I. DESCRIPTION To provide the Commission an update/overview of the - - PDF document

SLIDE 1

DAVID Y. IGE GOVERNOR

STATE OF HAWAII STATE PUBLIC CHARTER SCHOOL COMMISSION (ʻAHA KULA HOʻĀMANA)

1111 Bishop Street, Suite 516, Honolulu, Hawaii 96813 Tel: (808) 586-3775 Fax: (808) 586-3776 JOHN S.S. KIM CHAIRPERSON

PERFORMANCE & ACCOUNTABILITY COMMITTEE SUBMITTAL

DATE OF SUBMITTAL: February 11, 2020 DATE OF MEETING: February 13, 2020 TO: Makalapua Alencastre, Chairperson Performance and Accountability Committee FROM: Sione Thompson, Executive Director State Public Charter School Commission AGENDA ITEM:

• III. Presentation/Action on the Charter Schools’ Second Quarter Financials by the

Operations Team I. DESCRIPTION To provide the Commission an update/overview of the second quarter performance of charter schools on the Financial Performance Framework, as set in the Charter Contract. II. BACKGROUND Hawaii Revised Statutes §302D-17 provides that “(a) An authorizer shall continually monitor the performance and legal compliance of the public charter schools it oversees, including collecting and analyzing data to support ongoing evaluation according to the charter contract.” The State Public Charter School Contract requires schools to prepare and submit quarterly financial reports to the Commission, which includes a balance sheet, income statement, and statement of cash flows. The quarterly financial reports are key documents that provide the necessary financial information needed by the Commission to perform periodic financial monitoring of a school, which is a component of its general oversight function.

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2

III. PRESENTATION Commission staff has reviewed and analyzed the second quarter financial reports submitted by all 37 schools in the Commission’s portfolio. These reports were submitted to Epicenter, the compliance management system administered by the Commission. Quarterly financial reports are due approximately 30 days after the close on each quarter; second quarter financials were due on January 31st. By December of each year, charter schools receive two per pupil distributions which account for ninety percent of their state funding. This funding structure results in charter schools being “cash heavy” for much of the first and second quarters of their fiscal year. While this funding structure does allow for operational flexibility, it does limit the ability of both the Commission and the charter school governing board to determine any potential fiscal solvency issues early in the fiscal year. Second Quarter Risk Assessment Report for Fiscal Year 2019-2020 As of December 31, 2019, all 37 charter schools in the portfolio are categorized in either the “Low”

• r “Acceptable” risk designation according to Fiscal Year 2019-2020 Second Quarter Risk

Assessment analysis under the Financial Performance Framework. Exhibit 1 of this submittal provides the work sheet used to provide the risk assessment results. As a point to note, Commission staff may be doing follow-up analysis of the financial reports and engaging in discussions with five charter schools which reported negative net assets at the end of the second quarter. To clarify, these five schools still received low or acceptable risk designations; however, as discussed above, the funding structure which provides the bulk of funding in the first two quarters can make it challenging to determine any potential fiscal issues.

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Exhibit 1 Financial Performance Framework Audited Fiscal Year 2018-2019 Risk Assessment

SLIDE 4

Indicators

Risk Risk Index Official School Name Org ID 2020 Risk Rating 2018 2019 2020 Avg. Risk Rating 2020 Risk Rating 2018 2019 2020 Risk Rating 2018 2019 2020 Risk Rating 2020 Risk Rating 4th Qtr Risk Rating Waiʻalae Elementary Public Charter School 149 8.5 1 166 181 662 336 1 0.18 1 249,158 322,822 2,037,242 1 10.3% 3.2% 43.2% 1 90% 5 1.40 Low Kamaile Academy, PCS 275 10.7 1 243 274 760 426 1 0.07 1 880,444 1,082,679 3,241,558 1 10.0% 4.8% 39.4% 1 82% 5 1.40 Low Ka'ōhao School (formerly: Lanikai Elementary Public Charter School) 320 2.9 1 228 248 918 465 1 0.28 2 338,517 (622,659) 1,695,808 3 7.8% 8.5% 10.6% 1 53% 5 1.70 Acceptable Laupāhoehoe Community Public Charter School 377 10.9 1 95 106 418 206 1 0.09 1 (36,465) 207,460 1,073,759 2 4.5% 9.5% 38.9% 1 101% 1 1.10 Low Waimea Middle Public Conversion Charter School 394 3.8 1 213 236 734 395 1 0.22 2 26,364 227,415 954,430 1 0.1% 4.6% 40.0% 1 86% 5 1.50 Acceptable Connections Public Charter School 396 26.0 1 256 306 870 477 1 0.03 1 553,238 462,711 1,136,754 1 16.7% 14.6% 46.9% 1 82% 5 1.40 Low Kanu o ka ‘Āina New Century Public Charter School 397 14.0 1 135 165 549 283 1 0.07 1 1,182,914 611,017 1,632,967 1 17.3% 9.0% 34.5% 1 73% 5 1.40 Low Nā Wai Ola Public Charter School 398 4.7 1 52 66 270 129 1 0.18 1 43,150 60,778 323,085 1

• 1.0%

5.3% 29.7% 2 72% 5 1.65 Acceptable West Hawai‘i Explorations Academy 399 18.3 1 198 197 923 439 1 0.05 1 175,706 47 1,120,518 1 5.8%

• 3.6%

49.9% 3 89% 5 1.90 Acceptable Kualapu`u School: A Public Conversion Charter 411 7.8 1 178 210 641 343 1 0.12 1 436,753 349,592 1,223,426 1 15.4% 5.3% 39.4% 1 85% 5 1.40 Low Kula Aupuni Niihau A Kahelelani Aloha A New Century Public Charter School 466 6.7 1 95 109 411 205 1 0.11 1 (129,862) (343) 103,966 4

• 7.8%
• 13.6%

31.6% 4 58% 5 2.45 Acceptable Hālau Kū Māna Public Charter School 540 40.0 1 310 279 775 455 1 0.01 1 (7,447) (54,934) 227,917 4

• 0.8%
• 5.4%

49.6% 4 98% 2 2.15 Acceptable Voyager: A Public Charter School 541 1.6 1 115 123 525 255 1 0.57 4 (19,390) 88,884 879,468 2 1.8% 2.0% 1.8% 1 50% 5 1.80 Acceptable University Laboratory School 543 11.7 1 83 90 374 182 1 0.09 1 11,460 107,800 1,156,648 1 2.3%

• 2.0%

38.1% 3 85% 5 1.90 Acceptable Myron B. Thompson Academy 544 31.1 1 560 608 1,463 877 1 0.03 1 430,234 485,873 1,777,850 1 8.0% 7.6% 48.3% 1 92% 4 1.30 Low Ka Waihona o ka Naʻauao Public Charter School 545 17.9 1 9 31 241 94 1 0.02 1 (264,909) 453,842 1,374,114 2 0.2% 0.3% 44.5% 1 72% 5 1.50 Acceptable Hakipuʻu Learning Center 546 5.3 1 102 136 316 185 1 0.20 2 251,601 98,857 67,903 1 9.4% 1.5% 11.5% 1 57% 5 1.50 Acceptable Ke Kula ʻo Samuel M. Kamakau Laboratory Public Charter School 547 10.1 1 130 216 506 284 1 0.08 1 (99,296) 334,594 288,685 2 15.6% 32.5% 38.0% 1 86% 5 1.50 Acceptable Innovations Public Charter School 548 10.9 1 102 100 443 215 1 0.08 1 (211,093) (11,889) 663,130 4 4.2% 0.2% 43.9% 1 86% 5 1.70 Acceptable Ke Ana Laʻahana Public Charter School 549 10.8 1 306 403 942 550 1 0.09 1 (36,290) 94,894 65,525 2

• 3.7%

6.8% 28.6% 2 62% 5 1.75 Acceptable Mālama Honua Public Charter School 550 4.1 1 228 269 673 390 1 0.22 2 217,493 266,943 480,890 1 16.6% 11.6% 22.3% 1 78% 5 1.50 Acceptable Hawaiʻi Technology Academy (HTA) 551 1.4 2 123 112 503 246 1 0.65 4 768,454 163,958 3,995,254 1 9.7% 24.1% 65.3% 1 46% 5 1.80 Acceptable Kamalani Academy 553 2.6 1 23 29 254 102 1 0.45 3 204,043 (26,368) 555,724 1 0.2% 30.2% 1 93% 4 1.50 Acceptable Kihei Charter School 554

• 37.1

5 113 117 521 250 1

• 0.04

1 237,113 280,767 2,267,487 1 1.9% 5.0% 47.5% 1 92% 4 1.70 Acceptable Kapolei Charter School 555 11.2 1 152 231 814 399 1 0.09 1 145,720 195,165 594,023 1 26.5% 58.0% 1 95% 3 1.20 Low Ke Kula Niihau O Kekaha Learning Center 556 11.3 1 101 103 456 220 1 0.06 1 157,096 39,032 449,353 1

• 2.1%

17.8% 39.6% 2 86% 5 1.65 Acceptable Kua o ka Lā New Century Public Charter School 557 2.3 1 80 150 430 220 1 0.40 3 (11,842) 701,110 727,190 2

• 0.9%

12.8%

• 1.6%

4 49% 5 2.45 Acceptable Alaka'i O Kaua'i 558 146.6 1

• 23

319 171 1 0.01 1

• 69,775

483,410 1

• 2.6%

43.1% 3 89% 5 1.90 Acceptable The Volcano School of Arts & Sciences 560 9.8 1 39 44 288 124 1 0.09 1 (43,406) 84,949 640,912 2 5.8% 3.1% 33.5% 1 81% 5 1.50 Acceptable Hawaiʻi Academy of Arts & Science Public Charter School 561 1.7 1 177 176 612 322 1 0.51 4 584,166 56,435 2,454,085 1 2.9% 2.6%

• 0.7%

3 51% 5 2.20 Acceptable Ka ‘Umeke Kā’eo Public Charter School 562 4.3 1 251 265 555 357 1 0.20 1 478,626 694,444 (128,618) 3 1.6% 2.2% 10.5% 1 72% 5 1.60 Acceptable Ke Kula ‘o Nāwahīokalani’ōpu’u Iki Lab Public Charter School 563 34.1 1 48 42 447 179 1 0.03 1 (762,574) 561,873 3,093,617 2

• 6.1%

1.8% 32.2% 2 66% 5 1.75 Acceptable Kanuikapono Public Charter School 564 2.0 1 204 170 529 301 1 0.45 3 355,145 209,263 707,156 1 18.8% 5.7%

• 7.8%

3 53% 5 2.10 Acceptable Kawaikini New Century Public Charter School 565 13.3 1 50 65 294 136 1 0.03 1 (113,860) 81,052 531,704 2

• 9.2%

0.8% 30.9% 2 72% 5 1.75 Acceptable Kona Pacific Public Charter School 566 1.4 2 10 35 254 100 1 1.39 5 8,555 233,323 478,748 1 1.7%

• 26.2%

8.2% 3 49% 5 2.40 Acceptable SEEQS: the School for Examining Essential Questions of Sustainability 567 1.7 1 84 83 474 213 1 0.60 4 109,252 59,076 761,110 1 11.5% 3.2%

• 0.7%

3 47% 5 2.20 Acceptable DreamHouse Ewa Beach 568 69.7 1

• 257

257 1 0.01 1

• 328,103

1

• 61.5%

1 122% 1 1.00 Low (+,+,+) Margin, upward trend = 1 (-,+,+) Margin, up/down trend = 2 (+,-,+)or (+,+,-) Margin, up/down trend = 3 (-,-,+) or (+,-,-) or (-,+,-) Margin, up/down trend = 4 (-,-,-) Margin, downward trend = 5 Over 99% = 1 96%-98% = 2 94%-95%- = 3 91%-93% = 4 Less than 90% = 5 Closure risk when operating at a deficit for a sustained period 25%

Low = 1 to 1.45 Acceptable = 1.5 to 2.45 Moderate = 2.5 to 3.45 High = 3.5 to 4.45 Significant = 4.5 or higher

1st Quarter Fiscal Year 2020 Financial Performance Framework Risk Assessment Results

Inability to meet current

• bligations 10%

Insufficient cash to meet cash obligations 35% Not being able to pay back debt 10% Financial instability over time 10% More than 1.5 = 1 1.35-1.5 = 2 1.20-1.35 = 3 1.0-1.2 = 4 Less than 1.0 = 5 Total of individual score for three years/3 Annual scoring metric: More than 60 days,= 1 50-60 days, = 2 30-50 days, = 3 20-30 days, = 4 Less than 20 days, = 5 Less than 0.20 = 1 0.20-0.40 = 2 0.40-0.50 = 3 0.50-0.75 = 4 More than 0.75 = 5 (+,+,+) CF, upward trend = 1 (-,+,+) CF, up/down trend = 2 (+,-,+) or (+,+,-) CF, up/down trend = 3 (-,-,+) or (+,-,-) or (-,+,-) CF, up/down trend = 4 (-,-,-) CF, downward trend = 5 Near Term Sustainability Budget

Risk Assessment Results

Current Ratio Unrestricted Days Cash Debt to Assets Cash Flow Total Margin Budget Variance Unable to meet budgeted expenses 10%

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2nd Quarter Fiscal Year 2020 Financial Performance Framework Risk Assessment Results

Org ID Official School Name Cash Curr Assets Total Assets Curr Liab Total Liab Revenues Expenses Net Asset

149 Waialae

4,456,871 4,592,954 5,216,275 540,255 964,030 4,322,962 2,457,369 1,865,593

275 Kamaile

10,432,704 11,322,508 14,885,695 1,056,546 1,056,546 8,268,480 5,008,441 3,260,040

320 Ka`ohao ("Lanikai")

3,491,810 3,497,672 4,334,914 1,212,060 1,212,060 1,552,523 1,387,667 164,856

377 Laupahoehoe

2,092,665 2,491,917 2,678,913 229,576 229,576 2,989,575 1,827,886 1,161,689

394 Waimea Middle

2,834,335 3,016,455 3,733,358 803,686 803,686 2,349,206 1,408,920 940,287

396 Connections

3,510,571 3,637,648 4,368,098 139,998 139,998 2,775,096 1,472,724 1,302,373

397 Kanu o ka Aina

4,193,448 4,230,997 4,542,337 301,667 301,667 4,260,456 2,788,500 1,471,956

398 Na Wai Ola

620,397 770,879 904,454 163,813 163,813 1,195,327 839,916 355,411

399 WHEA

2,493,469 3,127,570 3,163,681 170,740 170,740 1,968,964 986,311 982,653

411 Kualapu'u

3,405,916 3,639,934 3,901,665 468,313 468,313 3,197,133 1,938,311 1,258,822

466 KANAKA

328,966 427,611 586,018 64,139 64,139 427,070 292,194 134,876

540 Halau Ku Mana

1,635,232 1,761,011 3,008,627 44,051 44,051 1,529,822 770,356 759,466

541 Voyager

1,709,317 1,759,223 2,011,501 1,092,463 1,139,263 1,209,666 1,187,641 22,025

543 University Lab School

2,072,782 2,134,108 2,134,108 182,854 182,854 3,270,458 2,025,047 1,245,411

544 Myron B. Thompson

8,386,420 8,389,218 8,853,804 269,684 269,684 4,044,331 2,092,146 1,952,185

545 Ka Waihona

2,007,336 2,360,776 5,349,413 131,982 131,982 5,466,988 3,035,014 2,431,974

546 Hakipu'u

433,866 451,970 454,829 84,750 93,060 566,013 501,103 64,910

547 Kamakau

1,215,901 2,682,890 3,500,177 265,936 265,936 1,415,412 877,785 537,627

548 Innovations

1,242,627 1,253,488 1,426,156 115,209 115,209 1,827,628 1,024,627 803,001

549 Ke Ana La'ahana

755,757 815,117 819,420 75,561 75,561 410,068 292,913 117,155

550 Malama Honua

1,361,538 1,840,117 2,023,348 450,899 450,899 1,317,826 738,480 579,346

551 Hawaii Tech Academy

7,005,820 9,183,881 9,737,625 6,362,147 6,362,147 5,072,309 5,087,971

• 15,662

553 Kamalani

733,399 860,198 1,167,488 328,609 526,792 1,512,141 1,055,565 456,576

554 Kihei

3,837,991 4,415,608 4,449,554

• 119,038
• 162,414

5,116,957 2,688,257 2,428,700

555 Kapolei

934,908 958,511 958,511 85,351 85,351 997,450 419,303 578,147

556 Ke Kula Ni`ihau

816,866 816,866 1,292,976 72,314 72,314 1,082,239 653,519 428,720

557 Kua o Ka La

2,082,565 2,534,401 2,776,669 1,116,726 1,116,726 1,739,199 1,766,416

• 27,217

558 Alakai

553,185 553,308 553,308 3,775 3,775 1,112,451 632,790 479,661

560 Volcano

945,183 1,124,913 1,232,329 114,437 114,437 1,798,472 1,196,170 602,302

561 HAAS

5,310,668 5,430,021 6,143,778 3,125,597 3,125,597 3,145,772 3,167,499

• 21,727

562 Ka Umeke

2,816,310 3,340,121 3,896,775 774,398 774,398 2,069,005 1,852,244 216,761

563 Ke Kula 'o Nawahi

3,785,803 3,930,047 4,207,778 115,244 115,244 4,556,256 3,089,039 1,467,217

564 Kanuikapono

1,801,185 2,233,011 2,481,518 1,104,454 1,104,454 1,151,931 1,242,027

• 90,097

565 Kawaikini

839,149 846,166 1,829,395 63,746 63,746 1,508,992 1,042,947 466,045

566 Kona Pacific

777,592 919,678 949,996 636,493 1,318,376 1,219,521 1,119,409 100,112

567 SEEQS

904,074 1,148,611 1,397,224 839,697 839,697 879,172 885,301

• 6,129

568 DreamHouse

328,103 526,218 751,722 7,553 7,553 1,210,764 466,595 744,169