Pub. 1 2011-2012 Issue 2

6 By Brian L. Carpenter, Charter Consultant | Brian L. Carpenter PhD & Associates, LLC I recently sat through a board meeting as part of the coaching services I provide to client charter schools, where, for more than 25 minutes, management walked the board through a line item review of mid-year budget revisions. Because enrollment fell short of the original pro- jection (it happens), management had combed through each line item and reduced budgeted ex- penses where appropriate. Following this rather tedious presentation, and the questions and an- swers that followed, the board voted to approve the amended budget. “Well and good,” I told the board after it voted, “except that very little in the way of actual financial oversight just occurred.” My pronouncement, of course, caught the board off-guard and produced befuddled expressions. I went on to explain that the only thing the board had essentially done was to “approve” something that had already occurred (a loss in revenue) and to “approve” the only responsible management action that should result (spending fewer dollars). The consequence of this all-too-common, time-honored board action (and similar approvals, such as reviewing and approving monthly financial reports) is that boards usually think they are performing financial oversight. This is an er- ror that can result in grave consequences, including lost or unaccounted for school money or property, negative media coverage of the board and school, board member personal liability, and charter revocation. The good news is, as this article will explain, meaningful financial oversight is within the grasp of any board. To be clear, there’s no question that management should periodically submit basic financial reports to the board, such as budget vs. actual, balance sheet, and income and expense statements. And, of course, it’s a good idea if one or two board members have the ability to interpret them. But board financial oversight does not occur primarily by reviewing and approving financial statements, including budget revisions. It occurs by implementing policies that safeguard the school’s money and assets from risk and improper management AND by continuously, and rigorously, monitoring management’s compliance with the policies. In this article, I will briefly explain 12 topics pertaining to finan- cial oversight, about which every board should adopt policies. Though far from being comprehensive, such policies serve as an excellent foundation for sound board financial oversight. I conclude with a simple method your board can use to help it remember to follow-through with evaluating compliance with its policies, once adopted. In no particular order, here are the 12 topics: 1. Bonding. Bonding is a type of insurance coverage that protects the school from certain kinds of theft or fraud. Anyone (i.e., employees, board members, or other volunteers) who will have access to material amounts of money or assets should be bonded beforehand. At a minimum, all check signers should be bonded, as well as anyone who handles cash on a regular basis (e.g., parent-teacher organization volunteers, lunchroom employees, etc.).