In The Public Interest Releases New Report on Widespread Financial Mess in California Charters

Today’s subject is the charter school sector in California, a microcosm of widespread problems with charter schools across the states. Many of us are missing the seriousness of the charter school scandal across the United States. Because education is governed pretty much by the state constitution, activists are in the habit of following the education news in their own state and assuming that schools elsewhere are the problem of that other state. This all makes it very easy to ignore the scope of violations of students’ rights and the amount of tax dollars being stolen by unscrupulous charter school operators. Reading about what’s happening in another state’s charter schools helps one grasp that problems of charter schools are widespread.*

Yesterday, In the Public Interest (ITPI) published Fraud and Waste in California’s Charter Schools, a fine new report clarifying the magnitude of charter school problems in California: “A modern gold rush continues to sweep California. Charter schools, which are publicly funded but privately operated, have increased in number by more than 900 percent in the past two decades to over 1,200 schools today, the most in the nation. Charter school funding (in California), including local, state, and federal expenditures, now tops $6 billion annually—this on top of the hundreds of millions of public dollars and publicly subsidized funds the state’s charter schools receive each year to lease, build, or buy buildings.”

And it is not only that money flows out of the public schools to fund privatization, but also that charter schools in California—as in many other states—are poorly regulated: “Despite this substantial investment, governments at all levels are unable to proactively monitor (for fraud and waste) the private groups that operate charter schools…. Most public school districts aren’t given adequate resources to oversee operators, especially large charter management organizations (CMOs), while all lack the statutory authority to effectively monitor and hold charter schools accountable.”

ITPI’s new report identifies three categories of fraud and waste:

  • “The most straightforward type of charter school fraud is the illegal practice of using public funds directly for personal gain.”  For example, the founder of the Celerity Education Group in Los Angeles used public dollars to buy luxurious meals, hotel stays, limousine trips and salon visits.
  • “Some charter school operators have used public funds to illegally support their own personal businesses.”  For example, the Bay Area’s Tri-Valley Learning Corporation was discovered covering up conflicts of interest, misappropriation of funds, and weak internal financial controls that allowed the CEO to divert $2.7 million without any record of the spending.
  • Finally there is widespread basic mismanagement. Beacon Classical Academy eventually lost its charter for failure to educate students, faulty financial audits, violations of the open-meeting-law, and fire code violations.

Despite that California’s legislature has “made limited attempts to increase oversight,” there are not nearly enough auditors to monitor charter schools for fraudulent financial practices, and state officials lack adequate authority for investigation unless serious violations have been alleged. Charter school operators are able to manipulate regulations to limit transparency. In California local school boards or country boards of education function as charter school authorizers, but if a school district or county board rejects a charter school application, state law permits the California State Board of Education to overrule the local agency’s decision.

ITPI’s report lists individual schools that have been caught, punished or closed in each category—turning public money into personal gain, self-dealing, and mismanaging public money and schools.  The report also includes an appendix that identifies the name of each charter school, its location, and the amount of money stolen or misspent.

Last November’s report from the Network for Public Education (NPE) is a wonderful companion to ITPIs new report. The early chapters in Charters and Consequences describe NPE Executive Director, Carol Burris’s visits to California to investigate abuses by charter schools. Her stories describe not only financial mismanagement and fraud by currently operating California charter schools but also educational malpractice—drop-in centers in strip malls where even 12-year-old students stop by occasionally to talk with their supposed teachers—and tiny school districts that sponsor satellite drop-in schools in far away urban school districts (that are never informed about the siting of these charter schools within their school district boundaries) in order to tap into funds California awards to sponsors for what is assumed will be oversight. Oversight, however, is what is lacking; nobody is looking out for the needs of students or for the interests of California taxpayers.

ITPI’s Fraud and Waste in California’s Charter Schools concludes: “Only the tip of the iceberg is visible, but this much is known: total alleged and confirmed fraud and waste in California’s charter schools has reached over $149 million.”

*Here is the question that comes up every time we talk about charter schools.  Aren’t charter schools really a kind of public school? The answer is NO.  Charter schools are a form of private contracting by a state or state-approved charter school authorizer. Even if your school district is the authorizer, your school district is contracting with a private provider with its own privately appointed board of directors. Proponents of charter schools try to BRAND charter schools as “public charter schools,” and they justify the branding with the fact that charter schools are funded largely with tax dollars. But the tax dollars are always paid to a private operator. That operator may be nonprofit or for-profit, but even if it is a nonprofit, it may well be subcontracting the operation of the school to a for-profit. By definition, however, charter schools are a form of private contracting. Someone other than a public school district is basically hired to run the charter school.