Financial oversight of public charter schools has significantly improved in recent years, but agencies monitoring the schools need to continue improving how they track contracts and enrollment verification, according to a D.C. auditor report released Tuesday.
The report recommended major changes to how the city pays charters, suggesting that payments reflect actual enrollment throughout the year rather than projected enrollment or one-time audits. It also called for the D.C. Council to consider legislation that would require private management companies to provide more information about their finances.
“Having transparency in how we use all public school dollars is critically important,” Jennifer Niles, deputy mayor for education, said in a news conference after the findings were released. “While there has been great progress and, overall, significant transparency, there is still more work to do.”
The audit examined financial documents and transactions between fiscal 2011 and 2013, monitoring the flow of more than $1.5 billion in local tax dollars. Auditors looked at a broad scope of financial oversight functions, including how the Office of the State Superintendent of Education (OSSE) certified summer-school enrollments and whether the D.C. Public Charter School Board was monitoring whether each charter school carried insurance.
Concerns about financial transparency at charter schools have been amplified in recent years, with the D.C. attorney general filing two lawsuits related to payments made to for-profit management companies that run D.C. charter schools.
In one suit, court documents show that the founder of Community Academy Public Charter School, Kent Amos, paid himself more than $1 million to lead the school via a management company. The other lawsuit involves three former leaders of Options Public Charter, a school for at-risk teens. They allegedly diverted funds to two for-profit management companies they ran.
The charter board in both cases gave schools favorable ratings for their financial performance during oversight reviews. Charter board officials said their watchdog abilities were limited because they could not see the private company’s financial records.
To help with oversight, the report by the Office of the D.C. Auditor urged the D.C. Council to require that for-profit management firms provide the same level of financial information that nonprofit organizations provide. D.C. Council members David Grosso (I-At Large) and Elissa Silverman (I-At Large) introduced a bill last month to achieve that goal.
The report also recommended adjusting payments to charter schools for transfers that occur after the annual October enrollment audit. Per-pupil city funding is awarded to charters based on the October audit, while D.C. public schools receive funding based on projected enrollments. Critics say the system encourages traditional schools to inflate projections and charter schools to let go of students later in the year. Niles said she wants to adopt a system that offers positive incentives.
“We want to reduce mobility during an individual school year as much as possible,” she said.
The report noted that the charter board has made significant improvements to its oversight, introducing an online database that makes it easier to file and track financial records. Early on, auditors could not find evidence that all annual financial and compliance reviews were conducted. The report also found missing documentation regarding charter school contracting; charters are required to enter a competitive bidding process for contracts of more than $25,000.
The charter board said in a response to the report that it has improved its oversight of contracting since 2013 and hired a specialist last year to more thoroughly monitor charter school finances.
In its review of OSSE, the audit found that the state-level agency was doing a good job of overseeing special education payments to schools and that students were receiving the level of service that their schools were being compensated to provide. But it said the agency did not verify summer-school payments to see whether schools were enrolling the number of students they were paid to serve.