A Guide on Board Financial Management

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Etoile’s Mission & Financial Mission

Étoile’s Financial Vision:

• Stakeholder-inclusive financial stewardship
• Build and sustain a stable long-term future for our staff & students

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Étoile’s Financial Tools & Resources:

• Cash Management
• Budgeting
• Long-term Forecasting
• Board Oversight

Étoile’s Mission:

Étoile Academy Charter School ensures that every student in grades K through 8 has the academic and character foundation necessary to succeed in high school, graduate from college, and pursue ambitious life goals.

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Vision-Derived Finances

• By the end of the day, the BWBAT…
• Explain how Etoile’s funding has changed over the years
• Analyze Etoile’s financial statements to determine how Etoile supports students with its funding
• Develop an understanding through clarifying questions about Etoile’s financial status and projects

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Table of Contents

• Etoile’s Mission & Financial Mission
• Revenue: The Water of the Reservoir
• Expenses: Water Flowing Out
• Finance: A Continuously Evolving System

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Appendix Section:

• Appendix A: Balance Sheet Example
• Appendix B: Examples of Revenue & Expenses
• Appendix C: Additional Financial Systems Improvements
• Appendix D: Questions a Board Might Ask

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Finance: The School’s Reservoir & Dam

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Revenue: The Water of the Reservoir

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Question 1: Where does Etoile’s funding come from? How much funding does Etoile receive?

Our funding comes from three types of sources:

• State sources
• Federal sources
• Local sources/philanthropy

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Funding Over Time

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Étoile Academy Strategic Plan

Question 1: Differences in Funding

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Expenses: The Water Flowing Out

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Question 2: How do we ensure our spending is going to the right places?

We broadly group expenses into two categories:

• Educational Expenses
• Operational Expenses

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Question 2: Educational Expenses

Educational Expenses: Expenses directly associated with supporting students and their families

• Academic
• Instructional, Curricular, and School Leadership Expenses are grouped here
• Student Supports
• Counseling, Social Work, and Student Health Expenses are grouped here
• Extracurricular
• Parents & Community Engagement

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Question 2: Operational Expenses

Operational Expenses: Expenses indirectly associated with supporting students and their families

• Services to help students access learning: Transportation, Food Service, Facilities, Security, IT/Technology, Data Reporting
• Funding used to maintain the entire scholar support system (administration)
• Funding used to help bring in more money to support our scholars (fundraising)

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Finance: A Continuously Evolving System

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Question 3: If the analogy is accurate, what steps are we taking to build the system?

Over the past year, we’ve taken steps to build a better financial foundation for our students & staff…

• Growth Task Force Financial Modeling
• Weekly & Monthly Financial Reporting
• Bringing parts of finance in-house

…and we’re excited to continue improving to help our teams make the best decisions possible!

• In-depth reporting
• More tailored modeling
• Key information, available earlier!

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Example 1: In-depth Reporting

Function Reports are being prepared to be sent weekly to key positions for review using real-time data & analytics!

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Example 2: Tailored Modeling of Growth

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Key Question: How do we ensure that we are being good stewards of our funding?

- Accountability (ex. delegation of authority, budget)

- Oversight (touch points throughout the financial process)

- Performance Metrics (ex. days cash on hand)

- People (leadership, consultants, board)

- Policies (investment policy, purchasing policy, other fiscal policies & manuals)

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Summary

• If we view our organization (charter school) from the perspective of our clients (students), one of the best ways to ensure that we best serve the client (students) is through a strong finance function.

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• We’re a continuously evolving function that seeks to serve the goal of providing greater clarity and strategic funding to the areas of greatest need in our schools.

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Q&A

Appendix A:

Balance Sheet Discussions

Financial System: The Reservoir & Dam

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Question 3: How do we ensure that we are being good stewards of our funding?

Growth in the balance sheet is an output of financial stewardship.

“Are we

• Balance Sheet Key Components
• Assets
• Liabilities
• Net Assets
• Internal Tracking Tools
• Data Dashboard
• Expense Dashboard & Function Reporting

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Q3: Balance Sheet

Example Balance Sheet:

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Assets = What the school owns.

Liabilities = What the school owes

Net Assets = The portion of our resources that we would own if we paid off what we owe.

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Q3: Internal Tracking Tools

Example Data Dashboard

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Cash on Hand: Money in the bank.

Days Cash on Hand: The number of days we can pay our bills with just the money in the bank.

More internal tracking tools to be shown in a few slides!

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Appendix B:

Examples of Revenue & Expense Breakdown

Q2: Revenue Display (August)

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Q2: Educational & Operational Expenses Display (August)

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Appendix C:

Additional Improvements to Financial Systems

Example 3: Long Term Budget Planning

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Example 4: Key information, faster!

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Note: Enrollment estimates subject to change until plans are finalized in Q2.

Appendix D:

Questions a Board Might Ask

Questions a Board Might Have

• What percentage of our assets are net assets? How has that changed over the past few years?

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• Do we have enough in current assets to cover current liabilities?

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• As we scale, what is the trade-off between doing real estate purchases with debt versus equity?

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Questions a Board Might Have

• What percentage of our funding is more flexible (state/local funding) versus more committed (federal, special state grants)?

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• What are some of the initiatives we are supporting with our federal grants and our philanthropic support?

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Questions a Board Might Have

• What percentage of our funding goes to educational expenses versus operational expenses?

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Questions a Board Might Have

• What are we hoping to accomplish with our new financial tools & systems?

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• How can we provide expertise & support to help evolve Etoile’s financial management?

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• Overall, what financial information does the board need to feel good about the school’s financial position?

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Why does Charter School Financial Management Matter?

• “We are not out of the woods yet.” (there really is never getting out of the woods in the charter space)
• “Funding per student in Texas ranks some of the lowest - yet our students needs are some of the highest”
• “

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