Part X: Financial Plan & Budget Narrative

X: Annual Financial and Program Audits

Budgeting, Accounting, Procurement, and Auditing Procedures: The necessary and proper oversight of all financial aspects of the charter school shall fall to the Local School Board.

Below are Interim School Board (ISB) decisions concerning the fiscal management systems for IPCS. These decisions were based on information available to charter school start-up groups at the time of writing. If new directives are determined by the DOE or other governing bodies, IPCS will make any adjustments necessary to be in compliance with Act 62.

IPCS has retained the services of the accounting firm of Barry Crivello, C.P.A. from Kona and Waimea, to oversee initial fiscal system development, selection of appropriate software, and ongoing fiscal management. Mr. Crivello's firm will continually monitor IPCS personnel responsible for fiscal matters. The firm currently assists several small schools.

All fiscal matters pertaining to budgeting, procurement, and taxes will be managed by IPCS staff with Mr. Crivello's direct oversight. Because of IPCS's collaborative nature and small size, staff will be responsible for day to day procurement decisions, with immediate oversight by the School Administrative Assistant. The IPCS Bylaws contained in this document (Section VII Governance) detail the fiscal constraints under which the staff may procure goods and services.

Payroll monies may be left in the state's account as we may continue utilizing the payroll services of the state.

Mr. Crivello will review monthly the IPCS financial records, and will annually review all fiscal matters to prepare for the yearly audit.

The IPCS fiscal year will be July 1 through June 30, corresponding to the State of Hawaii's fiscal year.

Funds from each major revenue source will be separated by placing in separate bank accounts to facilitate tracking expenditures.

The procurement system shall allow for the use of checks (two signatures required) and revolving charge accounts with local merchants.

IPCS salaries and benefits will follow equivalent union scales for bargaining unit members. Employee benefits at union rates not afforded directly by the state or the unions will be provided by IPCS.

Auditor Jennifer Gossert, C.P.A., of Hilo, Hawaii (tentative), will conduct yearly audits.

The LSB will work with the Auditor's office, state budget and finance offices, and the Department of Education to help align the fiscal system with the state's In$ite and FMS systems to facilitate tracking of state and federal funds.

The LSB will structure the final fiscal management plan so that fiscal information will be available to the public and state agencies in a readily accessible form.

The Legislative Auditor's Allocation to New Century Schools Project, February 2000, report specifically addressed funding for Lanikai and Waialae Elementary Schools. However, the Auditor's report also indicates that the methodology will likely be extended to other charter schools. The Interim School Board is confident that IPCS can provide excellence at a cost that does not exceed public school expenditures. The Budget Projection Narrative and budget projections for IPCS's first three fiscal years (2001-2004) start on the next page.

Innovations Public Charter School Budget Narrative

The IPCS three year budget which follows this narrative is based on the following projection assumptions:

A. Funding Sources:

Number of Students: Our target enrollment is 90 grade 3-5 students for the first two years (SY 2001-2002 and SY 2002-2003); 100 grade 2-5 students the third year (SY 2003-2004) and 120 grade K-5 students by year four (SY 2004-2005). See expected enrollment chart on page 2 of Section III.

FY 2000 Multiplier: We used allocation figures found in the Auditor's Allocation to New Century Schools Project, February 2000 (ANCSP), to develop the included projections. Since we needed a way to account for likely inflation of costs, we have supplied a FY 2001 multiplier. This figure appears on each FY projection, and represents an estimated inflation factor relative to FY 2001 year costs. We have used a 2.5% inflation rate without compounding.

Fixed Cost Positions: The Auditor's office has indicated that each New Century Charter School should receive funding for a principal, SASA, librarian, and a 0.5 FTE counselor. The fixed cost position funds designated for a principal will cover the half-time Teacher/Director and half-time Business Manager. The fixed cost position funds designated for SASA will cover the Administrative Assistant. It has been determined that fringe benefits will be paid out of the state's general funds. As enrollment grows and if the positions are funded, a librarian and half-time counselor will be added.

Variable Costs and Negotiable/formula Items : The auditor's figure of $2609 per student derived for Waialae and Lanikai Elementary schools was adjusted to $2769 as follows:

• $277 for services to remain with the DOE were subtracted from $2609 = $2332
• $27 for services assumed by IPCS were added to adjusted figure: $2332 + 27= $2359
• $410 for negotiable/formula items were added to the adjusted figure $2359 = $2769

The formula for Variable and Negotiated box: Number of students x $2769 x FY 2000 multiplier. The superintendent has indicated that this may be below the appropriate school program funding level; it probably represents a very conservative estimate.

Each New Century Charter School will receive funding for services that the Local School Board determines can best be provided by the school, rather than the Department of Education. These will be negotiated on a case-by-case basis with the DOE, and the Auditor is charged with determining the appropriate amounts for each category. In addition, state and federal funds allotted by formula are by law to be dispersed on an equitable basis to the charter schools. The sum of these two items has been $410.58 for Lanikai's and Waialae's allocations.

Federal Revolving Funds Loan: We plan to borrow $50K from the available no-interest federal revolving fund to insure sufficient startup funds. We plan to repay the loan in-full at the end of FY 02.

B. Expenditure calculations:

• T/D & Business Manager: ANCSP figure principal salary x FY 2000 multiplier x .5 FTE
• Administrative Assistant: ANCSP figure x FY 2000 multiplier x 1.0 FTE
• Teaching Staff salaries: 6 teachers - (50K + 40K + 37K + 32K + 36K + 52K) x FY 2000 multiplier
• Support Staff: 3 part-time teacher x FY 2000 multiplier (13,333K per part-time teacher)
• Temporary Contract Employee: Funds for curriculum specialists, workshop instructors, etc.
• Fringe: will be paid out of the state's general fund
• Service for Fee: represents indirect costs associated with DOE and/or outside agency contracts to manage funds to establish internal accounting systems, audits, R&M and other services.
• Contingency/carryover: This is for unforeseen costs or may be carried forward as a financial reserve.

C. Fiscal Sustainability: Federal charter start-up monies will no longer be available starting SY 2003-2004. By that time, IPCS will have purchased most of the start-up equipment it needs to run its program. The budget projection sheet for FY 2003 shows that the IPCS operating costs are covered by the DOE fixed, variable and negotiable allocations.

As needs arise that are not provided for in the budget and to provide for the continual upgrade of technology equipment and continued programs like Artists in the Schools, grants will be written to secure funding to augment the budget. All of the IPCS staff members have written and received substantial grants for Kahakai School (collectively totaling over a quarter of a million dollars) and will continue to use their expertise to provide IPCS students a quality educational program.