Prior to operating a charter, most business are aware of insurance requirements. Typically, charter schools will seek protection, through insurance, from breach of contract claims, wrongful termination claims, and negligence claims. In this regard, charter schools face the same risks school districts and their Boards of Education face.
The hidden liability comes in the form of personal claims against the charter founders and operators. Those personal claims are often made in media and can have a profound effect on the charter school’s operation. Accusations against charter school leadership affect a charter school’s ability to retain students, recruit students, and raise funds.
Take the case of a former charter school operator we will call “Mr. Hunt”. Mr. Hunt was the founder of a charter school as well as a local politician in his state. His charter focused on at risk students and low income students. The school, like many charter schools, faced challenges bought on by limited start up funds, a misunderstanding of compliance obligations, and an adversarial relationship with the school district. While the school was working on correcting their deficiencies, Mr. Hunt was also running for political office. His adversaries, through newspaper articles, accused him of misappropriating funds. While these charges proved false, the damage was done, and the charter was revoked. Transparency and advocacy are two strategies all charter schools should employ to protect themselves against these types of attacks. Charter schools should include the cost of an independent yearly, financial audit as part of their budgets. This audit, performed by a Certified Public Accountant, may include:
1. A description of how your business currently receives or plans to receive funds (e.g. grants, fees-for Service, etc.);
2. The organization’s proposed budgets, which accounts for all revenues, expenses, and cash flow activity; and
3. The organization’s actual budgets, which accounts for all revenues, expenses, and cash flow activity.
Then there is the case of a charter school operator charged with tax evasion and co-mingling funds, revealed in part because of a European vacation. Charter schools operators should pay strict attention to organizational and financial compliance or face personal liability for omissions.[divider top=”1″