Andrew Wilson Charter School ran a $410,824 deficit in the last fiscal year, according to a recently released audit, spurring the board and EdisonLearning, the company hired to help run the school, to blame one another for the sloppy bookkeeping.
This is the fifth straight year that auditors have pointed out shortcomings with the school’s financial management — every year since it was founded. Prior audits have faulted EdisonLearning for failing to provide the board with financial documents, and they have cited the board for not reviewing that information on a monthly basis.
Unlike the previous three audits, this one does not question any of the school’s expenses. But it again notes that the school’s board, Broadmoor Charter School Board, Inc., didn’t review its financial statements on a regular basis.
According to the audit for the 2011-12 fiscal year, the school:
Didn’t use the state’s standard codes to classify its financial transactions
Didn’t record some of the school’s depreciation expenses
Inaccurately recorded some federal grant expenses, some payroll expenses and some revenue
Couldn’t prove that finance officials regularly reviewed records of salaries, benefits, accrued liabilities, and other accounts
Though the school ran a deficit, it isn’t in the hole now — in part because it has not paid Edison $540,067 that the company billed for last year’s services. The school contends it doesn’t owe that much money.
Board President David Winkler-Schmit largely blames those issues on EdisonLearning, the school’s former for-profit education management organization. He pointed out that Wilson was managed by the for-profit company all three years — actually, it’s five — that the audits have revealed problems.
“In terms of the audit, in terms of the deficit, that was their responsibility” as the management organization, Winkler-Schmit said. The school ended its financial relationship with Edison on July 1, 2011 — the start of the fiscal year covered by the audit — but Edison still handled accounts during the six-month transition period that followed.
Edison spokesman Michael Serpe said his company is not to blame for the school’s financial issues. Though Edison helped to manage the school, he said, the governing board was ultimately in charge of accounting.
A company like Edison “can’t even cash the check,” he said. “For all intents and purposes, an education management organization is an employee of the board.”
The original contract between the two parties tasks Edison with managing the school’s finances, tracking enrollment and and keeping the board apprised of such matters, but puts it on the board to comply with any laws governing the use of state and federal funds, as well as with charter-school law.
Winkler-Schmit said the school ended the relationship with Edison because it had always planned to transition to self-management. However, he said, “keep in mind: there were three bad audits.”
Serpe said the decision was a mutual one. “They wanted to operate independently and we were more than happy to let them do that,” he said.
Fifth year of troubled bookkeeping
Edison had handled Wilson’s finances since the school’s inception in 2007. Previous audits have found similar problems.
In 2011, auditors cited the school for, among other things:
Poor internal financial controls and inadequate financial review processes
Failing to provide financial documentation to the board
Failing to record depreciation expenses and in-kind revenues and costs
Inaccurately recording the previous year’s transactions
Auditors also questioned $206,474 in costs. That included:
$148,560 in salaries and benefits for seven employees because the school couldn’t provide contracts or work records
$33,673 in salary and benefits because the school couldn’t prove that an employee who was paid with federal grants met grant requirements
$24,241 in reimbursements because supporting documentation was missing
In 2010, auditors painted a similar picture: finance staff didn’t record some expenses and inaccurately recorded others, they didn’t adhere to state and federal reporting guidelines, and they couldn’t show supporting documentation on several expenses. In total, auditors questioned $285,017 in spending.
In 2009, auditors questioned $68,336 in expenses after the school sought reimbursement of federal grants that had not yet been spent and it couldn’t provide supporting documentation for other federal grant expenditures.
Though auditors didn’t question any expenses in 2008, they said that the school’s financial statements were inaccurate and weren’t prepared on time.
As for the finger-pointing, prior audits support both sides. For both the 2010-11 and 2009-10 fiscal years, auditors said that EdisonLearning hadn’t prepared supporting financial documentation for the board’s review. For the 2008-09 fiscal year, auditors said that the financial statements prepared by EdisonLearning were incomplete.
In the latest report, auditors said there’s no evidence in the board’s minutes that it consistently reviewed the school’s financial position. Winkler-Schmit contended that the board did review finances regularly, but he said that wasn’t always reflected in the board’s meeting minutes.
Edison continued to provide educational services to Wilson until June 30, six months after it stopped handling finances.
Serpe said Edison had a minimal hand in the school’s finances for the 2011-12 fiscal year. The company’s role during the transition “was much more related to collecting and organizing information – not the managing and allocation of finances.”
Financial management was the board’s responsibility, under the amended contract and the original one, Serpe said. “The governing board of any charter school approves the annual budget, reviews financial statements, and makes adjustments in the spending priorities,” he said.
According to the latest contract, some of Edison’s responsibilities from July to December 2011 included finalizing payroll and invoices, calculating sick and personal time, and helping school leaders with grant reporting. Auditors noted issues in all of these areas.
In response to the audit findings, the school has taken steps to tighten up its internal controls, Winkler-Schmit said. An independent financial consultant has been hired to inform board members — “because we’re not all CPAs.” The board’s minutes note those monthly financial reviews, he said.
Most importantly, the board has severed its relationship with Edison, he said. “We‘re not paying a management company,” he said. “We’ve saved money.”
The school forecasts a million-dollar surplus next year, he said, which he attributed to not paying Edison, having more students and running the school more efficiently — for instance, custodial services are now handled in-house rather than by an outside company.
The school also made some budget cuts. The middle school’s academy director’s position was eliminated, and some cafeteria monitors’ contracts were not renewed, he said.
Who’s watching the books at charters?
Edison has partnerships with close to 400 schools globally. Locally, the firm has provided services for Intercultural Charter School, Capitol High School in Baton Rouge and Linear Leadership Academy in Shreveport.
Intercultural, too, blamed Edison in 2011 for a deficit of more than $300,000, saying the debt resulted from the company’s high management fee. Intercultural also ended its relationship with Edison. Capitol High also fired Edison in 2011, citing financial mismanagement.
Once Edison’s relationships with its Louisiana schools came to an end, Serpe said, the company pulled out of the state. The charters they’ve worked with sometimes have trouble funding school operations with just state per-pupil funding, he said. They may redirect blame to Edison when money dries up.
“When an audit is conducted, the board says ‘Oh, they screwed up all of our finances.’ Well, the only thing we do is help with bookkeeping,” he said. “We don’t make any decisions as to how the money is spent.”
Instead, Edison is focusing more on working with traditional school districts. As charter operators become more knowledgeable about school operations, they’re better able to handle their own affairs, he said.
“The money is controlled by the board,” Serpe said. “The board makes decisions as regards to how much is spent, and what is spent.”
Andrew Wilson Audit 2011-2012 (PDF)