Suggested Solutions on Charter School Oversight by Valerie Jablow
FIVE RECOMMENDATIONS
1. Institute and enforce limits on LEA spending and cash on hand and ensure LEA fiscal duties are public-centered and without conflict.
SPECIFICALLY:
--Strictly enforce upper and lower limits for cash on hand.
–Institute a cap on charter CEO pay so no CEO receives more than 10% higher than the average of all DC charter CEO pay.
--Ensure that pay for all administrators at each charter LEA constitutes no more than 10% of each LEA’s annual revenues and that pay for all executives (a subset of administrators) at each LEA is no more than 1% of annual revenues at each LEA.
–Forbid any charter CEO and/or COO to also be the LEA’s CFO.
–Ensure that all administrative officers at each LEA resign by signing a legal statement that they have not taken any DC taxpayer funds that they were not owed. The charter board should then keep on file all such documents for at least 7 years, as a way to pursue legal action if needed to recover taxpayer funds.
–Delineate explicitly a sworn fiscal responsibility of LEA board members for individual charter LEAs and make legally explicit the fiscal responsibility of charter school staff and boards to intervene, help, and otherwise bring to public attention fiscal problems at their LEAs.
Discussion: For 6 of the last 8 years, Eagle had less than 15 days cash on hand, well below the charter board’s recommendations. That history was not flagged for special consideration by the charter board until 2024. At the same time, some charters have tens of millions of cash on hand such that they have hired investment managers. Again, this has not been flagged for special consideration by the charter board. Both represent riskiness around, and waste of, public funds at organizations whose fiscal failure (but not fiscal success!) accrues to the public.
Consider that Washington Latin spent $504,128 for financial services according to its 2022 990, and DC Prep hired an investment manager to invest $30 million in public money in 2022. According to DC Prep’s 2022 990, the LEA realized $8.27 million in investment income the prior year. All of that is a direct transfer of DC taxpayer money to private entities.
Why isn’t DC realizing these savings? And why does DC keep giving public money to nonprofits that clearly do not need it and are not using it directly for students?
The other recommendations are intimately connected to bad practices around Eagle.
2. Institute more robust and public-oriented FARs and truly independent auditing.
SPECIFICALLY:
--Flag persistent low cash on hand as an immediate concern, particularly when it is accompanied by a very high CEO salary and persistent enrollment loss.
--Make all FARs clearly outline those trends. The FARs also need to list data they do not include now, including liens; nonpayment of taxes; fines; staff loans; and administrative salaries that are higher than average for the sector.
–Hire an independent auditor to review the charter board’s fiscal oversight of all DC charter schools, including examining how the fiscal information reported in the FAR is used by the charter board; what fiscal information it overlooks, including liens, fines, nonpayment of taxes, staff loans, extensions of the LEA and personnel to other charters in other jurisdictions, etc.; and reviewing and implementing best practices for DC charter fiscal oversight, including not having the charter board be funded by the entities it regulates.
–Institute publicly posted multiple measures of charter fiscal health at multiple stages in each fiscal year.
–Report both to DC citizens (via FARs) as well as the IRS any loans from charter staff or board members to charter schools. Ensure the charter board issues an affirmative statement annually that each LEA has no such loans or, if not, that the loans have been reported to the IRS by the charter board.
–Ensure the charter board immediately informs the DC attorney general about all possible criminal acts by DC charter schools as soon as they are known.
Discussion: Eagle Academy’s failure highlights the shortcomings of the charter board’s fiscal oversight processes and data collection. It’s not merely enough to say data exists. The data has to be timely, relevant, and complete—and the example of Eagle makes clear it is not. Serious fiscal shortcomings at Eagle were never flagged anywhere or only too late. And Eagle is not alone in that: Our largest charter LEA, KIPP DC, had $7 million go missing recently—but at no point did charter board fiscal oversight practices prevent that or ensure the public knew directly (see here).
To account for their spending, DC charters provide to the charter board annual 990s as well as annual budgets, annual audits, and annual reports. The charter board produces its own annual financial analysis reports and annual at risk funding reports, both of which are compiled from what LEAs report to the charter board. All of this information is available on the charter board’s website.
But charter 990s are neither timely nor extensive enough in outlining all financial issues, while each LEA’s annual budgets and reports often omit such information. And while the auditors used for charter LEAs are independent of those LEAs, they are also hired by and given information by the LEAs themselves. Taken together, all of this results in a closed feedback loop of incomplete data, which the charter board then uses for its FARs.
In addition, while the charter board looks at a number of fiscal factors besides cash on hand when it is determining the fiscal health of each LEA, persistent low cash on hand should trigger immediate concern, particularly when it is accompanied by a very high CEO salary and persistent enrollment loss over years, as shown by this table, which I created with data from the charter board’s financial analysis reports (cash on hand); audited enrollments; and 990s and the SY22-23 Eagle annual report (salary):
FARs need to make those trends clear. The FARs also need to use data including liens; nonpayment of taxes; fines; and administrative salaries that are higher than average for the sector. (See more about the shortcomings of charter board fiscal oversight here: https://educationdc.net/2023/05/04/public-accountability-dc-charter-finances/)
Finally, it is important for the council to understand the MANY fiscal misrepresentations and obfuscations by the charter board in its 9/9/24 response to Chairman Mendelson’s questions. The charter board’s misrepresentations and obfuscations appear to shield the charter board from direct responsibility for its poor fiscal oversight and lack of responsiveness to the public around it. I outlined all of that in a September email to the chairman and COW staff: https://drive.google.com/file/d/1iZeblB_fldtjB3jt55XVEjHwvZd8b3yy/view?usp=sharing
3. Make easy and quick public access to all charter board fiscal monitoring, notices, and concerns in one place, searchable by LEA, within a week of any LEA being named/listed.
SPECIFICALLY:
--Make all notices of finance committee meetings and transcripts publicly available in a timely manner and the meetings publicly accessible. None of this is apparently currently publicly available.
--Make all notices of fiscal concern and fiscal monitoring lists searchable per LEA and posted prominently by LEA not more than a week after they are generated.
–Make charter LEAs, like DCPS, convey to the public their budgets in a timely manner, including any necessary staff changes and any fiscal concerns. That would include informing families within 1 week of any and all notices of fiscal concern issued by the charter board.
–Immediately notify My School DC of any notice of fiscal concern or a fiscal issue involving layoffs of staff at any DC charter school in the lottery period from December 1 through May 1. Mandate that My School DC post a notice about this on its lottery website next to information posted on My School DC about that charter school.
–Make all charter LEAs have regularly scheduled, and well-publicized, board meetings attended by both families as well as staff. It is NOT enough to simply say notices of the board meetings are listed somewhere on the internet.
Discussion: The September 2024 charter board response to Chairmen Mendelson’s August questions referenced meetings of the charter board’s finance committee. But AFAIK neither the finance committee meetings’ announcements nor minutes of their meetings are publicly available. It is unclear if the finance committee meetings are even publicly accessible in any manner.
Every notice of fiscal concern is voted on by the charter board—but the only place where I could find the notices was in the materials for the specific board meetings at which they were voted on. The notices do not turn up in searches of the charter board website, so unless you search EVERY board meeting’s materials, you will not find them.
For instance, when I did a search of the charter board website for Eagle Academy, I found only the following notices of concern: one for an April 8, 2024 mystery caller violation (enrollment fairness), which was lifted on June 24, 2024, and a truancy notice of concern issued on April 24, 2017. Yet we know the charter board issued Eagle a notice of fiscal concern in January 2024, which was not made public until August 2024.
The charter board’s fiscal monitoring lists are also not searchable via the charter board website. If they are available via board meetings, you would then have to search *every* board meeting’s materials. For instance, the charter board placed Eagle on a fiscal monitoring list in November 2019 and in June 2023—but none of that was available to the public except as revealed by the charter board in its September 9, 2024 response document to Chairman Mendelson in 2024.
As a result, what the charter board reported of its oversight of Eagle happened largely out of public view. This purposefully decenters the public and makes a mockery of school choice, because the choice represented by this is that of the private LEAs and charter board—not of parents.
4. Publicly delineate all DC charter schools’ activities and investments in other jurisdictions.
SPECIFICALLY:
--Include in FARs all activities outside DC by each DC LEA; the connections of those activities to DC LEAs, including shared personnel, methodologies, and finances; and the status of those activities in other jurisdictions (i.e. are the organizations defunct, active, in good standing, etc.) by way of connection with the appropriate charter authorities in those jurisdictions.
Discussion: Eagle’s DC connections went to two states. Eagle in Nevada had at its inception two key players at Eagle in DC (Joe Smith and Jai (Julinda) Mallory) along with a charter management organization (Eagle Charter Schools Inc., or ECS) headed by Smith that was closely associated with DC’s Eagle Academy.
Eagle also has an Ohio branch, which in October 2023 was cited for not withholding taxes and had at its inception two key players in Eagle in DC (Joe Smith and Scott Knowlton) along with the same charter management organization used in Nevada.
Both the Nevada and Ohio Eagle schools were started in 2020-21 on the strength of Eagle’s performance in DC as documented by the charter board. Although ECS and these other schools were (eventually) independent of DC’s Eagle Academy, a key player—Eagle Academy’s CEO Joe Smith—was involved in all of them. (Someone has even alleged, in a comment posted to a Washington Informer story, that DC money from Eagle was going to Ohio.)
Here are outlines of what Eagle did in Nevada and in Ohio and their connections to DC.
5. Publicly account for all monies around charter school closures, starting right now with Eagle.
SPECIFICALLY:
--Outline DC’s fiscal connections to a lawsuit by former Eagle employees that was granted class certification.
--Outline where DC’s July 2024 UPSFF payment to Eagle for this school year went, as the school never started in SY24-25.
--Explain DC’s payment of legal expenses for a buyer in a cancelled tax sale of land Eagle owns around the Ward 8 DC-owned school building it was leasing, McGogney. That land–square and lots 5934 0014 and 5934 0015–was the subject of the buyer’s lawsuit (filed in DC superior court as cases 2023-CAB-001257 and 2023-CAB-001258, respectively).