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SALT LAKE CITY -- A report released Thursday says some charter schools in Utah are in serious need of additional financial oversight and compliance.
The report released by the Office of the Legislative Auditor General found lapses in the financial reporting processes of several schools and a need for better fiscal policies and enforcement by the State Charter School Board. It also recommended charter school boards receive additional financial training.
Some of the more serious fiscal problems stem from inaccurate enrollment projections, which result in schools going over budget, the audit report stated.
"While most state charter school enrollments are close to their projections, four schools have a history of missing their projections by a considerable margin," the report said.
Charter schools, like traditional public schools, create an initial budget based on enrollment projections. They use that to determine needed teachers, supplies, staff, etc. On Oct. 1 of each year, official enrollment counts occur, and the funding each school gets is aligned with actual enrollment.
Merit College Preparatory Academy in Springville, Beehive Science and Technology Academy in Sandy, Soldier Hollow Charter School in Midway and C.S. Lewis Academy in Santaquin were the four highlighted schools.
Merit initially budgeted $2,772,166 for fiscal year 2009. However, because the school only achieved 40 percent of its projected enrollment, Merit only received $1,147,089, a 59 percent reduction in budgeted revenues.
Because school building costs are fixed, instruction spending typically bears the brunt of budget cuts.
"The impact of those cuts can be severe if instruction spending is already limited by high facility cost burdens," the report said.
Ultimately, Merit ended 2009 with a deficit of $329,385.
Another reason for the school's budget busting was defined by the report as excessive spending in the classroom. The report found that in 2009, Merit's student-teacher ratio was 9:1, while the median for all charter schools was 20:1.
"Enrollment shortfalls justified a staffing cut of 55 percent that did not take place, which we estimate cost the school approximately $400,000 in teacher compensation it could not afford," the report said.
The audit was requested over the financial conditions at Beehive Science and Technology Academy, which nearly had its charter revoked this year due to financial difficulties. The majority of its deficit came from necessary facility upgrades and costs.
The audit found that had charter school boards had financial training, and if they stayed on top of their financial reporting, some of the problems could have been avoided.
"As we discussed Merit's problems with their former board chair and watched Beehive go through its proposed charter termination, it became clear that governing boards at schools with financial problems do not clearly understand their financial responsibilities," the report states.
Many charter schools are not submitting quarterly financial reports to the State Charter School Board, which, in part, reviews school financials throughout the year. Out of 55 schools in the state in 2009, 21 submitted partial reports or no reports, 29 submitted complete reports but in an improper format, and only 5 submitted complete reports in proper format. The 61 schools in 2010 improved significantly, with 46 submitting complete reports in their proper format.
State Superintendent Larry Shumway responded to the audit in a letter, writing that "The SCSB and USOE appreciate and largely concur with the findings and recommendations of this performance audit."
He noted that financial resources at the State Office of Education have not kept up with the dramatic upswing in the number of charter schools in the state.
"In fact, the USOE and the SCSB saw a 21 percent decrease in funding in fiscal year 2010 and continue to operate with only five dedicated staff members," his letter states.
Overall, Shumway said his office is appreciative of the audit's findings and said more scrutiny in the financial process is needed.
"The recommendations in the audit will strengthen the entities who are involved in charter school oversight," Shumway's letter states. "Recent concerns about some charter schools are evidence that greater oversight is needed."