Last spring, the Network for Public Education published a report on waste, fraud, and abuse in the federal Charter Schools Program. The report, called Asleep At the Wheel, documented the Department of Education’s failure to monitor the veracity or feasibility of applications for the program or to follow up on what happened to the money spent to launch new charter schools. It found that nearly $1 billion of federal dollars had been wasted on charters that either never opened or closed soon after opening.

Today, NPE released a new report that delves into what happened with federal money from the Charter Schools Program in the states. The findings were even more concerning than last spring’s report.
The new report is called Still Asleep At the Wheel.

An excerpt:

This report, Still Asleep at the Wheel: How the Federal Charter Schools Program Results in a Pileup of Fraud and Waste, takes up where our first report left off. In it, we provide detailed information, state by state, on how federal dollars were doled out to schools that no longer exist or never existed at all.

In 2015, the U.S. Department of Education (the Department) published a list of charter schools that received grants between the years of 2006 and 2014. Using that database of 4,829 schools, we meticulously determined which charters that received grants were still open, which had closed and which had never opened, resulting in state by state records of enormous waste. We examine the detailed spending records of some of Michigan’s ghost charter schools that received grants exceeding $100,000. We explain how money moves into the hands of for-profit management organizations and tell the stories of subgrantees that engaged in fraud—sometimes amounting to hundreds of millions of dollars—all beginning with funding from the federal Charter Schools Program.

Major findings of our research include the following:

Documented charter school closures and the waste of federal funds exceeds our first report’s estimations.
We believed that about 1,000 recipient charters were defunct. However, using the 2015 database (active grantees from 2006-2014), we identified 1,779 grantee schools that either never opened or had shut down. The number of non-operational recipients, across 25 years of the program is inevitably in the thousands.
In the first report, we estimated the fail- ure rate for recipient schools to be 30 percent. For schools listed in the database, however, our latest review found a failure rate of 37 percent.

It is impossible to document total waste for the entire 25 year program because the Department never required the states to report the names of funded schools until 2006. However, we have now documented $504,517,391 (28 percent of the total database amount) that was awarded to schools between 2006-2014 that never opened or that have closed. Applying that percentage to the total expenditures ($4.1 billion) of the CSP programs designed to create new schools, approximately $1.17 billion in federal funding has likely been spent on charters that either never opened, or that opened and have since shut down.

The disbursement of over one billion dollars during the program’s first decade was never monitored for its impact or results. There is no record of which schools received the funds.

From 1995 to 2005, enormous funds were pushed out to the states to distribute to schools via subgrants. Yet the Department has no complete record of which schools re- ceived funding during the program’s early years, because it never required the states to report the names of subgrantee schools or their status. The Department’s over- sight ended when the funds left Washington.

During the first decade of the program when states did not have to report where the money went, Florida, a state where nearly half of all charter schools are run by for-profit organizations, received four grants totaling $158,353,525. Michigan, where about 80 percent of all charters are run by for-profit management companies, received four grants totaling $64,608,912. California also received four grants, totaling $190,857,243.
Although the overall rate of failed charter projects was 37 percent, in some states the rate of failure was much higher.

Iowa and Kansas have the largest propor- tions of failed subgrantee charter schools. Eleven charter schools in Iowa received grants. Ten failed, wasting over $3.66 million. As of 2014, the database indicates that Kansas doled out $8.51 million to 29 schools. Twenty-two (76 percent) of those schools either never opened or are closed today–$6,389,964 of the $8.9 million was wasted.

States with a subgrantee failure rate exceeding 50 percent include: Delaware, Georgia, Hawaii, Iowa, Kansas, Maryland, Mississippi, Virginia and Washington (state). Mississippi had only one grantee and that school failed. Georgia had 75 failures, resulting in over 23 million federal dollars wasted.

The percentage of defunct charter school grantees in Florida was 37 percent ($34.2 million); the Michigan failure rate was over 44 percent ($21 million) and Lou- Asian’s failure rate was 46 percent ($25.5 million).
The most astounding loss, however, was California’s: nearly $103 million was awarded to charters that never opened or have shut down—37% failed.

Five hundred thirty-seven (537) schools list- ed in the database never opened at all. Many received over $100,000 in federal funds.

Since 2001, charter school entrepreneurs have been eligible to receive CSP grants before they have even identified an authorizer or submitted a detailed application to open a school. In total, we identified 28 states that had at least one charter school (537 schools in total) that never enrolled even one student for one day and yet had received federal funds. According to the CSP database, those schools received, or were due to receive when the database collection ended, a total of $45,546,552 million.

Topping the list was the state of Michigan where 72 never-opened schools received grants, most exceeding $100,000. Over $7.7 million was wasted. In California, we identified 61—with waste of $8.36 million.
Other states with large numbers of never- opened schools receiving CSP funds in- clude Arkansas (18), Florida (46) Illinois (20), Maryland (38), Massachusetts (17), New Jersey (23), Ohio (20), Oregon (40), Pennsylvania (41), South Carolina (34), Tennessee (43) and Wisconsin (15).

This report provides details on how several of these never-opened charters in Mi- chigan spent those federal funds.

Although Congress forbids for-profit opera- tors from directly receiving CSP grants, they still benefit by having their schools apply.

Although we could not identify every charter in the CSP database that was run by a for-profit management company, we were able to identify those run by the large for-profit chains including Academica, K12, National Heritage Academies, White Hat and Charter Schools USA. In total, we found 357 schools in the database run by major for-profit chains. These schools had received a total of $124,929,017 in federal CSP start-up funds. Unsurprisingly, most of this money flowed to for-profit run schools in Florida ($46,936,979) and Michigan ($26,452,927). Eighty-three (83) schools run by the Flor- ida-based, for-profit chain Academica received CSP grants, totaling $23,426,383.

Still Asleep at the Wheel also describes why so many charter schools fail, along with the stories of grantee schools that abruptly closed, sometimes with little or no notice to their students and families. Far too often those schools shut down due to corruption and fraud. Our report provides disturbing accounts of grifters and profiteers who took CSP and other taxpayer funds only to enrich themselves at the expense of the students they had promised to serve.

The staggering amount spent on schools that have closed or never opened, as well as those that have engaged in fraud, is nothing short of a national scandal. As public dollars are diverted from public schools, the students who attend their neighborhood schools have fewer resources. It is time to put on the brakes and chart a new course.

We were heartened that after the publication of our first report in March of 2019, the U.S. House of Representatives reduced funding for the CSP program for 2020. However, a small reduction is not sufficient to address the program’s structural flaws.

We therefore strongly recommend that Congress end appropriations for new charter school grants in the upcoming budget and continue funding only for obligated amounts to legitimate projects. Once those grants have been closed, we recommend that the CSP be ended and that charter schools continue to receive federal support only through other federal funding streams such as Title I and IDEA. Students, not charter school en- trepreneurs, should benefit from federal funds.

We also recommend thorough audits by Congress of previous grant awards, the establishment of regulations to ensure grant awards still under term are being responsibly carried out and that misspent money is returned to the federal coffers.