The Statements of Financial Position at 30 June 2022 and 30 June 2026 give the board its clearest single measure of position.

The operating checking account holds $47,672 — about eighteen days of expenditure. The balance of the reserve sits in a money market account opened since 2022 and in savings. Total cover is 2.6 months, against 5.2 months four years ago.

Two features of the balance sheet are favourable and should be stated. There are no borrowings — loan account 2552 is nil in both years — and the school has never carried debt. The corollary is that there is no existing credit facility to draw on if cash tightens further, and arranging one takes months rather than weeks.

The decline reconciles to the cent, which gives the board confidence that nothing is unaccounted for.

The equity section confirms the historic record precisely. At 30 June 2022, retained earnings of $213,019 plus that year's surplus of $142,249 gives $355,268 — the school's high-water mark. At 30 June 2026, retained earnings of $243,200 less this year's deficit of $78,058 gives $165,142, which matches the sixteen-year Statement of Activity exactly. Just over half of everything the school has ever accumulated has been consumed in four years.

For a governing board the distinction between a planned deficit and an overrun is the whole question, because one is a decision the board took and the other is a control matter.

In FY2023 and FY2024 the board approved deficits of roughly $50,000 and management delivered better than plan on both occasions. That is competent execution of a board decision.

FY2025 and FY2026 were approved at essentially break-even and closed $67,284 and $79,464 short. Together those two variances are $146,748 — more than 70% of the entire four-year cash deficit. They were not authorised by the budget the board approved.

Why the model held until it didn't

For eight consecutive years, FY2018 through FY2025, revenue came in above budget — by between 4.8% and 31.6%. Expenses also exceeded budget in every year from FY2020. The two offset each other and the school stayed roughly level.

The board's exposure here is specific: expenses have exceeded the approved budget in seven consecutive years and the board appears to have learned of it only after each year closed. That is a reporting-cadence matter within the board's gift to fix.

One ratio explains the deficit more completely than any other figure in the statements, and setting a limit on it is a board policy decision rather than an operational one.

Salaries and payroll costs together took $804,606 of $876,693 income in FY2026 — 91.8%, and 84.3% of all expenditure. In FY2021 the same figure was 65.5%.

That leaves about $72,000 for everything else the school must fund: curriculum, accreditation, assessment, graduation, recruitment, insurance, rent, software and payment processing. Those items cost $149,205. The gap is the deficit.

Bringing the ratio to 80% would release roughly $103,000 — more than the FY2026 deficit, without a single additional student.

Since the FY2022 peak, enrollment has fallen 24.4%. Teaching pay fell almost exactly in step. The remaining salary lines did not.

Director and assistant principal compensation rose by a combined $58,670 across the four deficit years, while teaching, recruitment and marketing salaries all fell.

The FY2026 variance against the approved budget shows the same pattern within a single year. Grouping every line by what it funds:

The largest single overruns were assistant principal salary at 191% of budget (+$32,482) and an unbudgeted bonus of $27,340. The largest underspends were teachers' salary at 95% of budget, advertising at 78% and social media advertising at 40%.

These figures describe transactions, not motives. Role changes, added duties and adjustments approved during the year may explain some or all of it, and none of that is visible in a profit and loss statement. But the pattern is large, consistent across four years, and it concerns the compensation of the officer who reports to this board. It is a matter the board must be able to explain, and it should be minuted.

The board should be clear that the enrollment position is sound by sector standards. That matters, because it locates the problem.

Measured against the last pre-pandemic year the school is 14.6% larger, while California public enrollment fell 7.0% and comparable online programmes fell 35% to 62% from their peaks. In real terms revenue is roughly 20% above its pre-pandemic level.

The board's own record confirms the same point internally: real revenue per student is 4.8% higher than before the pandemic. Pricing and yield have held against inflation.

One qualification deserves the board's attention. Christian schools nationally grew 35% over the period in which this school grew 14.6% — driven largely by state school-choice funding. The school is an approved provider in Arizona, Alabama and West Virginia, where the award exceeds full tuition, and has not marketed that position. Fifty such students at the full $4,950 would produce roughly $247,500 and convert the FY2026 deficit into a surplus.

The only expense category that generates enrollment was halved during the decline and then underspent against its own reduced allocation.

Twenty-seven additional students at current yield would close the entire FY2026 deficit.

Six items fall squarely within the board's oversight duty rather than day-to-day operations. None is an allegation; each is a control weakness that a governing board would normally want closed.

1. Expenses have exceeded the approved budget for seven consecutive years (FY2020–FY2026) and the board has learned of it after each year closed. There appears to be no in-year threshold requiring board approval for a line exceeding budget.
2. Profit and loss review alone concealed a $64,859 cash outflow. The deferred compensation paydown was correctly recorded but invisible on the P&L. The board reviews income and expenditure; it does not appear to receive a cash flow statement or a balance sheet on a regular cadence.
3. Opening Balance Equity has moved from $16,693 to $24,560. This is a QuickBooks setup account that should not change once a file is established. $7,867 of adjusting entries have been posted to it and should be closed to retained earnings so that the equity section reads correctly.
4. Accounts receivable is not recorded in the ledger. Tuition commitments are tracked in a separate database and receivables computed from it. That is a workable practice, but it means the audited balance sheet understates assets and no ageing of overdue tuition reaches the board. For FY2026 the gap between committed and collected tuition was $16,879, and the trend has moved from +9.5% to −1.9% over six years, which suggests collection is tightening.
5. Chart of accounts defects. Two rows are both named "Total Expenses", differing only in capitalisation and by roughly $90,000. Account 5345 is used twice, as Professional Development and as Cell Phone. Deleted accounts remain live, including "4111 Disability Insurance (deleted)" carrying $207,254 cumulative. FY2019 salaries were posted to Payroll Expenses rather than the salary accounts, and FY2018 contains $82,981 of "Uncategorized Expense". These make year-on-year comparison unreliable and would be raised in any audit.
6. Credit cards. Balances rose from $10,075 to $13,126 and are now 28% of the operating checking balance. Cards are held individually and one shows a credit balance of $3,472 requiring reconciliation. The board should confirm that a written card policy exists covering authorisation limits, permitted use and monthly review.

Framed as board decisions and policies rather than operational instructions, since operations are delegated. Ordered by urgency.

Two of these — the reserve floor and monthly financials including cash — cost nothing, require no operational change, and could be resolved at the next meeting. They are also the two the board would most want minuted if the position deteriorates further.

1. Sources. Twelve Budget vs. Actuals statements FY2015–FY2026 on an accrual basis; the Statement of Activity for July 2010–June 2026; Statements of Financial Position at 30 June 2022 and 30 June 2026; tuition records 2020–2026; enrollment records 2009–2026. Every annual total reconciles exactly to source, and the cash movement between the two balance sheets reconciles to $0.00 unexplained.
2. FY2014 and earlier. Records predate the current bookkeeping system. On an operating basis the period was approximately break-even (about +$6,040). A $136,000 deferred compensation obligation to the Director was accrued during those years and has since been discharged; recognising it produces the −$129,960 shown in the cumulative statement. The obligation was expensed once, on accrual.
3. FY2019 category detail is not comparable. Salaries were posted to Payroll Expenses rather than accounts 4110, 4115 and 4120. The bottom line is correct; FY2019 is excluded from all category trends.
4. Enrollment figures are school-year students, excluding summer, subject to a measurement band of roughly 3–4% arising from combined sibling billing and incomplete registrations.
5. Not an audit. This is an analysis of management accounts prepared from the records supplied. It does not test transactions, verify existence of assets, or constitute assurance. Where motive or authorisation is unknown, that is stated.