In education, there are often attempts to compare the performance of different schools in ways that are as useless as comparing apples and oranges.

It is, for example, often said that charter schools — which are publicly funded by privately operated, sometimes by for-profit companies — have higher test scores than traditional public schools. That makes little sense given that charter schools are vastly different from each other and from traditional public schools in the way they are created, operated and governed.

In fact, there are broad differences among charter schools, some of which can be traced back to the laws in the states in which they are located. Some states have laws that provide some oversight and consequences for failing charters. Other states, not so much.

Arizona is one of those “not so much” states. This is a post about what’s going on in the charter world in Arizona. It was written by Jim Hall, who was in education for more than 30 years, 23 of them as a principal in Arizona. He retired a few years ago and formed the nonprofit Arizonans for Charter School Accountability.

By Jim Hall

The pro-school-choice Center for Educational Reform ranks Arizona as the state with the fewest regulations and restrictions for charter schools in the country.

Arizona has no cap on charter schools and allows charter owners to opt out of procurement requirements and accounting guidelines required of other state agencies. Statutes even mandate that the state auditor general cannot monitor charter schools — but the lack of transparency goes much further than that. Charter schools have been allowed for years to systematically submit false and incomplete spending data to the state, making it impossible to detect waste and fraud.

Charter owners are only required to submit one document annually that details the expenditure of state funds, the Annual Financial Report. Arizonans for Charter School Accountability compiled the annual financial reports for all Arizona charter holders for 2016-2017 and, after sampling just 13 reports (out of 418), found all had significant errors and omissions.

The nonprofit Arizonans for Charter School Accountability has found that charter owners routinely omit data and make up spending numbers, making it impossible for state and federal agencies to accurately track charter expenditures. Its research revealed:

* Charter schools are required to submit the number and certification of teachers employed on the annual financial report, but 38 charter owners did not report teacher data in 2017 — many have not reported teacher employment for years. How many charter teachers are in Arizona? How many are certified? No one knows.

* One hundred and eighty charter owners out of 418 underreported administrative expenditures on required summaries to the state and to the National Public Education Financial Survey (NPEFS). Great Hearts Academies, one of the largest charter chains in Arizona, failed to report millions of dollars in administrative expenses, making it appear it is spending $300 less per pupil on administration. All data reported by Arizona Department of Education and the U.S. Department of Education regarding Arizona charter school spending on administration is inaccurate.

* The Superintendent of Public Instruction Annual Report has had systematic errors since 2009 as a result of inaccurate reporting by charter holders and the failure of the Department of Education to either monitor submissions or demand fixes. Data regarding statewide charter per pupil expenditures, numbers of teachers employed or total teacher salaries has been falsely reported to the Arizona legislature for years.

* The Arizona Department of Education has disseminated inaccurate charter spending data to the NPEFS since 2012, making any federal reports on Arizona charter spending meaningless.

Arizona’s laissez faire approach to charter regulation is evident in the Arizona State Board for Charter Schools’ near apology for requiring charters to meet the expectations of the Financial Framework, last revised in October 2017, which only evaluates the charter as a viable business:

However, the Board is aware of the delicate balance between appropriate oversight and infringement on autonomy. In developing the financial framework, the Board remained conscious of its limited resources to implement the financial framework. The Board was also mindful of its commitment to maintaining current levels of data collection so as not to unnecessarily burden the charter holders with requirements to submit additional information for financial performance rating determinations.

There are no mechanisms in place for detecting charter waste and fraud in Arizona. Google “Arizona charter school fraud” and you will not find a single instance where a charter owner has been held accountable for the misappropriation of public funds in the 21 years that charter schools have been operating in Arizona.

The result is $1.5 billion in state funding given to charter schools with no expectation of accountability. The American Leadership Academy (ALA) is an example of what happens in the Wild West when there is no sheriff in town:

The ALA is one of the largest charter chains in Arizona, growing from 300 students in 2008 to over 6,000 enrolled in 2017.  Year after year, ALA has failed to list any supply expenditures outside of instructional supplies, and for three years ALA did not report any spending at all for plant operations. The space asking for numbers of teachers is often left blank, and administrative expenditures in 2016 were underreported by more than $4 million.

And ALA does not submit expenditures for a number of operating programs:

  1. ALA posted no revenue from food service programs from 2008 to 2017, yet claims on its application for bonds in 2015 to historically earn $10.10 per pupil in food service profits each year (approximately $55,000 a year). In 2017, ALA did not report income or expenses for food service at all, even though all seven schools offer a lunch program.
  2. ALA charges all parents for bus transportation yet has not posted this revenue on its Annual Financial Reports from 2008 to 2017. A 2015 ALA bond application states that ALA earns an average of $44.45 per pupil in transportation fees (approximately $180,000 a year) that is not reported as revenue.
  3. ALA charges fees for student participation in activities and athletics, reporting $431,736 in fees for 2017 plus an additional $1 million in other “donations.” The $1.4 million in fees and donations listed as revenue are not accounted for. ALA has extensive sports programs and was 3A State Football Champion in 2016, yet there are no extracurricular or athletic program expenditures reported.

There is also the omission of more than $4 million in lease payments in 2015 made to companies owned by ALA founder Glenn Way. (Way has not disclosed any related party transactions to the state charter board.) ALA added the $4 million instead as assets to the company, allowing it to purchase an additional $6 million in land and equipment.

Is the ALA committing fraud with these acts? The Department of Education and the state charter board haven’t publicly said they are aware of any wrongdoing, and the Auditor General is not allowed to look — by law.

[Editor’s note: Answer Sheet is seeking comment from ALA and will post any response.]

Arizonans for Charter School Accountability has complained to:

* The Arizona attorney general, requesting an investigation into the failure of the Arizona Department of Education and the state charter board to provide mechanisms to prevent the misappropriation of public funds, as all state agencies are required to do.

* The U.S. Department of Education, for the systematic and continuing failure of the Arizona Department of Education to submit accurate and complete financial data on charter school expenditures for the National Public Education Financial Report, as required by law.

* The Federal Bureau of Investigation, requesting an investigation into the fraudulent use of public funds by charter schools as the result of inadequate supervision by Arizona government agencies.

* The Internal Revenue Service, alleging that ALA has not submitted accurate and complete 990 forms and has failed to disclose related party transactions of over $6 million annually.

* The Arizona Interscholastic Association, requesting a probe into the highly visible sports programs at ALA that apparently are not being funded by school money as required.

To many charter supporters, the ideology of free-market school choice trumps accountability, including in Arizona. That means the public has no idea how many charter schools spend their money — and in Arizona, there is no move among legislators and policymakers to change that.