Navigating Financial Oversight: A School’s Journey on the Monitoring List

The Monitoring List is the first escalation step taken by DC PCSB to track public charter LEAs that show signs of financial instability. Public charter LEAs are placed on this Monitoring List for a combination of factors like low cash reserves, high debt ratios, or issues with budget management. The purpose is not punitive but cautionary and supportive, designed to help public charter LEA leaders and their governing board of trustees to address financial issues before they jeopardize the school’s overall health.

When a public charter school LEA finds itself on DC PCSB’s Monitoring List, it is important to view it as a critical opportunity for growth, improvement, accountability, and fiscal responsibility. The financial health of a school is essential not only to ensure long-term sustainability but also to protect the quality of education provided to students. While being added to this list may seem like a cause for alarm, it can serve as a moment to assess, adjust, and ultimately strengthen the school’s financial practices.

Why Schools Get Added to the List

There are various reasons why a school might be added to the financial monitoring list.  Some include:

• Low Liquidity: Insufficient cash reserves to cover short-term obligations.
• Deficit Spending: Ongoing expenses that exceed revenues.
• Audit Findings: Irregularities or concerns in financial reporting or audit results.
• Over-Reliance on External Funding: High dependence on uncertain or one-time grants and external funding sources.

When a school is flagged, it’s an indication that something with their internal financial processes, strategy or decisions need to be revisited or reinforced. This is where collaboration between the school’s leadership, its board of trustees, and DC PCSB becomes essential. 

Interventions and Correction of Deficiencies 

When DC PCSB has concerns about a school’s financial health, DC PCSB staff collaborate with the LEA’s leadership to address it as early as possible. In most cases, it starts with two actions: (1) additional monitoring (including more frequent and deeper interim financial statements, budget reviews, and analysis with increased scrutiny), budget and forecast revisions, and additional information requests, and (2) discussions with the LEA’s leadership about the LEA’s financial challenges and improvement plans. DC PCSB subsequently discloses in the Financial Analysis Report the steps taken or that will be taken by the LEA to rectify each deficiency identified in the audit, to be carried out in a manner consistent with the Board's recommendations. A Financial Corrective Action Plan (FCAP) may also be instituted, which addresses financial and operational concerns and sets specific performance targets for the public charter LEA's finances. These actions would take place during a public Board meeting. 

The Role of School Leaders and Governing Boards

When a school is placed on DC PCSB’s Monitoring List, the public charter LEA’s leadership and their governing board of trustees must take immediate, coordinated action. Working together with the public charter LEA’s leadership to ensure transparent financial practices and the governing board of trustees to provide guidance, ensuring decisions are made in the best interest of the students and the long-term financial stability of the entire LEA. This “triangle of accountability” ensures that everyone—LEA leaders, governing board of trustees, and DC PCSB —work together to strengthen the school’s financial standing.

Oftentimes, DC PCSB is asking for more information from the LEA and urging changes to improve the LEA’s financial condition and performance. 

Turning a Challenge Into an Opportunity

Being placed on the Monitoring List is an escalation used by DC PCSB that provides schools with the chance to do the following among other actions:

1. Enhance Accountability: It calls attention to the financial decisions being made, ensuring there is adequate oversight and reporting.
2. Improve Budget Management: School leaders can use this as an opportunity to reassess their budget, identifying areas where spending can be reduced or revenue can be increased. While at the same time, receiving more feedback from DC PCSB about their budget submissions.  
3. Strengthen LEA Board Engagement: Governing boards must step up their involvement, taking a more active role in monitoring finances and ensuring compliance with financial policies.

DC PCSB takes a comprehensive approach to our financial oversight work. We do not believe plugging numbers into a spreadsheet to get a calculation that says yes or no about whether a school is healthy or not is the best approach.  

This means while we believe our review work must be consistent, we also must take into account the context of what is happening in the school, in the charter sector, public education, and in the city. We use a holistic evaluation that considers multiple indicators to thoroughly understand a school’s financial health. It is important to remember that each school has a unique mission and instructional methods, and creates their financial management approach to align with state and federal laws. Our financial oversight uses diverse indicators and data, and we take into account their operating histories and financial positions. This allows us to balance the flexibility public charter schools need and our judgment to assess their financial health and identify potential risks.

Navigating the Path to Financial Stability

School leadership often works closely with DC PCSB which provides tools, resources, and guidance for improving financial performance. These collaborations can include regular reporting to track progress.

Transparency and communication are key to this process. LEA leaders should be candid with staff, parents, and the broader school community about the financial challenges being faced, while also laying out a clear path for recovery. In doing so, they build trust and ensure that the entire school community is invested in returning to financial health. Additionally, DC PCSB shares information about when schools are on the Monitoring List at the board meetings following the DC PCSB Finance Committee meetings that are typically held quarterly.  

The following chart identifies the active LEAs that have been placed on DC PCSB’s Monitoring List and the date that FCAPs have been approved: