Archives for category: Virtual Charter Schools

EPIC virtual charter school is locked in a battle with state auditors over the question of whether public money belongs to the public or to the owners of the school.

Face-Off Between Epic, State Centers on Controversial ‘Learning Fund’

EPIC is a charter school but it’s defense is that it is a private business, not a public agency. How refreshing!

The story:

The state is drawing a hard line: Public education funds that flow to a private company are public.

Founders of the state’s largest online charter school are fighting to shield those funds. Their company has refused to comply with subpoenas from the State Auditor and Inspector.

The showdown is headed to court and could have major ramifications for Epic Charter Schools and its for-profit management company, Epic Youth Services, both of which have drawn controversy since inception a decade ago.

At the heart of the issue is something Epic calls the “learning fund.” It’s a major draw for students and families and has helped propel Epic’s stunning enrollment growth.

Here’s how it works: Epic makes at least $1,000 available to each student annually in the student’s learning fund. Dollars are deducted for their choice of curriculum and for a plethora of other items of their choice, such as laptops and iPads, science kits and craft supplies, soccer club fees, horseback riding lessons, gymnastics and summer camps.

Parents don’t receive the money directly but instead request a purchase from Epic. Epic transfers the money to Epic Youth Services, according to the court filing, which then pays the vendors directly. There are more than 1,400 private learning-fund vendors.

The school makes periodic transfers of state funding into a checking account specifically for learning fund purchases. The school transfers into a separate checking account 10% of its total revenue to Epic Youth Services for a management fee.

Epic Charter School co-founder Ben Harris is seen at a board meeting in Oklahoma City on Oct. 16, 2019. (Whitney Bryen/Oklahoma Watch)
Epic was founded by David Chaney and Ben Harris; the two men also own Epic Youth Services LLC. Chaney and Harris have split at least $10 million in profits from Epic Youth Services between 2013 and 2018, according to the OSBI, which is investigating Chaney and Harris on allegations of embezzlement and racketeering.

Chaney and Harris have denied wrongdoing, and no charges have been filed. Through an attorney, they responded to the auditor’s court motion with a written statement.

“The state Auditor’s legal position – that private businesses are subject to state audit – should concern every business owner in Oklahoma. Epic Youth Services has offered to voluntarily allow the auditor to review records appropriate to their request, but we have received no response prior to this court filing. We will vigorously fight for the protection that has historically been provided to private businesses like Epic Youth Services.”

Online charter schools are an “epic” fail, as proved by the disaster of the EPIC online charter school in Oklahoma.

Here is the latest EPIC story:

Like many teenagers, Maggie Waldon caught a sort of senioritis halfway through a traditional high school. She was ready to be done.

With two years left, she enrolled in Epic Charter Schools, the Oklahoma City-based online public school that is now one of the largest virtual schools in the country.

At Epic, Waldon said she easily raised her grades from Cs and Fs to As and Bs. She said she did so with little interaction with her teacher, spending long days clicking through the curriculum. “There were days I asked my teacher for help. But mostly, I just figured it out,” Waldon said.

She was able to fast-track her remaining credits, finishing in one year what would have taken two in a traditional school. She was one of 2,500 students in Epic’s class of 2019.

That’s when she discovered she wasn’t prepared for college, she said. On the ACT exam, she “failed, majorly.” She has put her dream of becoming a kindergarten teacher on hold.

“I wish Epic actually helped prepare you for a future, because we all grow up and become adults. That’s something they didn’t do,” Waldon said.

In a five-month investigation into Epic’s college-going rates, Oklahoma Watch found that fewer than one in five 2019 graduates enrolled in a public Oklahoma college or university last fall. Its rate was lower than rates for all of the state’s 10 largest school districts, according to an Oklahoma Watch analysis of education data. The data was collected from every college and university in the state.

EPIC has more high school graduates than any of the state’s 10 largest school district, but only 14.7% of their graduates enroll in college or university.

Clearly, state legislators in Oklahoma like to send public money to EPIC, despite its horrible statistics.

Do they care about the education of the next generation of Oklahomans or do they just prefer an uneducated population?

I have posted repeatedly here about the dismal academic results of virtual charter schools. Students have high attrition rates, low test scores, and low graduation rates.

This finding has been reported again and again. In 2015, CREDO at Stanford said that students lose almost a year of learning in math when they attend virtual charter schools. In many states, the virtual charters are the state’s lowest performing schools. Pennsylvania has many virtual charter schools, and none of them has ever met state benchmarks in reading and math.

The latest study comes from Indiana, as reported by Stephanie Wang in Chalkbeat.

Faced with low academic results at online schools across the country, supporters often defend virtual education because it provides a haven for struggling students.

But a new study in Indiana found that students fell further behind after transferring to virtual charter schools. The findings suggest that online schools post low outcomes not simply because the students they serve face challenges, but because of problems with how online learning works — and the shortfalls of not having a physical classroom.

The new research, to be published in the journal Educational Researcher, is in line with other studies that have shown that students who transfer to virtual charter schools saw significant drops in their math and reading scores.

“Parents need to know that as they’re making these choices,” said Mark Berends, director of the University of Notre Dame’s Center for Research on Educational Opportunity.

Berends, along with three other researchers, tracked seven years of recent test scores to look at how Hoosier students in grades 3-8 performed before and after they transferred to virtual charter schools. The study compares students at virtual charters to peers in brick-and-mortar classrooms with similar profiles at the same academic level.

The declines equate to a student who was performing at an average level (50th percentile) sinking to the 35th percentile in math and the 40th percentile in reading, Berends said.

It didn’t make much of a difference which virtual charter school they attended or which teachers they had, according to the study. And the negative effects weren’t just due to the disruption of switching schools — unlike students who transferred to brick-and-mortar charter schools, students’ scores didn’t bounce back after the transition.

Even if students had been struggling before changing to an online setting, researchers concluded that they would have fared far better had they stayed at a traditional public school.

Researchers couldn’t exactly pin down why those declines happen. Their theory is that the problem could lie in the very nature of a virtual environment being “inherently limiting” when it comes to how teachers interact with students and how many more students are in each class. It can be hard to track how long students really spend at their computers and to make sure students keep up with their schoolwork.

Do you think any state will close down failing virtual charters? Back when Kevin Huffman was state superintendent in Tennessee, he tried to close down the state’s virtual charter, the lowest performing school in the state. He couldn’t do it. He wrote an article called “An Ed Commissioner’s Confession: How I Tried (and Failed) to Close the Worst School in Tennessee.”

At some point, you have to wonder whether state legislatures simply don’t care about the quality of education in their state.

Last year, two large online charter schools collapsed in Indiana at a cost of $86 million.

Now a new online charter has opened and hired some key employees of those that defrauded they public.

Last summer, as two large Indiana virtual charter schools collapsed under the weight of fraud allegations, a small new online program made its debut.

Indian Creek Online Academy was launched by a 2,000-student district south of Indianapolis experimenting with new ways of reaching students.

Officials with the Nineveh-Hensley-Jackson district said they wanted to avoid the mistakes of the troubled virtual schools. But they also picked an outside management company whose leader had a history with those very institutions, Indiana Virtual School and Indiana Virtual Pathways Academy.

Businessman Gar Hoover, the head of Indian Creek Online Academy’s management company, had previously served as chief operating officer for AlphaCom, a company accused in the $86 million alleged enrollment fraud and self-dealing scheme at the two virtual charter schools.

A state auditors’ investigation released earlier this month alleges that Hoover, who also served as a board member for Indiana Virtual School, signed off on a request for more than $96,000 in state funds based on inflated enrollment numbers. He’s listed as one of the parties personally responsible for repaying that amount, plus the cost of the auditors’ investigation.

A federal investigation has been launched into the fraud allegations. It is unclear whether Hoover’s role is included in the investigation.

Nineveh-Hensley-Jackson Superintendent Tim Edsell said he asked about Hoover’s history at Indiana Virtual School before the district contracted with his new company, American Online Education Services.

But Edsell wasn’t aware that Hoover was named in the state auditors’ investigation until contacted by Chalkbeat. After Chalkbeat sent him the state’s report, Edsell said he opened an internal investigation with the district’s legal counsel into Hoover’s connections to the virtual charter schools.

“I do have concerns,” Edsell said. “I want to be very thorough and comprehensive and accurate in our review.”

Edsell also didn’t know that Hoover had brought in a subcontractor with several other former employees from the web of companies paid millions in public dollars to operate virtual schools that served far fewer students than they received money for.

This editorial appeared in the Fort Wayne Journal Gazette, a newspaper that has paid close attention to the scandals and frauds in the charter industry.

It begins:

Operators of two Indiana charter schools spent nearly $86 million in tax dollars at businesses in which they had ties. The money came from state tuition support for students who, in some cases, were never enrolled in the schools.

This is the school choice Indiana lawmakers celebrate – a breathtaking violation of the public trust.

A special report by the State Board of Accounts was released last week, based on an investigation of Indiana Virtual School and Indiana Virtual Pathways Academy. Chalkbeat, an online education news service, first reported in 2017 that one of the online schools collected nearly $10 million in 2015-16 while graduating only 5.7% of its seniors – the lowest graduation rate in the state. Chalkbeat revealed a web of business interests between school founder Thomas Stoughton and AlphaCom, a for-profit company he operated while charging the school millions for management services and rent for offices in a suburban Indianapolis office park.

State auditors found public funds misappropriated through “malfeasance, misfeasance, and/or nonfeasance.” The complexity of the scam required a diagram to lay out ties among Stoughton, other charter officials and 14 private companies that shared in ill-gotten school funds – almost $69 million.

 

Chalkbeat’s reporting found discrepancies in enrollment now confirmed by the state. In more than 4,700 examples, children reported as enrolled completed no courses. Another 3,811 were flagged with just one or more course completions. The ghost enrollees included individuals who died or moved out of state, students withdrawn for lack of participation and some who did nothing beyond requesting information on the school. Counted as enrollees, they drew thousands of dollars each in state support that was, in turn, funneled to connected vendors. In the 2017-18 school year alone, the audit identified $15.5 million in overpaid tuition support.

Asked about the State Board of Account’s report, House Speaker Brian Bosma defended the virtual school program and pointed to Daleville Community Schools, the tiny public school district that granted its name as authorizer of the charter schools, and the Department of Education, overseen by Indiana schools chief Jennifer McCormick. The Republican state superintendent, whose office was eliminated by the legislature effective next year, has been outspoken in calling for greater accountability for schools of choice.

Blaming the Department of Education for the abuses of charter school operators is like blaming the BMV for the actions of a drunk driver. Responsibility for lax regulations and oversight for both charter schools and voucher schools falls squarely on Bosma and the GOP supermajority. In cozying up to the deep-pocketed school-choice community, they ignored glaring examples of corruption here and elsewhere. It was almost 11 years ago when The Journal Gazette first reported on the suspicious real estate deals surrounding two Imagine Inc. charter schools in Fort Wayne – schools that eventually shut down with $3.6 million in outstanding state loans.

Charter school scandals are so common that the Network for Public Education began collecting them on a website and tagging them on Twitter: #AnotherDayAnotherCharterScandal.

“There is a crisis of charter corruption in the United States and sadly the powerful charter lobby stops every attempt to enact reform,” said Carol Burris, executive director of the organization. “In 2019 alone the Network for Public Education identified four major virtual charter scandals, including Indiana’s two schools. A California virtual scandal cost that state’s taxpayers over $50 million. Virtual charter schools have a pattern of ‘cooking the books’ when it comes to attendance and enrollment, and have the worst outcomes when it comes to student achievement.”

Do Indiana taxpayers care?

Oklahoma has just experienced a fraud involving an online charter school called EPIC, which was accused of collecting money for ghost students and billing for excessive administrative overhead. It’s amazing how many of the big scandals in charter land involve the highly profitable online charters.

Now parents in Oklahoma are outraged that a new virtual charter obtained the names and addresses of their children. The charter is aligned to the Gulen movement.

State Superintendent Joy Hofmeister has promised get to the bottom of this breach of student privacy.

There is not much to admire in Oklahoma’s penurious funding of its public schools. But there is one admirable law on the books. Schools are not permitted to spend excessive amounts on administrative overhead. And when they do, they are penalized.

Epic One on One virtual charter school has been penalized more than $530,000 for exceeding the state limit on administrative spending, a limit imposed by state statute meant to keep the bulk of state education funding in the classroom. 

Epic’s superintendent, Bart Banfield, was notified of the penalty last month, according to an email obtained by The Frontier through an open records request. 

The total penalty of $530,527.20 is based on Epic exceeding the allowable limits on administrative expenditures by 5.58 percent. 

School districts with more than 1,500 students are not allowed to spend more than 5 percent of expenditures on administrative costs, which includes salaries for superintendent, assistant superintendent or any employee who has responsibility for administrative functions of a school district. 

The amount will be deducted from Epic’s next state aid payment, according to the email to Banfield. 

Thirteen school districts exceeded administration spending limits in Fiscal Year 2019, according to a report from the State Department of Education. 

The penalties for the 12 other districts averaged $19,468, with penalties on school districts ranging from $27.39 to $39,514.

Epic’s penalty of more than half a million dollars is 10 times more than any penalty issued over the past three years, according to documents obtained by The Frontier. 

EPIC’s CEO said it was a coding error. The state superintendent Joy Hofmeister said there was no error and the fine would be collected.

Steve Hinnefeld writes about education in Indiana.

In this post, he explains the deep corruption in the virtual charter industry and how the frauds were facilitated by generous gifts to key politicians.

He writes:

We’ve known something fishy was going on with virtual charter schools since 2017, when a Chalkbeat Indiana investigation exposed shady business practices and lousy test scores and graduation rates at Indiana Virtual School and its sister school, Indiana Virtual Pathways Academy.

A blockbuster report this week from the State Board of Accounts shows just how bad it was – and it was worse than we’d imagined. The report charged that the schools overbilled the state by $68 million by vastly inflating the number of students who were enrolled in and attending classes online.

It also found schools made $85.7 million in questionable payments to vendors in which school officials or family members had an interest. Much of the taxpayer money that the schools received, the report shows, went to a network of for-profit businesses tied to school founder Thomas Stoughton and his associates.

The state investigatory report suggests officials at the virtual schools were “focused on maximizing profits and revenues,” not on serving students.

How did they get away with it? For one thing, they appealed to the dominant ideology in the Republican-controlled state government, which holds that choice and competition in the educational marketplace are an inherent good. For another, they played the game of politics.

Businesses that were associated with and benefited from Indiana Virtual School and Indiana Virtual Pathways Academy gave over $140,000 since 2016 to the campaigns of

Republican legislators and Gov. Eric Holcomb. The schools also paid over $300,000 to a high-end lobbying firm, according to the report.

That’s in addition to similar amounts paid by other online education providers – e.g., K-12 Inc. and, for a time, Connections Academies – to promote an environment conducive to virtual schools.

Political connections

Indiana Virtual School and its initial operator, the Indiana nonprofit Business Consulting Inc., worked with politicians from the get-go. In July 2011, just a month after the school got its first charter, its board approved a contract with the consulting firm of state Sen. Travis Holdman, R-Markle.

Holdman said in a statement that the schools paid him a monthly retainer from 2011 to mid-2019 to be “available for general business consulting on legal and personnel matters, contract interpretation, the relationship with the school’s authorizing entity and strategic planning.” He said he had no day-to-day involvement with the schools and terminated the

contract once news media reported “alleged malfeasance” by school officials.

Early board members of Indiana Virtual School included Sue Richardson, a former member of the State Board of Education, and Linda Chezem, an influential retired state appeals court judge.

Daleville Community Schools, a small, rural school district near Muncie, approved the charters for Indiana Virtual School and Indiana Virtual Pathways Academy and was supposed to monitor their performance. That’s an unusual situation. Most charter schools in Indiana are authorized by Ball State University, the mayor of Indianapolis or the Indiana Charter School Board.

But Daleville, by serving as authorizer, was able to collect 3% of all money the two virtual schools received from the state. As enrollment ballooned, so did Daleville’s revenues. In a sense, the authorizer was another “related party” with a financial stake in the schools’ growth.

It gets worse. Money, politics, education. Why not steal from the children? Why not sacrifice their futures to make a profit?

Do taxpayers in Indiana care? How do they feel about their tax money going into the pockets of the entrepreneurs?

 

 

The biggest and worst charter scandals are perpetrated by virtual charter schools. Why do states tolerate their waste, fraud, and abuse?

The only online charters should be operated and supervised by public officials, not by grifters and entrepreneurs.

Indiana was just scammed of more than $68 million by two virtual charters. This was money that should have spent on children and in classrooms to reduce class sizes and pay teachers.

Why did the authorizer ignore the graft? Could it be that it was getting paid a commission for each student supposedly enrolled in these “schools”? Enough fraud to pay off almost everyone.

Early estimates of just how much money two online schools stole from the state of Indiana were wrong, according to a report filed Wednesday by the Indiana State Board of Accounts.

A special investigation into malfeasance by Indiana Virtual School and Indiana Virtual Pathways Academy found that the schools inappropriately received more than $68.7 million collectively.

Last summer, state investigators revealed that the charter schools had inflated their enrollment to defraud the state — by enrolling students who’d simply requested information on the schools’ website, re-enrolling students after they’d left the schools or, in one case, by keeping a deceased student on their books more than a year after their death.

The state funds public schools — which include virtual charter schools — based on the number of students enrolled each year. At the time, investigators estimated overpayments to be around $40 million.

The new report details widespread fraud, misuse of state funds and a severe lack of oversight by school officials and the schools’ charter authorizer, Daleville Community Schools.

 

 

Craig Harris, investigative reporter for the Arizona Republic, wrote about the abysmal record of online charter schools. Despite their poor outcomes, they continue to be very profitable.

The biggest of the online charter companies is K12 Inc., whose schools regularly get bad results but whose revenue this year topped $1 billion for the first time.

State regulators mouth complaints about the low quality of online charters yet they are renewed again and again. As Harris points out, even school choice advocates (except for Betsy DeVos) believe that the online charters should be regulated, yet they continue to operate unimpeded.

Harris writes:

SAN DIEGO — By the time authorities brought charges against the owners of A3 Education earlier this year, the online charter school company had bilked California taxpayers out of $50 million, according to indictments handed up in May. 

The state would have lost another $200 million if authorities had not detected the scheme to inflate enrollment in the virtual charter school using names gleaned from youth sports league rosters, said San Diego County District Attorney Summer Stephan. League owners are alleged to have received kickbacks for providing names, according to the indictments.

A3 Education, a nonprofit management company that enrolled tens of thousands of California students at its peak, had sought out small school districts to authorize its online schools, knowing the districts would provide little oversight, authorities said.

The California case is the latest in a string of allegations of fraud and educational malpractice against virtual charter schools. These have included, among others, multimillion dollar scams in Ohio, Oklahoma and Indiana, and academic or financial problems that shuttered online charter schools in Georgia, Nevada and South Carolina.

California last year banned for-profit charter schools and this year adopted a two-year moratorium on new virtual charter schools. Neither law, however, would have affected A3 Education or its schools.

The Arizona Republic visited seven states to investigate the successes and challenges surrounding charter schools — the publicly funded but privately operated schools that many believed would revolutionize American public education through competition and innovation…

In Arizona, which has the most charter school students out of the states, no online charter school meets the state Charter Board’s academic standards. And Arizona’s largest virtual charter school, Primavera Online, earned the board’s lowest academic ranking and posted declining graduation rates for the last decade. That hasn’t stopped Primavera founder and CEO Damian Creamer from paying himself a combined $10.1 million in 2017 and 2018.

Primavera, which has a total enrollment of 22,000, reported a $10 million profit this year, while spending $6.9 million on teacher salaries. 

“These guys are definitely in it for the profit,” said Macke Raymond, director of the nonpartisan Center for Research on Education Outcomes, or CREDO, at Stanford University.

Negative headlines have, however, prompted prominent charter school leaders to call on regulators to clamp down on virtual charters, and for the industry to cut ties with the schools.

Todd Ziebarth, a senior vice president of the National Alliance for Public Charter Schools, said poor academic performance at virtual charter schools gives ammunition to teachers unions and others who oppose school choice, hurting high-quality charter schools and the broader school-choice movement.

“They make up a small percentage of charter schools, but a huge percentage of negative publicity,” said Tom Torkelson, chief executive of Texas-based IDEA Public Schools, one of the nation’s largest charter school operators. “They add no value. I would never send my kids to one.”

Torkelson argues that it’s time for online charter schools to go out of business.

But few states have enacted reforms, experts note, because when such proposals arise, virtual charter operators — flush with cash — have flooded key lawmakers with campaign contributions.

This proves that when a big charter corporation buys legislators, they stay bought.

Despite poor academic performance, virtual charter schools likely are here to stay because parents want that choice, said Raymond, the CREDO director.

However, CREDO notes in a study, low-performing online charter schools are not keeping their end of the educational “grand bargain” struck about 25 years ago, during the early charter movement.

That deal gave charter operators the freedom to teach kids in innovative ways with minimal red tape. By being allowed to run a school like a business, operators promised they would allow regulators to shut down poor performing schools. 

To fix the problems, Stanford researchers concluded that charter school authorizers “must step up their responsibilities and demand online charter providers improve outcomes for students.” And, states should examine the progress of existing online programs before approving any expansions.

Raymond said she still believes in a “cost-efficient and effective education through online” schools but the system “doesn’t seem to deliver on that.”

University of Colorado researchers agreed that states should slow or halt the growth of virtual and blended schools until their performance has improved, and student-to-teacher ratios are lowered.

But Miron, the Western Michigan professor, said changes are unlikely.

Even when prosecutors, like the San Diego County district attorney, crack down on one virtual school another will quickly pop up because the business is so lucrative, he said. 

“Even if a charter board fires them, it doesn’t affect them. They are not losing a building,” Miron said. “They don’t get punished for risky behavior. It’s a very different model for brick-and-mortar schools.”