Budgeting Best Practices for Charter Schools

Copyright © 2018 Charter School Capital, Inc. All Rights Reserved.
Budgeting
Best Practices
for Charter
Schools

2
OUR
SPEAKERS
Spencer Styles
President & CEO
Charter Impact
Matt Percin
Manager of Financial
Analysis and Risk
Charter School Capital

3
AGENDA
1.Why Charters Close
2.Life Cycle Stages
3.Other Revenue
Factors to Consider
4.Expenditure Trends
5.Cash Flow Planning
6.Budget Safeguard
Strategies

Why Charters Close

5
WHY CHARTER SCHOOLS CLOSE
42%
24%
19%
6%
5%
4%
Financial
Mismanagement
Academic
Authorizer Obstacles
Facilities
Other
Financial mismanagement is the leading cause of charter school closures.

Lifecycle Stages

7
STAGES OF GROWTH
# of
Students
Start-up
Survival/Establish
Growth
Flexibility/Stability
Sustainable Maturity
Efficiency
Time (years)0 2-3 5-10
100%
Students as a %
of mature
targets
10-25% 25-90% 90-100%

START UP STAGE

9
START UP
Start with
petition budget
Pay close
attention to the
budget and map
to school
priorities for the
year
Have a plan and
show how costs
frame the
proposed budget
Include all
expenses: Start
with budget that
includes
everything from
your wish list,
then prioritize
1 2 3 43

10
START UP
Lay the foundation for
an annual budget
Plan for regular
updates early on
6 7
Plan for surprises
5

GROWTH / MATURE SCHOOL
STAGE

12
11
Start with baseline
budget, based on
previous year
1
All dependent on
enrollment projections
2

13
3
Active management
of cash flow
3
Understand your
accounts payable (AP)
4

14
5
Partner with external
service provider (BOP)
5

Four Revenue Factors
to Consider

16
OTHER REVENUE FACTORS
Correlation of Free
and Reduced Price
Lunch Rate to
Fundraising
*Important for schools on
the move
1
Tracking of
Fundraising Families
*Avoid over-reliance on
per ADA trends
2

17
Restricted Grants
*May be less beneficial
depending on the nature
of the restriction
3

18
Sustainability of
Institutional
Fundraising
*Most are for
start-up/expansion/new
products
4

Four Expenditure Trends

20
EXPENDITURE TRENDS
Salary Scale Changes
*Low Unemployment
Higher Demand Higher
Costs
1

21
EXPENDITURE TRENDS
Retirement
Benefits
*Will the increased rates
fill the unfunded gap?
2

22
EXPENDITURE TRENDS
Textbooks vs.
Renewing/Changing
Technology
*Use of accurate and
updated technology plans
3

23
EXPENDITURE TRENDS
Facility Cost Increase
*Increase in funding and
need for permanent
facilities
4

Cash Flow Planning

25
CASH FLOW PLANNING: 1. TIMING OF REVENUE
What revenue is
monthly, quarterly, or
more variable?
What attendance
filing/metric drives your
revenue?
Is there a lag between
reporting and cash receipts?
How do you pay for up-front
costs when onboarding
students (curriculum, new
teachers, etc.)?
What happened in prior
years with regards to
timing of payments?
(Federal and grant money is
more variable in timing) *if a
continuing charter.

26
CASH FLOW PLANNING
Timing of Expenses
Which costs are fixed
monthly and which vary?
2

27
CASH FLOW PLANNING
Other Non-P&L
Cash Items
1. Financing
2. Receivables
3. Payables
4. Capital Expenses
3

Budget Safeguards

29
BUDGET SAFEGUARDS: 1.SALARY AND PERKS
Non-Financial Perks
*Flexibility/Recognition/
Culture/Growth/Making a
Difference
Review salary scale
changes with future in
mind.
*Just because you can afford
the increase next year, doesn't
mean it’s sustainable

30
BUDGET SAFEGUARDS: 2. BALANCES
Set target fund balance
*State mandated levels may
not be sufficient
Set target cash balance
*Review annual operating
needs and assess future
economic downturn

31
BUDGET SAFEGUARDS: 3. FACILITIES
Plan new construction
to include additional
space
Max enrollment of a
facility
*The ”hidden reserve”
Facilities Reserve
• Repair and replacement
• Technology infrastructure
• Expansion

32
BUDGET SAFEGUARDS
Equipment/
Technology Plan
4

33
BUDGET SAFEGUARDS
Annual Board
Discussion on Long
Term
Objectives/Initiatives
*Ensure actions today are
moving you in the direction you
want to go
5

34
Q&A
1.Why Charters Close
2.Life Cycle Stages
3.Other Revenue Factors to
Consider
4.Expenditure Trends
5.Cash Flow Planning
6.Budget Safeguard
Strategies

THANK YOU
Presentation available at:
CharterSchoolCapital.org/
charter-school-resources
YouTube: Charter School Capital
Spencer Styles,
sstyles@charterimpact.com
Matt Percin,
mpercin@charterschoolcapital.org

Budgeting Best Practices for Charter Schools

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