Report 2016-141 Recommendation 17 Responses

Report 2016-141: Charter Schools: Some School Districts Improperly Authorized and Inadequately Monitored Out‑of‑District Charter Schools (Release Date: October 2017)

Recommendation #17 To: Acton-Agua Dulce Unified School District

To better ensure effective oversight of its charter schools' finances, Acton-Agua Dulce Unified should develop written procedures for addressing financial concerns, such as a charter school's failure to meet the minimum reserve requirement established in the district's memorandum of understanding with the charter school.

1-Year Agency Response

Procedures for reviewing charter schools' financial information are contained in the District's charter school policy. All budget and financial reports are reviewed using a uniform budget and ADA analysis tool. Staff's review of charter school finances incorporates the practices and procedures in FCMAT's "California Charter School Accounting and Best Practices Manual." Staff findings are included in a written response letter to each charter school. If warranted, follow-up actions to ensure solvency include the development and implementation of a Fiscal Solvency Plan to meet the minimum reserve requirements and address cash flow issues. (See policy, pages 9-12.)

Implementation Date: October 11, 2018 (adoption of updated policy).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

The district's updated charter school policy describes steps that the district will take when a charter school faces financial issues. Specifically, the policy describes a process through which the district will require a charter school with financial issues to submit a Financial Stability Plan. If the charter school fails to provide a detailed plan outlining steps that could realistically resolve fiscal issues, the policy says that the district will issue a notice of violation to the charter school and ultimately may revoke the school's charter.

6-Month Agency Response

The District's Assistant Superintendent of Business continues to provide District-authorized charter schools with written feedback after completing their financial reviews, noting any areas of concern and requesting financial plans that address any projected shortfalls.

California State Auditor's Assessment of 6-Month Status: Pending

Although Acton-Agua Dulce Unified stated that it fully implemented our recommendation, the district did not provide any new evidence to support its assertion.

60-Day Agency Response

The District's Assistant Superintendent of Business provides District-authorized charter schools with written feedback after completing their financial reviews, noting any areas of concern and requesting financial plans that address any projected shortfalls. The District has implemented the Auditors' recommendation to provide charter schools with more detailed recommendations to address any identified financial concerns. The District's Staff believes that it is first and foremost an independently operated charter school's responsibility to develop and present a sound financial plan for addressing any of the District's financial concerns.

California State Auditor's Assessment of 60-Day Status: No Action Taken

Although Acton-Agua Dulce Unified states that it fully implemented our recommendation, it did not provide evidence to support its assertion.

In addition, we stand by our recommendation that Acton-Agua Dulce Unified should develop written procedures for addressing financial concerns to better ensure effective oversight of its charter schools' finances. As we note on page 49 of the audit report, Acton-Agua Dulce Unified demonstrated that it generally reviewed Assurance Academy's financial reports and assessed Assurance Academy's financial condition. However, we noted that Acton-Agua Dulce Unified does not have written procedures for reviewing charter schools' financial reports. Without robust oversight processes, districts cannot ensure the consistent quality of their reviews of charter schools' financial reports. In addition, without written procedures, district staff may not always take appropriate or prompt action if charter schools' financial reports start exhibiting indicators of financial distress. Therefore, we look forward to the district's six-month response.

All Recommendations in 2016-141

Agency responses received are posted verbatim.