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Steel City Academy

A new financial audit questions the ability of Steel City Academy, a charter school located in Gary, to continue as a going concern due to spending exceeding revenue and liabilities exceeding assets.

GARY — A top-rated Gary charter school is planning to begin its fourth year of classes next month, despite financial issues identified in a new audit that questions the school's ability to continue as a going concern.

Steel City Academy ended the 2017-18 budget year with a deficit of $104,504, due primarily to school spending exceeding revenue by $220,764 during the 2016-17 budget year, according to the audit released through the State Board of Accounts.

The audit also noted that the school's liabilities exceeded its assets by $464,000 as of June 30, 2018, including more than $240,000 owed to government agencies for payroll taxes withheld from employee paychecks but not remitted as required.

"These factors contribute to a heavy burden of current obligations that the school does not have liquid assets to pay, which therefore raise substantial doubt about the school's ability to continue as a going concern," according to Avon, Indiana-based auditing firm Donovan.

In response, school officials said they're focused on growing student enrollment to approximately 600 from 443, which will increase revenue; seeking additional support from donors; requesting newly available state grant funds; and renegotiating contracts to reduce expenses.

"Many schools early-on face these challenges," said Katie Kirley, Steel City Academy executive director and principal.

"We're incredibly optimistic, particularly with these additional revenue sources that we'll be eligible for, as well as our continued ability to meet enrollment projections and growth every single year."

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Kirley attributed the failure to remit payroll taxes to early turnover in the school's finance department that was "fixed immediately" through a payment plan once it was discovered.

"That's not something that's holding us back moving forward," she said.

James Betley, executive director of the Indiana Charter School Board that oversees Steel City Academy, agreed the "A"-rated school serving students in kindergarten through second grade and grades seven-12 likely will open in August.

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But Betley said that will depend on school officials demonstrating this month that they have satisfactory plans to remedy their financial deficits and address the structural conditions that produced them.

"Our primary concern, obviously, is the welfare of the students and the school, and if it does appear to us that they would not be able to continue throughout the entire school year, not just one semester, we would not let them open at all — but we're not there yet," Betley said.

"They're in a better place now," he added. "They need to make their program overall more efficient, and they need to have the internal controls in place to make sure they're being responsible with their spending."

Records show the state charter school board previously has used its authorizer power to close more than a half-dozen charter schools that failed to meet academic or financial standards.

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