The Center for Popular Democracy and the Alliance to Reclaim Our Schools reviewed reports of financial abuses by charter schools and concluded that more than $200 million in state and federal funds have been squandered. They examined records in only 15 states and estimate that what they discovered is only “the tip of the iceberg.” Most financial scandals and frauds come to light only after a whistle-blower speaks out or a state agency audits charter schools or an enterprising journalist digs into charter records. Many state laws governing charter schools confuse “flexibility” with a lack of oversight. Charter schools receive public money yet have gone to court to prevent public audits by state officials.
The report says that “According to standard forensic auditing methodologies, the deficiencies in charter oversight throughout the country suggest that federal, state, and local governments stand to lose more than $1.4 billion in 2015. The vast majority of the fraud perpetrated by charter officials will go undetected because the federal government, the states, and local charter authorizers lack the oversight necessary to detect the fraud.”
The report is alarming. Even more alarming is that the Obama administration intends to increase charter school funding by nearly 50% despite the absence of adequate supervision and oversight to prevent fraud.
Legitimate charter schools, serving students with high needs, should be first to expose the hucksters.
Regulations exist for a reason: to protect children and the public from fraudulent, unqualified, and incompetent operators who will prey upon them and profit because of the absence of oversight. How long will the public continue to tolerate this laissez faire approach to an industry that siphons money away from public schools without any accountability?
Diane Ravitch's blog 
Reblogged this on Exceptional Delaware and commented:
This is shocking news! Not that this isn’t common knowledge, but that it is so much. So where is all of this money going? There has to be something much bigger at play here. The estimated $1.4 billion is a HUGE figure. This money is being laundered into something, hast to be…
Yep, some of it into the election coffers of those who have been “confused” when writing the laws and/or as “charity” to ALEC.
“Many state laws governing charter schools confuse “flexibility” with a lack of oversight.”
That “confusion” is designed into the laws on purpose!
The “standard forensic auditing methodology” is a trade group’s estimate that *any* organization loses 5% of its revenue to fraud. Using that figure, traditional district schools are bleeding an astounding $30-32 billion from the public each and every year.
It is ironic that the report complains about transparency and accountability. For the New York schools, all of the information is taken from mandatory annual financial audits that by law must be made available to everyone, even the Center for Public Democracy. If a charter does not take corrective action, it faces non-renewal or closure.
Finally, some disclosures: the Center for Public Democracy received $60,000 from the AFT in 2014, and Randi Weingarten sits on its board. If you are expecting them to issue a scathing report on the $30-32 billion in fraud at district schools, you probably shouldn’t hold your breath.
Tim,
Have you read what W. Black has written about “account control fraud”? No doubt the parallels between what occurred, and is still occurring, in the banking sector and what is currently happening in the charter/privaizer sector of public education funding should be carefully examined. And then the crooks and frauds held accountable via monetary fines and restitution and, more importantly jail time served in maximum security prisons.
When deregulation of public and private sectors (that were regulated by those who came before us to help alleviate the unfortunate human tendency to greed and avarice by the unethical and immoral few) occurs the account control fraud vultures will be circling overhead having smelled the drying ink on the deregulation and/or charter privatization laws.
30 billion of copy paper theft by students and teachers? Overbilling by outside consultants maybe. I don’t think comparing “any” organization is a valid comparison. A retail chain like Target or Home Depot can’t be compared to the public schools.
TC, you may be right that it isn’t the best comparison, but it is the exact same method that the Center for Public Democracy chose to use to arrive at the eye-popping and soundbite-friendly $1.4 billion dollar figure that Diane has blogged about at least three times since April.
Furthermore, they are badly fudging when they say that this 5% figure is “standard accounting methodology;” it is absolutely nothing of the kind. What it is is this: “This [5%] estimate is based on the collective opinion of the more than 1,400 anti-fraud experts who participated in our study, rather than on any specific data or factual observations. As such, it provides an important measure that can be used as a benchmark, but it should not be interpreted as a precise representation of the cost of fraud.” The ACFE survey also says that fraud is much more likely to be identified by employees or vendors (in the case of a charter school, that would be teachers, students, and families) than it is by adding layers to or tightening institutional controls. You can read the full report here: http://www.acfe.com/rttn/docs/2014-report-to-nations.pdf.
Does charter school fraud occur? Of course it does, especially in states that allow for-profit chartering—this is illegal in New York, and it ought to be illegal everywhere. But that topline $1.4 billion dollar figure isn’t real research; it’s little more than bought-and-paid-for propaganda.
Are you also aware of the amount of money which many teachers have paid out of their own pockets to improve their classrooms, to supply students with materials which the government would not supply ad nauseum?
Yes there MAY be some auditing discrepancies here and there but when I was teaching the auditors came around all the time to check on what the schools were spending AND we HAD to get by on a minimum of funding. I myself bought many items to enhance my teaching. Hundreds of dollars in materials, much of whicht I never used but to keep up with what was going on felt the necessity of purchasing.
AND the amount of time I personally spent for which I NEVER was reimbursed. I did not care. I enjoyed what I did and felt that I was really contributing to better education. MANY teachers did likewise.
Who can believe that now?
Shameless private looting of our public school budgets.
It’s really difficult to re-regulate once you deregulate, which for some reason we have to find out over and over and over in this country.
Ohio is finding it impossible despite broad recognition and unanimous support from the state’s major media outlets
It may actually take a ballot referendum
This report should be sent to every governor and every legislature in the nation. We need to hold these fools accountable for their actions. This is taxpayers’ money that is being funneled to corporations. It is their job to be stewards of this money. They should feel the collective wrath of the public, and then, perhaps, they will be less complicit.
“Account control fraud”
Read what William Black says to Bill Moyers about what happened with the banking industry as it became more and more deregulated (starting with Clinton). Is not the parallel to the charter school/voucher sector eerily similar?
See: http://www.pbs.org/moyers/journal/04032009/transcript1.html
YES, indeed!
Unscrupulous billing by providers in Medicaid is estimated at 10% of 500 billion or 50 billion of fraud. Do we want to match that with 50 billion of fraud from loosely regulated charter schools? Because that is the way it is headed.
What a terrible waste of money!
Charter schools are approximately 5% of all public schools. Based on a fraud estimate of $1.4 billion for charter schools alone, my estimate for the rest of the public schools is 19 times higher, i.e., $26.6 billion. Remember this is the estimate for one year. Actual fraud is unknown.
Is there anyone out there to claim that public schools are so sacrosanct that there is no fraud associated with them? Or is there no one willing to delve into the fraud in the public school sector? Or is this a simple sound bite, typical of Fox News?
You mean “typical of Faux News”??
Sherrod Brown has a bill to regulate charter schools. Obviously it’s federal but I would bet it’s inspired by the absolute mess in Ohio:
http://www.brown.senate.gov/newsroom/press/release/brown-introduces-bill-to-strengthen-charter-schools-by-improving-accountability-and-transparency
I don’t think they’ll do any better job regulating charter schools at the federal level than they did regulating for-profit colleges and that is a disaster.
The most important thing to remember is that it is an iceberg. The unsinkable Titanic struck an iceberg which caused its destruction accompanied by suffering and death. The massive USSR ran itself into a few icebergs of greed and corruption and sank itself.
America, the sole mega-power and the wealthiest country in the world whose population is being forced into austerity, is feeling the impact of this public-private partnership iceberg. There are even more metaphorical icebergs on the horizon, and we seem to have lost our bearings.
Reblogged this on David R. Taylor-Thoughts on Texas Education.