FCMAT
Fame Public Charter School Report
fiscal review
Read the report at FAME Public Charter School ↗
FAME Public Charter School
Fiscal Review
February 10, 2010
Joel D. Montero
Chief Executive Officer
Fiscal Crisis & Management Assistance Team
February 10, 2010
Maram Alaiwat, Chief Executive Officer
FAME Public Charter School
39899 Balentine Drive, Suite 335
Newark, CA 94560
Dear Ms. Alaiwat,
In August 2009, the FAME Public Charter School and the Fiscal Crisis and Management
Assistance Team (FCMAT) entered into an agreement to provide a review of the charter
school’s fiscal status. Specifically, the agreement stated that FCMAT would:
1. Review the charter’s 2009-10 general fund budget, multiyear financial projections for
2010-11 through 2013-14, and cash flow projections for 2009-10 and 2010-11 for the
purpose of validating the assumptions used by the charter to develop the data.
The team will provide recommendations for changes, as necessary. Completion of the
scope of work by the team is contingent on the ability of the charter to deliver all sup-
porting documentation within the requested timeline.
The attached final report contains the study team’s findings with regard to the above areas of
review. We appreciate the opportunity to serve you, and we extend our thanks to all the staff
of the FAME Public Charter School.
Sincerely,
Joel Montero
Chief Executive Officer
FCMAT
Joel D. Montero, Chief Executive Officer
. .
1300 17th Street - CITY CENTRE, Bakersfield, CA 93
.
301-4533 Telephone 661-6
.
36-4611 Fax 661-63
.
6-4647
422 Petaluma Blvd North, Suite. C, Petaluma, CA 94952 Telephone: 707-775-2850 Fax: 707-775-2854 www.fcmat.org
Administrative Agent: Christine L. Frazier - Office of Kern County Superintendent of Schools
Fiscal Crisis & Management Assistance Team
TABLE OF CONTENTS i
Table of Contents
Foreword ...........................................................................iii
Introduction ...................................................................... 1
Study Guidelines ............................................................... 2
Executive Summary ......................................................... 3
Findings and Recommendations ................................... 7
General Fund Budget and Multiyear Financial Projections ...........................................7
Cash Flow Projections.......................................................................................................................21
Appendices ......................................................................25
FOREWORD iii
Foreword - FCMAT Background
The Fiscal Crisis and Management Assistance Team (FCMAT) was created by legislation
in accordance with Assembly Bill 1200 in 1992 as a service to assist local educational
agencies (LEAs) in complying with fiscal accountability standards.
AB 1200 was established from a need to ensure that LEAs throughout California were
adequately prepared to meet and sustain their financial obligations. AB 1200 is also a statewide
plan for county offices of education and school districts to work together on a local level to
improve fiscal procedures and accountability standards. The legislation expanded the role of the
county office in monitoring school districts under certain fiscal constraints to ensure these dis-
tricts could meet their financial commitments on a multiyear basis. AB 2756 provides specific
responsibilities to FCMAT with regard to districts that have received emergency state loans.
These include comprehensive assessments in five major operational areas and periodic reports
that identify the district’s progress on the improvement plans.
In January 2006, SB 430 (charter schools) and AB 1366 (community colleges) became law and
expanded FCMAT’s services to those types of LEAs.
Since 1992, FCMAT has been engaged to perform nearly 750 reviews for local educational
agencies, including school districts, county offices of education, charter schools and community
colleges. Services range from fiscal crisis intervention to management review and assistance.
FCMAT also provides professional development training. The Kern County Superintendent of
Schools is the administrative agent for FCMAT. The agency is guided under the leadership of
Joel D. Montero, Chief Executive Officer, with funding derived through appropriations in the
state budget and a modest fee schedule for charges to requesting agencies.
Study Agreements by Fiscal Year
80
70
60
50
40
30
20
10
0
92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10
Projected
Total Number of Studies....................743
Total Number of Districts in CA ........1,050
Management Assistance.............................705 (94.886%)
Fiscal Crisis/Emergency ................................38 (5.114%)
Note: Some districts had multiple studies.
Eight (8) districts have received emergency loans from the state.
(Rev. 12/8/09)
FAME Public Charter School
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Fiscal Crisis & Management Assistance Team
INTRODUCTION 1
Introduction
Background
California Education Code Section 47600, also known as the Charter Schools Act of
1992, was enacted “to provide opportunities for teachers, parents, pupils, and community
members to establish and maintain schools that operate independently from the existing
school district structure.” Charter schools are a part of the public school system but differ
from traditional public schools because they are exempt from many state laws relating
to specific educational programs. Specific goals and operating procedures for the charter
school are detailed in an agreement, or charter, between the authorizing agency and the
charter school organizers. Charter schools may elect to operate as corporations organized
under the Nonprofit Public Benefit Corporation Law of the Internal Revenue Code [26
U.S.C. Sec. 501(c)(3)].
Charters offer a more flexible school governance model but are accountable for student
achievement and fiscal management. The chartering agency is responsible for adequate
and appropriate oversight, including determining if a charter is following prudent busi-
ness practices and generally accepted accounting principles (GAAP) in accounting for
revenues and expenditures and preparing financial reports. The chartering agency may be
a school district, county office of education, or the California State Board of Education.
The Families of Alameda for Multi-Cultural/Multi-Lingual Education (FAME) Public
Charter School was authorized in May 2005 by the Alameda County Office of Education.
The school is direct-funded and is operated by BASIS, Inc., which is a nonprofit corpora-
tion. FAME serves approximately 1,442 students in kindergarten through grade 12 in
classroom and non-classroom settings.
In August 2009, FCMAT and the charter school entered into a study agreement, which
specifies that FCMAT will complete the following:
1. Review the charter’s 2009-10 general fund budget, multiyear financial projections
for 2010-11 through 2013-14, and cash flow projections for 2009-10 and 2010-11
for the purpose of validating the assumptions used by the charter to develop the
data.
The team will provide recommendations for changes, as necessary. Completion of
the scope of work by the team is contingent on the ability of the charter to deliver
all supporting documentation within the requested timeline.
FAME Public Charter School
2 INTRODUCTION
Study Guidelines
FCMAT visited the charter school on September 28 through October 1, 2009 to conduct
interviews, collect data and review documents. This report is the result of those activities
and is divided into the following sections:
• Executive Summary
• General Fund Budget and Multiyear Financial Projections
• Cash Flow Projections
• Appendix
Study Team
The FCMAT study team was composed of the following members:
Diane Branham Margaret Rosales
FCMAT Fiscal Intervention Specialist FCMAT Consultant
Bakersfield, California Kingsburg, California
Laura Haywood
FCMAT Public Information Specialist
Bakersfield, California
Fiscal Crisis & Management Assistance Team
EXECUTIVE SUMMARY 3
Executive Summary
Budget and Multiyear Financial Projections
Multiyear financial projections (MYFPs) help local education agencies make more
informed decisions and forecast the effect of current decisions. Projections should be
a part of annual budget development and evaluated and updated during each interim
financial reporting period and before any significant budget adjustments, such as salary
increases. In developing and implementing the multiyear financial projection, the charter
school’s primary objectives are to achieve and sustain a balanced budget, improve aca-
demic achievement and maintain local governance. The financial crisis at the state and
national levels make it an especially challenging time financially for educational agencies
statewide. The 2008-09 and 2009-10 state budget acts included significant cuts to the
education budget, and this situation requires local governing boards to make extremely
difficult decisions to balance the budget and remain fiscally solvent.
FCMAT’s review of the 2009-10 draft first interim budget, MYFPs, and cash flow projec-
tions indicate that charter school staff have put a great deal of effort into completing the
documents. As with processes and procedures in all local education agencies, there are
areas that may be improved and efficiencies that may achieved following review by an
external, independent organization.
Although FAME used conservative enrollment and ADA projections when building its
2009-10 budget and MYFPs, the October 2009 CBEDS enrollment is 58 students less
than the amount used in the charter school’s current year enrollment projection. This will
have a negative impact on each funding source that is generated by enrollment or aver-
age daily attendance if the charter school is unable to increase these factors prior to the
second principal apportionment (P-2). Thus, the charter school should reduce its 2009-10
revenue budget based on the October 2009 CBEDS data and review its enrollment pro-
jections for subsequent years to ensure they are not overstated. The charter school should
also continue to monitor student enrollment and attendance and make any necessary
adjustments at each reporting period.
The charter school’s draft first interim budget included the one-time revenue reduction of
$252.83 per prior year ADA twice. The charter school should adjust the budget to ensure
that the reduction is only reflected once in the 2009-10 budget and is not included on
an ongoing basis in the multiyear financial projections. In addition, the budget includes
$345,719 for State Fiscal Stabilization Funds (SFSF) and funds from the American
Recovery and Reinvestment Act (ARRA) for IDEA. However, the information posted by
the CDE and the funds received in 2009-10 from the SELPA total $153,366. Because it
has not yet been determined how much additional funding the charter school will receive
for SFSF and ARRA funds, it is recommended that the budget be reduced to account for
FAME Public Charter School
4 EXECUTIVE SUMMARY
the amount that has been allocated to date and wait for additional funding information
from the CDE and SELPA before including additional dollars in the budget.
The charter school’s draft first interim budget for services and other operating expendi-
tures has been reduced by approximately $500,000 compared to the 2008-09 unaudited
actuals report. While some savings may be realized in 2009-10, it does not appear that
the current budget is sufficient to cover all expenses in the 5000 object codes. The charter
school staff should review the budget for services and other operating expenses and deter-
mine if it needs to be increased.
To ensure that the most current information is included in the working budget, the charter
school staff should monitor the CDE Web site throughout the year and make changes as
necessary to the budgets for categorical program funding and other applicable state fund-
ing sources. The charter school should also use the revenue and expense budget projec-
tion variables reflected in the most current School Services of California (SSC) Financial
Dartboard at each budget reporting period.
Review of the Multi-Year Projection Assumption Worksheet and the Multi-Year Projection
– Alternative Form completed during budget adoption found that some of the informa-
tion was not consistent between the two documents. The charter school should ensure the
reported information is consistent and include a list of the specific assumptions used for the
budget and MYFP for each revenue and expense category at each reporting period. FAME
should also consider implementing budget spreadsheets that include the same object code
categories as reflected on the Alternative Form that is used for budget adoption.
Cash Flow Projections
The purpose of a cash flow statement is to project the timing of receipts and expenses so
that an organization can understand its cash flow needs. The cash flow statement reflects
the charter school’s ability to meet its payroll and other financial obligations.
Based on the continued and increased cash deferrals included in the state’s 2009-10
budget, including deferrals equaling 25% of the current year funding into 2010-11, it is
imperative that the charter school continue to monitor its current year and subsequent
year cash flow at least monthly and carefully monitor its annual budget to ensure that
expenditures do not exceed revenues.
The charter school should work with its independent auditors to determine whether the
ending monthly cash balance reflected on the cash flow statement should be taken from
the reconciled bank statements or from object codes 9110 and 9120 on the monthly trial
balance. The charter school’s cash flow statement should also include columns for all trans-
actions that affect cash including: current year and prior year revenue and expense accruals,
a total column that balances back to the current working budget, and prior year accounts
payable data.
Fiscal Crisis & Management Assistance Team
EXECUTIVE SUMMARY 5
The charter school should also work with the county office to determine, given the capa-
bilities of the county treasurer’s finance system, if the general purpose block grant funds
can be transferred to the charter school in the month they are received by the county
office. In addition, the charter school should review the funding schedule for in-lieu
property taxes as outlined in Education Code section 47635(b) and work with the affected
school districts to ensure that funds are received in accordance with the education code
requirements.
Subsequent Events
On January 8, 2010, the governor submitted his proposed 2010-11 state budget, which
includes expenditure reductions, revenue shifts and increased federal funding to address
the estimated $19.9 billion state budget shortfall. The governor also declared a fiscal
emergency and called for another special session of the Legislature, as provided in
Proposition 58, to deal with the state’s budget crisis.
The proposed 2010-11 education budget includes a negative COLA of .38% as well as an
ongoing reduction to revenue limits, which equates to a cut in the general purpose block
grant funding of $191 per grade K-8 ADA and $231 per grade 9-12 ADA. The charter
school should update its MYFP to include these proposed cuts to education and begin
making decisions now to determine how to balance the projected year budgets and main-
tain fiscal solvency.
FAME Public Charter School
6
Fiscal Crisis & Management Assistance Team
GENERAL FUND BUDGET AND MYFPs 7
Findings and Recommendations
General Fund Budget and Multiyear Financial Projections
State Budget - Overview
Fiscal years 2008-09 and 2009-10 have been unprecedented budget years for California’s
local educational agencies. In November 2008, the governor called for a special session
when it became clear that financial projections showed a growing multibillion-dollar
state budget deficit. During the emergency session, the governor released the 2009-10
proposed budget in December, a month earlier than normal.
On February 20, 2009, after months of delays, the governor signed a 17-month budget,
Senate Bill (SB) 1, Chapter 1, Statutes of 2009, which runs through June 2010 and
included revisions to the 2008-09 budget and approval of the 2009-10 state budget. The
enacted budget reduced education spending by $8.6 billion over the next 17 months. To
address the state’s $41.6 billion budget deficit, state lawmakers reduced expenditures,
added new taxes, borrowed money and offset the difference with federal stimulus funds.
The state budget revisions enacted in February provide some flexibility to local edu-
cational agencies including K-3 Class Size Reduction. SBX3 4 closed the program
in 2009-10 through 2011-12 to participants that did not apply for 2008-09 funds and
established a new schedule of funding reduction percentages in Education Code section
52124.3 for classes exceeding 20.44 pupils. From 2008-09 through 2011-12, this new
schedule replaces the schedule of funding reduction percentages previously established in
Education Code section 52124. The new schedule provides for reductions to funding as
follows:
Schedule of CSR Funding Reductions
Funding Reduction Class Size Range, Inclusive
5% 20.45 to 21.44
10% 21.45 to 22.44
15% 22.45 to 22.94
20% 22.95 to 24.94
30% 24.95 or more
Like the previous schedule, funding for classes of more than 20.44 pupils will be cal-
culated based on a count not to exceed 20 pupils multiplied by the funding rate, less the
funding reduction percentage.
The enacted budget depended on the passage of several ballot measures that went before
the voters on May 19, 2009. All failed with the exception of Proposition 1F. Therefore,
the governor’s May revise included further cuts to education funding.
FAME Public Charter School
8 GENERAL FUND BUDGET AND MYFPs
In July, the governor called for another special session to address the additional $24 bil-
lion deficit in the state’s budget. On July 28, 2009, the governor signed a package of bills
that amended the 2008-09 and 2009-10 state budgets and included substantial additional
cuts to education funding. These cuts included the following:
• Proposition 98 – In an effort to avoid suspending Proposition 98, the state swept
$1.6 billion in 2008-09 unallocated categorical funds and restored this amount in
2009-10, less funding for High Priority Schools grants that ended in 2008-09. The
state then acted to reduce each local education agency’s 2009-10 revenue limit, on
a one-time basis, by approximately $253 per 2008-09 ADA.
• Revenue Limit Deficit – The July state budget revisions included an increase in
the revenue limit deficit factor. The 2009-10 deficit is 18.355%. This means that
education will receive approximately 82 cents on the dollar in revenue limit fund-
ing. Additionally, selected state categorical programs will experience a 19.84%
reduction over a two-year period. This is a significant reduction in funding when
compared with the 2008-09 adopted budget.
Comparison of Governor's Proposal and Actual State Budget
Proposed Enacted May Revise July Revised
Budget Budget Budget Budget
Fiscal Year 2009-10 2009-10 2009-10 2009-10
Revenue Limit - Deficit
2008-09 9.685% 7.844% 11.428% 7.844%
2009-10 16.161% 13.094% 17.967% 18.355%
2010-11 16.161% 13.094% 17.967% 18.355%
State Categorical Program Funding Reductions (Tier II and III)
2008-09 0.00% 15.38% 15.38% 15.38%
2009-10 0.00% 4.46% 4.46% 4.46%
2010-11 0.00% 0.00% 0.00% 0.00%
During the signing of the budget bills, the governor and legislative leaders indicated that
additional budget adjustments may be required as California’s budget crisis remains chal-
lenging and state cash collections are less than projected. Therefore, the charter school
should be prepared to implement additional budget cuts that may occur in the 2009-10
fiscal year. It is critical for local education agencies to monitor their spending and cash
flow and make reductions as needed to maintain reserves and weather the state’s fiscal
crisis.
Additional information regarding the 2009 Budget Act may be accessed at the following
Web site: www.cde.ca.gov/nr/el/le/2009budgetact.asp
Fiscal Crisis & Management Assistance Team
GENERAL FUND BUDGET AND MYFPs 9
In an effort to save jobs, stimulate the economy, improve academic achievement and
support school reform, the federal government enacted the American Recovery and
Reinvestment Act (ARRA). ARRA funds are provided in the following three areas:
• State Fiscal Stabilization Funding (SFSF) – These funds can be utilized for a
broad range of purposes beginning April 17, 2009.
• Title I – These funds can be expended beginning February 17, 2009. The use of
these funds is subject to cost and accounting rules under OMB-A87 and A133 and
is subject to maintenance-of-effort requirements.
• Individuals with Disabilities Education Act (IDEA) – These funds can be
expended beginning February 17, 2009 and are being sent to SELPAs for distribu-
tion. The use of these funds is subject to maintenance-of-effort requirements.
More information regarding the ARRA funds can be found on the following CDE Web
sites:
SFSF - http://www.cde.ca.gov/ar/sf/index.asp
Title I - http://www.cde.ca.gov/fg/aa/ca/nclbtitlei.asp
IDEA - http://www.cde.ca.gov/fg/fo/r18/arralocass09result.asp
Multiyear Financial Projections
Education Code section 47604.33 requires that charter schools complete the following
reports and submit them to the county superintendent of schools:
1. On or before July 1, a preliminary budget.
2. On or before December 15, an interim financial report, reflecting information
through October 31.
3. On or before March 15, a second interim financial report, reflecting information
through January 31.
4. On or before September 15, an unaudited report for the prior year.
In addition, the memorandum of understanding (MOU) between the charter school and
the county office dated August 23, 2005 requires that the financial reports include a cash
flow statement for the current year and financial projections for the two subsequent years.
The MOU also states that the charter school “shall maintain an appropriate level of fund-
ing reserve which shall not be less than 3% of the School’s total annual expenditures.”
Multiyear financial projections (MYFPs) help local education agencies make more
informed decisions and forecast the effect of current decisions. Projections should be
a part of annual budget development and should be evaluated and updated during each
interim financial reporting period and before any significant budget adjustments, such as
FAME Public Charter School
10 GENERAL FUND BUDGET AND MYFPs
salary increases. In developing and implementing the multiyear financial projection, the
charter school’s primary objectives are to achieve and sustain a balanced budget, improve
academic achievement and maintain local government. The MYFP helps identify specific
planning milestones that will help the charter school make decisions.
Financial planning is crucial for every local education agency, regardless of its size or
structure. Long-term financial planning helps a charter school strategically align its
budget with its instructional goals and programs, and should be part of annual budget
development. In addition, recognizing financial trends is essential to maintaining a charter
school’s fiscal health. Reviewing and analyzing year-over-year trends in key budget areas
is helpful in evaluating the charter’s budget direction and in highlighting possible areas of
concern.
Any forecast of financial data has inherent limitations because calculations are based
on certain economic assumptions and criteria, including changes in enrollment trends,
cost-of-living adjustments, forecasts for utilities, supplies and equipment, and changing
economic conditions at the state, federal and local levels. Therefore, the budget projection
model should be evaluated as a trend based on certain criteria and assumptions instead of
a prediction of exact numbers.
Local education agencies throughout the state have been forced to update multiyear
assumptions and projections several times during the 2008-09 and 2009-10 fiscal years as
the state continues to experience severe revenue declines. Multiyear projections in a time
of fiscal instability can become somewhat unreliable, especially in the subsequent fiscal
years, as projected revenue information from the state may frequently change. However,
the MYFP still provides guidance with decisions that cover several fiscal years, and the
charter school must continue to update and reassess the ramifications of state-imposed
budget adjustments.
Budget and Multiyear Financial Projection Assumptions
The primary purpose of a MYFP is to project the charter school’s budget over several
fiscal years using budget assumptions that allow the school to achieve and sustain a bal-
anced budget and meet the required 3% minimum reserve for economic uncertainties.
To evaluate the multiyear projection, attention is focused on the charter school’s ability to
meet its reserve requirement of 3% and demonstrate a positive, unappropriated fund bal-
ance. When the unappropriated fund balance is negative, the deficit balance is the amount
by which the budget must be reduced to meet the reserve requirement. The projections
completed by the charter school and reflected in the summary below indicate that it will
meet its 3% reserve requirement in the current and subsequent years. However, FCMAT’s
review of the charter school’s budget assumptions, as outlined below, indicate that some
of the assumptions may not materialize and that revenue may need to be increased and/or
expenses decreased to maintain the 3% reserve requirement in the projection years.
Fiscal Crisis & Management Assistance Team
GENERAL FUND BUDGET AND MYFPs 11
FAME's Multiyear Financial Projection Summary
General Fund
Unaudited First Interim Projected Projected Projected Projected
Actuals Draft Budget Year 1 Year 2 Year 3 Year 4
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Revenue Limit Sources 7,842,362 7,290,422 7,549,337 7,826,476 8,339,082 8,755,155
Federal 441,042 0 0 0 0 0
Other State 2,698,542 2,863,159 2,422,803 2,471,530 2,578,600 2,647,980
Other Local 37,667 34,000 35,000 36,050 37,132 38,245
Total Revenues 11,019,613 10,187,581 10,007,140 10,334,056 10,954,814 11,441,380
Certificated Salaries 3,506,984 3,513,530 3,562,328 3,627,185 3,784,367 3,977,847
Noncertificated Salaries 1,698,266 1,805,157 1,836,491 1,961,585 2,105,433 2,168,596
Employee Benefits 900,045 1,000,878 1,037,726 1,081,151 1,156,892 1,245,665
Books and Supplies 682,618 672,791 711,742 786,214 783,939 833,251
Services and Other Operating 3,456,438 2,953,396 2,747,643 2,763,824 3,006,236 3,099,076
Capital Outlay (depreciation) 147,285 145,481 109,327 109,327 109,327 109,327
Other Outgo 0 0 0 0 0 0
Total Expenditures 10,391,636 10,091,233 10,005,257 10,329,286 10,946,194 11,433,762
Net Increase (Decrease) in Fund Balance 627,977 96,348 1,883 4,770 8,620 7,618
Fund Balance:
Beginning Balance 408,103 928,503 1,122,059 1,123,942 1,128,712 1,137,332
Adjustments/Restatements* (107,577) 97,208 0 0 0 0
Total Ending Balance 928,503 1,122,059 1,123,942 1,128,712 1,137,332 1,144,950
Components of Ending Fund Balance:
Reserve for Prepaid Expenditures 37,054 0 0 0 0 0
3% Reserve Requirement 311,749 302,737 300,158 309,879 328,386 343,013
Undesignated/Unappropriated 579,700 819,322 823,784 818,833 808,946 801,937
First interim draft budget, dated September 27, 2009, and projection years, dated September 14, 2009.
*Adjustments/Restatements reflected in annual independent audit reports.
FCMAT’s analysis of the budget assumptions used by the charter school in preparing the
2009-10 draft first interim budget, dated September 27, 2009, and the 2010-11 through
2013-14 multiyear projections, dated September 14, 2009, are included below.
Revenues
Enrollment and Average Daily Attendance (ADA) – Proper enrollment tracking and
analysis of ADA are essential to providing a solid foundation for budget planning.
Because the charter school’s primary funding is based on student attendance, monitoring
and projecting student enrollment and attendance is a crucial function. When enrollment
and related ADA decline, the charter school must consider the budgetary impacts of the
decline on teacher-to-student ratios and related expenditures and plan accordingly.
To validate the charter school’s enrollment projections, FCMAT used the cohort survival
method, which groups students by grade level upon entry and tracks them through each
year they stay in school. This method evaluates the longitudinal relationship of the
number of students passing from one grade to the next in a subsequent year. This method
more closely accounts for retention, dropouts and students transferring to and from the
charter school grade by grade. Although other enrollment forecasting techniques are
FAME Public Charter School
12 GENERAL FUND BUDGET AND MYFPs
available, the cohort survival method usually is the best choice for local education agen-
cies because of its sensitivity to incremental changes to several key variables including:
• Birth rates and trends.
• The historical ratio of enrollment progression between grade levels.
• Changes in educational programs.
• Migration patterns.
• Changes in local and regional demographics.
FAME has shown continued enrollment growth, from a CBEDS enrollment of 785 stu-
dents in fiscal year 2005-06 to an enrollment of 1,442 in 2009-10, an 84% increase during
that period. Due to facilities limitations and charter enrollment restrictions included in
the charter school petition, the administration is planning for moderate growth in the
site-based educational program with a slight decline in the independent study educational
component of the charter. The following table reflects the charter school’s historical and
current year enrollment and ADA data along with the enrollment and ADA data devel-
oped by the charter school for the projection years.
Enrollment & ADA
2005-06 2006-07 2007-08 2008-09 2009-10* 2010-11** 2011-12** 2012-13** 2013-14**
CBEDS 7 85 1,143 1 ,286 1 ,398 1 ,442 1 ,540 1 ,565 1 ,630 1 ,660
P-2 ADA 8 05.87 1,146.66 1,257.77 1,362.14 1,407.92 1,480.75 1,504.05 1,564.90 1,593.10
ADA % 102.66% 100.32% 97.80% 97.43% 97.64% 96.15% 96.11% 96.01% 95.97%
*P-2 ADA projected by FCMAT based on actual CBEDS and average percentage of prior two year's ADA by grade level.
**Enrollment/ADA projected by FAME.
FCMAT reviewed the charter school’s enrollment and ADA projections for reasonableness.
Based on the growth realized since the school’s inception, FAME used conservative enroll-
ment and ADA projections in building its 2009-10 budget and MYFPs. Charter school staff
reported that enrollment was 1,503 during the first week of school. However, enrollment
has declined since the start of the 2009-10 school year, and the October 2009 CBEDS
enrollment of 1,442 is less than the amount used in the charter school’s current year enroll-
ment projection of 1,500. Based on the P-2 ADA to enrollment average of the prior two
fiscal years, this decrease in enrollment and related ADA will have an estimated negative
impact of $207,500 on the charter school’s general purpose block grant funding and will
reduce the categorical block grant funding by an estimated $14,200. It will also negatively
affect all other revenue generated by enrollment or ADA. The charter school should reduce
its revenue budget based on the October 2009 CBEDS information and review its enroll-
ment projections for subsequent years to ensure they are not overstated.
Charter school staff indicated that they are aware of the enrollment decline and are accept-
ing new students to help meet the enrollment projections. Staff also indicated that expenses
are being reduced in several areas. For example, staffing costs have been reduced by not
filling new and vacated positions.
Fiscal Crisis & Management Assistance Team
GENERAL FUND BUDGET AND MYFPs 13
Other Revenue Limit Sources – The July 2009 state budget revisions included a one-time
reduction of $252.83 per 2008-09 ADA. The charter school’s 2009-10 draft first interim
budget includes a one-time reduction of $364,922 to account for the state budget revision.
However, the backup documentation indicates that the reduction was made twice; once to
the general purpose block grant rates and again as a separate line item. This resulted in an
understatement of approximately $364,922 in revenue for 2009-10. In addition, the latest
information provided by the California Department of Education (CDE) indicates that the
one-time reduction will be $344,358. An adjustment should be made in the current year
budget to ensure that the reduction is only included once and to reflect the information
from CDE.
The charter school’s 2010-11 through 2013-14 Projected Revenue spreadsheets include
the one-time reduction of $252.83 per ADA on an ongoing basis. This reduction should
only be included in the 2009-10 budget.
Federal – The spreadsheets provided by the charter school reflecting the current year draft
first interim budget and the projection year budgets do not include a separate category
for federal funds. However, based on the backup documentation provided, the charter
school has included $345,719 in its 2009-10 budget for the remaining federal dollars to
be received for State Fiscal Stabilization Funds (SFSF) and funds from the American
Recovery and Reinvestment Act (ARRA) for IDEA. The CDE Web site indicates that the
charter school will receive $128,292 in the second apportionment for SFSF; the charter
school reported that these funds were received in September 2009. However, it has not
yet been determined how much each local educational agency will receive from the
next distribution of SFSF. The charter school also reported that they received $25,074
in September 2009 from ARRA funds for IDEA. However, documentation has not been
received from the SELPA regarding additional ARRA funds. The charter school should
reduce its 2009-10 revenue budget to account for the $153,366 that has been allocated
to date, and wait for funding information from the CDE and the SELPA before including
additional dollars in the revenue budget.
In addition, the charter school has included the SFSF and ARRA budgets for 2009-10 in
the general purpose block grant line item on the 2009-10 budget spreadsheet. An adjust-
ment should be made to the spreadsheet to reflect SFSF and ARRA as federal funding
sources. The charter school also included funding for other federal programs such as Title
II, Part A, and Title III in the other state revenue line item on the 2009-10 budget spread-
sheet. An adjustment should be made to the spreadsheet to reflect these items as federal
funding sources.
State – The charter school’s 2009-10 draft first interim budget includes an estimate of
$500,000 from the Charter School Facility Grant Program. Following FCMAT’s field-
work, the CDE posted a grant award of $489,983. Charter school staff indicated that they
are aware of this adjustment and plan to include it in the first interim report.
FAME Public Charter School
14 GENERAL FUND BUDGET AND MYFPs
The charter school’s budget includes an estimate of $846,841 for special education fund-
ing. Documentation from the county office indicates that the 2008-09 special education
apportionment was $634.03 per prior year ADA. Assuming the charter school receives
$634.03 per prior year ADA in 2009-10, the special education budget would be $863,548.
However, this amount has not yet been verified by the SELPA. Once the amount is veri-
fied, the charter school should adjust its budget to reflect the funding amount provided.
The draft first interim budget includes $14,212 for the California High School Exit Exam
(CAHSEE) and $32,111 for the Arts and Music Block Grant. The latest information avail-
able from CDE indicates that the 2009-10 CAHSEE funding will be $11,392 and that the
2008-09 Arts and Music Block Grant was $20,110. The charter school should continue
to review the information available from CDE throughout the year to ensure the most
current data is included in the working budget and that the funding for Tier II and Tier III
categorical programs is reduced by 4.46% in 2009-10.
FCMAT did not have access to the backup documentation regarding the charter
school’s estimates for some of the categorical programs including the Local Assistance
Entitlement, and was therefore unable to assess the budgets for these items. Charter
school staff indicated that the Local Assistance Entitlement is passed through the county
office and backup documentation is not provided to FAME. The charter school should
work with the county office to obtain the backup documentation for each applicable fund-
ing source.
The charter school’s MYP assumption worksheet submitted with its 2009-10 adopted
budget includes no COLA for revenue in 2010-11 and a 1% COLA for state revenue
in 2011-12. In addition, the projected annual statutory COLA is not included in the
charter school’s MYFP, dated September 14, 2009, in each of the projection years for
the categorical block grant and EIA funding. The charter school should use the statutory
COLA included on the School Services of California (SSC) Financial Dartboard to project
increases in state categorical funding for future years. (The SSC dartboard is included in
the appendix of this report. The appendix also includes the revised dartboard based on the
governor’s January budget proposal.) Based on the state’s current economic situation, the
charter school should also have a contingency plan in place if the COLA is not funded.
Local – Based on the 2008-09 actuals, the budget for local revenue appears reasonable.
Expenditures
Certificated Salaries – FCMAT reviewed the charter school’s Projected Salaries spread-
sheet for 2009-10 dated September 27, 2009 and the October 2009 payroll records.
Although the spreadsheet includes an error in the formula for the Dublin independent
study teachers’ salaries and does not include salary increases for two staff members, the
total 2009-10 budget for certificated salaries appears reasonable.
Fiscal Crisis & Management Assistance Team
GENERAL FUND BUDGET AND MYFPs 15
Due to facility limitations and charter enrollment restrictions, the teacher salaries reflect a
shift in teaching positions by a decrease in independent study positions to an increase in
classroom teaching positions in the projection years.
The charter school’s MYP assumption worksheet submitted with the 2009-10 adopted
budget includes an increase of one FTE in 2010-11 and three FTE in 2011-12 based
on the projected increase in enrollment. These two projection years also include a 1%
COLA. The MYP assumption worksheet does not include an amount for step and column
increases. In addition, the Projected Salaries spreadsheet for 2010-11 does not include a
step increase for the full-time independent study teachers. FCMAT recommends that the
charter school include the annual costs for step and column increases for certificated staff
on the MYP assumption worksheet and not include a COLA until it is approved by the
governing board.
Non-Certificated Salaries – FCMAT reviewed the charter school’s Projected Salaries
spreadsheet for 2009-10 dated September 27, 2009 and the October 2009 payroll records.
The total 2009-10 budget for non-certificated salaries appears reasonable.
The charter school’s MYP assumption worksheet submitted with the 2009-10 adopted
budget does not include any changes in classified salaries in 2010-11 but includes a
COLA of 1% in 2011-12. Because the charter school’s classified salary schedule does
not include an automatic step increase, no cost is included in the charter’s MYFP. The
Projected Budget spreadsheets dated September 14, 2009, include a 3% COLA per year
beginning in 2011-12. It is recommended that the MYFP not include a COLA for non-
certificated salaries until it is approved by the governing board.
The charter school’s budget spreadsheets include the following new positions in the
projection years:
1 Facilities Manager – Newark
2 Arabic Enrichment Aides – Fremont
1 Accountant – Newark
1 Arabic Enrichment Aide – San Leandro
Increased Hours for an Existing Aide – San Leandro
Employee Benefits – The charter school’s MYP assumption worksheet submitted with the
2009-10 adopted budget includes a statutory benefit rate of 11.93% for certificated and
19.31% for classified personnel. These amounts are based on the following current year
rates:
• STRS – 8.25%
• PERS – 9.428%
• OASDI – 6.20%
FAME Public Charter School
16 GENERAL FUND BUDGET AND MYFPs
• Medicare – 1.45%
• SUI – 0.30%
• W/C – 1.93%
The charter school’s Projected Salaries spreadsheet dated September 27, 2009 includes
a PERS rate of 9.75%. However, the 2009-10 PERS contribution rate for employers is
9.709%. The school should make revisions to the budget based on the current year PERS
rate and carefully monitor the estimated PERS employer rates, as they are projected to
increase annually through 2013-14. As reported by SSC, the estimated PERS employer
contribution rates are:
2010-11 10.2%
2011-12 11.6%
2012-13 13.7%
2013-14 14.0%
The charter school staff reported that they were able to negotiate a better rate for workers’
compensation costs of 1.55% and have included the reduction in the draft first interim report.
The MYP assumption worksheet submitted with the 2009-10 adopted budget indicates that
an increase for health and welfare benefits has not been included in the projection years.
However, increases are included in the Multiyear Projection - Alternative Form. The charter
school should ensure that the documents are consistent in the amounts reported.
The FAME Employee Handbook dated August 2009 states the following:
Currently, FAME contributes a set dollar amount to pay for premiums for medi-
cal coverage, and the employee must pay for any additional costs. FAME con-
tributes the entire monthly premium payment for vision and dental insurance for
the employee. However, FAME reviews all coverage periodically and employer
contributions are subject to change based on budgetary considerations.
Based on the language above, the charter school should continue to work with its insur-
ance providers to obtain an estimate of any proposed premium increases for the projec-
tion years and determine if increases for medical coverage, in addition to increases for
dental and vision insurance, will be included in the MYFP prior to specific governing
board approval for increased medical insurance contributions..
Books and Supplies – Based on the 2008-09 unaudited actuals report, the 2009-10 budget
for books and supplies appears reasonable.
The charter school’s MYP assumption worksheet submitted with the 2009-10 adopted
budget reflects an increase of 1% in fiscal years 2010-11 and 2011-12. The charter
school should use the annual consumer price index (CPI) as reflected on the most recent
Fiscal Crisis & Management Assistance Team
GENERAL FUND BUDGET AND MYFPs 17
SSC Financial Projection Dartboard to project expenditures for books and supplies. In
addition, the school should make adjustments to this expenditure category based on the
projected enrollment growth/decline in each fiscal year.
Services and Other Operating Expenditures – The charter school’s 2008-09 unaudited
actuals report includes expenses of $3.45 million in services and other operating expendi-
tures. However, the 2009-10 draft first interim report includes a budget of $2.95 million in
this category. FCMAT’s review of the 2008-09 expenditures and the projected expenses for
2009-10 indicate that the budget needs to be increased by approximately $280,000. While
it appears that some savings will be realized compared to the 2008-09 unaudited actuals,
including interest expense due to the payoff of all loans from individuals in 2008-09 and
a reduction in consultant services due to the hiring of a chief operating officer, it does not
appear that the charter’s current year budget for services and other operating expenditures is
sufficient to cover all expenses.
The charter school’s 2009-10 budget includes a 3% oversight fee of $231,108 payable
to the county office of education as the authorizing agency. The memorandum of under-
standing (MOU) between the county office and the charter school dated August 23, 2005
states the following:
OVERSIGHT: As provided in Education Code Section 47605.5, for the first year of its
operation, the School shall pay to the County Superintendent the actual expenses of over-
sight, monitoring and reporting in an amount not to exceed 2% of the general purpose
block grant and categorical block grant revenues for oversight services.
In the second and each subsequent year of its operation, the School shall pay to the
County Superintendent the actual expenses of oversight, monitoring and reporting in an
amount not to exceed 3% of the general purpose block grant and categorical block grant
revenues for oversight services.
Education Code Section 47605.6(c) states the following:
A county board of education that approves a petition for the operation of a
countywide charter may, as a condition of charter approval, enter into an
agreement with a third party, at the expense of the charter school, to oversee,
monitor, and report to the county board of education on the operations of the
charter school. The county board of education may prescribe the aspects of the
charter school’s operations to be monitored by the third party and may prescribe
appropriate requirements regarding the reporting of information concerning the
operations of the charter school to the county board of education.
Charter school staff stated that their conversations with county office personnel indicate
that a 3% oversight fee is being charged because FAME is a countywide charter and the
county office is serving as the LEA for special education services. The charter school
FAME Public Charter School
18 GENERAL FUND BUDGET AND MYFPs
should work with the county office to ensure the correct Education Code citation is
included in the MOU. The charter school should also obtain a copy of the third party
agreement between the county board of education and the county superintendent to
include with its backup documentation for the oversight payments.
The charter school’s MYP assumption worksheet submitted with the 2009-10 adopted
budget indicates that no adjustments were made to this expenditure category in the projec-
tion years. FCMAT recommends that the school use the annual CPI as reflected on the most
recent SSC Financial Dartboard. In addition, the school should make adjustments to this
expenditure category based on the projected enrollment growth/decline in each fiscal year.
Capital Outlay – The charter school’s 2009-10 draft first interim budget includes depre-
ciation expense of $145,481. While this amount appears reasonable based on the 2008-09
unaudited actuals report, FCMAT did not have access to the charter schools fixed asset
depreciation schedule to validate this information.
The MYP assumption worksheet submitted with the 2009-10 adopted budget does not include
any change in the capital outlay expense in the projection years. However, the charter school
has reduced its budget in the MYFP to $109,327 per year. The charter school should review its
fixed asset depreciation schedule to ensure the projection year budgets are correct.
Adjustments/Restatements to Beginning Balance – The charter school’s 2008-09 unaudited
actuals report includes an adjustment to the beginning fund balance of $323,732.76. Charter
school staff indicated that this adjustment was based on the encroachment of special educa-
tion. The charter school should reflect encroachment of special education, and any other
restricted programs, in the contributions between unrestricted and restricted accounts line of
the Alternative Form rather than as an adjustment to the beginning balance.
The 2008-09 annual independent audit depicts net ending assets of $1,025,711, and
the charter school’s 2008-09 unaudited actuals report reflects a balance of $928,503.
However, the audit report does not include a reconciliation schedule that includes the
specific line item adjustments. The charter school staff reported that they have reviewed
the adjustments with the auditor and concur with the changes.
The charter school’s spreadsheets for the draft first interim report and the projection year
budgets is not in the same format as the Alternative Form used at budget adoption. The
school should consider implementing a spreadsheet that includes the same object code
categories as the Alternative Form, and included in the California School Accounting
Manual. This change should help to make tracking revenue and expenditure projections
between reporting periods more efficient. It would also be beneficial to include both unre-
stricted and restricted categories on the spreadsheets to help ensure that restricted dollars
are tracked properly throughout the year.
Fiscal Crisis & Management Assistance Team
GENERAL FUND BUDGET AND MYFPs 19
The charter school staff has prepared a significant amount of information for the projec-
tion years regarding enrollment, general purpose block grant funding, and salary informa-
tion. The charter school should also include a list of the specific budget assumptions used
by fiscal year for each of the other revenue and expense categories and update the list of
assumptions at each reporting period. This would provide staff a history of the changes in
revenue, expense and the ending fund balance throughout the year and should help when
reporting changes to the governing board and the public.
Recommendations
The charter school should:
1. Reduce its revenue budget based on the October 2009 CBEDS information and review
its enrollment projections for subsequent years to ensure they are not overstated.
2. Adjust the 2009-10 budget to reflect the one-time reduction of $252.83 per prior
year ADA once rather than twice. Ensure that this one-time reduction is not
included on an ongoing basis in the multiyear financial projections.
3. Adjust the current year budget to reflect the one-time revenue reduction of
$344,358 as indicated by the CDE, instead of $364,922.
4. Reduce its 2009-10 revenue budget to account for the $153,366 in SFSF and ARRA
funds that have been allocated to date, and wait for funding information from the
CDE and the SELPA before including additional dollars in the revenue budget.
5. Adjust the 2009-10 budget spreadsheet to reflect SFSF, ARRA, Title II, Title III and any
other funds received from federal sources in a separate line item for federal revenue.
6. Adjust its 2009-10 budget to reflect the award amount posted by CDE for the
Charter School Facility Grant Program.
7. Adjust its 2009-10 budget to reflect the funding amount provided by the SELPA
once the amount has been verified.
8. Review the latest funding information for categorical programs available from the
CDE to ensure the most current estimates are included in the 2009-10 budget, and
ensure that the estimated funding for Tier II and Tier III categorical programs is
reduced by 4.46% in 2009-10.
9. Work with the county office to obtain backup documentation for each funding source.
10. Use the statutory COLA included on the SSC Financial Dartboard to project
increases in for the categorical block grant and other state categorical funding in
each projection year budget.
11. Include the projected annual costs for step and column increases for certificated
staff in its MYFP and on the MYP assumption worksheet.
12. Not include a COLA for certificated and non-certificated staff members in the
MYFP until it is approved by the governing board.
FAME Public Charter School
20 GENERAL FUND BUDGET AND MYFPs
13. Revise its PERS employer contribution rate to 9.709% for the 2009-10 budget and
include the estimated increased PERS employer rates in the projection year budgets.
14. Ensure that the information reflected on the MYP assumption worksheet is consis-
tent with the information included on the Multiyear Projection - Alternative Form.
15. Determine if increases for medical coverage, in addition to increases for dental
and vision insurance, should be included in the MYFP prior to specific action by
the governing board to increase contributions for medical coverage.
16. Use the annual CPI as reflected on the most recent SSC Financial Dartboard when
projecting expenditures for books and supplies and make adjustments to this expen-
diture category based on the projected enrollment growth/decline in each fiscal year.
17. Review the current budget for services and other operating expenses and deter-
mine if it needs to be increased.
18. Work with county office personnel to ensure the correct Education Code citation
regarding oversight fees is included in the MOU and obtain a copy of the third-
party agreement between the county board of education and the county superin-
tendent for oversight fees.
19. Use the annual CPI as reflected on the most recent SSC Financial Dartboard to
project expenditures for services and other operating expenses, and make adjust-
ments to this expenditure category as needed based on the projected enrollment
growth/decline in each fiscal year.
20. Review its fixed asset depreciation schedule to ensure the projection year budgets
for depreciation are correct.
21. Reflect encroachment of special education, and any other restricted programs,
in the contributions between unrestricted and restricted accounts line of the
Alternative Form used for reporting the unaudited actuals rather than as an adjust-
ment to the beginning balance.
22. Request that the 2008-09 annual independent audit report include a reconciliation
schedule that includes each adjustment to the ending balance.
23. Consider implementing budget spreadsheets that include the same object code cat-
egories as the Alternative Form, and include unrestricted and restricted resource
categories on the spreadsheets.
24. Include a list of the specific budget assumptions used for the MYFP for each revenue
and expense category and update the list of assumptions at each reporting period.
Fiscal Crisis & Management Assistance Team
CASH FLOW PROJECTIONS 21
Cash Flow Projections
The purpose of a cash flow statement is to project the timing of receipts and expenses so
that an organization can understand its monthly or even daily cash needs. The cash flow
statement reflects the charter’s liquidity and ability to meet its current payroll and other
required financial obligations. As an analytical tool, the cash flow analysis should not be
confused with the charter school’s budget and fund balance; it excludes transactions that
do not directly affect cash receipts and payments.
Any forecast of financial data for cash flow purposes has inherent limitations, including
issues such as unanticipated changes in enrollment trends and changing economic condi-
tions at the state, federal and local levels. Therefore, the cash flow forecasting model
should be evaluated as a trend based on certain criteria and assumptions rather than a pre-
diction of exact numbers. Multiyear cash flow projections help provide for more informed
decision making and the ability to forecast the fiscal impact of current decisions. The cash
flow projections should be updated each month to accurately account for all revenues,
expenditures and other changes related to cash.
The July 2009 state budget revisions included SBX4 16, which changed the statutory
apportionment schedules for local education agencies and pushes state funding to later in
the fiscal year. In addition, several additional cash deferrals were enacted with the July
budget revisions, making cash flow for local education agencies an even larger challenge
than in previous years and making it imperative to place emphasis on cash flow analysis.
Apportionment & Cash Payment Schedules
2009-10
Month Apportionment Cash Payment
July 5.0% 1.0%
August 5.0% 0.0%
September 9.0% 9.0%
October 9.0% 14.0%
November 9.0% 4.5%
December 9.0% 13.0%
January 9.0% 13.5%
February 9.0% 0.5%
March 9.0% 9.0%
April 9.0% 6.0%
May 9.0% 4.5%
June 9.0% 0.0%
Subsequent Year
July 17.5%
August 7.5%
Total 100.0% 100.0%
School district or COE name
22 CASH FLOW PROJECTIONS
Charter school staff indicated that the cash flow statement is updated each month and
that updates are presented monthly at a governing board meeting. Board meeting minutes
indicate that these presentations began at the April 14, 2009 meeting. The June 18, 2009
board meeting minutes indicate that a fiscal policies manual was approved. The manual
includes Policy 2100.1, Financial Accounting and Reporting, and 2300.1, Budget Policy,
which require that a cash flow statement be provided to the governing board monthly.
During FCMAT’s fieldwork, charter school staff provided a copy of the 2009-10 cash
flow statement that contained actual monthly data through August 2009. An updated copy
of the cash flow statement provided to FCMAT following fieldwork contained actual data
through October 2009. The 2009-10 beginning cash balance on the cash flow statement
is $1,941,441. This does not match the charter school’s unaudited actual and audited cash
balance of $1,995,062.45, which includes cash in county treasury, cash on hand, and cash
in banks (object codes 9110 and 9120). Discussions with charter school staff indicated
that the monthly cash balance is taken from the reconciled bank statements rather than
from object codes 9110 and 9120 on the monthly trial balance. The charter school should
discuss this issue with their independent auditors to determine what source should be
used to report the ending monthly cash balance.
The charter school’s most recent cash flow projection for 2009-10 includes actual receipts
and expenditures through the month of October. However, the statement does not include
a column for current year accruals and does not include a total column that balances back
to the current working budget. The cash flow spreadsheet should be updated to include
these columns to help ensure that the budgeted amounts for each category are reflected
appropriately on the cash flow statement. In addition, it appears that formulas are not
used on the spreadsheet which requires the user to calculate the monthly projections
manually.
The current year cash flow statement includes line items to account for prior year
accounts receivable; however, it does not include line items to account for prior year
payables. The charter school should include a line item for prior year accounts payable
on its cash flow spreadsheet to ensure that all items that affect cash are reflected on the
monthly statement.
A review of the general purpose block grant line item indicates that the monthly appor-
tionment is deposited to the charter school’s bank account during the month after it is
received by the county office. Charter school staff indicated that the funds are deposited
the same day the check is received from the county office. The charter school should
review the timing of these receipts with the county office and determine if, based on the
processing capabilities of the county treasurer’s financial system, it is possible to receive
the apportionment in the month the funds are received by the county office.
Fiscal Crisis & Management Assistance Team
CASH FLOW PROJECTIONS 23
The October cash flow statement also reflects that in-lieu property taxes have not been
received in the months of July-October. In addition, the projection months do not include
the receipt of property taxes. Education Code section 47635(b) states that the sponsoring
local educational agency must transfer the in-lieu of property tax funds to the charter school
by the 15th of each month and specifies the transfer schedule. The charter school should
review this schedule and work with the affected school districts to ensure that funds are
received per the schedule indicated in the Education Code.
The current year cash flow statement includes a line item for net payments to employees
and includes a line item for taxes/withholdings that appears to include amounts withheld
from employee wages and amounts paid by the employer for some of the statutory bene-
fits. The charter school should include gross wages paid to employees under the 1000 and
2000 (certificated and classified salaries) object codes and report the benefits paid by the
charter school on behalf of its employees in the 3000 object codes (employee benefits).
The charter school’s current year cash flow statement includes a separate line item for
each individual object code in the 4000 (books and supplies) and 5000 (services and other
operating expenses) major object code series. This appears to add a level of detail to the
cash flow statement that is not necessary and requires a significant amount of additional
work by the staff member who updates the statement. The charter school should consider
eliminating the individual lines items for these object codes and report one line item for
books and supplies and one line item for services and other operating expenses.
On July 9, 2008 the charter school obtained a revenue anticipation note (RAN) from
Wells Fargo Institutional Securities, LLC of $2 million that matured on September 1,
2009 and was repaid by the charter school in August 2009. The $2 million repayment
is included on the 2009-10 cash flow statement. On April 28, 2009 the charter school
obtained a RAN from Wells Fargo Institutional Securities, LLC of $1.575 million that
matures on September 1, 2010.
Although the charter school’s 2009-10 cash flow statement does not reflect a negative
cash balance in any month, it does include additional borrowing of $1.3 million in June
2010 to end the year with a positive cash balance.
The 2010-11 Cash Flow Projection spreadsheet prepared by the charter school does not
include a column for current year and prior year accruals, and the total column for each
line item does not balance to either the MYFP that was presented at budget adoption or
the Projected Budget spreadsheets dated September 14, 2009. The charter school should
ensure that the revenue and expense included in the cash flow statement balance to the
current working budget and MYFP for each fiscal year.
The 2010-11 cash flow statement does not reflect a negative ending balance in any month.
However, it does include an additional borrowing of $1 million in July as well as the
School district or COE name
24 CASH FLOW PROJECTIONS
repayment of the April 2009 RAN of $1.575 million. In addition, it does not yet include
the cash deferrals for the months of February, April and May as indicated in Education
Code section 14041.6.
Recommendations
The charter school should:
1. Continue to monitor its current year and subsequent year cash flow at least
monthly.
2. Contact its independent external auditors and determine what source should be
used to report the monthly ending cash balance.
3. Update the current year and projection year cash flow statements to include a
column for current year and prior year accruals, ensure that the total column for
each line item balances to the budget for that respective year, and include formu-
las to calculate the projection months.
4. Include a line item for prior year accounts payable on its cash flow statement to
ensure that all items that affect cash are reflected.
5. Work with the county office to determine, given the capabilities of the county
treasurer’s finance system, if the general purpose block grant funds can be for-
warded to the charter school in the same month they are received by the county
office.
6. Review the funding schedule for in-lieu property taxes included in Education
Code section 47635(b) and work with the affected school districts to ensure that
funds are received as specified by the Education Code.
7. Include the gross wages paid to employees under the 1000 and 2000 (certificated
and classified salaries) object codes and report the benefits paid by the charter
school on behalf of its employees in the 3000 (employee benefits) object codes on
its cash flow statement.
8. Consider eliminating the individual lines items for the 4000 and 5000 object
codes on the current year cash flow statement. Instead, use one line item for books
and supplies and one line item for services and other operating expenses.
9. Include cash deferrals as reflected in Education Code section 14041.6 in the 2010-
11 cash flow projection.
Fiscal Crisis & Management Assistance Team
APPENDICES 25
Appendices
Appendix A – School Services of California Dartboard – 2009-10 Final Budget
Version and 2010-11 Governor’s Budget Proposal
Appendix B – Study Agreement
FAME Public Charter School
26 APPENDICES
Fiscal Crisis & Management Assistance Team
APPENDICES 27
Appendix A
2009 SSC School District and County Office Financial Projection Dartboard
ABX4 1 Budget Version (Updated September 14, 2009)
This version of SSC’s Financial Projection Dartboard is based on the 2009-10 ABX4 1 State Budget revision. We have
updated the COLA, CPI, and ten-year T-bill factors per the latest economic forecasts, and this resulted in changes to virtually
every factor for 2008-09 and thereafter. We rely on various state agencies and outside sources in developing these factors, but
we assume responsibility for them with the understanding that they are, at best, general guidelines.
Factor 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Statutory COLA (use for K-12 and COE 5.66% 4.25% 0.50%1 2.30%1 2.50% 3.00%
Revenue Limits)
Revenue Limit Deficits:
Eliminates COLA .94643 .90785 .90785 .90785 .90785 .90785
Further RL Cut .97372 .89932 .89932 .89932 .89932 .89932
Total Deficit % 7.844% 18.355% 18.355% 18.355% 18.355% 18.355%
Net Revenue Limit Change: K-12 -2.63% -7.64% 0.50% 2.30% 2.50% 3.00%
Revenue Limit Deficits—COEs:
Eliminates COLA .94643 .90785 .90785 .90785 .90785 .90785
Further RL Cut .97377 .89639 .89639 .89639 .89639 .89639
Total Deficit % 7.839% 18.621% 18.621% 18.621% 18.621% 18.621%
Net Revenue Limit Change: COEs -2.62% -7.95% 0.50% 2.30% 2.50% 3.00%
Other Revenue Limit Adjustments2 – -$252.83 – – – –
per ADA
Special Education COLA (on state and
0.00% 0.00% 0.50% 2.30% 2.50% 3.00%
local share only)
State Categorical Funding (including
adult education and ROC/P)3 Tier I 0.00% 0.00% 0.50% 2.30% 2.50% 3.00%
Tier II -15.38% -4.46% 0.50% 2.30% 2.50% 3.00%
Tier III -15.38% -4.46% 0.50% 2.30% 2.50% 3.00%
California CPI 1.20% 0.50% 1.90% 2.20% 2.70% 3.00%
California Lottery4 Base $109.50 $111.00 $111.00 $111.50 $111.50 $111.50
Proposition 20 $11.50 $13.25 $13.25 $13.50 $13.50 $13.50
Interest Rate for Ten-Year Treasuries 3.10% 3.60% 4.10% 4.40% 4.70% 4.90%
ESTIMATED STATEWIDE AVERAGE BASE REVENUE LIMITS PER ADA “UNDEFICITED”
Year Elementary High School Unified
2008-09 Statewide Average (est.) $5,882 $7,069 $6,150
2009-10 Inflation Increase @ 4.25% COLA $250 $300 $261
2009-10 Statewide Average (est.) $6,132 $7,369 $6,411
2009-10 BUDGET ACT ESTIMATED CHARTER SCHOOL RATES
K-3 4-6 7-8 9-12
General Purpose Block Grant
(will change at each apportionment)2 $4,778 $4,855 $5,003 $5,845
Categorical Block Grant (est.)5 $401 $401 $401 $401
Total $5,179 $5,256 $5,404 $6,246
1While a positive statutory COLA is projected for 2010-11, the state’s ability to fund it is suspect. Districts should have a contingency plan should the state
decide not to fund this COLA percentage.
2 The 2009 Budget Revision did not include the 11.428% deficit for 2008-09, which was proposed in the May Revision. Instead, the Budget Revision
requires school district, COEs, and charter schools to reduce revenue limits by $252.83 per ADA on a one-time basis in 2009-10. The charter school general
purpose rates displayed above include this one-time reduction.
3 The categorical cut percentages are based on the amount of cuts from prior-year funding.
4 The forecast for Lottery funding per ADA includes both base (unrestricted) funding and the amount restricted by Proposition 20 (2009) for instructional
materials.
5 The Charter School Categorical Block Grant rates do not include Economic Impact Aid funding, which is provided separately.
© 2009 by School Services of California, Inc.
FAME Public Charter School
28 APPENDICES
2010 SSC School District and County Office Financial Projection Dartboard
Governor’s 2010-11 Budget Proposal
This version of SSC’s Financial Projection Dartboard is based on the Governor’s 2010-11 State Budget proposal. We have
updated the COLA, CPI, and ten-year T-bill factors per the latest economic forecasts, and this resulted in changes to virtually
every factor for 2009-10 and thereafter. We rely on various state agencies and outside sources in developing these factors, but
we assume responsibility for them with the understanding that they are, at best, general guidelines.
Factor 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Statutory COLA (use for K-12 and 4.25% -0.38% 1.80%1 2.40% 2.80% 3.10%
COE Revenue Limits)
Revenue Limit Deficits:
Eliminates COLA .90785 .90785 .90785 .90785 .90785 .90785
Further RL Cut .89932 .89932 .89932 .89932 .89932 .89932
Total Deficit % 18.355% 18.355% 18.355% 18.355% 18.355% 18.355%
Net Revenue Limit Change: K-12 -7.64% -0.38% 1.80% 2.40% 2.80% 3.10%
Revenue Limit Deficits—COEs:
Eliminates COLA .90785 .90785 .90785 .90785 .90785 .90785
Further RL Cut .89639 .89639 .89639 .89639 .89639 .89639
Total Deficit % 18.621% 18.621% 18.621% 18.621% 18.621% 18.621%
Net Revenue Limit Change: COEs -7.95% -0.38% 1.80% 2.40% 2.80% 3.10%
-$191 Elem3 -$191 Elem -$191 Elem -$191 Elem -$191 Elem
-$252.832 -$231 High3 -$231 High -$231 High -$231 High -$231 High
Other Revenue Limit Adjustments per ADA -$201 Unified3 -$201 Unified -$201 Unified -$201 Unified -$201 Unified
per ADA per ADA per ADA per ADA per ADA
Special Education COLA (on state
0.00% -0.38% 1.80% 2.40% 2.80% 3.10%
and local share only)
State Categorical Funding (including
adult education and ROC/P)4 Tier I 0.00% N/A4 1.80% 2.40% 2.80% 3.10%
Tier II -4.46% -0.38% 1.80% 2.40% 2.80% 3.10%
Tier III -4.46% -0.38% 1.80% 2.40% 2.80% 3.10%
California CPI 0.80% 2.00% 2.60% 2.90% 3.20% 3.40%
Base $110.00 $110.00 $110.00 $110.00 $110.00 $110.00
California Lottery
Proposition 20 $13.00 $13.00 $13.00 $13.00 $13.00 $13.00
Interest Rate for Ten-Year Treasuries 3.50% 3.90% 4.30% 4.70% 5.00% 5.20%
ESTIMATED STATEWIDE AVERAGE BASE REVENUE LIMITS PER ADA “UNDEFICITED”
Year Elementary High School Unified
2009-10 Statewide Average (est.) $6,132 $7,369 $6,411
2010-11 Inflation Increase @ -0.38% COLA -$23 -$28 -$24
2010-11 Statewide Average (est.) $6,109 $7,341 $6,387
2010-11 BUDGET ACT ESTIMATED CHARTER SCHOOL RATES
K-3 4-6 7-8 9-12
General Purpose Block Grant $4,983 $5,058 $5,203 $6,040
(will change at each apportionment) - $1913 - $1913 - $1913 - $2313
Categorical Block Grant (est.)5 $399 $399 $399 $399
Total $5,191 $5,266 $5,411 $6,208
1While a positive statutory COLA is projected for 2011-12, the state’s ability to fund it is suspect. Districts should have a contingency plan if the state
decides not to fund this COLA percentage.
2 The 2009 Budget Revision did not include the 11.428% deficit for 2008-09, which was proposed in the May Revision. Instead, the Budget Revision
requires school districts, COEs, and charter schools to reduce revenue limits by $252.83 per ADA on a one-time basis in 2009-10.
3 The Governor’s Budget proposes an ongoing revenue limit adjustment of $191 for elementary, $231 for high school, and $201 for unified revenue limits
tied to reductions to school district administration, and contracting out. $45 million reduction to COEs to be determined.
4The categorical cut percentages are based on the amount of cuts from prior-year funding. In 2010-11, Tier I programs have various funding rates.
5The Charter School Categorical Block Grant rates do not include Economic Impact Aid funding, which is provided separately.
© 2010 by School Services of California, Inc.
Fiscal Crisis & Management Assistance Team
APPENDICES 29
Appendix B
FISCAL CRISIS & MANAGEMENT ASSISTANCE TEAM
STUDY AGREEMENT
July 27, 2009
The FISCAL CRISIS AND MANAGEMENT ASSISTANCE TEAM (FCMAT),
hereinafter referred to as the Team, and the Fame Public Charter School, hereinafter
referred to as the Charter, mutually agree as follows:
1. BASIS OF AGREEMENT
The Team provides a variety of services to school districts, county offices of
education, charter schools, and community colleges upon request. Senate
Bill 430 (2005) and Education Code 42127.8 (d) (1) established the ability of a
charter school to request management assistance services by the Team. The
Charter has requested that the Team provide for the assignment of professionals
to study specific aspects of the Fame Public Charter School operations. These
professionals may include staff of the Team, County Offices of Education, the
California State Department of Education, school districts, or private contractors.
All work shall be performed in accordance with the terms and conditions of this
Agreement.
2. SCOPE OF THE WORK
A. Scope and Objectives of the Study
The scope and objectives of this study are to:
1) Review the Charter’s 2009-10 general fund budget, multiyear financial
projections for 2010-11 through 2013-14, and cash flow projections for
2009-10 and 2010-11 for the purpose of validating the assumptions
used by the Charter to develop the data.
FAME Public Charter School
30 APPENDICES
The Team will provide recommendations for changes, as necessary.
Completion of the scope of work by the Team is contingent on the
ability of the Charter to deliver all supporting documentation within
the requested timeline.
B. Services and Products to be Provided
1) Orientation Meeting - The Team will conduct an orientation session at
the Charter to brief Charter management and staff on the procedures of
the Team and on the purpose and schedule of the study.
2) On-site Review - The Team will conduct on-site meetings at the
Charter office to gather documentation and conduct interviews. The
Team will request assistance from the Charter in setting up interview
schedules with staff and compiling the requested documentation.
3) Progress Reports - The Team will hold an exit meeting at the
conclusion of the on-site reviews to inform the Charter representatives
of significant findings and recommendations to that point.
4) Exit Letter - The Team will issue an exit letter approximately
10 days after the exit meeting detailing significant findings and
recommendations to date and memorializing the topics discussed in
the exit meeting.
5) Draft Reports - Sufficient copies of a preliminary draft report will be
delivered electronically to the Charter administration for review and
comment.
6) Final Report – An electronic version of the final report will be
delivered to the Charter following completion of the review. Up to
15 hardcopies of the final report will be provided to the Charter, if
requested.
7) Follow-Up Support – Six months after the completion of the study,
FCMAT will return to the Charter, if requested, to confirm the
Charter’s progress in implementing the recommendations included
in the report, at no cost. Status of the recommendations will be
documented to the Charter in a FCMAT Management Letter.
Fiscal Crisis & Management Assistance Team
APPENDICES 31
3. PROJECT PERSONNEL
The study team will be supervised by Anthony L. Bridges, Deputy Executive
Officer, Fiscal Crisis and Management Assistance Team, Kern County
Superintendent of Schools Office. The study team may also include:
A. Diane Branham, FCMAT Fiscal Intervention Specialist
B. Jim Cerreta, FCMAT Fiscal Intervention Specialist
C. Margaret Rosales, FCMAT Fiscal Consultant
Other equally qualified consultants will be substituted in the event one of the
above noted individuals is unable to participate in the study.
4. PROJECT COSTS
The cost for studies requested pursuant to E.C. 42127.8(d)(1) shall be:
A. $500.00 per day for each Team Member, while on site, conducting fieldwork at
other locations, preparing and presenting reports, or participating in meetings.
B. All out-of-pocket expenses, including travel, meals, lodging, etc. Based
on the elements noted in section 2 A, the total cost of the study is estimated
at $15,500. The Charter will be invoiced at actual costs, with 50% of the
estimated cost due following the completion of the on-site review and the
remaining amount due upon acceptance of the final report by the Charter.
C. Any change to the scope will affect the estimate of total cost.
Payments for FCMAT services are payable to Kern County Superintendent of
Schools- Administrative Agent.
5. RESPONSIBILITIES OF THE CHARTER
A. The Charter will provide office and conference room space while on-site
reviews are in progress.
B. The Charter will provide the following (if requested):
1) A map of the local area
2) Existing policies, regulations and prior reports addressing the study
request
3) Current organizational charts
4) Current and four (4) prior year’s audit reports
5) Any documents requested on a supplemental listing
FAME Public Charter School
32 APPENDICES
C. The Charter Administration will receive an electronic draft copy of the
preliminary report for review. Any comments from the Charter regarding
the accuracy of the data presented in the report will be reviewed by the
Team prior to completion of the final report.
Pursuant to EC 45125.1(c), representatives of FCMAT will have limited contact
with Charter pupils. The Charter shall take appropriate steps to comply with EC
45125.1(c).
6. PROJECT SCHEDULE
The following schedule outlines the proposed completion dates for key study
milestones:
Orientation: September 28, 2009
Staff Interviews: September 28 – October 1, 2009
Exit Interview: October 1, 2009
Preliminary Report Submitted: to be determined
Final Report Submitted: to be determined
Board Presentation: to be determined
Follow-Up Support: If requested
7. CONTACT PERSON
Please print name of contact person: Maram Alaiwat, Chief Executive Officer
Telephone 916 847-6481 FAX
Internet Address basischarter@aol.com
Maram Alaiwat, Chief Executive Officer Date
Fame Public Charter School
July 27, 2009
Barbara (Dean) Murphy, Deputy Administrative Officer Date
Fiscal Crisis and Management Assistance Team
Fiscal Crisis & Management Assistance Team