Purpose of Audit

The purpose of our audit was to evaluate the effectiveness of the School’s compact contract with the Foundation for the period July 1, 2011 through July 31, 2013.

Background

The Brighter Choice Charter Middle School for Boys is located in the City of Albany, and is governed by a Board of Trustees, which is currently comprised of seven members. The School’s 2012-13 fiscal year budgeted expenses were approximately $2.71 million.

Key Findings

• The School entered into a three-year compact agreement with the Foundation in June 2011. All Board members voted in favor of the compact agreement, except for the Board Chairman, who recused himself from voting because he is also the Foundation’s Executive Director. The compact does not describe in detail the services that the Foundation will provide. The fee for the services is 1 percent of total pupil revenue from the prior academic year. The total 2012-13 fiscal year fee due to the Foundation was $14,801. In January 2013, the School revised the compact contract with the Foundation. The revised compact provides further detail about the specific services that the Foundation could provide the School and increases the fee from 1 percent of total pupil revenue for the 2012-13 fiscal year to 1.5 percent for the following year, and 2 percent for the contract’s final year. The fee structure, based on a percentage of per pupil revenue, does not appear to be reasonable, as the services being provided do not have any bearing on the number of students at the School or the State Education Department’s Charter School Tuition rate.
• During the audit period, two Board members were also officers or directors of the Foundation. While both filed financial disclosure forms, neither disclosed their relationship with the Foundation on these forms.

Key Recommendations

• Determine if there is a more cost effective means to receive the desired services currently being provided by the Foundation. Ensure that contracts with the Foundation contain sufficient descriptions to determine the benefits, rights and responsibilities of all parties to the contract, and the Board should use this information to monitor compliance with the contract.
• Disclose interests in School contracts, in writing, to the Board, with the written disclosure being made a part of the record of the Board’s proceedings.