Success and Opportunity Through Quality Charter Schools Act
Floor Speech
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Ms. CASTOR of Florida. Mr. Chairman, the Castor amendment directs the Secretary of the Department of Education to develop and enforce conflict of interest guidelines for any charter school receiving assistance under this law.
These guidelines must include disclosures of any person affiliated with the charter school that has a financial interest in the charter school.
We all know that a conflict of interest is a situation in which an individual who has an obligation or duty to act for the benefit of the public--in this case, students and schools--exploits that relationship for personal benefit--typically for money--if the individual tries to perform that duty while, at the same time, trying to achieve a personal gain.
In the context of charter schools, there have been very serious cases all across the country over the past few years involving conflicts of interest in charter schools. Despite the overriding duty and responsibility to students and schools, individuals have acted to benefit or enrich themselves with public money--taxpayer money.
In my State of Florida, we have had a number of cases of conflict of interest in the approval and operation of charter schools. Recently, the Department of Education raised serious questions in an audit about expenditures of money and conflicts of interest of Florida's largest charter school management company. The preliminary audit report findings are very disturbing.
It appears that the charter school corporation entered into leases with development companies tied to the president of the company's family, that they hired an architectural firm that employs the president's brother-in-law, and that the board of directors transferred public funds to another organization with the same board of directors.
In Arizona, The Arizona Republic has reported that boardmembers and administrators from more than a dozen State-funded charter schools are profiting from their affiliations by doing business with the schools they oversee.
The newspaper reviewed thousands of pages of Federal tax returns, audits, corporate filings, and records with the Arizona State Board of Charter Schools.
The analysis looked at the 50 largest nonprofit charter schools in the State, as well as schools with assets of more than $10 million. They found at least 17 contracts or arrangements totaling more than $70 million over 5 years and involving about 40 school sites in which the money from the nonprofit charter school went to for-profit and nonprofit companies run by board of directors, executives, or their relatives.
In Colorado, an audit report took a certain charter school network to task for egregious financial improprieties and for severe nepotism. The report said that the CEO was paying himself over $340,000 per year. He hired his wife as chief operating officer and paid her over $200,000 a year, and the chief financial officer was paid over $320,000 per year.
This far exceeds what the standard salary is for a charter school or even when you look at the salaries for our larger district superintendents.
This charter school company then hired 20 members of their own family, according to the report and audit, and they racked up over $400,000 in credit card charges in one year.
In California, State auditors found that the president of the American Indian Public Charter School in Oakland had given $350,000 in improper payouts to his wife. They also found another $350,000 had been spent on unauthorized construction projects, all going to companies owned by the CEO.
Also, Mr. Chair, just last week, a report was issued by the Center for Popular Democracy and Integrity in Education entitled, ``Charter School Vulnerabilities to Waste, Fraud, and Abuse.'' That title was borrowed from the title of a section of a report that appeared in the Department of Education's Office of Inspector General's recent report.
The report stated that the OIG experienced a steady increase in the number of charter school complaints, State-level agencies were failing to provide adequate oversight needed to ensure Federal funds were being properly used and accounted for. They estimated over $100 million in taxpayer losses due to fraud, abuse, and waste in charter schools.
We can do much better. The conflict of interest problems afflicting charter schools across the country endanger the outstanding work being done by many charter schools.
For example, the Pepin Academies in my hometown of Tampa is a tuition-free public charter school for students with identified learning disabilities. They have an individualized education plan. They serve a very important population, and I believe in their mission.
If charter schools are going to effectively carry out their mission for students, using public funds, it is clear that we need more accountability and better procedures in place to protect taxpayer investment.
I include for the Record the press report that I referenced, along with the letters of support from First Focus, School Superintendents Association, NEA, and AFT.
[From the Republic, Nov. 17, 2012]
Insiders Benefiting in Charter Deals
(By Anne Ryman)
Board members and administrators from more than a dozen state-funded charter schools are profiting from their affiliations by doing business with schools they oversee.
The deals, worth more than $70 million over the last five years, are legal, but critics of the arrangements say they can lead to conflicts of interest. Charter executives, on the other hand, say they are able to help the schools get better deals on services and goods ranging from air-conditioners to textbooks and thus save taxpayers money.
The Arizona Republic reviewed thousands of pages of federal tax returns, audits, corporate filings, and records filed with the Arizona State Board for Charter Schools. The analysis looked at the 50 largest non-profit charter schools in the state as well as schools with assets of more than $10 million. For-profit schools were not analyzed because their tax records are not public.
The Republic's analysis found at least 17 contracts or arrangements, totaling more than $70 million over five years and involving about 40 school sites, in which money from the non-profit charter school went to for-profit or non-profit companies run by board members, executives or their relatives.
Arizona has 535 charter schools that enrolled about 144,800 students this school year, or about 14 percent of students in public schools.
Arizona's regulations on charter schools are relatively lax. The state allows charters to seek exemptions from state laws that require schools to obtain competitive bids for goods or services. Nearly 90 percent of the state's charter holders have gotten permanent exemptions from the state Board for Charter Schools, according to the state's database.
The schools' purchases from their own officials range from curriculum and business consulting to land leases and transportation services. A handful of non-profit schools outsource most of their operations to a board member's for-profit company. The transactions are legal provided schools report the relationships on their federal tax forms and board members abstain from voting on their own contracts.
In one case, school officials in Phoenix thought they were exempt from purchasing laws and failed to put a contract out to bid for non-academic services that were worth hundreds of thousands of dollars. In another case, a Glendale school purchased a van for almost twice its value and had to get the money refunded.
It's impossible to know whether any money was potentially diverted from classrooms through insider transactions or lack of competitive bidding. Several charters said they saved money but were unable to provide specifics; others did not respond to interview requests. Some said they contracted with a school official's company because the quality of the product or service was better than what was on the market.
Educators and ethicists say the arrangements raise questions about whether the schools are being used partly for personal gain.
``This is crony capitalism,'' said Alex Molnar, an education professor at the University of Colorado-Boulder who has studied charter schools. ``This is greasing the palms of special-interest and favored individuals.''
A for-profit company paid by a charter school, even a company that operates most of the school, does not have to disclose spending details or how much profit it makes. Some board members who did business with their schools told The Republic they macle a profit on the transactions. Others said they lost money. Some refused to comment.
Charter-school leaders say most executives and board members operate with good intentions when they conduct business transactions with their schools. The schools want to stretch their funding, and school leaders who own businesses can give the schools a good deal on products or services.
Being exempt from purchasing laws gives schools more flexibility, allowing them to focus more on the classroom and less on red tape, charter-school officials say.
``I see a lot of my schools really using thrifty, cost-effective methods,'' said Eileen Sigmund, president and CEO of the Arizona Charter Schools Association, a non-profit group that provides support services for charter schools.
For example, she said, one charter-school leader picked through Northern Arizona University's surplus equipment to get desks for classrooms.
Because Arizona charter schools receive on average $1,700 less in annual state funding per child than district schools, charters ``really have to be efficient,'' she said.
Charter schools are public schools that are independently run by non-profits, for-profits, school districts or state universities.
Charters get less funding on average largely because, unlike school districts, they can't ask voters in their surrounding areas to pass bonds and overrides to bring in more money. About 96 percent of charter schools operating now are authorized by the state and the rest by school districts or state universities.
Molnar, the education professor, said because charters are publicly funded, they should be subject to state procurement laws. Board members shouldn't be allowed to do business with their own schools, either.
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[From the denverchannel.com, May 6, 2010]
School CEO Ripped for Hiring Wife, Paying Himself $340K
A new audit report rips the founders of the Cesar Chavez Charter School Network for egregious financial impropriety and ``severe nepotism.''
The Colorado Department of Education is now calling for an investigation by the Pueblo County District Attorney and the IRS.
The Cesar Chavez Network operates three schools, one in Denver and two in Pueblo.
The report said Chief Executive Officer Lawrence Hernandez was paying himself $340,000 per year. He hired his wife as chief operating officer and paid her $201,000 a year. The chief financial officer was paid $321,000.
``This far exceeds what is the standard salary for a charter school or even if you look at some of our larger district superintendents,'' said CDE commissioner Dwight D. Jones.
In fact, Hernandez, who oversaw just three schools, made almost twice as much as the superintendent of the largest school district in the state--Jefferson County. Jeffco School Superintendent Cindy Stevenson makes $180,000 a year overseeing 94 elementary schools, 20 middle schools, 17 high schools, 10 option schools and 14 charter schools.
Hernandez and his wife then hired 20 members of their own family from 2002 to 2008, according to the CDE report and audit. Hernandez's wife's stepbrother was a board member and the owner of a janitorial service that was a vendor for the schools.
And, according to the report, school officials racked up $400,000 in credit card charges in one year.
``I call it questionable use of taxpayer money,'' Jones said. ``I think it's very concerning and have requested that Pueblo City Schools take immediate action to correct some of the improprieties that were identified.''
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[From Seven Days/The East Bay News Blog, Jun. 18, 2012]
It's Time To Close the American Indian Public Charter Schools
(By Robert Gammon)
For the past decade Ben Chavis and his so-called American Indian Public Charter schools in Oakland have gotten away with egregious conduct that would be considered grossly unacceptable for any other school--because they have had high test scores. First, there was the revelation that Chavis routinely abused his students verbally, humiliating them in front of their classmates, to force them score higher on tests or quit the school altogether.
Then came the news that Chavis had hurled racist and sexist comments at others in front of students, and that his schools had stopped serving American Indian children.
But that's not all. Earlier this year, a draft report by state auditors uncovered evidence that Chavis had engaged in fraud and was illegally pocketing taxpayer funds. Then last week, the Express reported that one of the schools' eye-popping test scores appear to be the product not of academic excellence. Instead, there's evidence that the school has been routinely cherry-picking top students from local elementary schools in violation of district regulations. At minimum, Chavis' schools appear to be nothing more than a rigged system in which mostly high-scoring students apply to get in, are accepted, and then continue to score well on tests.
Then, the state's final audit came out and revealed some truly disturbing evidence, including $350,000 of what appear to be improper payouts to Chavis' wife; $355,000 in payments to Chavis for a summer school program that violated state law; and $348,000 to companies that Chavis owns and did unauthorized construction projects.
Alameda County schools Superintendent Sheila Jordan requested the audit after receiving complaints from former school employees of financial impropriety by Chavis and his wife. Jordan has turned the final audit results over to Alameda County District Attorney's Office for possible criminal prosecution.
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[From the Miami Herald, Apr. 21, 2014]
South Miami-Based Charter School Management Company Under Federal Scrutiny
(By Kathleen McGrory)
The state's largest charter school management company has come under scrutiny from the U.S. Department of Education for potential conflicts of interests in its business practices, federal authorities have confirmed.
The Education Department's Inspector General Office is auditing the South Miami-based Academica Corp. as part of a broader examination of school management companies nationwide. The audit will be complete this summer, department spokeswoman Catherine Grant said.
A preliminary audit report obtained by the Herald/Times identified potential conflicts of interest between the for-profit company Academica and the Mater Academy charter schools it manages. One example the auditors cited was the transfer of money from Mater Academy to its private support organization, which shares the same board of directors.
When asked about the potential conflicts of interest raised in the report, Academica attorney Marcos Daniel Jiménez, in an email to the Herald/Times, touted the charter school network's academic record and commitment to its students.
Jiménez also said Academica had sent a response letter to the U.S. Department of Education correcting what he called ``inaccuracies and false statements'' contained in the preliminary report. But Academica declined the Herald/Times request to be provided the response, saying the Education Department considered the report and the response from Academica to be confidential.
The Education Department's findings come as the Florida Legislature considers a bill that could weaken school districts' ability to control business practices at new charter schools.
Under current law, school systems have the power to negotiate contracts with new charter schools. HB 7083 would mandate the use of a standardized contract, meaning school districts would give up most of their leverage.
Charter schools are funded by tax dollars, but run by non-profit governing boards that function independently of local school boards. Some are managed by for-profit companies like Academica.
Academica oversees nearly 100 charter and virtual charter schools in Florida, according to its website. It also manages schools in Texas, Nevada, Utah, California and Washington, D.C.
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Charter School Vulnerabilities to Waste, Fraud, and Abuse, A Report From The Center for Popular Democracy & Integrity in Education, May 2014
The Center for Popular Democracy is a nonprofit organization that promotes equity, opportunity, and a dynamic democracy in partnership with innovative base-building organizations, organizing networks and alliances, and progressive unions across the country.
Integrity in Education is a nonprofit organization dedicated to restoring integrity in education. Integrity in Education exists to shine a light on the people making a positive difference for children, and to expose and oppose the corporate interest groups standing in their way.
PREAMBLE
The title of this report, Charter School Vulnerabilities to Waste, Fraud, and Abuse, was borrowed from the title of a section of a report that appeared in The Department of Education's Office of the Inspector General's Semiannual Report to Congress, No. 60. The report references a memorandum issued by the OIG to the Department. The OIG stated that the purpose of the memorandum was to, ``alert you of our concern about vulnerabilities in the oversight of charter schools.'' The report went on to state that the OIG had experienced, ``a steady increase in the number of charter school complaints'' and that state level agencies were failing ``to provide adequate oversight needed to ensure that Federal funds [were] properly used and accounted for.''
The purpose of this report is to echo the warning issued by the OIG and to inform the public and lawmakers of the mounting risk that an inadequately regulated charter industry presents to our communities and taxpayers. Our examination, which focused on 15 large charter markets, found fraud, waste, and abuse cases totaling over $100 million in losses to taxpayers. Despite rapid growth in the charter school industry, no agency, federal or state, has been given the resources to properly oversee it. Given this inadequate oversight, we worry that the fraud and mismanagement that has been uncovered thus far might be just the tip of the iceberg. Our hope is that lawmakers will use the information and concrete recommendations that we outline in this report to pass meaningful oversight legislation.
Ms. CASTOR of Florida. I ask for approval of this amendment regarding conflict of interest.
I yield back the balance of my time.
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