Monday, May 11, 2015

Charter Fraud: Tip of the Iceberg

In April, the Alliance to Reclaim Our Schools and the Center for Popular Democracy released their looks-like-it's-becoming-annual report on charter school fraud. The Tip of the Iceberg: Charter School Vulnerabilities to Waste, Fraud, and Abuse has several points to make and some numbers to throw around, but the major point is, "Wow! Many charters abuse the system something fierce."

The report sorts the various reports of fraud that they've cataloged into six varieties.

Operators using fraud for personal gain.

This is good, old-fashioned "I'm going to dip into the company cash register fraud. Examples include Masai Skiefs of the Harambee Institute of Science, who helped himself to $88K for, among other things, a house down payment. He was a slacker compared to the Pierces, of Minnesota's Right Step Academy, who paid for a Caribbean vacation, $11,125 worth of Timberwolves season tickets, and almost $18K of credit card debt.

School revenues used to support other operator businesses.

This would include the Philadelphia charter operator who used a half a million in tax dollars for his school to help keep his restaurant and health food store in business. Or the Florida charter director who used $750K from his school to finance his apartment complex.

These are really fine examples of the charter philosophy that says, "That money doesn't belong to the taxpayer-- it belongs to the child. And once the child enrolls in the school, the money belongs to me." This is the bold entrepreneurial spirit run amuck.

Mismanagement that puts children in actual danger.

In all fairness, this is more like "not following state regulations to insure safety of children." Less common, but still concerning. Take the two Ohio charters that were shut down by the state because, among other things, they were not feeding the students. Or the Paterson NJ charter in which 75% of the staff never passed a background check.

Charters requesting public funds for services not provided.

Ah, good old-fashioned fraud. Just charge the government for things you never did. California's Cato School of Reason Charter School managed to soak the state for millions of dollars for students who were actually attending private school elsewhere. In Minnesota, the Community School of Excellence Charter School had its students attest to lunches that they did not eat so that the school could be reimbursed for them. Not providing mandated special ed services is also a popular twist on this trick.

Boosting Enrollment

Sort of a special subcategory of the previous scam, this is billing the government for students you just don't have. Success Academy in Minnesota was found to have overbilled the taxpayers over $600K. The report cites schools in Florida, Pennsylvania, and California that listed enrollment over and above the number of students actually in evidence.


Keeping books for a school is hard, but many states don't require charter operators even to prove they can balance their own check book (Hey, remember that time New York authorized a twenty-two year old who hadn't even finished college to run a charter school?)

The report has appendices full of more specifics-- and this is just the stuff that made it into official paperwork of charges, convictions, or state direct orders to pay money back.

The grand total of charter waste and fraud is now over $200 million dollars. The more sexy number that made it into the papers is $1.4 billion in the next year, but that's a bit of grandstanding-- the report uses a methodology from the Association of Certified Fraud Examiners, and the methodology is to look at the grand total and assume that 5% of it will end up drained by fraud. So that's not exactly a rock-solid number.

But the $200 million? That's a real number, and simply it only includes what has been proven by or admitted to authorities, I feel comfortable believing that there's a heck of a lot more money than that involved. And that's before we get to all the perfectly legal methods that charters can use to bilk the taxpayer (lease a building to yourself, anyone?).

That is over $200 million dollars drained away from public schools. That is over $200 million that public schools didn't have to buy supplies, hire staff, maintain buildings, and keep from raising taxes. That is $200 million dollars taken from taxpayers.

The longer the modern charter movement continues, the more instances of misbehavior come to light and the more obvious it becomes (even and especially to the non-fraudster charter operators) that the charter sector needs-- at the very least-- to be more tightly regulated and controlled.

The charter industry will push back against that, as they have pushed back against every attempt to inhibit their ability to just roll in piles of money freely, answering to nobody. In fact, word on the street is that a brand-new Education News Service is about to be launched. It will employ actual professional reporters, but they will be employed only after signing a pledge that they will cast a critical eye only on public schools and never on charter schools. So there's that to look forward to.

But in the meantime, check out this report, and read up on the many, many ways that charter scam artists make themselves rich and their industry look bad all at the same time.

1 comment:

  1. And then there's the stuff that's perfectly legal and not considered fraud at all, like the various outrageous sale-leaseback deals between charters and their management companies.