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NYS Comptroller

THOMAS P. DiNAPOLI

Taxpayers' Guide to State and Local Audits

Brooklyn Excelsior Charter School
Oversight of Financial Operations


Issued: December 7, 2012
Link to full audit report 2011-S-14

Purpose
To determine whether Brooklyn Excelsior Charter School (Excelsior) officials exercise adequate oversight over the school's fiscal affairs and maintain an adequate system of internal controls over financial operations. The audit covered the period July 1, 2009 through June 30, 2010.

Background
Established in 2002 and opened in 2003, Excelsior is governed by a Board of Trustees (Board) and managed and operated by National Heritage Academies Inc. (NHA), a privately-held corporation. Through a written Management Agreement, NHA is responsible for all aspects of Excelsior's operations. In return, NHA receives all of the school's revenues and pays the costs of its operations. Excelsior's revenues for the fiscal year ended June 30, 2010, totaled $10.23 million, all of which was paid to NHA in accordance with the Management Agreement.

Key Findings

  • We could not fully determine the extent to which Excelsior officials exercised their fiscal oversight because we were unable to verify the true cost of Excelsior's operations or the extent to which the $10 million of annual public funding benefited students. The reason for these limitations is that NHA officials did not provide support for $1.7 million of costs allocated to the school. NHA officials claimed the information was private and proprietary.
  • We noted other areas where the Board has been lax in fulfilling its fiduciary responsibility. We question whether the Board exercised due diligence and care in approving NHA's related party lease of the school building at a rate almost $800,000 per year above market value. As a result, NHA has already recovered its full $16.3 million cost of purchasing, renovating and outfitting the entire facility in less than 10 years of operation.
  • We identified conflicts of interest that exist because NHA employed a Board member at a salary of more than $138,000, as well as the Board's failure to comply with certain provisions of its adopted by-laws.

Key Recommendations

  • Verify that expenses allocated to Excelsior by NHA are reasonable and fair, and are based on items that were actually provided to the school.
  • Reevaluate the lease agreement at the end of its current term and negotiate reduced future lease payments that reflect market conditions.
  • Develop and implement an appropriate policy to control and account for cash receipts from students and fundraising activities.

Other Related Audits/Reports of Interest

Brooklyn Charter School: Financial Management Practices (2006-N-9)
KIPP Academy Charter School: Financial Management Practices (2006-N-15)


State Government Accountability Contact Information:
Audit Director: John Buyce
Phone: (518) 474-3271; Email: StateGovernmentAccountability@osc.state.ny.us
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236