Transparency Watch: Charter Schools Spend Almost $1 Billion Public Dollars in D.C., But Watchdog Says Financial Operations Opaque

dcogcadmin | August 15, 2015

Several charters in D.C. have been sued for financial management problems – but after that heart-stopping wait for your own child’s lottery results and working out the cross-town travel schedule, is your new charter school financially sound or is it wasting scarce dollars paying the principal’s brother-in-law for overpriced payroll services, “management advice” or cleaning the building?  

Putting on your green eyeshade and studying the D.C. Charter School Board’s 2014 Financial Audit Review of the 60-plus charter school operators, you still couldn’t tell which are in financial trouble and which are OK, says the D.C. Fiscal Policy Institute in its review of the review, released August 5.

Says FPI, the Board’s summary of the audit provided by each charter operator lacks details and is confusing in format, not even identifying the places in the worst shape.

The Board review uses various metrics but lacks a synthesis non-financial readers could grasp.  After all, if U.S. News & World Report can crunch numbers on twenty dimensions of a university and rate it in a way users value (even if it’s controversial), why not here? 

Turns out, for charters’ financials, there’s no clear signal about whether a school is soundly managed, nor is there a single clear list of those doing well or not so well (just how many of each).  Not surprisingly, FPI suggests “One singular number or letter grade to represent the overall financial health of a charter would be a smart addition to the financial report cards,” and “a tier system would be beneficial for readers.”  

As the gusher of public money flowing into charters grows, concerns are rising everywhere about both educational results and also financial oversight, as the Post’s Valerie Strauss reported in April, using examples not only of the D.C. scandals but related events in Michigan, Ohio and California.  

Advocates in Louisiana, in a May report tartly titled, “System Failure: Louisiana’s Broken Charter School Law,” criticized the weak review of self-reported audits by that state’s large charter network (including just about all schools in New Orleans, set up after the state decided not to reopen the public schools in New Orleans after Hurricane Katrina).  Fiscal management of the state’s investment of $800 million annually is reviewed by one Louisiana state auditor.

A specific concern (and the subject of the legal action against two charters in D.C.) is the lack of controls to prevent conflicts of interest.  Many schools contract for goods and services, but auditors typically don’t check if the schools’ deals were above-board or just directed to companies owned by the charter staff or friends. The D.C. charters in hot water even got sound financial ratings, owing to that limited review, despite the self-dealing that came to light later.

The D.C. Council is considering Bill B21-0115, “Charter School Fiscal Transparency Act,” introduced in March by Council Members David Grosso and Elissa Silverman (formerly a staff member at the D.C. Fiscal Policy Institute) to set guidelines for charter contracts and conflicts of interest and to allow access to financial records of major charter contractors that could bring to light self-dealing and kickbacks. (See gory details of one of the D.C. situations involving such conflicts, here.) No hearing has been scheduled; it will be an interesting question to explore, whether future audits of charters will be any more likely to check for internal controls and their effectiveness in preventing such situations.

But deeper study and reporting on how millions in public money are spent in charter schools each year may face resistance. When the Post reported on the Fiscal Policy Institute suggestions, reporter Michael Alison Chandler said charter spokesperson Tomeika Bowden downplayed clearer, simpler disclosure, saying how hard it could be to boil things down to a single financial management score and how “we do not want to distract parents from the most important factor in choosing a school, academic quality.”

But just as even those living comfortably care if D.C. is spending wisely to address the housing crisis for those of modest income, or those whose house hasn’t burned recently care that fire trucks are quick to respond, interest in open and accountable government is wider than the immediate beneficiaries of an expense.  Charter schools are a huge experiment, paid for by D.C. (and federal) taxpayers; we all care to know not only if children are thriving but whether our money is well handled.