Purpose of Audit

The purpose of our audit was to examine the School’s relationship with National Heritage Academies Inc. (NHA) for the period July 1, 2011 to June 30, 2013.

Background

Southside Academy Charter School, located in the City of Syracuse, is governed by a Board of Trustees (Board) that has five members. The School’s budgeted expenditures for the 2012-13 fiscal year were approximately $9 million.

Key Finding

While the Board meets regularly to deal with a range of issues, its oversight of the School’s fiscal affairs could be improved.

• The Board contracted with NHA to be responsible for the administration, operation and performance of the School in accordance with the School’s Charter and subject to the oversight and authority of the Board. The agreement transfers all School revenues to NHA, and the revenues are to be expended by NHA in accordance with the approved budget, and as otherwise authorized by the Board. NHA provides the Board with projected budgets, budget amendments and quarterly financial statements for its review. Although the Board reviews and approves budgets and budget amendments, the budgetary information and the quarterly financial statements lack transparency to allow the Board to identify the fee for services paid to NHA and to distinguish indirect from direct costs, and how indirect costs are allocated by NHA to the School. For example, $2.9 million in indirect costs have been allocated to the School by NHA but the Board has not received support for how the costs are allocated. As a result, this limits the Board’s ability to adequately monitor NHA and verify indirect costs allocated to the School are accurate and appropriate.

Key Recommendations

• Identify the fee paid to NHA, and reconcile it as stated in the terms of the management agreement with NHA, to ensure the fee is reasonable and in the best interest of the School.
• Periodically request a breakdown of costs to verify that expenditures allocated to the School by NHA are reasonable and fair, and are adequately supported.
• Periodically assess the terms and conditions of any management and lease agreements to ensure that they are reasonable and in the best interest of the School.