Report Gives Mixed Grades to Four Chicago Charter Schools

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CHICAGO — A new quantitative fiscal review of four Chicago charter schools and charter school networks ranks two as financially healthy and finds the other two face negative trends that could hinder their long term prospects.

The review, which looked at five years' worth of fiscal results, concluded that Lawndale Regional and Educational Network and Namaste Charter School are fiscally sound.

Trends at North Lawndale Charter School and UNO Charter School Network were mixed with negatives reported in some areas "that could impair long-term fiscal viability."

The Civic Federation of Chicago, a local organization that tracks local and state of Illinois fiscal policies, conducted the review as part of a broader study planned that was to include a second piece focusing on the schools' long range planning, capital improvements, and fundraising. The latter portion was dropped due a lack of cooperation on the schools' part.

"This analysis provides valuable information on fiscal trends in Chicago's charter schools, but we were disappointed that a lack of cooperation from the charter schools prevented us from completing the report," said federation president Laurence Msall.

A full evaluation could have provided a more in depth view of the individual circumstances each school faces, the federation said. The analysis was also hampered by data limitations because charter schools are not required to report revenue or expense information in a consistent manner.

Msall said the federation's difficulties underscore the need for greater oversight and he urged state lawmakers to act on legislation that would "require greater financial accountability from both public and charter schools."

At least three of the four schools or networks have issued debt through the Illinois Finance Authority to finance their acquisition of property or improvements to their campuses.

The federation applied 13 financial condition indicators to each of the schools or networks based on their financial reports between 2007 and 2011. It analyzed the percentage of each charter school's resources spent on instruction-related expenses versus administrative expenses, evaluated available resources and liquidity, the level of total resources consumed by occupancy and instruction costs, and an organization's overall ability to meet financial obligations.

The Lawndale Regional network, which operates multiple kindergarten through eighth grade campuses, scored positive results on 12 indicators and adequate on one. The network's average spending on instruction was 68%, it reported surpluses in each of the five years reviewed, carried a fund balance above 10%, and had sufficient net assets to fund liabilities if needed, the review found.

The Namaste charter school, a single campus offering elementary classes, scored positive results on eight indicators, with four mixed, and one negative. All three expense indicators were positive and Namaste spent more than 65% of all expenditures on programming, the review found. Two of the three financial condition analyses were positive with surpluses in all five years reviewed and healthy fund balances. Increases in its fixed assets ratios indicated a negative trend.

The North Lawndale charter school, a single campus serving high school students, showed mixed results with six positive indicators and seven negative that "could be warning signs of future financial difficulties if trends continue," according to the Civic Federation.

The school saw a decline in its ending balances over the five years to a deficit of 2.8%, its liquidity fell to 9.7 days cash on hand from 41 days, its instructional costs steadily rose, and its profit margins declined. On the positive side, the school spent a large majority of resources on direct service programming and had sufficient net assets available finance new assets and fund liabilities if needed.

UNO, which offers multiple kindergarten through 12th grade campuses, had seven positive indicators and six negative. On the positive side, the school reported a healthy five-year average of 506 days of cash on hand. Less than 50% of UNO's expenses went toward instruction on average over the five year period, in three of the five years it reported a negative year-end balance including a negative 20.1% in 2008, and its profit margin was positive in only two of the five years analyzed.

UNO recently settled fraud charges with the Securities and Exchange Commission over disclosure issues. The network in August disclosed that the Internal Revenue Service is auditing bonds issued in 2011.

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Illinois
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