The Charter School Industry: Is This Business Model Appropriate?

• In Event: Current Topics in Nonprofit Accounting

Abstract

Charter schools are elementary, middle, and high schools that receive state and federal public monies but operate as private entities. Through use of Internal Revenue Service (IRS) 990 data, this study examines charter school finances to explore whether charter schools are using the appropriate reporting model based on their revenue sources. Charter schools are privately operated, akin to a business model compared to traditional public schools. The study uses resource dependency theory as a theoretical construct to confirm that charter schools are dependent on governmental funding sources.
Based on reviewing charter school IRS 990 forms submitted between 2002 and 2013, this study finds that most charter schools in the sample receive more than 96% of their funding from government sources. The study uses logistic regression to explore the open versus closed schools using Tuckman and Chang’s indicator variables for financial vulnerability. Additional variables are investigated contributing to a model to predict failure (closure). Finally, the study uses a sample of Ohio schools to explore whether independently operated schools are more likely to close than schools operated by not-for-profit and for-profit management organizations. The study finds that additional financial variables, beyond those reported in the not-for-profit financial vulnerability literature, assist in developing a model to predict charter school success versus failure.

Authors

• Chevonne Alston, The University of Mississippi

• Dale L Flesher, The University of Mississippi