NN4DA Webinar on CCAP Anti-Fraud Task Force Recommendations
Rescheduled For July 10, 2024
12:00 noon to 1:00 pm MDT
We are rescheduling the NN4DA Webinar on charter school fraud to later this summer. Apologies for the inconvenience. The new time is July 10, from noon to 1, MDT.
For more on why this webinar and CCAP’s work on charter fraud are relevant to charter authorizers in any state, read on…
Fraud in charter schools is an unfortunate, if rare, reality. Charter school authorizers have a responsibility to protect against fraud, to have systems in place that will identify fraud if it ever occurs, as well as tools that allow them to take necessary steps to address it after the fact.
A-3, a charter network in California, defrauded the state of $400 million, using various strategies that ultimately inflated enrollment counts to charge the state for students they did not educate. To put this in perspective, this total is near what the entire federal charter school program spends in one year on all schools and programs — $440 million.
The scale of this fraud prompted several years of reflection and discussions in California. NN4DA Partner, California Charter Authorizing Professionals (CCAP), responded by convening a statewide anti-fraud task force. That Task Force met for more than a year before recently releasing a set of recommendations that should be of interest to authorizers across the country. Additional groups in California are working on additional reviews that are expected to inform calls for changes in state policy eventually.
As California moves forward, changes to their state law may get attention in the US Congress or other states that consider similar changes. By way of precedent, the current federal requirement that all Charter School Program grantees funded through their State Entity (SE) program, now must submit a community needs analysis with any grant application is roughly modeled on a law that passed in California. In California, their change allowed authorizers to evaluate charter applicants based on the proposed schools’ impact on the local community and its school system.
You can read about the CCAP Anti-Fraud Task Force and download the full report, Protecting California Public Schools Against Fraud: The Charter School Sector and Beyond by California Charter Authorizing Professionals.
Any crime of this size in the public sector is likely to create a lot of finger-pointing, beyond the school’s operators. The obligation of authorizers to oversee charter finances deeply enough to identify and address fraud is a given. In this case, the culpability was greater. A superintendent of one of the authorizing school districts was eventually indicted along with the school’s operators, not for being complicit in the operator’s malfeasance, but for the district’s use of oversight funds.
Like most efforts to address bad-actors in the charter school sector, a key consideration is how to ensure the solutions to address an egregious crime at one school or network don’t create a burden on authorizers and all the other school operators that doesn’t match the risk of fraud or that undermines much-needed charter school autonomy.
In response to this concern, CCAP Executive Director, Tom Hutton, observed,
“Most of these recommendations are in the nature of ‘self-help,’ best practices for schools and authorizers, with supports proposed for their adoption and implementation. The prosecutors of A3 were pretty blunt that they were lucky to catch this bad apple, and they warned that the sector still is vulnerable.”
Equally important is the question of whether authorizers have sufficient capacity and expertise to implement recommendations and how any changes on the ground align with state law and policy to support strong charter school oversight by authorizers. CCAP’s members include many small authorizers that oversee only one or two charter schools and that have very few staff or professional resources. To accommodate small authorizers, Hutton suggested,
“The very first step probably should be checking the authorizer’s own policies and practices against the recommendations. Some of the recommendations are for all LEAs, not just charter schools, and authorizers should model what they would like their charter schools to do.”
CCAP’s found shortcomings at several levels:
- Charter school governing boards failed to fulfill their fiduciary responsibilities;
- Charter school authorizers failed to fulfill their oversight responsibilities;
- Charter school audits were inadequate;
- State fiscal control and reporting systems had vulnerabilities; and
- California lacked a comprehensive or effective structure to report, investigate, and prosecute fraud in schools.
CCAP recommended 20 changes addressing three areas:
- Preventing and Detecting Fraud;
- Getting Help When a Fraud Concern Arises; and
- System Improvements.
Outlining all the recommendations requires more space than this blog can provide. Below are a few of the recommendations.
Key recommendations for avoiding fraud include adopting:
- Fraud risk management programs;
- Robust conflict of interest policies; and
- Board policies on audits for all appropriate stakeholders.
Recommendations to strengthen a response to fraud include:
- Creating systems to receive complaints, such as an internal and/or external third-party fraud reporting system (e.g., hotline) by each authorizer, charter school, or CMO; and
- The promotion of fraud prevention and fraud reporting systems by each LEA and CMO.
Policy recommendations include:
- Establishing an Inspector General function, which encompasses responsibility and authority for investigating and prosecuting financial fraud in the public-school sector;
- Improving real-time tracking of individual student enrollment; and
- Establishing a single set of criteria for Independent Study.
Authorizers in other states can learn from this case and the California response to it. A single particularly outrageous case of fraud not only harms students, taxpayers, and the state, but it also sets up charter school operators and authorizers for scrutiny and criticism that can be avoided. The NN4DA will continue to track the developments in California, and the team at CCAP is available to talk with authorizers and other stakeholders in your state about how to avoid and address similar fraud.
Please join us for a discussion of these events and details of CCAP’s recommendations at the July 10, webinar, from noon to 1:00 pm, MDT.