{"id":4905,"date":"2009-06-10T07:32:30","date_gmt":"2009-06-10T12:32:30","guid":{"rendered":"http:\/\/www.shotinthedark.info\/wp\/?p=4905"},"modified":"2009-06-11T08:09:04","modified_gmt":"2009-06-11T13:09:04","slug":"charter-schools-the-hit-is-out-part-iv","status":"publish","type":"post","link":"http:\/\/www.shotinthedark.info\/wp\/?p=4905","title":{"rendered":"Charter Schools: The Hit Is Out (Part IV)"},"content":{"rendered":"<p>Yesterday, we <a href=\"http:\/\/www.shotinthedark.info\/wp\/?p=4904\">took a tour <\/a>through a typical charter school.<\/p>\n<p>The big takeaway?\u00a0 Charter schools are started by organizations that want to <em>teach kids<\/em>; they might be social organizations, like the various inner-city advocacy groups that have started many charters in the Cities as well as Native-American-focused schools statewide; over 50% of <em>all <\/em>kids in charters in Minnesota are, ironically, minorities; their parents and organizations are responding to the abysmal education their kids have always received.\u00a0 Others are educational; Hamline and Concordia Universities both sponsor charter schools in Saint Paul.\u00a0 Others are related to religion (there are pseudo-Catholic charters, as well as at least one Islamic one) or ethnic (there are H&#8217;mong, Afrocentric and Hispanic focused charters) or program-based (there are charters for kids with emotional problelms, as well as ones based on military, arts, free-form, environment, &#8220;service learning&#8221;, science and technology, and even music recording).<\/p>\n<p>The schools recruit staff who are usually non-union, but pretty much always are committed to teaching in the environment or philosophy the organization is pushing.\u00a0 They are, very often, the kinds of teachers you really, really want for your kids; the teachers that will lose a few dollars for the chance to work with kids in smaller environments focused more on learning and less on bureaucracy.<\/p>\n<p>Usually, this means teachers <em>teach<\/em>.<\/p>\n<p>As opposed to futzing with the books.<\/p>\n<p>&#8212;&#8212;&#8212;-<\/p>\n<p>In <a href=\"http:\/\/www.mn2020.org\/index.asp?Type=B_BASIC&#038;SEC={198C7021-C205-4F44-B914-84BDAF67A34B}\">his piece last week<\/a>, John Fitzgerald&#8217;s big marquee point was:<\/p>\n<blockquote>\n<blockquote>\n<ul>\n<li><font size=\"2\">83 percent were found to have at least one financial irregularity in their audit &#8211; five years earlier, that figure was 73 percent;<\/font><\/li>\n<\/ul>\n<ul>\n<li><font size=\"2\">51 percent of those schools with problems identified on their 2007 financial audits had the same problems identified on their 2008 audits, according to the MDE;<\/font><\/li>\n<\/ul>\n<ul>\n<li><font size=\"2\">29 percent did not respond to a request for board minutes &#8211; five years earlier, that figure was 33 percent;<\/font><\/li>\n<\/ul>\n<ul>\n<li><font size=\"2\">55 percent were found to have \u201climited segregation of duties,\u201d a requirement that ensures no single charter school official has control of the school\u2019s funds;<\/font><\/li>\n<\/ul>\n<ul>\n<li><font size=\"2\">26 percent didn\u2019t have proper collateral for deposit insurance, a requirement that ensures the charter school can pay its bills.<\/font><\/li>\n<\/ul>\n<\/blockquote>\n<\/blockquote>\n<p>Wow.\u00a0 Seems pretty damning!<\/p>\n<p>But what <em>were <\/em>these &#8220;irregularities&#8221;?\u00a0 How important were they, that John Fitzgerald, writing for Minnesota 2020, a &#8220;non-partisan&#8221; progressive group, could conclude:<\/p>\n<blockquote><p><font size=\"2\">The state should reconsider its agreements with the 121 charter schools that cannot successfully pass a financial audit. Further, taxpayers should not continue to fund the 50 percent of charter schools that do not resolve financial problems&#8230;<\/font><font size=\"2\"><br \/>\nIf charter schools can&#8217;t run their schools in a financially competent manner, Minnesota should reconsider whether charter schools are worthy of public funding at all. <\/font><\/p><\/blockquote>\n<p>In other words, these &#8220;irregularities&#8221; are, to John Fitzgerald, <em>so severe <\/em>that the state should gut the charter school movement <em>now<\/em>, and send its students back to the public schools so many of them worked so hard to <em>escape<\/em>?<\/p>\n<p>I had visions of charter school executives sitting on beaches in Rio, sipping mojitos from hookers&#8217; bellybuttons.<\/p>\n<p>What were the &#8220;irregularities&#8221;?<\/p>\n<p>&#8212;&#8212;&#8212;-<\/p>\n<p>In the non-copyable section at the bottom of the article which contains the actual MN2020 report, Fitzgerald lists the actual problems against which the schools were measured.<\/p>\n<p>They were:<\/p>\n<ul>\n<li>Schools must provide board meeting minutes on request.<\/li>\n<li>Limited Segregation of Duties<\/li>\n<li>Inadequate Preparation of Financial Statements<\/li>\n<li>Inadequate Annual Reporting under GAAP<\/li>\n<li>Bank Reconciliations<\/li>\n<li>Collateral for Deposits<\/li>\n<li>Employee Advances are a no-no.<\/li>\n<li>Lack of Documentation of Employee Salaries<\/li>\n<li>Payroll Transaction Calculations<\/li>\n<li>Adequate Accounting System<\/li>\n<\/ul>\n<p>For the benefit of those of us who are <em>not <\/em>accountants, what do these mean?<\/p>\n<p>Let&#8217;s go through each of them, and Fitzgerald&#8217;s specifics, one by one.<\/p>\n<p><strong>Schools must provide board meeting minutes<\/strong>: Yep, it&#8217;s the law.\u00a0 Public bodies are required to send minutes of their board meetings to those who request them.\u00a0 Even if the request comes from a group that intends to job them in the media.\u00a0 So during their work days, trying to run a school and teach kids (remember our <a href=\"http:\/\/www.shotinthedark.info\/wp\/?p=4903\">walk through the staff of a charter <\/a>yesterday?), 43 out of the 145 charters that Fitzgerald asked, didn&#8217;t send meeting minutes.<\/p>\n<p>So &#8211; whether they are great schools or not, whether they provide the kids a better education or a <em>much <\/em>better education than the public schools, Minnesota 2020 thinks they should be shut down because they are sloppy with return mail.<\/p>\n<p>Well, the law is the law.<\/p>\n<p><strong>Limited Segregation of Duties<\/strong>: in a proper accounting system, nobody should be able to do <em>all <\/em>the steps of a transaction &#8211; ask for money, write a work order\/invoice, and cut a check &#8211; themselves.\u00a0 There needs to be segregation of duties.\u00a0 To be fair, this has led to some grotesque abuses &#8211; the head of one Minneapolis charter school is accused of embezzling $160,000 and driving his school, &#8220;Heart of the Earth&#8221;, a native-american charter serving the Minneapolis first-nations that have been served so abysmally by the public system, out of business.\u00a0 To be fair<em>er<\/em>, among the <em>80<\/em> schools out of the 145 that Fitzgerald cites are several that I personally know to be exceptionally well-run long-term successes (both financially and educationally), and whose staffs I&#8217;m calling for follow-up on these allegations.<\/p>\n<p><strong>Preparation of Financial Statements <\/strong>-Fitzgerald&#8217;s report describes this one; I add the emphasis: &#8220;Many charter schools do not have the resources necessary to prepare their own financial audit, which <strong>could <\/strong>create a conflict of interest.\u00a0 This is considered bad financial practice.&#8221;\u00a0 Yes, I imagine it <em>could<\/em>.\u00a0 But it&#8217;s a &#8220;bad financial practice&#8221;, not an actual offense.\u00a0 For the 43 charters cited, using this as reason to close them without some, I dunno, <em>more evidence of actual wrongdoing, as opposed to the potential for problems<\/em> seems a bit stretchy.<\/p>\n<p><strong>Annual Reporting under GAAP <\/strong>&#8211; Huh?\u00a0 Again, Fitzgerald, with my emphases:\u00a0 &#8220;Schools need an internal control policy over annual financil reporting.\u00a0 Without one, <strong>the potential exists <\/strong>that a material misstatement of the annual financial statements <strong>could <\/strong>occur and not be detected.&#8221; 22 schools fail to observe this &#8211; let me choose my word carefully &#8211; technicality.\u00a0 Perhaps it&#8217;s an important one; I&#8217;m no accountant.\u00a0 But using it as justification to <em>demand closing <\/em>the schools seems&#8230;draconian?<\/p>\n<p>Bank Reconciliations &#8211; <em>Three <\/em>of the 145 charters reported not reconciling their general ledger with their monthly bank statements.\u00a0 On the one hand, it seems like a good practice. On the other, it&#8217;s <em>three out of 145<\/em>.<\/p>\n<p><strong>Collateral For Deposits <\/strong>&#8211; The law requires that schools with deposits over the FDIC-insured amount have collateral or bonds to cover any uninsured amounts.\u00a0 38 schools are cited.\u00a0 At least one of them is a school I&#8217;m aware of, and which is an excellently-managed school with &#8211; for those of you who care about such things, which doesn&#8217;t seem to include MN2020 &#8211; a spectacular academic record, including amazing success with one of my children.\u00a0 I&#8217;ll be seeking comment from this school, among others.<\/p>\n<p><strong>Employee Advances<\/strong> &#8211; Giving advances to employees is a no-no.\u00a0 Two schools did it.\u00a0 It could well be a form of malfeasance.\u00a0 It could also be someone who&#8217;s spent their career learning how to teach rather than keep books making an error.\u00a0 We don&#8217;t know &#8211; and by &#8220;we&#8221;, I mean &#8220;Fitzgerald doesn&#8217;t either&#8221;.<\/p>\n<p><strong>Lack of Documentation of Employee Salaries <\/strong>&#8211; Schools need to document staff salaries.\u00a0 Fitzgerald, with emphasis added: &#8220;&#8230;the charter <strong>could <\/strong>be subject to a higher risk taht fraud or error could occur and not be detected in a timely manner&#8221;.\u00a0 Again, &#8220;could&#8221;. Two schools out of 145 are cited.<\/p>\n<p><strong>Payroll Transaction Calculations <\/strong>-Two schools improperly calculated payroll transactions, and, as Fitzgerald notes, were asked to improve their practices.\u00a0 Did they?\u00a0 The MN2020 report is silent.<\/p>\n<p><strong>Adequate Accounting System <\/strong>&#8211; This one caught my attention.\u00a0 Perhaps this&#8217;d be the one that would actually justify Fitzgerald&#8217;s demands that we close most of Minnesota&#8217;s charter schools!<\/p>\n<p>But what does it mean?<\/p>\n<p>Fitzgerald: &#8220;Some charter schols use accounting systems that aren&#8217;t compatible with the MDE [Minnesota Department of Education] accounting systems.\u00a0 The charter schools then ahve to pay a management company at the end of the year to transfer data from the current accounting system to an MDE-compliant system.&#8221;<\/p>\n<p>Ahem.<\/p>\n<p>So some schools use their own systems &#8211; perhaps (we dont&#8217;t know) systems better-suited to small schools run by people who <em>are not accountants<\/em> than the Department of Education&#8217;s system (built by and for accountants!) &#8211; and <em>that <\/em>is a material irregularity that justifies shutting them down?<\/p>\n<p>Both (two) of them?<\/p>\n<p>That&#8217;s right &#8211; <em>two <\/em>out of 145 charter schools?<\/p>\n<p>And that&#8217;s it.<\/p>\n<p>&#8212;&#8212;&#8212;-<\/p>\n<p>This isn&#8217;t to say that there aren&#8217;t problems with charter schools.\u00a0 Heart of the Earth&#8217;s closure was one of several high-profile cases involving alleged fraud.\u00a0 Other charters have closed because they just couldn&#8217;t manage money well; no crime was involved (or at least none that John Fitzgerald and MN2020 could conjure up from phantom context), but the business of running a school that is also a non-profit business was too much for the staff involved.<\/p>\n<p>A rational conclusion: some charter schools need some help with running financials.<\/p>\n<p><em>Not <\/em>&#8220;we need to shut them down&#8221;.<\/p>\n<p>Unless, of course, your motive is less about education <em>or <\/em>accountability than it is about getting rid of competition to the public school system.<\/p>\n<p>I&#8217;m trying to follow up with a couple of the charter schools cited in Fitzgerald&#8217;s report.\u00a0 I&#8217;ll present the results as they come in, hopefully later this week.<\/p>\n<p>(<a href=\"http:\/\/www.shotinthedark.info\/\/?p=4878\">Part I<\/a>, <a href=\"http:\/\/www.shotinthedark.info\/\/?p=4886\">Part II<\/a>, and <a href=\"http:\/\/www.shotinthedark.info\/\/?p=4903\">Part III<\/a> of this series )<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Yesterday, we took a tour through a typical charter school. The big takeaway?\u00a0 Charter schools are started by organizations that want to teach kids; they might be social organizations, like the various inner-city advocacy groups that have started many charters in the Cities as well as Native-American-focused schools statewide; over 50% of all kids in [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[],"class_list":["post-4905","post","type-post","status-publish","format-standard","hentry","category-education"],"_links":{"self":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts\/4905","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4905"}],"version-history":[{"count":0,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts\/4905\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4905"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4905"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4905"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}