Each year during the first week of December charter schools must compile and submit a first interim financial report. The report is eventually submitted to the CDE after a review by the respective district and county offices.
While many view the first interim report as just another item to cross off their list, the elements of the report provide an ideal opportunity to reflect, review and project the fiscal position of your charter school.
Reflect – The Adopted Budget
A natural place to begin is the first column of the report; in which the annual adopted budget from the beginning of the year is inputted. By starting the report here, it provides charter school leaders the ability to review and analyze the assumptions and figures comprised in the adopted budget.
Given that the adopted budget was developed in June, there will be certain projections that no longer reflect the financial position of the school six months later. Perhaps curriculum costs were cheaper than forecasted or technology services were a bit higher than originally projected. Or the best-case scenario, your school’s enrollment has significantly increased and revenues will now be much higher than originally forecasted.
The bottom line: there are a myriad of assumptions that could have changed and it is important to take time to make note of those.
Review – The Financials
The second column of the report calls all financial activity thru October 31st, the first four months of the fiscal year. This column documents all revenue and expenditure activity the school has incurred since July 1st.
Reviewing the financials thru the first quarter of the year provides an ideal time to not only reflect on the adopted budget in the first column, but also start to project the remainder of the fiscal year. If enrollment has grown, what expenses must be increased? Are additional teachers needed? Will curriculum costs increase? Or, if certain expenditures are lower, do you want to allocate those savings elsewhere? These are all important considerations as the report is finalized.
Project – The First Interim Budget
Encapsulating changes based on the school’s fiscal position as of October 31st when compared to the adopted budget, the third column of the report is aptly labeled as “first interim budget.”
If every assumption in October is exactly how it was projected in June, then your first interim budget will be a mirror image of the adopted budget.
However, naturally projections and assumptions change. If enrollment is up, the increased revenue projections will be reflected. Similarly, if expenditures have increased due to higher enrollment, those changes will be accounted for. Any fluctuation between the original adopted budget and the projected year-end figures will need to be accounted for in the first interim budget.
Completing the Three Steps
Analyzing and calculating the fluctuations between the adopted budget and the (updated) first interim report requires advanced knowledge of school finance. The ability to dissect these changes to accurately and clearly project the remainder of the fiscal year is what separates the highest quality back office service providers.
In preparing a school’s interim reports, a high-quality back office provider will not only provide accurate projections, but will keep their client involved in the process by asking their client to help reflect, review and project during the process.