Internal Controls in Charter Schools: Current Perceptions and Opportunities for Improvement

ABSTRACT

We survey 137 charter school administrators and 129 board members and find that U.S. charter school internal controls are perceived to be relatively strong overall. However, board independence, board communication of internal control responsibilities to school personnel, lines of communication between the board and school personnel, and reporting lines that allow the board to assess the school’s activities are perceived to be weakest in comparison to other internal controls. We also find that board members have more positive views than administrators regarding the strength of several of the internal controls examined. We discuss implications and several avenues for future research.

KEYWORDS:

• Administrators
• board of directors
• internal controls
• COSO internal control framework

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Such concerns also exist in the traditional public school sector (Maranto, 2019; Segal, 2004).

2. We confirmed that all states in our sample require charter schools to have annual financial statement audits.

3. The fifth component, control activities, reflects detailed policies and procedures that are tailored to the organization, and an organization may have a very large number of control activities. Such detailed controls are beyond our scope. We encourage future research to investigate the control activities component as possible.

4. We sent 8,889 e-mails to potential participants, and 1,620 were undeliverable, leaving 7,269 total e-mail invitations sent to administrators and board members. There were 732 surveys started and 266 completed, for a final response rate of approximately 4%. The low response rate is a limitation of the study.

5. The responses for this question were reverse coded with 0 = “Very Descriptive of My Charter School” and 100 = “Not Very Descriptive of My Charter School”.

6. We also tested for differences between (a) self-managed charter schools and (b) charter school management organizations and charter schools that are network managed. We found only one significant difference. For the item, “The charter school communications about internal controls are delivered in a manner that is relevant to those responsible for acting on the information” (S10), the mean for self-managed charter schools is 68.26, versus a mean for charter school management organizations and charter network managed schools of 53.23 (p = .019). Otherwise, the two groups have very similar perceived internal control strength.

Additional information

Funding

This work was supported by the Walker College of Business Dean’s Club, Appalachian State University.