Fiscal Intelligence

When people think about one of the most common reason/rationale for charter schools closure what immediately comes to mind is an instructional reason, however, what the most recent research points out to is a completely different story.  It turns out that an often overlooked area surfaces as a rationale for most of the charter school closures and that is financial mismanagement. Another factor that is usually mentioned is governance. Pondering a second over this, the financial reason makes a great deal of sense. The students drive the inflow of capital into the schools. Therefore, if enrollment falls substantially that can jeopardize the viability and sustainability of the school. We have seen this scenario played out in some of the New York State suburbs and throughout the nations where municipalities have been forced to close down numerous schools because of a decline in enrollment.

When the authorizers are making a decision to close a school (not renewed its charter), they do tend to weigh heavily the fiscal viability of the entity. If they consider it not to be a robust one, they likely move forward with the decision to shut down the school. A point of reference that is important to mention  is Washington, D.C., where 50% of the students attend charter schools. When one looks at the report  released by the District of Columbia Public Charter School Board (PCSB), more than 50% of the charter schools closed since 1996 have been due to financial mismanagement.   Although the rest of the school might not have been closed solely for financial management, this rationale was mentioned as one of the reasons for the decision.  This sheds some light on the importance of having strong financial procedures and a strong finance team with the background and skills needed to support and strengthen the viability and sustainability of the charter school movement.

Another factor that triggers the closure of the charter schools – one that people tend to overlook most of the time – is governance (Board of Trustees). Governance plays a vital and critical role in setting the strategic direction of the school when it comes to procedures, operations, and finance. If they are not doing what they have been chosen to do, which is governing, even if the school is doing well instructionallly the school will not be considered a viable and sustainable entity in the foreseeable future.

Given my professional experience in the education sector, I was not surprised by the findings presented by the research as to the importance of finance and governance. They do play a pivotal role in the viability and sustainability of any school. What keeps getting my attention on a daily basis is that in actuality, these two significance areas are usually overlooked and dismissed to a secondary, not strategic role.  The evidence clearly indicates that these two functions cannot continue to be ignored and must be fully understood in order to ensure that we are building stronger and fiscally viable schools.

See you next time,

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