Massive Fraud and Waste in US Charter Schools

A report has detailed fraud and waste in charter schools in the United States totalling over $200 million in 2014 and 2015. The report says that this is likely to be the tip of the iceberg and that the federal, state and local governments stand to lose more than $1.4 billion because of regulatory failure.

Charter schools are independent public schools in the US that are publicly funded but operate independently of public education systems. They have considerable autonomy over staffing, curriculum, and budgeting. Charter school operators may include community groups, institutions of higher education, non-profit corporations, and, in some states, for-profit corporations.

The report details cases of fraud, mismanagement and waste in several states. For example, in Ohio this year, the state auditor reported that inspections of 30 charter schools revealed that nearly half of them had significantly over-stated their enrolments. As schools are funded according to enrolments this meant schools were being over-funded. Almost 900 students were missing in seven of the schools at a cost of roughly $5.7 million. The auditors identified eight other schools with troubling, but less significant numbers of missing students.

The report is highly critical of inadequate regulation of charter schools. It says:

Despite the tremendous ongoing investment of public dollars to charter schools, government at all levels has failed to implement systems that proactively monitor charter schools for fraud, waste, abuse, and mismanagement….
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. [p. 1]

It notes that while charter schools are subject to significant reporting requirements by various public offices (including federal monitors, chartering entities, county superintendents, and state controllers and auditors), very few public offices regularly monitor for fraud.

The report calls for governments to put systems in place to prevent fraud, waste, abuse and mismanagement. It recommends the following reforms:
• Mandate audits that are specifically designed to detect and prevent fraud, and increase the transparency and accountability of charter school operators and managers.
• Clear planning-based public investments to ensure that any expansions of charter school investments ensure equity, transparency, and accountability.
• Increased transparency and accountability to ensure that charter schools provide the information necessary for state agencies to detect and prevent fraud.

Trevor Cobbold

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