Lax policing of charter schools opens door to “epidemic of fraud, waste”

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Félix Pérez

Little is known about how charters are spending federal and state tax dollars, even as politicians continue to increase funding for them while slashing budgets for traditional public schools. And it’s that hands-off approach by elected officials that has led to incident after incident of fraud and financial abuse, according to a yearlong investigation into charter schools spending in the United States.

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The Center for Media and Democracy (CMD) investigation, based on a review of more than 20 years of federal budget data, found the federal government has spent more than $3.7 billion on its Charter Schools Program (CSP) for states. The report also uncovered that states have not provided the public with sufficient information about amounts diverted from traditional public schools to each charter getting funds.

This “black hole” of charter school funding, argued the study’s authors, is largely due to the way the charter industry promotes “flexibility” over rules. “That flexibility has allowed an epidemic of fraud, waste, and mismanagement that would not be tolerated in public schools,” wrote CMD.

CMD reviewed how much federal CSP money had been given to charters and how that money was spent in 12 states. It found that public information about funds received and spent by charters is severely lacking. It also documented spending by closed charters, and identified “ghost” schools, charters that never opened but were awarded federal grants.

Said Lisa Graves, CMD executive director:

The bottom-line is taxpayers know far too little about how much their federal tax dollars are being used to fund charters, and there is far too little information provided by states about how tax monies are being spent by charters or by for-profit firms they are tied to. Neither the federal government nor the states require charters to publish that information on their websites, and neither the federal or state governments we examined publish that information themselves. Even aside from serious questions about academic performance by charters — especially online charters — the lack of real accountability remains a real problem for kids and families, as more and more people and corporations have sought to get a piece of pie, a revenue stream from taxpayer money, to operate or assist charters.

One state recently awarded a federal charter grant, Ohio, has drawn sharp criticism. David Yost, Ohio’s state auditor, said he was “shocked” that the the U.S. Department of Education gave the state a $71 million grant. “I figured we would be a couple of years away from being able to get back into contention for federal money,” Yost said in disbelief.
charter school money

Described by experts and news media outlets alternatively as “more broken than the Wild West,” “the most troubled in the country” and “a national joke,” Ohio’s charter school system has become an albatross for presidential candidate and Ohio Gov. John Kasich. In fact, the state charter official who oversaw Ohio’s application for the federal charter grant was forced to resign this summer for rigging the grades of charter schools, thereby making them eligible for millions of taxpayer dollars.

Former Ohio Gov. Ted Strickland, an Ohio congressman and a member of the state Board of Education also questioned whether the U.S. Department of Education should trust an application from the person who intentionally altered reports to make charter schools look better.

In a letter to U.S. Secretary of Education Arne Duncan, Strickland wrote:

Not only are these poor performing charter schools undeserving of millions of additional funds, this grant to charters comes at a time when many of Ohio’s traditional  public schools are facing significant cuts and are being asked to do more with less. Surely this money could be better invested in public schools that have a proven track record of better serving Ohio students.

Among the CMD investigation findings:

  • California: Nearly 200 charters have closed, nearly one of every five that have opened. Their failures have included financial fraud, skimming of retirement funds, and financial mismanagement, material violations of the law, massive debt, unsafe school conditions, lack of teacher credentials, failure to conduct background checks, terrible academic performance and test results, and insufficient enrollment. More than $4.7 million in tax money for CSP grants went to California charters that closed within a few years.
  • Indiana: More than $2 million out of the $19.8 million in CSP funds paid  was squandered, and Indiana charter schools are heavily segregated.
  • Michigan: At least $1.7 million in federal funds was paid to 25 Michigan charter schools that never opened. Since the inception of charters in the state, 108 charters have closed, many due to lack of “academic viability” (poor results), lack of “financial viability” (such as inadequate enrollment) and some for both or other failings.
  • New York: Almost every single application for the New York subgrants was written by the same multi-million-dollar charter consultancy firm: Charter School Business Management.
  • Ohio: From 2007 to 2012, more than $4.6 million went to schools that later closed or never opened. Out of the 88 schools funded with the CSP grant money, at least 15 closed within a few years and four of them never opened.
  • Wisconsin: More than $2.5 million in CSP money was used to create charter schools that shuttered shortly thereafter. In addition to the school closings, at least one of the schools created by federal charter school money was a former religious school that has since “converted” to charter status so as to be eligible for funding.

The report also reviewed federal charter spending in Arizona, Colorado, the District of Columbia, Florida, Texas and Utah.

Reader Comments

  1. Massachusetts requires charter schools to submit finance reports to the state annually. All charter schools in the state undergo a rigorous renewal process every five years, as well as a shorter interim review every 2 to 3 years. Saying that all charter schools are part of this “epidemic of waste” is like saying that all public schools are poorly run and are failing the students of the United States.

  2. Regular public schools operate under every kind of rule and regulation imaginable. Meanwhile the public is barraged by the “failing” public school propaganda, while hearing propaganda about how charters and private schools and home schooling are all superior. The truth is that there is success and failure all over, but only one side of the story, or a very specific school is used as an example. There is a lot to this story, and no simple answers.

    1. The push for the privatization of public education gained momentum as a strategy that fit well in the right wing anti-government rhetoric that demonizes everything public sector, especially where Unions are involved.
      The current corporate domination of our legislatures at the national and state levels with their leagues of lobbyists, teams of lawyers and business experts to exert influence on policy, and their $MONEY$ to purchase elections, is just one of the multi-faceted offensives that have been underway for over 35 years now.
      It is, by now, no secret that conservative think tanks like ALEC, Americans for Prosperity, The Heritage Foundation, etc. whose well-connected, well-heeled members from Corporate America have invested significant political effort and $capital$ into political activism to turn government policy to their benefit, regardless of how those policies affect the USA worker, or the USA as a nation.
      All of this effort and capital has been an investment that has seen incredible returns on the investment as the unfathomable USA $capital$ has been consolidated to the top 1% as well as corporate profits stashed in offshore tax havens an inversion tax strategies. The $privatization$ of public education is just taking a little longer to achieve than the purchase of our Representative form of government as public opinion takes a little longer to influence, but the disingenuous narrative is certainly there, working to influence public opinion.

  3. I find this article to be one sided. Texas Charter school are required to submit funding reports just at traditional distrust are. Is there w study done and reported on the misuse of funds in traditional schools??

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