More on How Charter Schools Profit from Tax Dollars and Undermine Host School Districts

Recent weeks have brought a lot of press about the way charter schools are undermining public school districts and diverting tax dollars allocated for education too often to for-profit companies.  Capital & Main in California just published a week-long expose explaining how rapid expansion of charters threatens the financial stability of the Los Angeles and Oakland school districts. The Salt Lake Tribune editorialized against for-profit charters after that newspaper’s scathing investigation explained how, “A handful of private companies have banked more than $68 million from Utah taxpayers over the past three years.”  And in Ohio, after the legislature ended its spring 2016 session without considering an excellent law that would have required the notorious cyber charters to prove that the students the state is paying for are actually participating in the online program, the Columbus Dispatch editorialized: “The idea was that if student outcomes improved in charter schools, then the schools would continue… But the straightforward experiment went off the rails when some clever operators figured out how to get rich by sponsoring charter schools.  And to keep the gravy flowing, they began making major political contributions to the lawmakers who control the gravy.”

This is the context in which the Center for Popular Democracy has just released its third annual report, Charter School Vulnerabilities to Waste, Fraud, and Abuse: “Two years ago, the Center for Popular Democracy issued a report demonstrating that charter schools in 15 states—about one-third of the states with charter schools—had experienced over $100 million in reported fraud, waste, abuse, and mismanagement since 1994.  Last year, we released a new report that found millions of dollars of new alleged and confirmed financial fraud, waste, abuse, and mismanagement in charter schools had come to light, bringing the new total to $203 million.  This report offers further evidence that the money we know has been misused is just the tip of the iceberg. With the new alleged and confirmed financial fraud reported here, the total fraud, waste, abuse, and mismanagement in charter schools has reached over $216 million.”

The new report examines fraud and mismanagement across the states and explains that, “State oversight systems are currently reactive by design. While states do require that charter schools submit budgets, financial reports and independent financial audits, most do not proactively monitor for fraud, waste, mismanagement, or other financial abuses.”  The Center for Popular Democracy recommends that charter schools be required to institute internal fraud risk management assessments and that oversight agencies like state comptrollers’ offices should regularly audit charter schools.

Of course a huge problem is that charter schools are established and regulated in state law, and experience tells us that political pressures and financial contributions to state lawmakers have exacerbated the states’ failures to oversee charter schools in the public interest. It is for this reason that the Center for Popular Democracy recommends that the U.S. Department of Education should make the awarding of enormous federal grants to states for the expansion of charter schools contingent on states’ passage of laws to strengthen oversight: “Taxpayers invest billions of education dollars in charter schools, yet states offer too few protections to ensure that those taxpayer dollars are benefitting students.  Therefore, we recommend that federal funding for charter school education should flow only to states that have… taxpayer protection provisions in place for their charter schools.”

The new report once again points to failed federal regulation of the federal Charter Schools Program. “The federal government alone has contributed over $3.3 billion through several grant programs specifically designed to increase the number of charter schools in the United States.  With the recent passage of the Every Student Succeeds Act (ESSA), the federal government has signaled its plan to spend another $3.3 billion over the next 10 years, which would double the federal investment in charter schools.”

And yet, according to Center for Popular Democracy’s new report, “In 2010, the U.S. Department of Education’s Office of Inspector General (OIG) issued a memorandum to the Department of Education’s Office of Innovation and Improvement.  The OIG stated that the purpose of the memorandum was to ‘alert you of our concern about vulnerabilities in the oversight of charter schools.’…  In September of 2012, the OIG audited the Department of Education’s Office of Innovation and Improvement’s (OII) Charter Schools Program and found that OII did not adequately monitor the federal funds.  Specifically, the audit report states that: ‘We determined that OII did not effectively oversee and monitor the SEA (State Educational Agencies) and non-SEA grants and did not have an adequate process to ensure SEAs effectively oversaw and monitored their subgrantees.  Specifically, OII did not have an adequate corrective action… process in place to ensure grantees corrected deficiencies noted in annual monitoring reports, did not have a risk-based approach for selecting non-SEA grantees for monitoring, and did not adequately review SEA and non-SEA grantees’ fiscal activities.'”

In other words, the U.S. Department of Education has been giving billions of dollars to states to promote the expansion of charter schools and to other charter school sponsors without any kind of adequate tracking of how the money is being used.  This allegation is  certainly consistent with the findings of a new report released in Ohio last week by Innovation Ohio and the Ohio Education Association. Ohio has been a big recipient of federal Charter Schools Program Grants over the years, receiving CSP grants of $99.6 million since the 2006-2007 school year. Belly Up: A Review of Federal Charter Schools Program Grants explains that in Ohio, “At least 108 of the 292 charter schools that have received federal CSP (Charter Schools Program) funding (37 percent) have either closed or never opened, totaling nearly $30 million.” “Of those that failed, at least 26 Ohio charter schools that received nearly $4 million in federal CSP funding apparently never even opened and there are no available records to indicate that these public funds were returned.”

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