Options Public Charter School for at-risk youths is seen in Washington. (Marlon Correa/The Washington Post)

The District’s traditional public school system is in negotiations to run Options Public Charter, a school for at-risk youth that faces possible closure in the wake of allegations that its former managers diverted millions of tax dollars meant for students.

The discussions, which officials disclosed at a D.C. Council hearing Wednesday, are part of a larger effort to allow Options to remain open until the end of the 2014-15 school year, giving the city more time to figure out how to best serve the school’s students, said Scott Pearson, executive director of the D.C. Public Charter School Board.

Most Options students have severe emotional or learning disabilities, or have been homeless or incarcerated. And most have experienced repeated academic failure: On average, students attended 21 / 2 secondary schools before landing at Options.

The city charter board voted last month to begin the process of revoking Options’ charter, arguing that the law requires revocation in cases of fiscal mismanagement. The board is scheduled to make its final decision in February, and should the school close, its approximately 400 students — nearly 200 of whom have the most severe special-education needs — would have to find another school.

“Finding appropriate and lasting placements for the students now served by Options is both necessary and a challenge,” said Josh Kern, the court-appointed receiver who has overseen the school since the lawsuit was filed in the fall. “I worry that outright closure of Options raises the very real specter of many students rotating among the District’s schools in search of an education.”

Nathaniel Beers, chief of specialized instruction for D.C. public schools, said the school system wants to help ensure stability for those students. But he also said the school system simply cannot absorb the hundreds of challenging students who would need a new place to go to class should Options close.

“If the school closed tomorrow and all the kids came to DCPS, we would have a crisis in our neighborhood schools,” said Beers, who added that many middle schools and high schools are already struggling to serve high numbers of special-needs students.

More than 180 students at Options are identified as having the most severe special-education needs. The school system has the capacity to serve only about 20 of those students, Beers said.

Options was thrown into turmoil in October, when lawyers for the D.C. Office of the Attorney General filed a civil lawsuit alleging that three former Options managers created a contracting scheme to divert more than $3 million from the school to two for-profit companies they controlled.

Pearson, speaking at the council hearing Wednesday, faced criticism from council members who asked why the charter board hadn’t considered the fate of Options students — among the city’s most troubled children — before voting last month to take the first step toward closing the school.

“You acted precipitously to close this school . . . without having any plan for what should happen to these children,” Education Committee Chairman David A. Catania (I-At Large) said.

Catania and colleagues David Grosso (I-At Large) and Tommy Wells (D-Ward 6) asked why Options had been allowed to continue operating — and was even granted a 15-year charter renewal in 2011 — given the school’s pattern of poor academic performance and documented failures in providing students with required special-education services.

Pearson said the renewal was granted shortly before his arrival at the charter board.

“I don’t think they did a particularly thorough job of that review,” Pearson said. But he acknowledged that if not for the school’s recent financial problems and the alleged contracting scheme, the school would probably still be operating as it had been.

Talks about the future of Options have included Kern as well as representatives from the city charter board and the school system. The charter board recently hired Tami Lewis, the former head of special education at the District’s Office of the State Superintendent of Education, to coordinate the discussions.

Pearson said that in the long-term, the charter board could decide to find another charter operator to run Options. Catania said he expects to receive a plan for the school’s 2014-15 operation, including a budget, by March.

The District must plan and budget for the possibility that some Options students would be best served at a private school, Grosso said. “We shouldn’t kid ourselves,” he said.