Purpose of Audit

The purpose of our audit was to evaluate the process for selecting and negotiating the related financial terms for the building space needed for school operations and the effectiveness of the School’s compact contract with the Foundation for the period July 1, 2011, to February 28, 2013.

Background

The School is located in the City of Albany. The School is governed by the Board of Trustees, which currently comprises 10 members. The School has 69 employees. The School’s budgeted expenses for the 2012-13 fiscal year were approximately $7 million.

Key Findings

• We found no evidence that the Board had fulfilled its fiduciary responsibility to the School by ensuring that it fully evaluated the choice of its site selection for the elementary school or middle school.
• School officials could have saved about $207,000 to $2.3 million if they purchased the elementary school by issuing a bond instead of continuing to lease the building.
• On May 26, 2011 the Board approved a compact contract between the School and the Foundation that states that the Foundation will provide the School with access to legal and financial assistance, technical support, and advocacy at State and local levels at a fee of 1 percent of per pupil revenue from the prior academic year. On April 18, 2013 the Board approved a revised compact contract with the Foundation that increases the fee from 1 percent in for the 2012-13 school year, to 1.5 percent for the following year, and 2 percent for the final year of the contract. With the increase in the fee percentage and the growth of the number of students over the next two years as the School expands to include middle school grade levels, the fee that the School pays the Foundation will increase three times from the 2011-12 school year payment which does not appear to be reasonable as the services being provided do not have any bearing the number of students at the School, nor the State Education Department Charter School Tuition rate.

Key Recommendations

• Properly fulfill fiduciary responsibility by conducting and documenting thorough analyses of alternatives before making major financial commitments.
• At a minimum, for future building acquisitions, request a list of buildings available from OGS and the local school district to ensure all available buildings are evaluated for suitability and cost.
• Ensure that contracts include a sufficient description of the benefits, rights, and responsibilities of all parties to the contract.
• Determine if there is a more cost effective means to receive the desired services currently being provided by the Foundation.