Finding: Frequently numbers in AFRs, Audits, and IRS filings are inconsistent even though they cover the same period. Some audits are inadequately detailed and done by out-of-state firms that may not be familiar with Arizona law. Charter schools submit AFRs to the Arizona Dept. of Education, audits to the ASBCS for the state of Arizona, and if a nonprofit, as most are, a Form 990 to the IRS. Currently while financial reports and audits are submitted annually, they are not scrutinized for consistency even though they cover the same reporting period. Audits always don’t follow a standardized format. Some auditors are in state and do good detailed work, and other audits are completed by out of state entities and may lack detail. The level of detail varies by auditor. on at particular charter sites can be challenging due to Identifying what’s going consolidated audits or, if the charter is operating in the context of a much larger nonprofit, the consolidated audit inhibits the ability to examine the charter performance more carefully. As these funds are from state taxpayer dollars, the public accounting should be consistent across all reporting forms—and when to it’s not, clear steps advanced remedy deficiencies. The excuse that no one checks the accuracy of AFRs to the state and compares that data to the audits submitted to the ASBCS is an indictment of oversight. As will be detailed in subsequent reports and listed in this large report’s Appendix “A”, numbers of charter operations are running deficits and many have negative net assets. The state needs to be ahead of potential financial problems, so they can appropriately intercede for the best interest of students and taxpayers. Audits need to follow a standard format that requires detail Recommendations: 1. and supporting information on assets and liabilities, revenues and expenditures, and related-party expenses. Audits need to be done by auditors with offices located in Arizona with a demonstrated expertise in Arizona law. The ASBCS needs to provide a list of acceptable auditors using data gleaned from the audits to
Finding: Frequently numbers in AFRs, Audits, and IRS filings are inconsistent even though they cover the same period. Some audits are inadequately detailed and done by out-of-state firms that may not be familiar with Arizona law. Charter schools submit AFRs to the Arizona Dept. of Education, audits to the ASBCS for the state of Arizona, and if a nonprofit, as most are, a Form 990 to the IRS. Currently while financial reports and audits are submitted annually, they are not scrutinized for consistency even though they cover the same reporting period. Audits don’t always follow a standardized format. Some auditors are in state and do good detailed work, and other audits are completed by out of state entities and may lack detail. The level of detail varies by auditor. Identifying what’s going on at particular charter sites can be challenging due to consolidated audits or, if the charter is operating in the context of a much larger nonprofit, the consolidated audit inhibits the ability to examine the charter performance more carefully. As these funds are from state taxpayer dollars, the public accounting should be consistent across all reporting forms—and when it’s not, clear steps advanced to remedy deficiencies. The excuse that no one checks the accuracy of AFRs to the state and compares that data to the audits submitted to the ASBCS is an indictment of oversight. As will be detailed in subsequent reports and listed in this report’s Appendix “A”, large numbers of charter operations are running deficits and many have negative net assets. The state needs to be ahead of potential financial problems, so they can appropriately intercede for the best interest of students and taxpayers. Recommendations: 1. Audits need to follow a standard format that requires detail and supporting information on assets and liabilities, revenues and expenditures, and related-party expenses. Audits need to be done by auditors with offices located in Arizona with a demonstrated expertise in Arizona law. The ASBCS needs to provide a list of acceptable auditors using data gleaned from the audits to
gci-policy-report-following-the-money-final-9-12-2017-ap-revised-with-track-changes28121.docx