We are required to review all charter school and charter technical career center (charter school) financial audit reports submitted pursuant to Section 218.39(8), Florida Statutes.  The audit reports for the fiscal year ended June 30, 2003, were required to be filed with us no later than June 30, 2004.  A total of 222 charter schools were in operation during the fiscal year ended June 30, 2003.  This report provides a summary of the significant findings and financial trends that were identified in the audit reports submitted to us for 217 charter schools.  Audit reports for 5 charter schools were not submitted to us. 

Audit Findings

• The audit reports for eight charter schools included findings that were considered by the independent certified public accountants (CPAs) to be material weaknesses in internal controls, with two CPAs considering the material weaknesses to have a material impact on the financial statements of the charter school concerned.

• The audit reports for eight charter schools included a statement by the CPA regarding the schools’ ability to continue operations on an ongoing basis. 

• Many of the audit reports included audit findings that were not material to the financial statements, but needed to be addressed by the management of the schools involved.  Such findings included weaknesses in internal control and instances of noncompliance with applicable laws or rules.

Financial Trends

• Sixty-two of the 217 charter schools ended the fiscal year with a deficit unreserved fund balance in their general fund (for statements using the governmental model) or deficit unrestricted net assets in their unrestricted fund (for statements using the not‑for‑profit model).

Legislative Recommendation

• CPAs are not required to include comments to management regarding the charter school’s financial condition; consequently, such comments are not consistently made.  We recommend that the Legislature consider changes in law to require that, at a minimum, CPAs notify the charter school governing board whenever their audit discloses a deficit financial position.  We also recommend that the Legislature consider implementing a requirement that, when a charter school is in such a deficit financial position, the charter school file a detailed financial recovery plan with the sponsoring district school board.  The Florida Department of Education should establish guidelines relating to the content of such a plan.