Navigating around icebergs in the sea of charter school finance

Last week, I was preparing for an upcoming adventurous Alaskan vacation that included thoughts of my wife and me, peacefully floating by dangerous summer artic icebergs, when those mental images were suddenly dashed as I opened up my local newspaper.  The Cincinnati Enquirer reported dubious spending activities by the superintendent of the Cincinnati College Preparatory Academy (CCPA) and the contracted treasurer who was approving them. 

Both the school director and the treasurer face twenty six counts of theft in office, unauthorized use of property, tampering with evidence and tampering with records.  The amount in question exceeds $350,000, and focuses on credit card transactions over the course of a few years that covered lavish trips to Europe, Las Vegas, day spas, an Oprah show in Boston, and so on, under the guise of legitimate business expenses.

The Enquirer also made reference to three other charter school treasurers who were found by State Auditor Dave Yost, to be responsible for more than $1 million in questionable, and possibly illegal, spending of public dollars.  All three were involved in the finances of some of Ohio’s most troubled charter schools.  

As Fordham’s charter school finance expert on the ground in Ohio for our authorizing operation, the chilling effect of these activities will be remembered, as the thoughts of “why” and “how” immediately followed.  What should have been in place that, at a minimum, could have averted such avarice from happening?

As with all organizations, including charter schools, the first place to always look is at the top – the board (of directors).  Perhaps, an audit or finance committee operating within the board would have helped catch problems much earlier.  A finance committee also could have been tasked to either approve or disapprove the superintendent’s expense reports.  Despite the potential checks and balances, all of this is of course predicated on a school board being vigilant and adherent to its own policies, including in its enforcement.

As an authorizer we also need to learn from these all too often reoccurring charter school debacles.  Authorizers in Ohio must review the school financials of all authorized schools monthly.  But too often authorizers either don’t do this or they do not do it well.  There is much complexity in school finance so an authorizer must carefully scrutinize a treasurer’s records and ask tough questions as needed.  Unusual credit card expenses and reimbursements should raise all sorts of red flags and should trigger an increased risk assessment for the authorizer.  Likewise, any observance of payroll irregularities (including bonus compensation), or inordinate payment amounts to unusual vendors, should have again rang the alarm bells soundly.   

State statutes and contract law, derived from the sponsorship agreement, dictate that authorizers should be vigilant in its oversight of charter schools and how they spend public dollars.  However, vigilance does not necessarily mean requiring the treasurer or school to furnish specific details of every purchase order, although this may be called at certain times.  Instead, vigilance begins by simply asking the right questions.  This is the route that must be taken to hold all parties accountable, and to successfully navigate through the fatal icebergs that surround schools.

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