The U.S. Department of Education (ED) has pledged to tighten controls of its quarter-billion-dollar-a-year charter schools program—a program repeatedly criticized by the Office of the Inspector General (OIG) for waste and inadequate financial controls, as CMD has helped document in this special report series [3].

Just last year, ED required that states applying for grants in 2015 submit a plan on how they are going to hold charter schools and their authorizers accountable. This provision made its way to a bipartisan bill [4], introduced in April this year by Senators Patty Murray (D-WA) and Lamar Alexander (R-TN), which requires that states explain how authorizers are held accountable when applying for funding. But as long as their applications are primarily evaluated based on how little control they have over the charter schools, paying lip service to accountability is unlikely to stem the flow of millions going into corporate coffers with no public disclosure.

The tally of charter school fraud, aided and abetted by the "flexibility" promoted by ED, stands at $200 million in 15 states alone—a figure that is likely just the "tip of the iceberg," as the Center for Public Democracy pointed out in a 2015 report. [5] And worryingly, the new "accountability" provision is likely to prove just as toothless as prior pledges to the same effect.

In fact, state applications, as CMD has shown [6], have literally received the highest possible marks for a putative commitment to holding charters accountable despite the fact that they had no authority whatsoever to monitor charter schools spending.

This Orwellian formula in which no accountability translates to full accountability (and the highest score possible) can be chalked up to the fact that ED recruits its reviewers [3] from within the charter school industry—an industry that has been fighting tooth and nail to dismantle even the semblancce of safeguards.

State oversight, charter school advocates argued in dozens of public comments to the new 2014 rules, is anathema to the idea of charter schools. But they failed to mention that this "idea," which is taken straight out of the ALEC playbook [7], lends itself to fraud and waste.

Charter Schools Use Their Growing Power to Push Back on Controls

Here is a snapshot that reveals how charter school associations, authorizers, and state departments of education divisions captured by pro-charter advocates have reacted to federal efforts to seek more accountability:

• The California Department of Education: “We strongly recommend that Selection Criteria (g) [i.e. “Oversight of Authorized Public Chartering Agencies”] be removed from the requirements or given a very low value in the scoring process. This criterion assumes that authorized public chartering agencies are providing inadequate or ineffective oversight and that SEAs have the statutory authority to monitor, evaluate, and hold accountable the public chartering agencies.”
• The National Association of Charter School Authorizers argued that states with “high-quality” authorizers should not be required to exercise any oversight of these: “Quality authorizer oversight in this context may be limited to transparent reporting by the authorizers on their practices and the quality of their portfolios … with little direct involvement from the state in the authorizers’ work.”
• Ohio Department of Education: “Ohio’s policy is grounded in the principle of autonomy [and] independence of action.” “Ohio strongly recommends that authorizer diversity, including the authorizer’s ability to apply its judgment and discretion to contracting decisions be regarding as a strength, not a deficiency.” The system relies on “authorizers holding themselves accountable.”
• The Michigan Council of Charter School Authorizers assured the OII that state authorizers authorize themselves through a self-imposed accreditation system. “This system improves accountability and authorizing practices while allowing authorizers to retain autonomy to make independent decisions.”
• The Illinois State Board of Education argued that authorizer accountability should be downplayed; instead the focus should be on a “diverse” team of players, including authorizers and for-profit management companies.
• National Alliance for Public Charter Schools: The organization recommends “Revisions to authorizer oversight selection criteria that may impede the development of new, innovative charter school models.”
• D.C. Public Charter School Board: “We ask that the NPP be modified to allow PCSB to continue its successful practices, and, more broadly, to provide authorizers flexibility in their approach to addressing important equity and fiscal issues. Moreover, we believe that adding school-specific objectives in these areas may infringe on charter school autonomy as well as create unnecessary reporting burdens on the schools.”
• Charter Schools Development Center: “First, the proposed priorities favor a very strong SEA role in driving both (1) statewide charter school strategy and (2) authorizer quality and oversight. This approach does not align to many states’ laws or context, including California’s, where the state charter statutes were purposefully drafted to minimize the SEA’s role in the charter school sector.” “[W]e suggest deleting this third priority in its entirety.”

Other Examples of How the Charter Industry Tries to Strong-Arm State Officials that Dare to Hold Them Accountable

CMD’s open records requests to states have resulted in some illuminating exchanges illustrating how charters and their authorizers are flexing their muscle with state authorities in an effort to wrest even more power from the hands of politically accountable officials.

For example:

• Utah:  Last year, Bryce Adams, Senior Director of State Relations at the Connections Academy chain of online charter schools, exerted pressure on Utah school officials. When the state tightened its regulations by prohibiting schools from outsourcing their student records to third parties, Adams submitted a corporate line-by-line rewrite of the law [8]. He also issued a warning: if the law is not changed, “student achievement” will suffer. From 2012 to 2014, Utah Connections Academy received $643,792 in federal funds, according to state receipts reports.

How much public money underwrote the Academy’s lobbying—or that of other charter operators—to prevent regulation of how public money is spent is unknown.

• New York State: When the payment for a CSP grant for a new charter school in upstate New York was delayed last year amid serious concerns [9] that a school subcontractor owed more than $25,000 in unpaid wages, the head of the school, Finn Academy, reached out to the State Education Department by phone, and became—in the words of an official—“abusive [10].”

  A supervisor had to tell her staff to “work via email only with HER.” As if this were not enough, the Director of School Applications at the State University of New York’s Charter School Institute, the school authorizer, emailed the Department “with a potentially annoying question. [11]” He wanted to get the ball rolling and the money to be paid out with no delay.

  Finn Academy is still set to open its doors in August 2015, although the head of that charter has given assurances that the subcontractor in question will not be used.

• Colorado: In 2013, Children’s Kiva Montessori in Cortez, CO, was awarded a $189,000 start-up grant under the federal CSP program. In October 2014, a former business manager at the school sounded the alarm in an email to the Colorado Department of Education:  “I’d like to pass-on some thoughts on what criteria you want to consider when evaluating future charter school applications: Does anyone directing the school actually have some knowledge about federal and state employment laws?” he wrote. He then listed some of the violations he had encountered [12]:

They had no means to actually process and pay a payroll. The CCSP Grant that had been approved is a reimbursement grant and they only had $1,000 +/- in the bank.

They had not applied-for a Colorado Tax ID.

They had not applied-for a Colorado Unemployment Insurance Account.

They did not have a PERA Account.

They did not have an Employers Liability (Workers Comp) Insurance Policy.

The Grant Manager with the Colorado Department of Education replied that this “is not typical or appropriate,” and went on to send an email to the Colorado League of Charter Schools as “potential feedback … to consider for your quality criteria document.“

The program manager with the Colorado League of Charter Schools wrote back, demanding that she “rescind the statement …  ‘you are right that the arrangement you outlined below is not typical or appropriate.’”

She went on to say that the business manager was let go for mismanagement, and that he was the one in charge of implementing the processes he complained of.

She later added: “some of this may not be out of the ordinary, especially depending on the exact wording that covers these areas contractually. Charters are always so interesting!”

Conclusion

Charters are more than “interesting.” The anti-regulatory environment surrounding their operations and the lack of real consequences for a stunning array of unaccountable spending of public tax dollars are astonishing and must be reformed.

CMD's review of audits and open records material reveals a deep fault line between, on the one hand, the pious pledges by lawmakers and the U.S. Department of Education that charter schools and their authorizers be held accountable, and, on the other hand, the reality on the ground.

The charter schools program was not designed with accountability and transparency in mind. Quite the contrary. It was created to provide incentives for states to create a separate system of schools that are exempt from state oversight, and do not answer to locally elected school boards. States are judged based on how much "flexibility" charter achools and authorizers are enjoy. It is true that they must also pay lip service to "accountability," but this rubric is rubber stamped by reviewers recruited from within the charter school industry. And once a state has been awarded tens on millions, it is then monitored for compliance by a company with close ties to the charter industry.

Patchwork provisions did not change things in the past; they are unlikely to do so now. Until the charter schools program receives a complete ovehaul, a moratorium on charter funding—rather than a 48 percent increase—is warranted.

This is the fifth instalment in a CMD special report on waste and lack of accountability in the quarter-billion-dollar-a-year federal chart schools program. Click here for part 1 [13], part 2 [6], part 3 [14] and part 4 [3]. This serialized version expands on the original report [15] as new findings have come to light.