Area

charter

schools

financially

sound

in 2002

By KREMENA TODOROVA

Journal Staff Writer

NEW ULM -- Area charter schools compared favorably to many counterparts statewide in terms of financial health in the fiscal year 2002, according to a Journal analysis of an audit of charter-school finances released last Thursday.

Three area schools, in Hanska, Lafayette and on the Lower Sioux Reservation near Morton, steered clear of a list of financially failing schools that includes about a quarter of all charter schools in the state.

Charter schools are publicly-funded schools formed by parents, teachers or community members. Encouraged to offer innovative programs, they are seen as an alternative to "regular" public schools.

The state report identifies 16 out of the state's 68 charter schools as "schools in financial difficulty." It also pegs their problems to poor financial planning and insufficient monitoring of actual revenues and spending.

The report uses several measures to determine whether or not a school is in financial trouble. The auditors look at the combined effect of factors such as: the ratio between a school's fund balance and its expenses; the size of the fund balance; and whether a school had an operating deficit or surplus during the fiscal year.

The three area schools analyzed reported a "safe" ratio between fund balances and expenses (called a statutory operating debt ratio). The ratio was 33.7 percent for Hanska, 25.6 percent for Lafayette, and 45.6 percent for the Lower Sioux school, Eci' Nompa Woonspe.

Ratios of 10 percent or higher are considered healthy. Generally speaking, the larger the number, the better off a school is thought to be. If the number is a negative -2.5 percent or lower, the school is considered to be in trouble.

In addition to generally poor operating debt ratios, failing schools had either a negative fund balance, or an operating deficit for the year combined with a low fund balance.

In comparison, Hanska had an operating deficit of $24,015 but a fund balance of $118,852 -- a sizeable amount compared to its $355,391 in revenues.

Lafayette had a surplus of $63,287 and a balance of $109,511; that compares to $586,713 in revenues.

At $3,404, Eci' Nompa Woonspe's operating surplus was fairly small, but its fund balance was $295,606. Its revenues were $1,086,349.

Schools in financial trouble spent an average 19 percent of their budgets on administration, compared to about 15 percent for other schools (although numbers in both classes varied widely), according to the audit. In comparison, Hanska spent 13.1 percent on administration, Lafayette spent 12.4 percent, and Eci' Nompa Woonspe spent 15.4 percent.

The report defines administrative expenses as expenses for the school board, principal and office staff, and for central office services such as data processing and printing.

The Lafayette school spent less than the other two area schools on both administration and "regular" instruction -- respectively, $1,098 and $3,089 per student. Hanska spent $1,647 and $3,220 per student, and Eci' Nompa Woonspe spent $3,822 and $9,311 per student, respectively.

Because percent and per student comparisons account for school size, they are considered better indicators of where schools stand than the size of a fund balance, deficit or surplus.

School size is described in terms of average daily attendance -- which in fiscal 2002 was 59 at Lafayette, 44 at Eci' Nompa Woonspe, and 30 at Hanska.

The state audit report establishes no state averages in most comparison categories. The auditors caution that costs in specific spending categories vary widely depending on location (rural versus metro), curriculum emphasis and other factors.

District 88 Business Manager Donna Luhring discourages direct comparisons between charter schools and "regular" public school districts. Luhring cites differences in audit categories and formats.