Massachusetts Charter Schools

Commonwealth Charter Schools Excess Surplus Report for Fiscal Years 2011 and 2012

The Achievement Gap legislation (St. 2010, c. 12) contained a number of changes to the charter school statute, including a new requirement that Commonwealth charter schools return excess tuition payments to the sending districts (M.G.L. Chapter 71, Section 89(hh)). This requirement was implemented on July 1, 2010, the start of fiscal year 2011. At the end of the fiscal year, each school is required to submit a supplemental schedule calculating the amount of any excess surplus. Data on this schedule derives from the school's audited financial statements and is reviewed by the Department for accuracy. The summary tables found at FY2011 and FY2012 Commonwealth Charter Schools Excess Surplus Report contain the amounts described in the statute that the Commissioner has certified for fiscal years 2011 and 2012.

We acknowledge with appreciation the assistance we received from charter school business officials and members of the CPA community in developing the new accounting policies and reporting requirements needed to implement this new statutory provision. Considerable time was required to resolve a number of complex issues, but we now have the framework in place to issue subsequent years' reports on a more timely basis.

Here is an explanation of the columns on the summary charts:

• Surplus carryover: This column in the FY11 chart shows the amount of surplus tuition carried forward from the previous fiscal year. Because FY11 is the first year of implementation of this requirement, all schools show a zero carryover from FY10. For FY12 and subsequent years, the actual carryover amount from the prior year's surplus calculation appears in this column.
• Change in net assets: This column shows the change in net assets as reported on the school's audited Statement of Revenue, Expenses and Changes in Net Assets.
• Adjustments to change in net assets: Adjustments to the change in net assets are made for non-tuition revenue sources (such as fundraising); principal payments on debt; capital expenses; depreciation; and transfers to reserve funds.
• Cumulative (total) surplus: The cumulative (total) surplus as of the end of the fiscal year is defined as the carryover from the prior fiscal year plus the change in net assets for the current year, net of adjustments.
• Allowable carryover: The statute permits charter schools to retain a reasonable surplus as working capital for the upcoming fiscal year. The amount of the allowable surplus carryover is equal to 25% of the prior year's tuition payments plus 20% of the budgeted operating and capital expenses for the upcoming year.
• Excess surplus: Any cumulative surplus in excess of the allowable carryover must be returned to the sending districts. For these first two years of reporting, none of the schools exceeded their allowable carryover.
• Actual carryover: This column shows the amount to be carried over to the following fiscal year, to become the starting point of the new year's surplus calculation. The actual carryover amount is either the year-end cumulative surplus or the allowable carryover, whichever is less (but not less than zero).

Please note that for surplus calculations for fiscal year 2013 and subsequent years, a vote of the board of trustees of a charter school will be required to designate funds to be held in reserve for the purchase or renovation of an academic facility pursuant to a capital plan. Capital plans must be submitted as part of the charter school's annual report, and amounts transferred into reserve accounts for capital projects are reported as an adjustment in the surplus tuition calculation (line 7 in the template provided in the Charter School Audit Guide).

For further information, please contact Francis Cash (781-338-3226; fcash@doe.mass.edu ) or Cliff Chuang at (781-338-3222; cchuang@doe.mass.edu ).