Oregon charter schools (inadequate oversight)

FINANCIAL OVERSIGHT OF OREGON'S CHARTER SCHOOLS REMAINS SPOTTY; October 26, 2008; The Oregonian 

An investigation by the North Clackamas School District has raised questions about accounting and financial practices at a group of public charter schools.

But after more than six months of review, district officials say so many questions remain that they are asking the state for help, both in sorting out the financial records of the Clackamas Charter Alliance and in establishing standards to guard against misuse of public money.

The case also raises the broader issue of financial oversight of charter schools, which operate with greater freedom than traditional public schools and are growing across Oregon and the nation…

The 1999 Oregon law that created charter schools is "pretty skimpy" on the question of district oversight, said Kaaren Heikes, executive director of the Northwest Center for Educational Options, an independent nonprofit that works with charter schools. By law, the schools are required to be 501(c)(3) nonprofits and to have an annual audit, but it's up to each district to determine how closely to monitor the finances, she said.

Some districts, such as the Oregon City School District, require monthly revenue and expense reports.

"On the other end, there are districts that never look," Heikes said. She recommends quarterly review of revenue and expenses and close analysis of the annual audit…

Before initiating its investigation, the only financial information the North Clackamas district received from the alliance schools in two years were annual audits, said Jim Langstraat, the district's chief financial officer.

The questions in North Clackamas revolve around the use of charter school funds at New Urban High School, Clackamas Middle College and Clackamas Web Academy.

"We have made an attempt to collect the records and to make some sense out of them," Superintendent Ron Naso said. "We've gotten just so far. We see some things that we were certainly concerned about, but it's hard for us to determine whether they're actionable or not."

In July, the alliance's accounting company noted "material weaknesses" and "significant deficiencies" in each school's 2007 audit. According to a July 11 letter from Jarrard, Seibert, Pollard & Co. of West Linn, the schools failed to consistently get two signatures on all checks. They also left the schools' accounting system "to one individual without significant oversight or review."

Under the North Clackamas charter, alliance staff are technically employees of the school district. Former district teacher Tim King started New Urban in 2003… [NOTE: King went on to start more charter schools with problems. See All Prep Academy Network.] 

King, who left as director of the charter group in June and has helped start a string of online and middle college academies across the state, said the district's questions came as a surprise and that he had a good working relationship with the district…

Naso said the district investigation was triggered by last year's decision to convert New Urban into a district-run magnet school. About the same time, King decided to step back from the alliance and ultimately left.

$300,000 in expenses flagged

Questions arose as new people came on board.

Clackamas Middle College Principal Brian Sien, who started in July, said he has flagged more than $300,000 in questionable expenses from the previous school year. He said the school has been billed for software, physical education and other professional services it apparently did not receive.

Some of the payments in question are to EdChoices, a new venture associated with King that helps set up middle colleges and Web academies across the state. EdChoices provides marketing, financial, technological and special education services to charter schools, King says. It now works with charter schools in Sisters, Marcola and Estacada.

A growing concern

After being notified last week that the district is referring the matter to the state, King provided an analysis to show how the schools benefited from EdChoices' services such as bookkeeping, paying rent and writing grants.

"It could well be that this is simply an attempt by the charter alliance to spread the costs among the schools they operated," Naso said. "It could be as simple as that. ... It also could, in a worst-case scenario, simply be that that money wasn't really owed and should be returned."

If nothing else, Naso said, the review shows that bookkeeping practices at the alliance do not meet district standards…

Growth brings problems

"It's a growing frontier," Naso said of charter schools. "That's part of the problem. Superintendents all over the state are having difficulties understanding exactly what the relationships are going to be."

Naso said he hopes the state will clarify whether charter schools are allowed wider parameters in terms of financial operations as well as curriculum.

"There is a dilemma," he said. "What happens if something goes wrong in the process? Who's held accountable for it?"

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See this entry for more information:
EdChoices

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