Ariz. Admin. Code § 7-5-402

Current through Register Vol. 30, No. 50, December 13, 2024

Section R7-5-402 - Minimum Financial Performance Expectations

A. The Board shall assess a charter holder's achievement of the minimum financial performance expectations using data contained in the annual audit required under A.R.S. § 15-914 and conducted according to the standards specified in R7-5-504 and average daily membership calculations completed by the Department using student attendance data submitted to the Department by the charter holder.

1. The Board may assess a charter holder's achievement of the minimum financial performance expectations at any time.

2. The Board shall assess a charter holder's achievement of the minimum financial performance expectations:

a. During the five-year-interval review required under A.R.S. § 15-183(I);

b. When considering a charter contract renewal request submitted by the charter holder;

c. Upon receipt of information that a charter school operated by the charter holder failed to meet the minimum academic performance expectations for three consecutive years;

d. Upon receipt of information that a charter school operated by the charter holder has been assigned a letter grade of "F" by the Department; and

e. When making a decision related to the charter holder's achievement of the minimum academic performance expectations or compliance with its charter, other contractual agreements with the Board, federal and state law, and this Chapter.

B. The Board shall annually assign a charter holder a summative financial performance rating, based on measures specified in the Financial Performance Framework.

1. The Board shall assign a summative financial performance rating of "Good Standing" if the charter holder receives no measures rated "below standard" and no more than one measure rated "approaches standard" based on the most recent audit conducted under R7-5-504.

2. The Board shall assign a summative financial performance rating of "Adequate Standing" if the charter holder receives no measures rated "below standard" and two or more measures rated "approaches standard" based on the most recent audit conducted under R7-5-504.

3. The Board shall assign a summative financial performance rating of "Intervention" if the charter holder receives one or more measures rated "below standard" based on the most recent audit conducted under R7-5-504 or if the charter holder has received a summative financial performance rating of "Adequate Standing" for three consecutive years.

C. A charter holder assigned a summative financial performance rating of "Good Standing" or "Adequate Standing" based on the most recent audit conducted under R7-5-504 is financially eligible to submit to the Board, if the charter holder meets all other eligibility criteria, an expansion request to:

1. Add a new charter school to an existing charter;

2. Add one or more grade levels to a charter;

3. Increase the number of students the charter holder may serve;

4. Add an Arizona Online Instruction program;

5. Replicate an existing charter;

6. Transfer an existing charter school to its own charter contract; or

7. Transfer an existing charter school or charter contract from the current charter holder to an existing charter holder with a different financial performance dashboard.

D. A charter holder assigned a summative financial performance rating of "Intervention" or identified as "On Probation" based on the most recent audit conducted under R7-5-504 is not eligible to submit to the Board an expansion request specified in subsection (C).

E. The Board shall determine that a charter holder meets the minimum financial performance expectations if the charter holder receives a summative financial performance rating of "Good Standing" or "Adequate Standing" based on the most recent audit conducted under R7-5-504.

F. The Board shall require a charter holder assigned a summative financial performance rating of "Intervention," based on the most recent audit conducted under R7-5-504, to submit the financial intervention submissions as described in R7-5-509 and the following attestation using the form available on the Board's web-based interface:

1. The charter holder's board or, if applicable, the charter school's governing body has considered the written notice, provided by the Board under R7-5-504(H)(2), of the charter holder's intervention status, along with the Board's probation risk levels and associated consequences identified in subsections (H) through (K);

2. Management has identified and the charter holder's board or, if applicable, the charter school's governing body has considered the factors that caused or contributed to the charter holder's financial performance in the audited fiscal year;

3. Management and the charter holder's board or, if applicable, the charter school's governing body have reviewed the charter holder's current financial plan and approved any necessary changes; and

4. Management and the charter holder's board or, if applicable, the charter school's governing body shall at least quarterly review the charter holder's current performance under the Financial Performance Framework.

G. A charter holder that receives a summative financial performance rating of "Intervention" for two or more consecutive years shall also be placed "On Probation" and be required to submit the financial intervention submissions as described in R7-5-511. The Board shall determine that a charter holder placed "On Probation" does not meet the minimum financial performance expectations.

H. For each charter holder identified as "On Probation" and, therefore, under subsection (G) does not meet the minimum financial performance expectations, Board staff shall:

1. Determine the charter holder's "ADM category" using publicly available average daily membership calculations completed by the Department and the criteria set forth in Table 1;

2. Determine the charter holder's "default measure category" using the following criteria:

a. The Board shall determine the charter holder is "low risk" is the default measure received a rating of "meets standard" based on the two most recent audits conducted under R7-5-504.

b. The Board shall determine that a charter holder is "moderate risk" if the default measure received a "below standard" rating:

i. Based on the most recent prior audit conducted under R7-5-504; or

ii. Based on the most recent audit conducted under R7-5-504 due to the charter holder's failure to comply with non-payment related requirements.

c. The Board shall determine that a charter holder is "high risk" if the default measure received a rating of "below standard" based on the most recent audit conducted under R7-5-504 due to the charter holder's failure to make required payments; and

3. Assign the charter holder a probation risk level using the charter holder's results based on the two most recent audits conducted under R7-5-504 and the criteria set forth in Table 2.

I. A charter holder assigned to probation risk level one under subsection (H)(3):

1. Shall be subject to charter oversight specified in Article 6, including a consent agreement with the Board or charter revocation proceedings, or, if applicable, to the denial of renewal under R7-5-301(I);

2. Shall be required to attest, within 30 days of the date of the written notice provided under subsection (L), using the form available on the Board's web-based interface, to the following:

a. The charter holder's board or, if applicable, the charter school's governing body has considered the written notice, provided by the Board under subsection (L), that the charter holder does not meet the Board's minimum financial performance expectations after having been placed "On Probation" and has been assigned to probation risk level one, along with the associated consequences;

b. The charter holder's board or, if applicable, the charter school's governing body and management understand that, due to the charter holder's assignment to probation risk level one, the charter holder will be placed on a subsequent agenda for the Board to meet and determine whether to approve a consent agreement with the charter holder or to pursue revocation proceedings or, if applicable, denial of renewal;

c. Management has identified and the charter holder's board or, if applicable, the charter school's governing body has considered the factors that caused or contributed to the charter holder's financial performance in the audited fiscal year;

d. Management and the charter holder's board or, if applicable, the charter school's governing body have reviewed the charter holder's current financial plan and approved any necessary changes; and

e. Management and the charter holder's board or, if applicable, the charter school's governing body shall at least quarterly review the charter holder's current performance under the Financial Performance Framework; and

3. Shall be required to submit the quarterly financial reports required under R7-5-511(A) by the deadlines identified in R7-5-511(B).

J. A charter holder assigned to probation risk level two under subsection (H)(3) shall be required to:

1. attest, within 30 days of the date of the written notice provided under subsection (L), using the form available on the Board's web-based interface, to the following:

b. The charter holder's board or, if applicable, the charter school's governing body and management understand that should the charter holder be placed "On Probation," based on the next audit conducted under R7-5-504, the charter holder shall be subject to charter oversight, which may include a consent agreement, charter revocation proceedings or, if applicable, denial of renewal;

d. Management and the charter holder's board or, if applicable, the charter school's governing body have reviewed the charter holder's current financial plan and approved any necessary changes; and

2. submit the quarterly financial reports required under R7-5-511(A) by the deadlines identified in R7-5-511(B).

K. A charter holder assigned to probation risk level three under subsection (H)(3) shall be required to:

1. Attest, within 30 days of the date of the written notice provided under subsection (L), using the form available on the Board's web-based interface, to the following:

b. The charter holder's board or, if applicable, the charter school's governing body and management understand that, should the charter holder be placed "On Probation," based on the next audit conducted under R7-5-504, the charter holder shall be subject to charter oversight, which may include a consent agreement, charter revocation proceedings or, if applicable, denial of renewal;

d. Management and the charter holder's board or, if applicable, the charter school's governing body have reviewed the charter holder's current financial plan and approved any necessary changes; and

2. Submit the quarterly financial reports required under R7-5-511(A) by the deadlines identified in R7-5-511(B).

L. For each charter holder identified as "On Probation" and, therefore under subsection (G) that does not meet the minimum financial performance expectations, Board staff shall notify the charter holder in writing of:

1. The probation risk level assigned to the charter holder under subsection (H)(3);

2. The student count visit required under subsection (N);

3. The submission requirements associated with the charter holder's probation risk level; and

4. The deadline or deadlines for submitting, to the Board, the information identified in subsection (L) (3).

M. Board staff shall report the following to the Board at a public meeting:

1. The probation risk level assigned to each charter holder identified as "On Probation" and, therefore under subsection (G) that does not meet the minimum financial performance expectations; and

2. The detail underlying the probation risk level determination for each charter holder assigned to probation risk level one.

N. Subject to the provision set forth in subsection (N)(1), for each charter holder identified as "On Probation" and, therefore under subsection (G) that does not meet the minimum financial performance expectations, Board staff shall visit each school operated by the charter holder to conduct a physical count of students and compare the information observed and obtained onsite with the number of students reported to the Department.

1. Should extraordinary circumstances preclude Board staff from completing one or more site visits, Board staff shall:

a. Report to the Board at a public meeting the specific extraordinary circumstance and the number of site visits affected;

b. Propose an alternative method for conducting the site visits, request a waiver of one or more site visits, or both; and

c. Provide at least five days' public notice of the Board meeting identified in subsection (N)(1)(a).

2. Time permitting, Board staff may visit each school operated by a charter holder that has been assigned, under subsection (F), a summative financial performance rating of "Intervention" based on the most recent audit conducted R7-5-504.

O. "Improvement plans," for the purpose of A.R.S. § 15-183, shall include:

1. The first four quarterly financial reports, including the June 30 quarterly financial report, and, if applicable, the attestation submitted to the Board by a charter holder assigned to probation risk level one based on scenario 1, scenario 2, scenario 3, scenario 4 or scenario 5 as set forth in Table 2.

2. The first eight quarterly financial reports, including the June 30 quarterly financial reports, and, if applicable, the attestations submitted to the Board by a charter holder assigned to probation risk level one based on scenario 6 as set forth in Table 2.

P. In general, Board staff does not grant extensions for financial submissions as the Board has an interest and duty to timely review these submissions to better understand the charter holder's current financial status. However, if the deadline has not passed, Board staff may, for good cause, grant the charter holder an extension of time to submit the information pursuant to subsections (F), (I)(2), (J)(1), (K)(1), R7-5-509(B), R7-5-509(E) or R7-5-511(B). A charter holder seeking an extension of time must submit the request in writing and include the reason(s) for the request.

Q. If a charter holder fails to submit or fails to timely submit by the specified deadline the attestation required by subsections (F), (I)(2), (J)(1) or (K)(1), Board staff shall:

1. Provide written notice to the charter holder that includes the reason for the finding and provides a three-day window for the charter holder to submit the attestation.

2. If the charter holder does not submit the attestation to the Board within the window identified in subsection (Q)(1), note the charter holder's failure on its operational performance dashboard and provide written notice to the charter holder of the deadline by which the attestation must be received to avoid charter oversight as specified in Article 6.

R. If a charter holder assigned a summative financial performance rating of "Intervention" under subsection (B)(3) or a charter holder identified as "On Probation" and, therefore, under subsection (G) does not meet the minimum financial performance expectations fails to timely submit its next audit conducted under R7-5-504, Board staff shall report the charter holder's intervention status to the Board when the Board considers action under R7-5-504(E).

Ariz. Admin. Code § R7-5-402

New section made by final rulemaking at 23 A.A.R. 693, effective 5/6/2017. Amended by final exempt rulemaking at 25 A.A.R. 1926, effective 7/8/2019. Amended by final exempt rulemaking at 26 A.A.R. 3245, effective 11/20/2020. Amended by final exempt rulemaking at 27 A.A.R. 1423, effective 9/30/2021. Amended by final exempt rulemaking at 28 A.A.R. 3492, effective 10/17/2022.