This report provides a summary of the significant findings and financial trends that were identified in the audit reports submitted to us for 247 charter schools and charter technical career centers (hereinafter referred to as charter schools).  A total of 258 charter schools were in operation during the 2003-04 fiscal year.  Eight of the 258 charter schools were closed during the 2003-04 fiscal year or subsequent to fiscal year-end.  Audit reports for 11 charter schools, which included the 8 charter schools that closed, were not submitted to us.  The audit reports for the fiscal year ended June 30, 2004, were required to be filed with us no later than June 30, 2005.

Audit Findings

• The audit reports for 24 charter schools included findings that were considered by the independent certified public accountants (CPAs) to be material weaknesses in internal controls, with one CPA considering the material weaknesses to have a material impact on the financial statements of the charter school concerned.

• The audit reports for 16 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

• Seventy-two of the 247 charter schools ended the fiscal year with a deficit unreserved fund balance in their general fund (for financial statements using the governmental model) or deficit unrestricted net assets in their unrestricted fund (for financial 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 and the sponsoring district school board when deteriorating financial conditions exist that may result in a state of financial emergency as defined by Section 218.503, Florida Statutes.  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 on the content of such a plan.

The Department of Education response is included as Appendix D.