Strong internal controls and clear and easy to understand policies and procedures help a charter school maintain compliance and mitigate risks. They also help a school use their funds in the most effective way to benefit learning and student outcomes. How do you develop, maintain, update and communicate proper internal controls while maintaining your organization’s culture? What are the key controls to have? How do you maintain compliance with limited staff? How do you ensure accurate and timely financial reports and audits?

1. Thrive. Grow. Achieve.
Internal Controls
for Charter Schools
Kathy Raffa- Partner
Debra Santos - Manager

2. RAFFA HISTORY
IN 1984, RAFFA SET OUT TO CREATE MEANINGFUL
ACCOUNTING WORK THAT SUPPORTED GIVING BACK
TO THE COMMUNITY.
RAFFA’S VISION IS TO BE THE MOST CARING AND
EFFECTIVE PROFESSIONAL FINANCIAL SERVICES
PARTNER IN THE INDUSTRY.
200
Employees, in
3 separate
companies:
• Raffa PC
• Raffa
Financial
Services Inc.
• Raffa Wealth
Management
LLC

3. RAFFA’S CHARTER SCHOOL CLIENTS
• Over 90% of Raffa’s client are nonprofits
• Charter school clients we serve include:
–Center City Public Charter Schools
–Cesar Chavez Public Charter Schools
–Community College Preparatory Academy
–D.C. Preparatory Academy
–D.C. Public Charter School Board
–Imagine Southeast Public Charter School
–KIPP DC
–Thurgood Marshall Academy
• Services to our charter school clients include:
–Managed (outsourced) accounting, technology and HR
–Financial statement and OMB A-133 audits
–Pension plan audits
–Form 990 and related filings
–Implementation of accounting software and cloud

4. WHY ARE INTERNAL
CONTROLS IMPORTANT?
• Maintains compliance
• Protects school
• Gives funders comfort to contribute
• Audit requirement
• Mitigate risks
• Allows school leaders to focus on student outcomes
• Maintains the school as a going concern
“CAUSES FOR NONRENEWAL OR TERMINATION”
(1) “FAILURE TO MEET GENERALLY ACCEPTED STANDARDS OF
FISCAL MANAGEMENT”
“Developing and
implementing IT
governance
design
effectiveness
and efficiency
can be a
multidirectional,
interactive,
iterative, and
adaptive
process.”
― Robert E.
Davis, IT
Auditing: IT
Governance

5. WHO IS RESPONSIBLE FOR INTERNAL
CONTROL?
It is everyone’s
responsibility to
ensure the
school is
practicing good
internal controls.
Board of Directors
School
Management
School
Employees

6. INTERNAL CONTROLS DEFINED
Systematic measures (such as reviews, checks and balances, methods
and procedures) instituted by an organization to
(1) conduct its business in an orderly and efficient manner,
(2) safeguard its assets and resources,
(3) deter and detect errors, fraud, and theft,
(4) ensure accuracy and completeness of its accounting data,
(5) (produce reliable and timely financial and management information,
and
(6) (6) ensure adherence to its policies and plans.

7. CONTINUED DEFINITION
Internal control is a process - effected by
an entity’s board of directors,
management and other personnel -
designed to provide reasonable assurance
regarding the achievement of objectives in
the following categories;
(a) reliability of financial reporting
(b) effectiveness and efficiency of
operations, and
(c) compliance with applicable laws and
regulations.

8. Control Environment
Risk Assessment
Control Activities
Information &
Communication
Monitoring Activities
UPDATE ARTICULATES PRINCIPLES OF EFFECTIVE
INTERNAL CONTROL
1. Demonstrates commitment to integrity and ethical values
2. Exercises oversight responsibility
3. Establishes structure, authority and responsibility
4. Demonstrates commitment to competence
5. Enforces accountability
6. Specifies suitable objectives
7. Identifies and analyzes risk
8. Assesses fraud risk
9. Identifies and analyzes significant change
10. Selects and develops control activities
11. Selects and develops general controls over technology
12. Deploys through policies and procedures
13. Uses relevant information
14. Communicates internally
15. Communicates externally
16. Conducts ongoing and/or separate evaluations
17. Evaluates and communicates deficiencies

9. COMPONENTS
INTERNAL CONTROL CONSISTS OF FIVE
INTERRELATED COMPONENTS:
 Control Environment
 Risk Assessment
 Control Procedures
 Information and Communication
 Monitoring

10. CONTROL ENVIRONMENT
..sets the tone of an organization, influencing the “control
consciousness” of its people. It is the foundation for all other
components of internal control, providing discipline and
structure.
• Organizational Structure
• Need an organizational chart to identify specific lines of
authority and responsibility.
• Job Descriptions
• Need written job descriptions for every position to
communicate expected performance and job functions.
• Policy Manual
• Need written policies regarding personnel, students,
accounting, operation, bonding, insurance, etc.

11. RISK ASSESSMENT
…IS THE ENTITY’S PROCESS OF IDENTIFICATION AND ANALYSIS
OF RELEVANT RISKS TO THE ACCURATE PREPARATION OF
FINANCIAL STATEMENTS.
THE FOLLOWING CONDITIONS COULD INDICATE POTENTIAL RISK:
• Changes in the unit’s operating environment
• New personnel
• New or revised information systems
• Rapid growth
• New departments or activities
• Restructuring or reorganization resulting in staff reductions,
changes in supervisor, or segregation of duties.
• Lack of timely monthly financial reports or delayed annual audits

12. CONTROL PROCEDURES - BUDGETING
• The governing board should adopt a
budget for all funds.
• Budget should be in enough detail to
provide meaningful comparisons with
actual transactions.
• Budget should follow the DCPCSB
financial reporting requirements.

13. CONTROL PROCEDURES – CASH
 Proper control over cash receipts is essential because cash
is the easiest of all assets to misuse.
 Access to cash should be limited and should be controlled as
soon as possible when received.
 A non-accounting staff person should receive the mail, open
it and list all checks on a Daily Collection Report or in a pre-
numbered receipt book.
 This report or receipt should identify the date, name of
organization or person submitting payment, amount of
payment and description of what the payment is for.
 A staff member should receive the checks and Daily
Collection Report of receipt book from the person opening
the mail.
 Deposits should be made daily by someone other than the
person who prepared the deposit. All deposits should be
made in official depositories.

14. CONTROL PROCEDURES CASH-
CONTINUED
• All deposits should be in institutions authorized by the
governing board of the school.
• All funds held by the financial institution should be
insured by the FDIC or otherwise fully collateralized
– January 1, 2013 change in coverage due to expiration of The Dodd-
Frank Act for unlimited coverage on noninterest-bearing accounts
• All bank statements should be reconciled promptly
upon receipt by a staff member independent of the
cash receipts and disbursement functions.
• Statements should be delivered unopened to this staff
member. In performing the reconciliations, the staff
member should check for the following:
.

15. CONTROL PROCEDURES CASH-
CONTINUED
DEPOSITS
• Compare dates and amounts of daily deposits as shown on
the bank statements with the cash receipt journal.
• Investigate bank transfers to see that both sides if the
transaction have been recorded in the schools financial
records.
DISBURSEMENTS
• Account for all check numbers, including voided checks.
• Examine canceled checks for authorized signatures, irregular
endorsements and alterations
• Look for checks payable to cash. Investigate these items.
• Bank reconciliation procedures should always include
comparing the reconciled balance to the balance per the
general ledger for accuracy.

16. MONITORING
…..is a process that assesses the quality of internal control
performance over time.
The following are several monitoring procedures that should be
performed:
• Management should approve all accounting system
procedures.
• A responsible official should approve public distribution of
financial reports and information.
• Budget should be compared to actual revenues and
expenditures on a monthly basis to identify variances.
• Set procedures should be established for authorizing budget
amendments.

17. FINANCIAL NON-COMPLIANCE
• Failure to respond to requests for data
(DCPCSB or others).
• Signs of financial insolvency or weakness.
• Material audit findings which remain
unresolved.
• Failure to comply with DCPCSB procurement
requirements.
• Lack of timely financial reporting to a Finance
Committee

18. GOVERNANCE NON-COMPLIANCE
• Failure to have a functioning board, and
meeting residency requirements
• Inability to show progress towards
educational and organizational goals.
• Failure to maintain student enrollment.
• Bylaws violations.
• Charter Agreement violations.

19. INFORMATION AND COMMUNICATION
• Implementation requires buy in by all
staff
• Implementation should be transparent
• Staff should be trained on procedures
and purpose for a strong internal control
system
• Communication should be organization-
wide

20. STRATEGIES FOR
IMPLEMENTING
INNOVATIVE USE OF TECHNOLOGY
• Systems can be used to improve controls
(Examples; timekeeping, accounting, web-based bill
paying)
INTERNAL RESTRUCTURING
• Assess current staff and roles and review re-
assigning tasks (create segregation of duties)
• Consider evaluating outsourcing vs internal role
COMMUNICATION
• Best Practices encourage full transparency during
and after the formal process
• Involve all levels of employees

21. OTHER CONSIDERATIONS
• Yellow book/A-133 audit
– Cash management, procurement, reporting
• Reporting to donors on restricted grants
• Bond issuances
• GAAP basis financial statements
– Deferred summer revenue, allowance for
uncollectible pledges, discounting, swaps at fair
value, depreciation, in-kind donations, M&G and
Fundraising expenses

22. REFERENCES
WWW.COSO.ORG
2013 INTERNAL CONTROL – INTEGRATED FRAMEWORK
WWW.NCPUBLICSCHOOLS.ORG/.../GUIDES/CHARTERSCHOOLSCONTR
OLS.PPT
FINANCIAL AND GOVERNANCE NONCOMPLIANCE POLICY FOR
CHARTER SCHOOL
WWW.IN.GOV/SBOA/FILES/CHSCH2012_008.PDF
PART 8 INTERNAL CONTROLS
HTTP://WWW.DCPCSB.ORG/SCHOOL-FINANCE-AND-FACILITIES/PCSB-
FISCAL-POLICY-HANDBOOK.ASPX
DCPCSB FISCAL POLICY HANDBOOK

23. UPCOMING CHARTER SERIES
WORKSHOPS
THURSDAY, AUGUST 8TH
FINANCING & FACILITIES
(INVITATION CODE CHRT3)
THURSDAY, SEPTEMBER 12TH
TECHNOLOGY SOLUTIONS
(INVITATION CODE CHRT4)

24. Kathy Raffa, Vice President & Partner
Direct 202-955-
Email: kathy@raffa.com
Debra Santos, Manager
Direct: 202-955-6746
E-mail: dsantos@raffa.com
www.raffa.com
THANK YOU! ANY QUESTIONS?