The financial autonomy of charter schools depends on each state's charter school legislation. In states that regard charter schools as schools within a district (also known as local educational agencies [LEAs]), the charter schools' fiscal responsibilities are similar to those of the other schools in the district. In states that treat charter schools as independent school districts/LEAs, charter schools have the same fiscal responsibility and autonomy as other independent districts/LEAs. Although all charter schools, regardless of status, must develop sound financial management practices, it is especially important that charter schools established as independent LEAs be able to address a full range of fiscal management issues.
Since proper accounting for the use of local, state, and federal funds is a critical element in operating and maintaining continued support for a charter school, the budget plans that charter schools develop must ensure that public funds are used properly, reflect the charter school's purpose and philosophy, and stand up to a financial audit.
This page provides information and Resources on charter school budgets, financial management, and fundraising. Because of variations in state laws, however, the materials presented here cannot cover specific state requirements. Instead, they are designed to provide examples and should not be viewed as a substitute for qualified financial counsel.
II. Budget and Fiscal Management Basics
A well-developed charter school budget not only lists projected revenues and expenditures, but ideally also reflects the mission, vision, and design principles of a school. Working within financial constraints, innovative charter school developers create innovative budgets to make the most of limited funds.
Statement about assumptions (e.g. enrollment projections, teacher salaries) underlying fiscal statements, and
Description of budget development and oversight process.
The fiscal management standards and practices used by charter schools vary widely. Some states require charter schools to use a state-mandated accounting system and audit process. Other states allow the charter school to determine its own processes and hire its own independent auditor. Schools receiving large amounts of federal funds may also need to comply with various federal standards regarding accounting and auditing. See the ESEA Compliance Supplement for guidance in this area. Charter developers who manage their own funds need to understand the accounting and audit procedures and laws applicable to them and then establish a workable system to account for their funds.
Our Resources section provides additional information that may be helpful in developing your school's budget and longer-term financial plan. Currently there is little published information regarding accounting and auditing procedures specific to charter schools. School developers should consult with their state education agency and other fiscal management experts when developing their fiscal management systems.
III. Facilities and Start-Up Costs
The majority of charter schools are start-ups, for whom securing facilities has proven to be a challenge. Scarce space in a district, limited start-up funds, and difficulties associated with borrowing money to rent space have prompted some schools to seek creative facilities solutions. Some schools have worked out arrangements with the sponsoring school district and lease building space at low prices. Sonoma Charter School, for example, rents its building from the local school district for one dollar a year. Other schools, like Leadership High, have formed partnerships with institutes of higher education to occupy unused classrooms during the day.
Federal legislation provides grants to help charters with start-up costs. A few states (AZ, CA, CO, GA, MN, PA) have made additional funds or loans available to help charter schools with facilities and other large start-up costs. The Arizona Stimulus Fund and the California Revolving Loan Fund are examples of what particular states have done. For information, see our State and School Information area or Resources section.
IV. Charter School Revenues
As public schools, charters are not allowed to charge tuition, and they are funded according to enrollment. In some states, such as Alaska, Colorado, Minnesota, and New Jersey, they receive less than 100% of the funds allocated to their traditional counterparts for the operation of public schools. In most states, charters do not receive capital funds for facilities. They are entitled to federal categorical funding for which their students are eligible, such as Title I and Special Education monies. In December, 1999, the U.S. Department of Education established new regulations to ensure that charter schools opening for the first time or significantly expanding their enrollment receive the federal formula funds for which they are eligible. You may view the Final Rule in html or PDF format.
A. Federal Funding
Federal funding is available for charter schools through a variety of categorical programs. These formula grants generally follow one of two routes before reaching schools: (1) funds are distributed directly by the U.S. Department of Education (ED), or (2) they are channeled through state or local education agencies that then make subgrants. If a state recognizes charter schools as independent LEAs, the state educational agency (SEA) may award funds directly to those charter schools that meet federal eligibility requirements. If the school falls within an existing LEA, such as a local school district or other sponsoring agency, the state distributes federal funds it receives through that "parent" education agency. To find out more about the legal status of charter schools in your state and how that affects the allocation of state and federal funds, contact your state charter school representative through our State and School Information area.
There are also federal discretionary grants available to charter schools to support school activities such as after-school programs, parent literacy initiatives, social services, and professional development. For a complete listing of federal grant opportunities, see ED's Funding Opportunities web page. The Guide to U.S. Department of Education Programs and Resources provides a brief description and application information for each of the ED programs as well as general information on How to Apply for ED Grants.
Charter School Start-up Funds. Funds available through the Public Charter Schools Program help new charter schools pay for planning, design, and start-up costs. In most cases, state departments of education apply to be part of the program and then award subgrants to developers and operators within their state. In states that have not elected to apply to the federal program, individual charter schools may, in some cases, apply directly to ED in partnership with their chartering agency. For more information see the Public Charter Schools Program Grant Application.
Title I Grants to Local Educational Agencies (LEAs). Authorized by Title I of the Elementary and Secondary Education Act (ESEA) as amended by the Improving America's School Act of 1994, this program provides financial assistance to LEAs and schools with high numbers or percentages of poor children to help meet the educational needs of children who are failing, or most at risk of failing, to meet challenging academic standards. A charter school that meets the eligibility requirements may receive Title I funding from the state or district, depending on how the state classifies its charter schools. To receive a "Basic Grant," a charter school as an LEA must have at least 10 "formula children" comprising more than two percent of the LEA's 5-17 year-old population. As a school within an LEA, a charter school may be eligible to participate in Title I if its percentage of children from low-income families equals or exceeds that of its district or is at least 35 percent.
Schools receiving Title I funds must abide by Title I rules and regulations unless specific waivers are granted. The Title I Guidance outlines the responsibilities and provides suggestions for schools and districts that receive Title I resources. Charter school operators, particularly of schools designated as LEAs, should take special note of the Allocation to Public Charter School Guidance, Fiscal Requirements, Use of Funds, and Schoolwide Guidance.
Special Education Funding under IDEA. Recently reauthorized, the Individuals with Disabilities Education Act (IDEA) aims to strengthen academic expectations and accountability for the nation's 5.4 million children with disabilities by helping states cover the extra costs of serving these children. The Office of Special Education and Rehabilitative Services provides information about recent publications, upcoming conferences and events, as well as grant opportunities. Both the amount of funds each charter school receives and the method by which they receive them vary. For information on whether your school is eligible for IDEA funding, contact your district or state charter school representative or special education official through our State and School Information area.
Other ED Programs. Although Title I is the largest federal elementary and secondary education program, other ED programs can support charter school activities. For instance, the Comprehensive School Reform Demonstration Program (CSRD) awards funds to schools that are in the process of implementing comprehensive school reform based on research and effective practices. These grants are awarded and administered by the state. For more information about these funds, contact your state education agency and read the CSRD Guidance.
The 21st Century Community Learning Centers Program supports after-school programs for students and families to supplement and enrich the educational experience of students. The program is designed to support schools to implement or expand projects that address the educational and social needs of rural or inner-city communities.
The distribution of state and local revenues to charter schools is usually prescribed in state law and is based primarily on student enrollment counts (i.e.,average daily attendance). Actual allocations to schools may vary, however, based on interpretations or negotiations with state, district, or sponsoring agencies over administrative costs and other fees. To determine the availability of start-up funds and per-pupil amounts for charter schools, contact the charter school or school finance representative in your state department of education or your state's charter school network through our State and School Information area.
C. Other Funding Sources
Working with the private and non-profit community can yield additional financial support for charter schools and can lead to increased support for the school within the community. Some charter schools have found that rather than applying for cash awards, there are other, sometimes more productive strategies for receiving support, such as building partnerships with local businesses and organizations. For example, to solve their facilities problems, some charter schools have established partnerships with community organizations like the YMCA or local institutions of higher education in order to take advantage of under-utilized space during the day.
Many charter schools also identify student use of technology as an important goal, focusing fundraising or partnership-building activities in this area. Because of the high visibility of technology in education, there are many opportunities for Technology Funding.
Other fundraising strategies that schools may consider are presented in the Hudson Institute's Charter Schools in Action Project: Final Report. Additionally, The Policy Perils of Charter Schools describes efforts such as that of the Prudential Foundation to begin a "charter school lending program" for start-up and early operations expenses. Through Prudential, philanthropists and investors in Washington, D.C. launched a non-profit organization to support charter schools by locating capital for facilities and equipment. See our Glossary of Fundraising Strategies for additional ideas.
V. Resources
The following links contain lists of useful on-line resources.
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