Purpose of Audit

The purpose of our audit was to examine the School’s relationship with Family Residences & Essential Enterprises, Inc. (FREE) for the period July 1, 2011, to February 27, 2013.

Background

A charter school is a public school financed by local, State, and Federal resources that is not under the control of the local school board and is governed under Education Law Article 56. The Child Development Center of the Hamptons Charter School (School) is governed by a seven member Board of Trustees. The School’s revenues for the 2011-12 fiscal year were approximately $3.2 million.

Key Finding

The Board has appointed FREE to serve as the designated representative for the Treasurer of the School. FREE performs virtually all aspects of the School’s financial operations, making monitoring even more essential.

• The Board needs to improve its monitoring of the management corporation to ensure School funds are used effectively and efficiently. The Agreement between the management corporation and the School states that FREE will provide the Board with financial reports including quarterly and annual balance sheets, monthly statements of revenue and expenses, and monthly banking transaction reports. The Board did not receive quarterly and annual balance sheets and monthly banking transaction reports, as required by the Agreement. Instead, the financial reports provided to the Board contained only budget-to-actual revenue and expenditure reports for on average, a two-month period. The management corporation did not present the Board with bank statements or cancelled checks and a list of all moneys received and paid each month – documentation that supports information in the financial reports.

Key Recommendations

• Follow the Agreement between the management corporation and the School as it relates to financial reporting.
• Prepare and review quarterly and annual balance sheets, monthly statements of revenue and expenses and monthly reports of banking transactions, as required by the Agreement.