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Mastering California’s Local Control Funding Formula for Smart Budget Planning and SustainabilitySamira EstilaiExecutive Vice President, ExED

Larry TamayoExecutive Vice President,ExED

Derrick DeBruyne, CPA, CFEPartner, Vicenti, Lloyd & Stutzman LLP

Who is ExED?

Results-focused:As the full-service “CFO” for each school, ExED creates efficiencies and sound business practices that direct more resources to the classroom.

A Charter School Pioneer:20 years of experience supporting some of the region’s most dedicated and effective charter schools

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A Nonprofit, Mission-Driven Business Partner forSouthern California's Leading Charter Schools

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96 39,000 29 $229M

ExED By The Numbers

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CharterSchoolClients

Students Served by

ExED Clients

ExEDFinanced Facilities

Facility Financing Secured

Who is Vicenti, Lloyd & Stutzman?

A charter school audit firm that works proactively with clients throughout the year to:• Identify issues

• Resolve challenges early

• Recommend improvements to charter school systems

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Topics for today

• Local Control Funding Formula (LCFF):Overview & Major Components

• Understanding the LCFF Funding Cycle

• Spending LCFF dollars

• Budgeting for Sustainability

• Preparing for Audits

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The changing landscape of charter school finance

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The new K-12 finance system aims to reduce complexity

The Revenue Limit and 56 categorical programs were phased out and replaced by the new Local Control Funding Formula.

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General Purpose/ Revenue Limit

Categorical Block Grant (Incl. EIA)

Supplemental Instruction

CAHSEE Intensive Instruction

Arts & Music Block Grant

K-3CSR

9th Grade CSR

Middle & High School Counseling

Community Based English Tutoring

New School Supplemental Block Grant

Local Control Funding Formula

The Local Control Funding Formula has 3 main elements

Base grantsSame rate for every California student (by grade span)

• Adjustments to the K-3 base grant for Class Size Reduction (10.4%) and to the 9-12 base grant for Career Technical Education (2.6%)

Supplemental grantEqual to 20% of adjusted base grant for English Learners, students eligible to receive free or reduced price meals, or foster youth

Concentration grantEqual to 50% of the adjusted base grant for targeted students exceeding 55% of a charter school’s enrollment (but capped at the eligible student enrollment of the district in which the charter school is located)

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Average Daily Attendance drives the LCFF base grant

ADA is the total number of days of student attendance divided by the total number of instructional days.

• A student attending every day would equal one unit of ADA.

• A student who is absent for 5 days in a 180-day school year would equal .97 ADA (175/180).

• The number of instructional days is based on when the student enrolled. Days a student is not enrolled don’t count in the # of instructional days.

• While we track attendance every day of the school year, LCFF funding is based on attendance through the last full school month before April 15.

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Student demographics drive LCFF Supplemental and Concentration Grant amounts

Families that meet federal income eligibility or pupils deemed to be categorically eligible

Eligible for Free or Reduced Price Meal

Children removed from their home pursuant to the Welfare & Institutions Code Section 450

Foster Youth

A child who does not speak English or whose native language is not English and who is not currently able to perform ordinary classroom work in English

English Learner

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Reporting eligible pupils in CALPADS

Charter schools must report an unduplicated count of eligible pupils annually using the California Longitudinal Pupil Achievement Data System.

Count is as of census day (1st Wednesday in October)

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CALPADS data will be audited

Charter schools must report an unduplicated count of eligible pupils annually using the California Longitudinal Pupil Achievement Data System.

Count is as of census day (1st Wednesday in October)

Auditor will test CALPADS Certified 1.18 – FRPM / English Learner / Foster Youth – Student List

Report

Supporting documentation must be on file

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Supporting documentation for CALPADS classifications

http://www.cde.ca.gov/fg/aa/lc/lcfffaq.asp#AUDIT

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English Learners

Language Survey(new students)

CELDT Scores/Report &

Parent Notification Letter)

Reclassification Policy/Procedure

Supporting documentation for CALPADS classifications

http://www.cde.ca.gov/fg/aa/lc/lcfffaq.asp#AUDIT

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Eligible for Free or Reduced Price Meals

NSLP Application

Alternative Household Income

Eligibility Form

Other Documentation

Proving Foster/Homeless or Direct Certification

Provision 2, 3 or Comm Eligibility Program –Base year and new

student documentation

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Accurate Data Reporting is Critical

Average Daily Attendance (ADA)

1. Period 2 (P-2) report sets your ADA total for the year: this represents the first 7 or 8 months’ average daily attendance

2. Attendance must be taken daily and accurately: a single day missed throws off your whole report

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What if you underreport by just 5 ADA?

• Reduce your funding by 5X your LCFF rate

• Example LCFF rate of $9,500 – total loss of $47,500

Accurate Data Reporting is Critical

CALPADS1. FALL 1 reports your Unduplicated Pupil Count (UPC)• Meal Applications must all be collected, verified

• Report data submitted in December

2. Potential for error• Not collecting all applications

• Not verifying

• Data entry errors

• Missing direct certification data

• CALPADS-SIS reporting issues

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What if you underreport by 40 free/reduced eligible students out of 300 eligible students with 400 enrolled?

• UPC rate reduced by 10%

• Reduce your LCFF rate by $80/ADA OR loss of $32,000

Note: Actual impact will vary by LCFF implementation, grade levels, etc.

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Let’s get to know the California Department of Education’s LCFF

Funding Exhibits and Apportionment Schedules

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P1, P2, and Annual ADA

P1 ADA is total ADA from the beginning of the school year through the last school month ending on or before December 31.

P2 ADA is total ADA from the beginning of the school year through the last school month ending on or before April 15.

• Most ADA-based revenue sources are based on P2 ADA.

Annual ADA is total ADA for the entire school year.

• Lottery revenue is the only ADA-based funding source that is based on Annual ADA.

LCFF Apportionment Calendar

Jul Aug Sep Oct

Nov Dec Jan Feb

Mar Apr May June

Apportionments (cash payments) are based on the prior year’s P2 ADA.* Apportionments are based on this year’s P1 ADA.Apportionment is based on P2 ADA.

*New schools receive a payment in September based on the estimated ADA they submit prior to school starting and another payment in December based on their actual 20-day attendance. Schools that are adding a grade level also receive these payments for their new grade level.

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Revenue UpdatesMonthly:

• Update ADA projections and demographic data

As Needed:

• Update LCFF state assumptions & local Concentration Grant cap

After finalized/certified:

• Lock in P2 ADA, UPC

Cash Flow UpdatesAdvance Apportionment (mid July):

• Update cash flow for Jul through Jan

P1(mid February):

• Update cash flow for Feb through May

P2 (late June):

• Update cash flow for June

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LCFF Budget & Forecasting Cycle

LCFF will come via multiple funding streams.

LCFF, State Aid

EPA

In Lieu of Local

Property Tax

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Proportions will vary based on your school and your local district

• EPA payments are made quarterly at the end of Sep, Dec, Mar, and June

• In Lieu Payments flow to charter schools based on statutory timelines

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Resources

FCMAT LCFF Calculator: http://fcmat.org/local-control-funding-formula-resources/

Apportionment schedules: http://www.cde.ca.gov/fg/aa/pa/index.asp• Advance (by July 20)

• P-1 (by Feb 20)

• P-2 (by June 25)

• Special Advance Apportionments for Newly Operational & Grade Level Expansion Schools (published in early Sep & Dec).

Funding Excel Files: http://www.cde.ca.gov/fg/aa/pa/iassf16p1.asp• Payment Schedule Summary - LEA detail – tells you how much cash and when

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Resources, continued

Funding Exhibits: http://ias.cde.ca.gov/apportionment/ias.aspx?schoolyearid=2016&RptType=P1&CertType=Non

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Resources, continued

LCFF Snapshot: http://ias.cde.ca.gov/lcffsnapshot/lcff.aspx

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Targeting Supplemental and Concentration Grant Funds to High Need Students

While LCFF is an unrestricted revenue source, you are required to expand or improve services for high-needs students in proportion to the additional funding that these students bring to your school.

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LCAP Audit Procedures

The auditors will request a copy of the LCAP and/or current year update. They will select a sample of actions or services from Section 2 with expenditures and then review supporting documentation for some of those expenditures.

Auditors are looking as to whether expenditures are truly supporting that particular action/service.

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Budgeting for Sustainability

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Expenses are revenue dependent – you can’t spend what you don’t have...

…and budgeting for sustainability means having a long term view of both your revenues and

expenses.

Sustainability Check ListRevenue

I use one-time revenues for one-time expenses. I will be able to sustain current expenditures in the out years.

EnrollmentI understand the enrollment trends in my neighborhood including birth rates, immigration/emigration patterns/new school openings and their impact on my school’s enrollment.

DemographicsI understand the impact a change in my Unduplicated Pupil Percentage could have on my funding.

FacilitiesI have enough space or a plan to acquire space to accommodate my growth plan. I include deferred maintenance costs/remodeling costs in my budget plan.

StaffingI have the right staffing to support my program and to address ongoing compliance needs. I have built salary increases into my budget plan.

BenefitsI have built in benefits increases into my budget plan.

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Planning for Sustainability

• Financial ratios can be useful tools in achieving financial sustainability.

• Strong internal controls are important to success.

• Auditors are required to analyze your ability to continue as a going concern.

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Preparing for your Annual Audit

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Charter School Audit Reports

• Charter schools operating as a 501(c)(3) typically use not-for-profit accounting model (FASB) and accrual basis of accounting

• If the corporation has over $750,000 in federal expenditures, a federal Single Audit is required.

• Charter CMOs and charters with related organizations should consolidate all entities into financial statements, including entities created for facilities financing.

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K-12 Audit Guide – Charter Schools

2016-17 Audit Guide Requirements• Educator Effectiveness

• Local Control Funding

• Education Protection Account Funds

• Energy Grant Funds if applicable

• Unduplicated LCFF Pupil Counts

• Charter School Facility Grant Program

• Contemporaneous Records of Attendance• Matching School Calendar to Attendance

Records

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K-12 Audit Guide – Charter Schools

2016-17 Audit Guide Requirements• Immunizations

• After School Education and Safety Program

• Instructional Minutes

• Mode of Instruction

• Non-classroom-Based Instruction/Independent Study

• Determination of Funding for Non-classroom Based Instruction

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Questions?For more information, please visit the ExED Booth and VLS Booth located in the California Charter School Exhibit Hall

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