Will Huntsberry of the Voice of San Diego has covered the scandals blighting California’s Charter Industry, especially the A3 online scandal, the largest in American history.
In this article, he goes straight to the heart of the scandals: the flawed audit process.
California lawmakers created a system that places just one process at the forefront of detecting fraud and mismanagement in the state’s schools: a yearly audit, conducted by a “state-approved,” “independent” auditor, according to the Department of Education.
But these auditors are not independent, in so much as they are hired and fired at will by the schools they are auditing. The term state-approved is also something of a misnomer. To qualify as an approved firm, the State Controller’s Office must only verify that the potential auditors are accountants in good standing with the California Board of Accountancy.
No special training or vetting required.
The audits themselves are also not designed to dig deeply into a school’s finances, according to transcripts from a grand jury proceeding into an alleged $80 million charter scam obtained by Voice of San Diego.
A3 Education operated 19 online charter schools around the state. The schools enrolled thousands of students, some real and some fake, prosecutors say. Two men at the top of the alleged scheme funneled $80 million out of the public education system and into companies they controlled, prosecutors say.
Even though few other people ever existed on the companies’ payrolls besides the owners, auditors following standard procedures missed that part of the alleged scam, as well as others, according to the grand jury transcripts.
“They’re not designed to catch fraud at all,” Michael Fine, who runs a state fiscal watchdog agency called the Fiscal Crisis Management and Assistance Team, told Voice of San Diego. “To have a certain confidence level in the numbers, they do some testing of transactions. But that testing is fairly limited.”
Fine said there’s another critical element that could limit the auditors’ effectiveness: They rely on what school management teams show them, rather than getting much behind the numbers.
That makes no sense. Ask the folks in charge of a massive scam to show you the numbers they choose to show.
California and charter fraud are becoming synonymous.
Diane Ravitch's blog 
The public school district where I worked had an independent auditor that had no affiliation with the school district. There was no conflict of interest and never any evidence of any impropriety. We need to raise the accountability bar for private contractors unless California enjoys wasting public resources.
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Back when I was still teaching near the end of my teaching career (1975-2005), one year, during negotiations between our local and the district’s fascist administrators (emphasis on the word “fascist”), they told us, teachers,, the district did not have the money to pay for a planning period, lower class sizes, and to keep funding electives like band and drama.
One math teacher at one of the three high schools in that district requested a copy of the schools budget/books and, alone, he discovered admin hid millions in fake accounts to make that money vanish from the reserve and at the end of each fiscal year, that money flowed back into the general fund for a week or two before new fake accounts were created to hide it.
The teachers started to picket the district office on the days when the elected school board met and admin was forced to capitulate by a majority of the elected school board because it was an election year and the majority of the board didn’t want to lose teacher support.
Transparency is great.
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Audits help schools strive for quality. If the charter industry in California wanted to develop a high quality product they could sell to the public as a viable alternative to public schools, why did they create ways to muddle the auditing process? That was really dumb! I guess when deregulation becomes your ideology, you wind up making dumb decisions like this one. Libertarian self-destruction. Reminds me of the Confederacy neglecting to collect taxes to pay for the war effort.
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Let me guess…Ann O’Leary, formerly at CAP, finds nothing wrong with charters hiring their own auditors.
Trump’s accountants in charge of the IRS’ audits of his tax returns- that would seem wrong anywhere except a place where there is class solidarity.
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This is not surprising since this is how corporate audits work generally.
To be honest, it would need to be done by a government agency or a randomly selected accounting firm that the company can’t fire.
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I bet thieves, sex offenders, and serial killers wish they could choose and fire their own investigators too.
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