Arkansas EFA Microschool Budget Rules: ClassWallet, Act 920, and the 75/25 Spending Limit

A lot of Arkansas parents discover, after they've already started planning their microschool or learning pod, that spending EFA funds incorrectly is easier than it sounds — and the consequences are serious. Misallocated funds trigger audits, clawbacks, and potential removal from the program. Understanding the current rules before you open ClassWallet and start paying vendors is one of the most important things you can do as a pod founder.

Here's what you need to know about the Arkansas EFA budget framework in 2026, including the changes introduced by Act 920 that most online guides still haven't caught up with.

What the EFA Funds Can Be Used For

Each eligible Arkansas student receives roughly $6,800 in Education Freedom Account funds for the 2025–2026 school year — money that flows through the ClassWallet platform and is disbursed only to pre-approved vendors. You don't receive a direct cash transfer; instead, you make purchases through the ClassWallet marketplace or submit reimbursement requests to approved providers.

Allowable core academic expenses include:

• Curriculum and instructional materials
• Tuition paid to private schools, microschools, and learning pods registered as EFA service providers
• Direct instruction from approved tutors or facilitators
• Required norm-referenced testing
• Educational software and apps
• Textbooks and essential supplies directly tied to instruction

These are the categories that must account for at least 75% of your student's EFA funds under the rules introduced by Act 920 in 2025.

What Act 920 Changed: The 75/25 Rule

Before Senate Bill 625 was signed into law as Act 920, EFA spending rules were considerably more flexible. Families were using state funds for horseback riding lessons, gym memberships, and other enrichment activities that legislators deemed non-academic. That flexibility is gone.

Under Act 920, no more than 25% of a student's annual EFA balance may be spent across these four combined categories:

1. Transportation to and from educational activities
2. Extracurricular programs and activities
3. Physical education classes and equipment
4. Field trips

This 25% cap is aggregate — it's not 25% per category. If you spend 15% on a shared transportation van and 12% on extracurricular activities, you've already exceeded the cap before a single field trip is purchased.

For a microschool or pod pooling funds from multiple students, this matters enormously when budgeting shared expenses. A van shared among six students might seem trivial per family, but if you're not tracking allocation per student account, you can inadvertently push individual students past the cap.

If a student's account exceeds the 25% non-core limit, the state can require repayment of the overage. Track this at the student level, not just the pod level.

How ClassWallet Works for Microschools

ClassWallet is the state-mandated financial platform through which EFA funds are stored and disbursed. Your microschool or pod must be listed as an approved EFA service provider in the system before families can pay you through it.

When a family wants to pay your pod for instruction, here's what happens:

1. The family logs into ClassWallet and selects your school or pod as a vendor.
2. They initiate a payment or approve an invoice you've submitted.
3. ClassWallet releases the funds to your registered business bank account (typically within a few business days).
4. The transaction is logged and visible to ADE auditors.

Every invoice must correspond to an approved expense type. Invoices that lump together academic and non-academic costs — for example, a single monthly fee that includes both instruction and field trips — are difficult to audit and should be avoided. Issue separate invoices for separate expense categories so each one maps cleanly to an allowable line item.

Who Qualifies as an Approved EFA Vendor

The ADE distinguishes between three types of EFA service providers. Which tier your microschool falls into affects your application requirements and what you're allowed to bill for:

Full-Time Student-Facing Providers (Microschools and Private Schools): These are pods or schools providing the majority of a student's instructional program. They face the most rigorous application requirements — including proof of a surety bond, employee fingerprinting, and a plan for administering ADE-approved norm-referenced testing annually.

Part-Time Providers (Tutors and Therapists): These providers deliver supplemental instruction in specific subjects. Requirements are lighter, but they cannot bill for a student's core instructional hours.

Retail Vendors: Strictly product-based (curriculum publishers, supply stores). Not applicable to microschool founders.

If you're running a pod where a hired facilitator delivers most of the daily instruction, you almost certainly fall into the Full-Time Student-Facing Provider category — meaning the more rigorous compliance path applies to you.

Common Budgeting Mistakes Microschool Founders Make

The two most common errors that result in fund clawbacks or audits:

Miscategorizing transportation as instruction. Driving to a science museum or a co-op meeting is transportation, not direct instruction. Even if the field trip itself has academic value, the transport cost falls in the 25% bucket.

Pooling expenses without per-student allocation tracking. When six families share a pod, it's tempting to split every shared expense equally and record it as a single line item. But EFA compliance is tracked per student account, not per pod. Each student's ClassWallet account must show that their individual 75/25 split is within limits.

A simple spreadsheet that tracks each student's cumulative academic vs. non-academic spend against their individual EFA balance is the minimum documentation you should maintain. During an audit, the ADE will want to see this broken down by student — not just your aggregate pod financials.

If you're building an Arkansas microschool or learning pod and want a complete framework for navigating the EFA vendor application, ClassWallet invoicing, and Act 920 budget compliance, the Arkansas Micro-School & Pod Kit includes an Act 920 budget allocator specifically designed to track the 75/25 split per student.

Approved vs. Non-Approved Vendors: How to Check

Before committing to any curriculum or service provider, verify their status in the ClassWallet marketplace. Not every Arkansas-based tutoring service or curriculum vendor has gone through the approval process, and paying an unapproved vendor — even for a legitimate academic service — can result in a disallowed expense.

If a service you want to use isn't in the ClassWallet system yet, the vendor can apply to become an approved provider. This is especially relevant for local tutors and smaller curriculum publishers who are excellent resources but haven't yet navigated the state registration process.

The ADE maintains a public list of approved providers on the DESE website. Cross-referencing this list before each new enrollment or purchase is a basic due-diligence step that many new pod founders skip.

The Bottom Line on EFA Budget Management

Running an Arkansas microschool on EFA funds is financially viable and legally straightforward — as long as you keep the 75/25 rule front of mind, invoice correctly through ClassWallet, and maintain per-student spend documentation. The risks aren't hypothetical: Act 920 was passed specifically because families were using the funds for non-academic expenses, and the state now has both the audit authority and the political motivation to enforce the rules.

Build your budget framework before you open your doors, not after your first semester of invoices. The compliance infrastructure is unsexy, but it's what protects your families' funding and your pod's ability to operate.

For the complete operational toolkit — including EFA vendor application checklists, ClassWallet invoicing templates, and the Act 920 budget allocator — visit the Arkansas Micro-School & Pod Kit.

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