student enrollment, budgeting, facilities planning, and long-term financial sustainability. We go deep and cross-functional in each topic. For example, COOs know about enrollment and prioritize the work, but more often than not, they don’t understand the interdependencies between operations and finance or operations and the academic team.

In addition to offering programming, we share best practices, tools, and templates with our Fellows–we don’t want anyone recreating the wheel when high-quality products exist. Fellows also have access to on-demand classes that are virtual and self-paced sessions. They complement the core curriculum.

Challenges and Growth in Fellows’ Roles

COOs and CFOs are uniquely positioned to drive success within a Charter Management Organization, albeit in the format of eliminating distractions so that instructional leaders can focus on what is important, which is student achievement. We often hear that finance and operations teams sometimes don’t understand how their goals impact the overall big picture, due to their lack of direct contact with students. Some CFOs and COOs operate in siloes much moreso than their academic counterparts. That isolation, whether it’s inadvertent or self-imposed, is really harmful to the organization as a whole. The COOs and CFOs certainly see themselves as leaders of their function, but they often don’t assume that they are also stewards of the organization as a whole. Sometimes part of the obstacles around building an infrastructure for success, whether operational, financial, or academic, has to do with how the leadership team works together to ensure that however the problem solving looks and whatever solutions are being executed, it is taking a holistic view that includes a COO and CFO sitting at the table and advocating for the best interest of the kids from their position of accountability.

One component of our fellowship is designed to quickly turn any less-than-ideal dynamics around–it is known as the Capstone Project. We believe a new COO or CFO should have a tangible win within their first six months. This sets the tone for their tenure, it facilitates working relationships among their peers, and engenders trust among their team. Fellows select a project after consulting with their CEO and leadership team. Their Capstone represents a pressing need of the organization. Through the Capstone Projects, our fellows have made an early impact on their organization’s overall financial health and quality of operations services.

We have about 60 fellows who have completed or are currently going through the FOX Fellowship. Over the course of the program, we get to experience the joy of seeing Fellows grow! We’ve had several instances where folks join the fellowship in interim roles, with their CEOs wondering about whether or not a promotion will materialize, and at the end of the fellowship, that promotion happens. Another exciting outcome is the network of connections that are happening with each cohort; these are life-long connections. Being a new leader who does such difficult work is hard and doesn’t leave much time or opportunity to build a network with peers outside the organization. It’s been incredibly rewarding to see folks that came into FOX feeling isolated or alone leaving the fellowship with a built-in family that provides support and a lifetime of lifelines. What’s really great about the fellowship is that you have representation of 20+ charter management organizations. Everybody comes together with a unique perspective about how to approach a problem. We share examples of how a particular problem or focus area should be approached, but the biggest learning comes from fellows sharing and learning from each other.

Lastly, the connections that our Fellows have made with their coaches is also something unique and special. It is not uncommon to have a coach continue their work with a fellow after the fellowship ends, and thus they continue a relationship. This is a testament to how incredible our coaches are and how much value they add to the networks they support.

What’s next for FOX Fellowship

We launched the pilot very quickly and are already on our third cohort. We are building excitement about FOX. We have a wait list for cohort 4, which will launch in September 2024. We have other amazing CFO and COO leaders who are raising their hand to be coaches. We need to pat ourselves on the back because we feel like we’ve done an amazing job so far to make each cohort even more of a success. We simply want to make the fellowship as impactful as possible.

If you’re interested in participating, please fill out the FOX Fellowship Interest Form.

Summer Charter School Enrollment Scenario Budgeting Advice

Written by Afton Group on . Posted in Effective Governance, Financial Sustainability.

Summer recruitment can bring up to a 20% surge in enrollment depending on local context and organizations’ time, resources, and focus. To achieve that surge, it’s critical to invest in marketing and recruiting activities and in particular, to tailor your strategies to your greatest areas of need. Summer recruitment activities require discipline in a variety of proven recruitment strategies including immediate lead follow-up, family engagement activities, old and cold lead follow-ups, efficient and engaging family onboarding, and family referral encouragements.

No matter how well we enact these strategies, there are often forces that will prevent us from meeting our enrollment goals. There are significant financial implications to missing enrollment targets. From a fiscal health standpoint, our schools will suffer unwanted consequences if we wait until close to the beginning of the school year to plan for operational changes required by enrollment misses.

While it isn’t fun to prepare for the downside possibilities, doing so protects your school(s) and the quality of your student services in the long run. We recommend you:

  1. Develop your downside fiscal scenario – how much of a fiscal deficit might you have from enrollment shortfalls?
  2. Confront the reality – The downside fiscal amount is a leadership and communication tool – it is a brutal fact that requires buy-in before rallying to fix it.
  3. Identify your stakeholders and rally the team – Be clear on who owns what responsibilities in the process of planning for downside mitigation strategies, knowing often the finance team might inform rather than make the decisions.
  4. Set a timeline for decisions – What is your cutoff date to determine how many students you anticipate and when implementation of changes should start?
  5. Monitor and leverage data – Report daily and weekly enrollment by grade and by school; use the data to inform where changes might need to be enacted. Use student outcome data to guide trade-off decisions.

With the team and timeline in place and your values at the center, your school organization can identify budget mitigation strategies equitably and effectively. At Afton, we believe the answers lie within your school communities. They depend on your student needs, your organizational values, and instructional strategies. And, there are some common approaches to consider as starting points. Learn more about these approaches in our Enrollment Scenario Budget and Planning document.

Navigating Uncertainty and Preparing for the Education Fiscal Cliff

Written by Afton Group on . Posted in Financial Sustainability.

Our guidance includes:

  1. Understand and confront the reality
  2. Engage and empower stakeholders
  3. Identify, invest in, and prioritize what works for students, staff, and families
  4. Plan now for sustainability
  5. Remain flexible to what may change

The first step here is understanding and confronting the reality. This includes developing a multi-year financial forecast to quantify the fiscal problem. Identify and communicate the forces causing a forecasted fiscal deficit, which include:

  • ESSER funds: These federal relief dollars must be obligated by September 2024 and expire thereafter. These funds have been integral to learning recovery investments and providing stability for school systems as much else in the operating environment has been unstable.
  • Economy: Since COVID-19, the cost of facility debt financing has risen while inflation and the corresponding cost of services and personnel has skyrocketed. Uncertain economic forecasts lead to some question about how sufficiently future tax dollars that support state education funding with increase correspondingly
  • Enrollment: NCES forecasts that through 2030, only five states will experience increased public school enrollment. In fact, this year’s tenth grade class is the largest class in the K12 system, and there will be 4% less enrollment in public schools across the nation in 2030 compared to 2019.
  • Talent: According to the IES School Pulse Panel, 53% of public schools reported feeling understaffed entering the 2022-2023 school year. And Teaching vacancies are more prevalent in high-minority schools and schools in high-poverty neighborhoods.

However unjust this circumstance is, we must navigate the situation in student-centered and values-driven ways across stakeholders.

COMMUNICATION: Engage and Empower Stakeholders

Engaging and empowering stakeholders in the change process can provide a meaningful and comprehensive path for determining the appropriate changes for navigating the fiscal cliff.

  • Lead with your values. Set guiding principles for change grounded in your organization’s values. Make communication and engagement commitments you know you can keep.
  • Empower your team. Consider how those most impacted by change and those accountable for spending might lead this change work. How might your finance function inform rather than lead the work to address the fiscal cliff? Identify the roles you want each part of your organization and each stakeholder group to play in operational decision-making.
  • Communicate reality. Change requires buy-in on why it’s necessary. That communication on the problem is critical underpinning before jumping to the solutions. Maintain the discipline to communicate the facts of your current environment. Approach conversations about resources with empathy and transparency. Change requires buy-in on why it’s necessary.
  • Tell the story. Each stakeholder group has a potential powerful role in being the ambassador of your progress story. Leverage your ecosystem and advocacy support.

ACCOUNTABILITY: Know What Works & Prioritize It

  • Identify what works. Identify aspects of your schools and similar schools that are contributing to positive student experience and value for parents and students. Develop and implement a plan to organize your school community to gather and analyze this data.
  • Prioritize. Identify the resource implications – programs, staffing, schedules – of your strategies that are working. Use your remaining one-time funds to support high impact learning recovery investments and non-recurring commitments that you won’t be able to afford in the future. Leverage your stakeholders to identify aspects of your operations that might have to change (levers include school-wide schedules, enrollment, fundraising, cohort sizes, transportation, maintenance schedules, ancillary services, refinancing). Iterate with your financial planning toward finalizing your operating priorities.

SUSTAINABILITY: Plan Now

  • Protect & Grow Revenue. Focus on enrollment: Invest to ensure family engagement is a top priority and a core competency. Take advantage of opportunities to maximize grade level cohorts. Invest in relationships that can lead to fundraising investments.
  • Scenario Plan. Understand potential financial impact of recession on state revenues. Run projections for the years that ESSER funds go away. If you don’t change operations, what is the financial impact on the organization and each school? Build plans for up, base, and down scenarios in enrollment and public funding. Identify targeted opportunities to reduce expenses in downside scenarios.
  • Establish & Reinforce Guardrails. Clarify your school system’s most important financial guardrails – loan covenants, liquidity needs, financing goals, etc. Communicate with key stakeholders your approach to ensuring long-term health of organization while navigating today’s opportunities and challenges.

FLEXIBILITY: Prepare for Uncertainty

  • Monitor financial health. Develop a financial health dashboard and set a cadence for discussion of strengths and risks on at least a quarterly basis. Develop rolling 12-18 month cash flow forecast, as needed.
  • Build Liquidity. Increase your cash target (we recommend >90 days) to provide flexibility in times of high uncertainty. Establish or renew a line of credit or revenue anticipation note. Ensure you’re claiming federal and other grant funding regularly.
  • Stay Scrappy. Limit new ongoing commitments. For example, when possible/reasonable, make strategic one-time investments (contractors, bonuses, etc) to avoid paying for recurring expenses with short-term funds. Consider staging/scaling facilities projects, rather than taking on new debt during a time of elevated cost of financing. Budget conservatively on inflation and per pupil funding assumptions.

Contents of this post were developed in a collaboration of Afton Partners and Charter School Growth Fund.

Iron Sharpens Iron: Collaboration Amongst Memphis Charter School CFOs

Written by Carrie Stewart on . Posted in Financial Sustainability, Leadership Development.

The vote to disband Memphis City Schools, seceding into six separate school districts, proved to be an egregious example of intentional segregation. That choice deepened existing opportunity gaps facing Tennessee’s highest-need students, while allowing school funding inequities to persist. But Memphis Shelby County Schools and its charter school leaders in this state refuse to back down on issues ranging from school funding policy to curriculum—and they know that changing the education funding formula can have lasting impacts.

In underserved communities like Memphis, schools get pitted against each other—for resources, for staff and student recruitment, even when they are part of the same local education agency. That resource-related competition dynamic is a byproduct of unjust education funding policy.

By elevating collaboration over competition, Afton has facilitated a cohort of Chief Financial Officers (CFOs) in Memphis for the past two years, including Gestalt Community Schools, Freedom Preparatory Academy, Journey Community Schools, and KIPP Memphis. Collaboration has enabled cohort members to feel more confident in their roles and better equipped to lead their schools’ finances. The four charter school CFOs in the Memphis cohort have built trust and learned the benefits of peer networking…because it’s ultimately a larger fight and one that they’re in together. Especially in Memphis, it will require a collective effort to rise above systemic barriers.

Our cohort holds rich discussions that leverage research and data and support these leaders to problem solve and take action. But if I’m being honest, I’m learning as much from them, and their acumen and tenacity, as they are from us. These inspirational leaders are doing transformative work for our students, our schools and our communities. I’m honored to work with them.

-Carrie Stewart

Anika Baltimore is the CFO for Freedom Prep.

Norriese Rogers, the Chief Financial & Human Resources Officer for Gestalt.

Anika and Norriese both graciously shared more with us about their collaboration and how the cohort has impacted their work.

Can you tell us about the cohort in your own words?

Norriese Rogers: The cohort is amazing. It has given CFOs in our area not only a sounding board, but an opportunity to think about best practices and collectively problem solve. Many of us are facing similar challenges, such as how to effectively allocate ESSER funds. Before the cohort, I felt like I was doing this work in isolation. Now, I have a safe space to discuss what I’m experiencing and learn from other’s expertise and knowledge.

What motivated you to join the cohort?

Anika Baltimore: We have a responsibility to ensure the organization’s sustainability. The first part of every meeting is, “What are the hot topics?” where we discuss the most immediate challenges. It’s such helpful context to discuss this with folks in the same position and juggling similar responsibilities. Since I was new to working for Memphis schools, this cohort started at the perfect time for me as I suddenly had this incredible team I could rely on. I was connected through Afton, who did our financial model.

Can you tell us about your individual initiatives at your schools since joining the cohort?

Norriese Rogers

  • Motivating Educators: We used ESSER funds to implement bonuses for staff, where they can earn up to $2500 per quarter based on student interim assessment scores. This stipend extends to our entire staff, where janitors and secretaries can earn up to $1,000 for individualized or small-group tutoring. Not only is our staff really excited about this, since we’ve never had bonuses aligned to outcomes for students, we’re already seeing it have a real impact on achievement and growth.
  • Staff Retention: We had staff members going through significant challenges in connection with the pandemic. In response, we established a “Gestalt Cares” initiative, where we were able to support team members through initiatives like donating Paid Time Off (PTO) and supporting additional Employee Assistance Programs (EAP). This has had a positive impact on retention.
  • School Expansion: We’re currently working on an acquisition for our fourth campus, which would allow us to provide excellent educational opportunities to more Memphis children.

Anika Baltimore

  • Compensation Plan: We were able to codify and bring structure to our compensation plan. Based on the analysis, we were able to attain more stability, so our compensation was predictable and aligned to our school’s vision.
  • Benefits: We also improved our employee benefits package. We improved our plan and were able to incorporate holistic medical coverage, adopt a paid leave plan, and not drastically change our rates for employees.
  • Facility Financing: We recently closed on a $22 million Equitable Facilities Fund (EFF) financing to refinance, purchase our fourth and final building, and conduct needed renovations.

Are there any broader lessons or takeaways you’d share with other leaders that you have gained from this experience? If so, can you tell us about them?

Anika Baltimore: Anytime there’s an opportunity to collaborate and build a network of like-minded people who can push you and help you think about things you wouldn’t normally think about—take it. Whatever role you play, whatever you are, it gives you a set of eyes from people who also deeply get it.

Norriese Rogers: Use your resources. And this cohort has proven to be a tremendous resource. Although Afton brought us together, we email each other all the time seeking advice, commiseration, and input. We don’t have unlimited resources but this one group has proven, again and again, to be invaluable. Collaboration is key. Iron sharpens iron. I don’t really boast, but the folks in this cohort are the sharpest CFOs in this state. Without this cohort we wouldn’t have the opportunity to learn from each other, or even know each other.

Anika Baltimore and Norriese Rogers are two of five members of the Memphis CFO Cohort. The other three members include: Angela Carr (and formerly Kaleo Curtis) from KIPP Memphis and Matt Seigel & Randi Owens from Journey Community Schools. The group has met bi-weekly or monthly over the last two years.

Financial planning for remote learning: Afton’s lessons learned from hundreds of technology-enabled school models

Written by Afton Group on . Posted in Effective Governance, Financial Sustainability, Resource Equity.

Students, teachers, and parents received a crash course in the spring to varying degrees of success, and this summer has allowed schools to evaluate that experience. As SY20-21 approaches and COVID-19 risks grow, more and more cities and states across the country are anticipating delayed in-person re-openings and creating fully remote options for some or all families. For many of these schools, the financial aspects of this continuation in technology-enabled instruction remains blurry.

While the types of technology-enabled learning employed today with remote and virtual learning may change after the pandemic, the experience will inevitably have lasting effects on how instruction is delivered in a post-pandemic world. School systems have made significant investments in hardware, software, and access, all of which will be accessible beyond the pandemic. And teachers will have learned new approaches to instructional delivery and student engagement which may inform their future practices.

For school business officials and boards across the country, now is the time to ensure that your new year’s budget and procurement planning fully captures the needs of your school system as it delivers technology-enabled instruction. And now is the time to understand what longer term investments may be needed to sustain aspects of technology-enabled instruction that will be relevant beyond the pandemic.

Since 2011, Afton has worked with over 200 schools, school systems, and school leaders in developing and evaluating long-term resource plans to support innovative school models, including those incorporating technology into the classroom. While most of these school models were not the virtual classrooms being employed during COVID-19, many of them require similar resources to virtual and hybrid learning. Much can be gleaned from the investments made by these schools to assist in financial planning today. As follows, we share three primary points of advice for school systems about financial planning for technology-enabled instruction.

Invest heavily in staff and their professional development.

For many, this is a new way of instructional delivery. The most critical thing to remember is that technology does not do the teaching – it enables the teaching.

Our advice:

Ensure the budget includes a material, recurring investment in professional development and teacher collaboration and planning time. Time and time again, in our discussions with school leaders and evaluations of their financial plans, investments in additional staff and professional development to support technology-enabled instruction proved to be the most important investments.

District leaders of schools implementing technology-enabled instruction invested more than 50% of one-time and recurring funding in personnel.

Following is a summary of actual and projected 5-year expenditures of Districts and Charter networks implementing technology-enabled school models. The data represent the resource allocation plans for 11 school systems, 110 schools, 850 classrooms and 36,000 students as of fiscal year 2019.

Be flexible and expect trial and error.

There will likely be some initial hardware and software choices that, when implemented, do not fully fit the needs of staff and students.

Our advice:

Ensure the budget includes a contingency for hardware and software and that procurement policies and practices are in place to enable swift course corrections. These often require significant changes in policy, but also culture shifts to ensure responsiveness, flexibility, and adaptability.

Plan now for hardware refreshes and sustaining software and professional development.

Because there are likely to be aspects of today’s pandemic-induced instruction that will forever change instructional delivery practices, school systems will need to plan for maintaining its technology and professional development investments into the future. Devices purchased during the pandemic will need to be refreshed in a few years, and there will need to be a provision for annual replacement devices. Learning management systems and instructional content may need to be enhanced or upgraded. Teachers and administrators will evolve in their use of technology as will their professional development needs. Post-pandemic, there will be school systems that will re-think how instruction should be delivered – including migrating to more competency-based approaches, changing classroom structures, and rethinking school scheduling and course offerings with a new view of in-person and virtual instruction at some grade levels. These considerations may completely change needs for school-level staffing, technology, and professional development investments.

Our advice:

Ensure you have a multi-year financial plan and include a contingency for renewing the current technology and professional development investments. As it is appropriate, begin assessing successes and opportunities that arise from this shift to technology-enabled instruction, and what implications it may have in the post-pandemic world. As you think ahead to long-term strategic planning, identify resources and services that could potentially be repurposed to meet post-pandemic instructional design opportunities.

How does this apply to your remote learning plan now?

As you think about the fall, and investments you might need to make, we can look at the types of investments that have been made by school in other models of technology-enabled instruction. Here we share the costs you can expect at the district and school level, alongside a few ideas for tradeoff considerations.

One-time costs: we define one-time costs as those that will expire or end after the school model has been fully implemented. An example of a one-time cost includes intensive professional development, or a program manager position that may be filled only during implementation, which may take anywhere from one to three years.

These findings are consistent with outcomes of a study our team led through LEAP Innovations in Chicago, wherein we evaluated the costs of implementing personalized learning across six schools. This study, Sustaining Innovation and Preparing for Scale: Financial Sustainability Research and Analysis of Personalized Learning School Models, found one-time investments ranged from $233 to $1,135 on a per pupil basis across the six schools.

Recurring costs: Our definition of recurring costs to support tech-enabled school models includes those investments that will be required to sustain these models in the long-term (i.e. after an implementation period).

Trade-offs: To fund these recurring costs, we have seen Districts employ strategies such as developing a long term staffing strategy, identifying inefficient technology spending and reallocating funding for textbooks and school supplies.

  • Long-term staffing plan. We recommend each district implementing a tech-enabled school model(s) perform a review of their existing position structure to identify opportunities to create positions required for long term success of these new models (such as blended learning coaches, data specialists) while also identifying opportunities for change in their existing structure (review of job descriptions, plan for turnover, etc.). When implemented effectively, a significant component of long term funding of recurring tech-enabled needs can be sourced with this approach.
  • Evaluate technology spending. Various studies have shown a significant underutilization of existing technology within school districts. Performing even a basic technology audit (such as one offered by Learn) could identify opportunities to more effectively leverage limited available funding for more impactful information technology spending.
  • Reallocate existing funding. More and more districts are reallocating historical funding from supplies and textbooks to software, content and devices. There is also an opportunity to evaluate central services and determine how to best support schools utilizing technology-driven instruction through re-evaluating large major contracts.

The specific impact this has on your schools depends on your start point, your approach to SY20-21, and what you envision for the future:

Given this, as you build your financial plan, consider these specific questions:

  • What is our starting point for technology? Should we (have we) conducted a technology audit?
  • What supports do our teachers need? What professional development could be provided to effectively support teachers in effective use of technology for remote learning?
  • What is our level of student access, and what do we need to do now to improve access (including devices, wifi, servers), if anything?
  • Do we have the right blend of online/asynchronous vs. synchronous materials and content? Should we (have we) conducted a software/content audit?
  • Can we improve upon student assessment and/or data systems? Should we invest in or support data-driven instruction PD or platforms for our teaching staff?
  • Do we anticipate these being short-term or long-term investments?
  • What sources of funding exist for one-time and recurring investments?

What have you learned about the financial aspects of remote instruction? Do these findings and recommendations ring true to you? What would you add or change? Let us know! Contact us at connect@aftonpartners.com.

An orange school locker in between a black and gray locker

How Districts Can Afford High Quality Schools, Despite Enrollment Decline: Defining the Problem

Written by hbutler@aftonpartners.com on . Posted in Effective Governance, Financial Sustainability.

In 2017, The Center on Reinventing Public Education (CRPE) convened practitioners, funders, and researchers from across the country to contemplate the challenges that school districts face when in a period of enrollment decline, specifically when that enrollment decline is influenced by the growth of charter schools. Out of that convening and various research done by CRPE, Dr. Marguerite Roza at Edunomics Lab, Afton Partners, and others, CRPE released Better Together: Ensuring Quality District Schools in Times of Charter Growth and Declining Enrollment.

Afton has completed many analyses with school districts of all sizes across the country related to the fiscal complications associated with enrollment decline, and in some cases, the decline was specifically attributable to students migrating from district-run schools to charter schools. Through our work, we have sought to answer the questions:

  • Why does the perception that “charters financially hurt districts” exist?
  • Is this issue just perceived, or is this reality?
  • If it is real, why, and what can be done at the local level to ensure (a) students in district-run schools do not end up under-resourced, and (b) quality public schools of all kinds can be supported going forward?

Our experience led us to define four major reasons that school districts with stagnant or declining enrollment could be financially impaired by opening and growing new charter schools.

  1. Inequitable Funding. School funding formulas used by some states and districts do not allocate resources equitably between charter school students and district-run school students, sometimes leaving district-run school students with less than equitable funding.
  2. Lack of District Cost Flexibility. Most school districts lack the flexibility and ability to reduce their cost structure when facing significant enrollment fluctuations; some of this stems from fixed-cost structures and legacy matters that are not possible or easy to unwind, and some of this stems from institutionalized policies and practices that districts need to change.
  3. Inability to Take Difficult Actions. Some school districts and stakeholders lack the willingness to take significant action necessary, such as school closures, to adjust to significant enrollment fluctuations.
  4. Lack of Understanding in the Charter Sector. Sometimes, charter operators have a difficult time understanding the challenges that enrollment migration presents to school districts, and are therefore hesitant to negotiate terms that would be beneficial to all students, district and charter.

THE PROBLEM:  MANY PARTS OF SCHOOL DISTRICT COST STRUCTURES ARE HARD TO UNFIX

As part of work Afton conducted in a large urban school district with declining enrollment partially attributed to the increase in charter schools, we answered the question – is the district allocating more or less dollars for instructional spend than a decade ago? What we found was – yes, the district’s proportional spend on school-level expenses decreased from 58% in FY07 to 50% of the budget in FY14 while enrollment declined 27% during the same period.

We found that the fixed nature of district costs was a big driver of the district’s budget shifting away from instruction during the enrollment decline.  A larger portion of this district’s budget went to “non K-12 commitments”, including pension obligations, debt service, and outplacement costs. The district has managed to shrink its staff along with enrollment: staffing decreased by 31% — including a 27% reduction in teachers, 37% in the central office, and 33% in all other positions. However, schools have not been closed at the same rate as enrollment has been lost, meaning there are dollars tied up in administrative staffing positions and operational staff (including maintenance, janitorial, security, etc.). School count decreased by 18% while enrollment decreased by 27%. Additionally, most buildings remained owned/operated by the district, with total buildings (including school buildings, offices, and vacant buildings) decreasing by only 6% – and these extra buildings need to be maintained. Finally, contractual costs for teacher salaries increased by 21% and the pension rate increased by 262% over this period.

This district’s situation highlights how difficult it is to cope with enrollment loss and maintain quality instructional programming and supports. Consider that in addition to the fixed cost challenges, the school district faces challenges with how to efficiently spend dollars left for instruction. Most salaries are contractual and will increase in average cost no matter the funding available, reducing the district’s buying power for teachers.  Also, migration of enrollment to charter schools is uneven from grades and schools at the district, leading to inefficient class sizes, further draining resources in non-optimal ways. All of this contributes to a feeling in schools of ‘lack of resources’, as proportional district spending at the school level shrinks and buying power for services and supports gets squeezed.

In the Appendix to CRPE’s “Better Together: Ensuring Quality District Schools in Times of Charter Growth and Declining Enrollment”, Afton shows how and why it is difficult for districts to unwind their fixed costs.

Afton’s work has shown that very few costs in a school district are truly fixed; yet many behave as fixed costs due to district decision-making (for example, contracts, teacher and other staff allocation policies, and facility footprint decisions). By understanding the root causes of fixed or partially fixed costs, districts may be better able to address them. The rest of this blog series will focus on actions school districts can consider to mitigate the challenges.

Growing for Success: How High-Performing CMOs Use Creative Financing Solutions for Facilities

Written by Afton Group on . Posted in Effective Governance, Financial Sustainability.

Afton Partners spoke to the Chief Financial Officers at two high-performing charter management organizations (CMOs) – John Murphy at KIPP Houston Public Schools and Delphine Sherman at Aspire Public Schools– who have successfully found creative financing solutions to secure facilities and address their growing waitlists.

Founded in 1995, KIPP Houston Public Schools (KHPS) experienced significant growth from 2005 through 2016. Currently, KHPS educates 12,500 students from educationally underserved communities and is on track to serve nearly 18,000 students in the near future. Aspire Public Schools opened its first school in 1998 and is now serving 15,000 students in 38 schools throughout California and Memphis, Tennessee.

But regardless of school size or location, charter leaders share that facilities remain one of the biggest challenges in addressing growth for a variety of reasons, including: funding, access to capital, real estate availability, zoning and development requirements, maintenance, the political climate, and many other reasons. This pushes charter leaders to be as innovative in their facility planning as they are in their educational program to find creative solutions to meet their needs.

As an example, KIPP Houston Public Schools has integrated various types of real estate solutions, including: modular buildings, permanent structures, office buildings, shopping centers, hospitals, green field developments, leased district buildings, and space in churches and other temporary locations. Aspire’s situation in California is much different. Aspire found in the markets it was serving that buildings were in short supply. In order to support growth, building new facilities, especially for secondary schools, was their best option.

Because of different market circumstances, the needs of the two CMOs led to different facility planning and debt structures to support their growth plans. In 2010, Aspire issued one of the largest charter school bonds at the time – $93M for seven campuses and 10 schools. It included two schools buying out an operating lease, one refinance, and the rest were new construction. A new entity was established to separate ownership of the building from the CMO, allowing the CMO to receive SB740 funds, which are charter school grants for the purpose of paying for lease costs. The charter school financing sector was not mature at the time – and a guarantee from foundations was a critical component to make the deal attractive.

To support its various types of school facilities, KIPP Houston Public Schools has closed on a variety of different financing options, including: traditional long-term (30 year+) tax-exempt bonds, Qualified School Construction Bonds (“QSCB”), Qualified Zone Academy Bonds (“QZAB”), commercial paper, real estate/construction bridge loans, and LOC’s. At this time, KHPS has been fortunate to access capital at a lower rate – their current average borrowing cost is 2.7%. KHPS’ “Q” deals are particularly notable. They required creativity and persistence and their rates were approximately 0.30%.

Demand for seats in high-performing charter schools is growing across the country. Afton Partners shares five lessons from KIPP Houston Public Schools and Aspire Public Schools on facility planning and financing to meet their growth plans.

1. As always, lead with the academic plan

Strong academic curriculum is the backbone of any high-performing school system. It’s critical not only for the students served, but the academic flywheel ensures the financial stability of the organization. John points out that strong academics creates student demand and waitlists at KIPP Houston Public Schools, which leads to charter renewals and strong financial performance. This translates to an even more successful organization all around, which resonates with lenders and funders.

2. As growth plans evolve, so should the debt structure

With the help of consultants, such as Afton Partners, Delphine shares that Aspire was able to make more informed decisions on prioritizing schools with debt service challenges that needed to be addressed. This allowed Aspire to focus on building reserves and pay down specific debt over time, so they could eventually refinance and move schools into a more sustainable financial circumstance.

KIPP Houston Public Schools notes that its 2009 transaction was ironically one of the more expensive transactions from a rate standpoint. However, it is considered one of their best transactions as they were honored as a Bond Buyer Deal of the Year finalist. This transaction recapitalized their separate 501c3 corporation, and it may have helped unfreeze the capital markets for public charter school operators nationally. KHPS worked with the Bill & Melinda Gates Foundation and the separate 501c3 entity to create a guarantee program that allowed the CMO to issue and recapitalize. This was also the period when they transitioned toward more modular campuses in response to the upcoming state funding reductions that challenged all schools in Texas. KIPP’s adage of “Find a way or make one” was tested during the 2008 – 2012 timeframe, and they successfully navigated through those challenges.

3. Understand the consequences of debt covenants

State funding reductions and deferrals cause enormous pressure on organizations and schools. Delphine shared some context about the state financial crisis in California (2008 – 2012) and how that crisis became even more challenging due to Aspire’s debt covenants at the time. Aspire’s debt covenants were organization-wide, which meant all schools had to participate in meeting the debt service coverage requirements and not just the schools for which the debt was issued. This meant that every school needed to contribute to a targeted budget surplus, even during a time when state funding was cut 20-30%. The debt covenants forced changes at some Aspire schools that would have otherwise not been made, such as spending cuts to enrichment programs and staff raises.

4. Focus on flexibility and conservatism in long-term planning

As John says, plans and models are guides and not set in stone. Things change and you must be flexible to be successful. In Texas, where land is available for new construction, KIPP Houston Public Schools took a bottom-up approach by identifying capital needs based on “model” school development costs, which addressed real estate estimates and construction estimates based on a “model” campus footprint. KHPS built in operating models for each school (existing and planned new schools) and developed a capital and operating fundraising program based on those assumptions. However, a struggle exists between modular and permanent solutions. In the short-term, charter schools can grow faster and build more campuses with modular buildings but the cost of cycling through modular units is more expensive in the long-run. Unfortunately, charters are challenged with these types of questions continually.

Delphine reiterates the importance of flexibility and being conservative as charter schools expand into new terrain. She shares as Aspire expanded into higher-grade levels – a new experience – it became difficult to achieve enrollment targets in the early years. This puts more pressure on the finances and spreads the debt burden over fewer students with lesser funding.

Furthermore, as it relates to planning and conservatism, John shares there is a growing focus for CMO’s to maintain higher levels of cash on hand and urges charter school leaders to focus on reserves early by establishing internal goals. This is counterintuitive to the mission of our organizations, which is to push more dollars into the schools, but a rainy day fund is necessary for every organization. KHPS is keenly focused on their investment grade rating and the new financial ratings the state of Texas recently adopted. These two areas are critical to long-term sustainability goals because of the impact it can have on charter renewal and the cost of capital.

5. Build relationships with the investor community

As charter schools grow their presence in the investor community, both John and Delphine recommend that CMOs do more to build credibility and educate investors. Building a good package and telling your story is important. KHPS and Aspire both focus on consistently meeting or exceeding financial results. To do this, Delphine advises schools to be smart and disclose as much information to investors upfront. John adds that accurate and timely reporting is critical. Do not underestimate the value of consistent historical information and the ability to compare apples-to-apples information. He shares that developing relationships with underwriters has been important because they are invested in the success of charter schools both locally and nationally. In Texas, underwriters, bond attorneys and the financial advisor community worked together with CMO’s and the Texas Charter School Association to develop facility solutions. The most notable recent success is the PSF Guarantee. This guarantee, allows investment grade charters to utilize a state-backed guarantee, which increases the bond rating to AAA, reduces interest costs and puts more money into the classrooms.

No matter where CMOs are in their growth plans, smart and creative facilities planning and financing will continue to be a critical component to success. As schools adopt more innovative strategies and find solutions, it’s important to highlight what’s working, replicate best practices, and share the challenges so more schools across the country have the opportunity to meet their facilities needs.

Altering Authorizing

Written by Carrie Stewart on . Posted in Effective Governance, Financial Sustainability, Funding Policy.

Charter school authorizers seek to ensure the quality of our nation’s public charter schools. Key to ensuring quality is having robust measures for accountability—academic, governance and financial. This work is of heightened importance given the Trump administration’s focus on expansion of school choice.

Financial sustainability is more closely intertwined with academic strategy and board governance than many district and charter school administrations appreciate. Financial accountability practices are at the core of protecting the interests of students and the public, one of three principles of quality authorizing established by the National Association of Charter School Authorizers (NACSA).

Instituting financial performance standards should enable an authorizer to monitor and evaluate a charter school’s financial sustainability in the short- and long-term. Such standards are relevant to all school types – including alternative charter schools that enroll students who have dropped out or have been adjudicated, or who face other circumstances that have prevented them from attending school.

Many cities, including Chicago and Buffalo, have recently committed to expanding the number of alternative school seats in their districts. Many are realizing this expansion by increasing the number of charter schools they authorize. This makes it even more important for charter authorizers to implement standards that help ensure school quality.

As NACSA pointed out in an October 2013 press release, alternative schools serve a different set of student needs. As such, authorizers need to “provide specialized oversight, tailoring oversight and monitoring to the circumstances of alternative schools.” This kind of specialized oversight is necessary for academic performance standards, and arguably just as much so for financial accountability.

Financial Best Practices: Supporting Academics, Promoting Sustainability

Afton Partners focuses on establishing financial best practices in public education. Since financial best practices support sustainability of effective education, our work is about much more than crunching numbers. The quality of a district or school’s governance, the design of its academic programs and its schools, and the relative success of its academic performance all significantly impact financial sustainability.

Governance and school design are just as important in the success of alternative schools as with all other school types; however, certain different characteristics can come into play with alternative schools, including:

  • For-profit management: Many alternative schools are established by for-profit companies.
    Subcontracting: Alternative school operators sometimes establish a charter with the authorizer and subcontract the educational operations of a school to a community partner or other agency.
  • Non-traditional school design: Often, alternative schools use technology to implement their instruction and offer more individualized student schedules.
  • Student mobility: Alternative schools may have high student mobility rates throughout the year. This affects how much revenue comes to a school as well as the use of staff and instructional time.

Through some of Afton’s recent engagements, we have seen how authorizing alternative school models require a specialized approach—particularly in the area of financial accountability.

Adapting to Alternatives: Financial Accountability for Authorizers

These varying characteristics of different alternative charter schools suggest there should be differences in how authorizers implement financial practices and accountability measures for such schools. Authorizers can approach this challenge by supplementing existing processes in important ways:

Authorization application process

In their RFPs, authorizers should ask alternative charter operators specific questions that allow the authorizer to evaluate the alternative school’s finances appropriately. These questions should focus on:

  • How the local entity and any potential related-party management company will implement governance, including how they will uphold the independence of financial operations between charters and subcontracted service providers as necessary to ensure financial integrity;
  • How the school will maintain transparency with respect to the contractual terms of any potential management agreement – including fees and the costs of goods and services paid to any management companies and their affiliated entities, and describing the goods and services they anticipate will be provided;
  • How the school’s budget will be allocated to align with student needs and the school’s design; and,
  • How the school will be transparent about subcontracting school operations and the practices that the school will institute to ensure quality in those situations.

Contracting and renewal process

Authorizers should add terms in its contracts with alternative charter schools that allow for ongoing evaluation to reflect enhanced approaches to financial accountability. Examples of such terms include:

  • School-specific audited financial statements. Authorizers could require all operators, including for-profit companies running alternative schools, to provide interim year-to-date and audited annual financial statements specific to the authorized school.
  • Separated financial controls. Authorizers could require operators that have contracted with management companies to have separate bank accounts, an independent board and finance committee, separate accounting and financial planning teams, and clearly established protocols for ensuring the school—and not the management company—owns any goods purchased or work papers created with public funds.
  • Subcontracting accountability standards. Authorizers could require operators that subcontract education services to partners or other agencies to abide by and be transparent about any contracts signed with subcontractors, the services to be provided, and the associated fees. Additionally, the authorizer could consider establishing standards for accountability that the operator must use with its own subcontractors to monitor quality, similar to those standards that the authorizer themselves is implementing with the schools it oversees.
  • Financial metrics. Authorizers could establish a specific set of metrics for financial accountability and conduct compliance checks annually with alternative charter school operators.

Annual evaluation process

Authorizers should implement an annual financial evaluation of an alternative charter school that includes reviews of its prior year’s financial performance and contract compliance, its annual budget, and its current year’s interim financial statements.

These reviews should depend on quantifiable financial metrics that recognize the various school and governance designs that are prevalent in alternative schools. Both the prior-year and annual budget reviews should use scorecards that review the financial health of the alternative school, including metrics typically used at any school: liquidity, debt coverage, audit findings and operating performance. These should be enhanced with financial metrics suited to the alternative school, allowing analysis of resource allocations, mid-year per-pupil revenue fluctuations, management fees, and the use of personnel, technology and other services in alignment with meeting unique student needs.

As part of the prior-year review, a full compliance check should be done on the contractual terms to be implemented with such schools, including any of the unique aforementioned contractual terms for alternative charter schools. As part of the annual budget review, alignment to the charter agreement’s approved plan should be checked, especially resource allocation and management fees and services. In reviewing the current year’s interim financials, the authorizer should be mindful of the potential for high student mobility and the impact it could have on cash and overall financial performance. Material deviations in actual performance compared to the budget should necessitate an explanation from the operator.

Conclusion

Charter authorizers face a complex challenge in assessing alternative schools and new school models—in part because the variety of innovative approaches and school structures makes comparison and analysis more complex.

Though they certainly need to be adapted to specific circumstances, financial practices and accountability standards are by their nature similar across different systems and models. Implementing and monitoring such standards for accountability offers authorizers an important way to gauge the viability of proposed schools and assess the relative success of those already operating. Financial viability and academic performance should be evaluated in tandem, with models that fail reviews receiving the scrutiny they warrant—and successful alternative models supported to the extent they deserve.

Carrie Stewart is co-founder and managing director of education finance advisor Afton Partners; Carrie is based in Chicago.