The New York charter schools act of nineteen hundred ninety-eight requires that a charter school "shall be subject to the financial audits, the audit procedures, and the audit requirements set forth in the charter. Such procedures and standards shall be applied consistent with generally accepted accounting and audit standards. Independent fiscal audits shall be required at least once annually."

These guidelines are provided to assist charter schools in New York State and their auditors through the annual audit process. The guidelines are also intended to provide some uniformity in the reporting by charter schools and to assist the Board of Regents in meeting its responsibilities for ensuring accountability over public funds and for reporting annually to the Governor and Legislature on the status of charter schools.

Each audit should meet the following minimum standards:

• An independent and licensed Certified Public Accountant or Public Accountant should perform the audit.

• The audits should be conducted in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States.
• If the charter school spends $500,000 or more in federal awards during the fiscal year, an independent audit as prescribed in the federal Office of Management and Budget Circular A-133 must also be completed and filed with the federal government and the State Education Department.

• The sample format for the financial statements is provided in accordance with Section 2851 of the Education Law.
• The financial statements should be prepared on the accrual basis of accounting in accordance with generally accepted accounting principles for not-for-profit organizations.
• All statements required by Financial Accounting Standards Board (FASB) Statement No. 117, Financial Statements of Not-for-Profit Organizations, should be presented including a Statement of Financial Position, Statement of Activities and Statement of Cash Flows. Required note disclosures and others that are deemed appropriate should be included.
• A supplemental schedule of functional expenses, in a format consistent with the attached, should be included and subject to the auditing procedures applied in the audit of the general purpose financial statements. Such supplemental schedule is not a required part of the general purpose financial statements and should be included for the purposes of additional analysis.
• When applicable, the auditor should prepare and submit a management letter. A copy of the management letter should be submitted with the financial statements along with the school’s corrective action plan to address any weaknesses identified in the report or the management letter.

• Reports (the independent auditor’s report on the financial statements, report on compliance, report on internal control over financial reporting, management letter, and federal Single Audit, if applicable) must be submitted within 120 days of the end of the charter school fiscal year to the following addresses:

Sample financial statements are provided for illustrative purposes. Charter schools and their auditors should consult applicable standards when determining the specific requirements that apply to their schools. The auditor should not consider these examples to be all-inclusive or a substitute for professional judgment.

The following sample financial statements are attached:

• Statement of Financial Position

• Statement of Activities

• Statement of Cash Flows

• Schedule of Functional Expenses

Explanations are provided below for certain key terms included in the sample financial statements:

State Grants: Report state funded grants or other apportionments received directly from the State of New York.

Federal Grants: Report federal funded grants or other apportionments received directly from the federal government or through the State of New York.

Private Grants: Report privately funded grants or other apportionments received.

Regular Education: Report instructional activities involving the teaching of students, instructional supervision, developing and utilizing learning materials and related services in the classroom or learning environment.

Special Education: Report instructional activities involving the teaching of students with Individualized Education Programs, or those receiving special education services, instructional supervision, developing and utilizing learning materials and related services in the classroom or learning environment.

Other Program: Services other than instructional provided to students, i.e., community services, health services, food services, athletic services, music and theatre arts, and other student activities.

Management and General: Activities related to the overall management and direction of the school that are not identifiable with a particular program or fundraising activity. Management and general expenses typically include the organization oversight, board expenses, business management, record keeping, budgeting, financing and other administrative activities.

Fundraising: Activities related to publicizing and conducting fund-raising campaigns, maintaining donor mailing lists, conducting special fund-raising events, activities involved in the solicitation of contributions from individuals, foundations, government agencies, etc.

Schedule of Functional Expenses:

The schedule of functional expenses must present, in reasonable detail, the nature of the expenses incurred in each category of program and supporting services reported in the activity statement. The sample schedule shows the typical level of detail expected. Charter schools are encouraged to add additional categories if it will enhance the reader’s understanding of the schedule. Likewise, classifications not used, or not material to the school’s presentation may be eliminated.

If not otherwise presented, charter schools employing management companies should obtain and provide in note disclosure a breakdown of contracted services fees in a similar format to the schedule of functional expenses to facilitate comparisons among districts.

Note on Allocation of Expenses: Charter schools must use allocation methods that are fair and reasonable. Such allocation methods, as well as the statistical basis used to calculate allocation percentages, should be documented and retained for review upon audit. Salaries of employees who perform tasks for more than one program must be allocated among all programs for which they work. The cost of supplies that are purchased for distribution among multiple programs must be allocated among these programs if direct charges are not possible. Allocation percentages should be reviewed, at a minimum, on an annual basis and adjusted as necessary.

Sample Statement of Cash Flows
Charter School Name
Statement of Cash Flows
For the Year Ended June 30, 20XX