Charter Schools: The Hit Is Out (Part IV)
By Mitch Berg
Yesterday, we took a tour through a typical charter school.
The big takeaway? 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 charters in Minnesota are, ironically, minorities; their parents and organizations are responding to the abysmal education their kids have always received. Others are educational; Hamline and Concordia Universities both sponsor charter schools in Saint Paul. Others are related to religion (there are pseudo-Catholic charters, as well as at least one Islamic one) or ethnic (there are H’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, “service learning”, science and technology, and even music recording).
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. 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.
Usually, this means teachers teach.
As opposed to futzing with the books.
———-
In his piece last week, John Fitzgerald’s big marquee point was:
- 83 percent were found to have at least one financial irregularity in their audit – five years earlier, that figure was 73 percent;
- 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;
- 29 percent did not respond to a request for board minutes – five years earlier, that figure was 33 percent;
- 55 percent were found to have “limited segregation of duties,” a requirement that ensures no single charter school official has control of the school’s funds;
- 26 percent didn’t have proper collateral for deposit insurance, a requirement that ensures the charter school can pay its bills.
Wow. Seems pretty damning!
But what were these “irregularities”? How important were they, that John Fitzgerald, writing for Minnesota 2020, a “non-partisan” progressive group, could conclude:
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…
If charter schools can’t run their schools in a financially competent manner, Minnesota should reconsider whether charter schools are worthy of public funding at all.
In other words, these “irregularities” are, to John Fitzgerald, so severe that the state should gut the charter school movement now, and send its students back to the public schools so many of them worked so hard to escape?
I had visions of charter school executives sitting on beaches in Rio, sipping mojitos from hookers’ bellybuttons.
What were the “irregularities”?
———-
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.
They were:
- Schools must provide board meeting minutes on request.
- Limited Segregation of Duties
- Inadequate Preparation of Financial Statements
- Inadequate Annual Reporting under GAAP
- Bank Reconciliations
- Collateral for Deposits
- Employee Advances are a no-no.
- Lack of Documentation of Employee Salaries
- Payroll Transaction Calculations
- Adequate Accounting System
For the benefit of those of us who are not accountants, what do these mean?
Let’s go through each of them, and Fitzgerald’s specifics, one by one.
Schools must provide board meeting minutes: Yep, it’s the law. Public bodies are required to send minutes of their board meetings to those who request them. Even if the request comes from a group that intends to job them in the media. So during their work days, trying to run a school and teach kids (remember our walk through the staff of a charter yesterday?), 43 out of the 145 charters that Fitzgerald asked, didn’t send meeting minutes.
So – whether they are great schools or not, whether they provide the kids a better education or a much better education than the public schools, Minnesota 2020 thinks they should be shut down because they are sloppy with return mail.
Well, the law is the law.
Limited Segregation of Duties: in a proper accounting system, nobody should be able to do all the steps of a transaction – ask for money, write a work order/invoice, and cut a check – themselves. There needs to be segregation of duties. To be fair, this has led to some grotesque abuses – the head of one Minneapolis charter school is accused of embezzling $160,000 and driving his school, “Heart of the Earth”, a native-american charter serving the Minneapolis first-nations that have been served so abysmally by the public system, out of business. To be fairer, among the 80 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’m calling for follow-up on these allegations.
Preparation of Financial Statements -Fitzgerald’s report describes this one; I add the emphasis: “Many charter schools do not have the resources necessary to prepare their own financial audit, which could create a conflict of interest. This is considered bad financial practice.” Yes, I imagine it could. But it’s a “bad financial practice”, not an actual offense. For the 43 charters cited, using this as reason to close them without some, I dunno, more evidence of actual wrongdoing, as opposed to the potential for problems seems a bit stretchy.
Annual Reporting under GAAP – Huh? Again, Fitzgerald, with my emphases: “Schools need an internal control policy over annual financil reporting. Without one, the potential exists that a material misstatement of the annual financial statements could occur and not be detected.” 22 schools fail to observe this – let me choose my word carefully – technicality. Perhaps it’s an important one; I’m no accountant. But using it as justification to demand closing the schools seems…draconian?
Bank Reconciliations – Three of the 145 charters reported not reconciling their general ledger with their monthly bank statements. On the one hand, it seems like a good practice. On the other, it’s three out of 145.
Collateral For Deposits – The law requires that schools with deposits over the FDIC-insured amount have collateral or bonds to cover any uninsured amounts. 38 schools are cited. At least one of them is a school I’m aware of, and which is an excellently-managed school with – for those of you who care about such things, which doesn’t seem to include MN2020 – a spectacular academic record, including amazing success with one of my children. I’ll be seeking comment from this school, among others.
Employee Advances – Giving advances to employees is a no-no. Two schools did it. It could well be a form of malfeasance. It could also be someone who’s spent their career learning how to teach rather than keep books making an error. We don’t know – and by “we”, I mean “Fitzgerald doesn’t either”.
Lack of Documentation of Employee Salaries – Schools need to document staff salaries. Fitzgerald, with emphasis added: “…the charter could be subject to a higher risk taht fraud or error could occur and not be detected in a timely manner”. Again, “could”. Two schools out of 145 are cited.
Payroll Transaction Calculations -Two schools improperly calculated payroll transactions, and, as Fitzgerald notes, were asked to improve their practices. Did they? The MN2020 report is silent.
Adequate Accounting System – This one caught my attention. Perhaps this’d be the one that would actually justify Fitzgerald’s demands that we close most of Minnesota’s charter schools!
But what does it mean?
Fitzgerald: “Some charter schols use accounting systems that aren’t compatible with the MDE [Minnesota Department of Education] accounting systems. 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.”
Ahem.
So some schools use their own systems – perhaps (we dont’t know) systems better-suited to small schools run by people who are not accountants than the Department of Education’s system (built by and for accountants!) – and that is a material irregularity that justifies shutting them down?
Both (two) of them?
That’s right – two out of 145 charter schools?
And that’s it.
———-
This isn’t to say that there aren’t problems with charter schools. Heart of the Earth’s closure was one of several high-profile cases involving alleged fraud. Other charters have closed because they just couldn’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.
A rational conclusion: some charter schools need some help with running financials.
Not “we need to shut them down”.
Unless, of course, your motive is less about education or accountability than it is about getting rid of competition to the public school system.
I’m trying to follow up with a couple of the charter schools cited in Fitzgerald’s report. I’ll present the results as they come in, hopefully later this week.
June 10th, 2009 at 8:40 am
Thank you for staying on this, Mitch. I had no idea where to start when I read the initial screed.
You may also want to ask how many school districts have similar irregularities. The short answer is that technicalities like this often fall through the cracks. We do audits to stop these problems, and generally things improve. In the case of a Charter School, we *can* have it shut down for non-compliance (and have several times). I can’t recall ever shutting down a school district.
The long and fascinating history of the Charter School movement has always involved a large dose of political grandstanding. That usually happens when people aren’t entirely honest about their motives – and I have to question the motives here. There’s no context and the proposed solutions can only be called draconian – OK, so what’s really up here, guys?
June 10th, 2009 at 12:04 pm
GREAT work Mitch, stay on it. I’m clearly not the only person really enjoying this.
Playing devil’s advocate here, sort of, what you describe sound more like weaknesses that really should be addressed. I would think there must be some solution that hasn’t popped up yet… but mostly it sounds as if these educators really need to find themselves some equally dedicated accountant.
These problems ARE solvable…. now there just needs to be some creative problem solving. I think you and the other parents can make a pretty darn strong point that the faults found are certainly easier to resolve than the failures of the mainstream schools failures in education.
Hello – baby, bath water?
June 10th, 2009 at 12:42 pm
Alert! Small business opportunity here.
Don’t hire a CPA for every charter school. Find a CPA looking for niche practice, hire herself out to several charter schools to make sure they have proper controls.
Maybe that means you swing by and counter-sign all checks once a day so there are two signatures. Maybe you install remote-access computer software so you can monitor everything from your office and affix electronic signatures.
Not saying how to do it, just wondering if an enterprising youngster could make a living offering services to a pool of charters that would address the stated concerns at minimal cost per-school?
A private business solution instead of dumping the whole project to go back to a government monopoly? Maybe that really IS crazy talk . . .
.
June 10th, 2009 at 12:48 pm
Nate,
There are businesses that do cater to charters in about the same way as you describe.
Of course, I don’t get the impression that “helping charter schools improve their processes” is MN2020’s goal.
June 10th, 2009 at 4:27 pm
What are the odds that hit man Fitz will truthfully respond?
June 11th, 2009 at 7:10 am
Nah. It’s not their goal at all; their goal is to cut out the alternative to the public school system.
And there’s some real frustrations inherent in the charter school system — for the good, service-oriented, dedicated public school folks. (And there are some.) Alternatives mean that at least some parents will take their kids out, and, typically, these aren’t going to be the neglectful parents with difficult-to-educate kids that the public school system simply has to accommodate. Nope. Those parents will follow the course of least resistance, and at least many charter schools simply don’t want — and won’t go looking for — the difficult kids. They may — may — even actually discourage them. If it’s going to cost a given charter school, say, $20K / year to serve a given kid (and it easily could, if the kid has some functional disability — like, say, ADHD or not being able to learn in English, or behavior issues or chemical dependency problems) they’re not going to go out and recruit a lot of them.
But that’s kind of going to have to be their problem, isn’t it?
This series hits close to home, for reasons I’m going to be going into later this summer, or maybe early fall; Mitch is aware of some of them, and I’m going to copy him on a series of emails, which I think will amuse him.
June 11th, 2009 at 8:09 am
Even if charter schools skimmed the cream and left the public schools to handle the dregs, would that be so bad?
The dregs would get warehoused, same as now, but at least the cream would have a chance to get an education, instead of being warehoused along with the dregs.
I’m not asking what’s fair to public school teachers, or fair to the dregs, I’m asking why it’s fair to expect the cream to sit with the dregs instead of getting the Hell out? Why should they be denied a shot at a better life?
Kids may be equal in the eyes of the law as far as deserving the best education the kid can handle, but kids are not identical and some of them plain can’t handle as much education as others. Bluebirds don’t read at the same level as Redbirds and that’s just the way it is. Spend the rest of the week re-doing vocab for Bluebirds and the Redbirds go stir crazy. Push ahead with the Redbirds and the Bluebirds sit bewildered. Athletes, musicians, readers, mathmeticians – we accept and laud different levels of accomplishment in adults, we need to do it in kids, too.
Unless you think you can afford to assign a personal teaching team to each child, you’d better start thinking about triage – which kids can we save and which can we only make comfortable?
Charter schools give the cream a chance they otherwise wouldn’t have.
.
June 11th, 2009 at 8:55 am
I don’t know that it’s fair to say charters are skimming off the cream. If academic success, as measured by college admittance tests are the mark being measured, private and home schools have a pretty good claim themselves.
The important point to take away from this, I think, is that while traditional public schools are adequate for many “middle of the road” kids, they are astonishingly insufficient for kids at either extreme of the curve. It gets tiring, I know, listening to people (like me) placing the lions share of the blame for the decline of the public system at the feet of the teachers unions, but while it is true there is plenty of blame to go around, it is the unions that are fighting the hardest to thwart any effort at meaningful reform that threatens their hegemony in any way.
Now that people are fighting back by leaving, and are taking their money with them, the defenders of the status quo are shifting their efforts at attacking “the enemy” directly, and given the stakes at play, it’s nothing short of despicable.
People like John Fitzgerald may not actually “hate” kids, but they certainly don’t mind throwing them under the bus if that’s what it’s going to take to keep the teachers union happy.
June 11th, 2009 at 10:31 am
Mitch,
As I said, my experience is that charter schools are no better at having motivated teachers than are mainstream public schools, which seems to be an argument you are making. I think nearly all teachers desire to teach well – no, not all of course, but nearly all. I think you’re arguing a point that both doesn’t exist and isn’t really meaningful anyway.
You are also arguing that Fitzgerald is making a tempest in a teapot – ok, but how is that different than comments about Sotomayor’s ONE comment about ‘latina women’ and ONE case where she a. followed the current law? Point being, one man’s tempest is another man’s (woman’s?) scandal. We chose to make issues out of nothing when it suits our purposes.
Fitzgerald makes a good general point (like it or not), that the lack of oversight of the finances at Charter schools, which are of course spending public funds, has proven far too enticing to those who would abuse/abscond with those funds. DogGone is right that such problems CAN be addressed, and I’m certainly not going to say anything other than Charter schools are a fine idea and alternative. However, I do not agree that ‘competition’ solves the current public school dilema. That’s overlooking what the systemic issues are and offering far too simple a solution to a VERY big problem.
Charter schools just like vouchers, essentially side-step the main problems and give an appearance of solving for them because they only deal with a miniscule portion of the overall set. Much like home schooling, most (not all) charter school, private school, home school students are coming from a. middle to upper class backgrounds b. motivated parents c. consequentially motivated students – again, most but not all. If you tried to apply that model more broadly (i.e. that everything is resolved simply by having competition and charter/private/home school options, the mainstream population, with all of it’s vaguries, poor motivations, disabilities, legal restrictions, mainlining of disability requirements etc.. would come into play. In short, they’d have to DEAL with, not side-step, the problems plagueing public schools in general. They’d have the same angry parents complaing about, and suing over, the fact that ‘johnny’ wasn’t passed along when his peer three schools over was (and winning).
As well, IF your competition model were to work, and I won’t agree it would, it would create wasteland public schools as well where students who don’t do well, don’t score well, would reside. What exactly is that solving? What teacher would want to teach there? It’s simply the problem of inner city schools writ large, reinforced by an institutionalized acceptance of such horror zones.
June 11th, 2009 at 10:41 am
penigma said:
“my experience is blah blah blah”
Where “blah blah blah” equals no explanation of what your experience is. Also:
“However, I do not agree that ‘competition’ solves the current public school dilema”
and you provide no alternate solution, or any indication that you understand why this list of problems is not dealt with constructively in public schools.
June 11th, 2009 at 10:53 am
Pen,
As I said, my experience is that charter schools are no better at having motivated teachers than are mainstream public schools, which seems to be an argument you are making.
Trying to compare school experiences is like comparing apples and tangerines. I know many good teachers in the public, charter and private systems.
However, speaking to as many charter teachers as I have, I think a lot of them are drawn to charters because they can focus on teaching rather than dealing with school bureaucracy.
I think nearly all teachers desire to teach well – no, not all of course, but nearly all. I think you’re arguing a point that both doesn’t exist and isn’t really meaningful anyway.
And, to top it off, wasn’t arguing in the first place! I know how teachers are; my dad, two grandparents, and my sister were/are teachers of one kind or another.
You are also arguing that Fitzgerald is making a tempest in a teapot
No. I’m arguing that MN2020 is taking tiny infractions – meaningless ones, in most cases, which one could call “tempests in teapots”, I suppose – and blowing them up to create a misleading case that charters are a swamp of fiscal irresponsibility and waste, and that the media ate up the report uncritically and without really questioning it (although we haven’t gotten to that part yet).
How misleading were they? I’m finding out as I talk with charter school administrators. Some of it, by the way, is stuff you will have some expertise in. Stay tuned.
ok, but how is that different than comments about Sotomayor’s ONE comment about ‘latina women’ and ONE case where she a. followed the current law? Point being, one man’s tempest is another man’s (woman’s?) scandal. We chose to make issues out of nothing when it suits our purposes.
For the moment, let’s assume the two are equivalent for argument’s sake. OK; both of them are attempts to bring shortcomings in something or someone to the public’s attention, to try to influence the public’s perception of…something; Sotomayor or the MN2020 report.
I don’t have much impact, personally, on the SCOTUS confirmation process. But I, like a lot of charter parents, find this particular issue very important; the DFL wants to destroy charters.
Fitzgerald makes a good general point (like it or not), that the lack of oversight of the finances at Charter schools, which are of course spending public funds, has proven far too enticing to those who would abuse/abscond with those funds.
No, Pen. He makes no such point. Fraud is fraud, embezzlement is embezzlement.
What he does do is try to draw a false equivalence between a lot of tiny, niggling little auditing quibbles (and that’s what the vast majority of the “issues’ in the report are) and big, headline-grabbing cases of embezzlement.
You of all people should know that mis-filing a receipt is not the same as administrators cashing checks they wrote to themselves. MOST people know this – but MN2020’s report does NOT make it clear that that’s the equivalence they’re trying to draw.
DogGone is right that such problems CAN be addressed,
Not only can they be, but…well, that’s coming up in a future installment of this series.
Charter schools just like vouchers, essentially side-step the main problems and give an appearance of solving for them because they only deal with a miniscule portion of the overall set.
Like that’s a bad thing? A journey of a thousand miles begins with one step. And education might just be an issue that needs a million tiny solutions rather than one big one.
Much like home schooling, most (not all) charter school, private school, home school students are coming from a. middle to upper class backgrounds b. motivated parents c. consequentially motivated students – again, most but not all.
Actually, no. 51% of charter students are minorities. And many of the students have had serious problems in regular schools. The parents are generally quite motivated, though.
As well, IF your competition model were to work, and I won’t agree it would, it would create wasteland public schools as well where students who don’t do well, don’t score well, would reside.
They already do.
What exactly is that solving?
None, but then nobody’s proposing that.
OK. Back to work.
June 11th, 2009 at 11:12 am
I agree, Peev, nominating Judge Sotomayor is about the same as nominating Fitzgerald to the Supreme Court.
Good call, Peev.
Bwwwaaaaaahahahahahahahahahahahaha
June 11th, 2009 at 11:36 am
Peev:
Say there’s one genius in the class; one moron; and 28 kids in the middle. What speed should the teacher proceed?
Too fast, the moron is bored and acts up so nobody learns nuthin.
Too slow, the genius is bored and acts up so nobody learns nuthin.
In the olden days, we let the genius advance to the next grade and held the moron back, leaving a smaller class of middle kids all working at the same pace. Seemed to work pretty well.
Charter schools are the equivalent. Geniuses get accelerated charter schools. Morons get special ed charter schools. Everybody else gets a chance to learn the material and hopefully get ahead in life.
What’st the problem with segretation by ability? Why do we have to turn everybody into the same mushy mediocrities?
.
June 11th, 2009 at 11:57 am
Nate, if it totally worked that way Peev would still be in -9th grade.
June 12th, 2009 at 11:08 pm
Fitzgerald: “Some charter schols use accounting systems that aren’t compatible with the MDE [Minnesota Department of Education] accounting systems. The charter schools then have to pay a management company at the end of the year to transfer data from the current accounting system to an MDE-compliant system.”
This is a problem? Sounds like a solution to me, keep books as best fits the operation, satisfy the bureaucrats only when its their feeding time.
October 25th, 2009 at 2:18 pm
[…] Part IV of this series, we took a high-level look at what the rules say these allegations […]