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How charter schools are scamming the US government

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A new report issued by the Network for Public Education provides a detailed accounting of how charter schools have scammed the U.S. Department of Education’s Charter Schools Program (CSP) for up to $1 billion in wasted grant money that went to charters that never opened or opened for only brief periods of time before being shut down for mismanagement, poor performance, lack of enrollment, or fraud. The report also found many of the charters receiving grant awards that managed to stay open fall far short of the grant program’s avowed mission to create “high-quality” schools for disadvantaged students.

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President Trump’s 2020 budget blueprint proposes increasing funding for the charter grant program by 13.6 percent, from $440 to $500 million, and education secretary Betsy DeVos praised this increase as a step forward for “education freedom.” But the report finds that increasing federal funds for this program would mostly continue to perpetuate academic fraud.

Of the schools awarded grants directly from the department between 2009 and 2016, nearly one in four either never opened or shut their doors. The federal program’s own analysis from 2006 to 2014 of its direct and state pass-through funded programs found that nearly one out of three awardees were not currently in operation by the end of 2015.

Since then, the federal program has continued to award charters with grant money, increasing the total amount awarded to over $4 billion. Should the department’s own 2015 study finding hold, that one in three of the schools awarded grants had closed, never opened, or were not yet opened, the likely amount of money scammed by bogus charter operators tops $1 billion. In California alone, the state with the most charter schools, the failure rate for federal grant-awarded charters was 39 percent. Of the 306 schools that received CSP money but are not open, 75 are “ghost” schools—that is, they received money but never began.

As a coauthor of the report, along with Carol Burris, the executive director of NPE, I found an astonishing array of charter operators who ripped off American taxpayers with impunity, and generally suffered no adverse consequences for their acts. In fact, many are still actively involved in the scam. The scams varied from the brazenly open—such as the Michigan charter that isn’t a charter at all, it’s a Baptist church—to the artfully deceptive—like the Hawaii charter that received a grant in 2016 and still hasn’t opened, doesn’t have a location, and its charter hasn’t even been approved.

But perhaps my favorite scam artist to take advantage of the federal charter grant program was a Delaware company.

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Anatomy of a Scam

In 2013, Innovative Schools Development Corporation applied for and received a three-year start-up grant eventually totaling $525,000 to open Delaware Met Charter School in Wilmington, DE. The school’s grant application promised to create an “Expeditionary Learning (EL) charter” to “maximize learning” for “elementary-aged Hispanic Latino English Language Learners in a high poverty community.” The school claimed to “be able to cater to each students’ [sic] career goals by personalizing their education,” a local reporter gushed. “The model is called ‘Big Picture Learning,’ and for lack of a better analogy, it’s kind of like Build-A-Bear for a high school education.”

The school didn’t open until August of 2015, but the company was already at work getting more grants from CSP.

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In 2015, Innovative Schools applied for and received a three-year grant totaling $600,000 to support the Early College High School charter schools at Delaware State University in Dover, Delaware. The school would focus on “the development of college-ready students through an inquiry and project-based learning environment that engages students with a dynamic, rigorous STEM curriculum … to serve a diverse student population, focusing recruitment on first-generation college-bound students from low-income families.”

Then in 2016, Innovative Schools applied for and received a three-year federal grant totaling $609,000 to open the Delaware STEM Academy charter school. The school promised in its application to enroll 250 students for 9th and 10th grade in September 2016 and to add 150 students each year for 9th grade thereafter from the high-needs student populations in the Wilmington and New Castle County area of Delaware.

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In the meantime, while the company was applying for and receiving grant money from the federal government, no one seemed to notice that its schools were quickly failing.

Delaware Met was closed just five months into its first school year, in January 2016. The state committee that recommended closing found the school struggled to maintain a safe campus, used lesson plans that didn’t fit the state’s academic standards, and was out of compliance on all 59 of its Individualized Education Plans for its students with disabilities.

In June 2016, Delaware’s Charter School Accountability Committee and the State Secretary of Education both recommended revoking Delaware STEM Academy’s charter two months ahead of its planned opening, due to low enrollment of just 30 students and uncertain funding due to an overreliance on external grants. Local news reports on the demise of the school noticed that New Castle County already had a heavy concentration of charter schools—20 of 27 charter schools statewide. Yet in its review of the application, the U.S. Department of Education’s reviewers complimented the application for its “detailed management plan including objectives, measures, targets” and including a full year for implementation.

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The Early College High School has managed to stay open, but although the application said it would have a student enrollment that is 24.7 percent “economically disadvantaged,” the school is located in a district with a student population that is 70 percent economically disadvantaged. In other words, what was supposed to be a lifeline out of poverty for students more closely resembles a white flight academy.

In the meantime, Innovative Schools Development Corporation did fine, as it was budgeted to receive, just from the STEM Academy deal, $247,500 of the federal grant funds for management fees, with $147,500 coming in the first year alone.

At this writing, the Innovative Schools Development Corporation website has been taken down and it is unclear whether the company still exists.

An Inside Operation

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Much of the fraud and malfeasance is due to the fact that in many ways the charter scam is an inside operation.

The Department of Education uses a slipshod process to conduct reviews of charter school grant applications that allows applicants to get away with making false and misleading claims about their academic programs. The review process does not allow the verification of applicants’ claims, and reviewers are instructed to accept what applicants have written as fact. And reviewers are not publicly identified by the department and are likely to be biased because of the department’s requirement that they have “a solid understanding of the ‘charter school movement.’”

Many of the worst abuses take place in the grant program that sends money to states. When state education agencies pass the federal funding on to charter schools, there is generally little to no accountability for how the money is used. The subgrantee schools often never open or close quickly, and the schools often blatantly discriminate, engage in outright fraud, and engage in related-party transactions that result in private individuals and companies pocketing huge sums of money at taxpayer expense. But once the monies are given to the state, the Department of Education maintains a “hands-off” policy.

One of these subgrantee charter schools recently made national headlines when the New York Times recently reported about East Austin College Prep in Texas, where raccoons and rats invade offices and classrooms. When it rains, the roof of the main building leaks. Yet for all this, the secondary school pays almost $900,000 in annual rent to its landlord who is also its founder, Southwest Key Programs, the nation’s largest provider of shelters for migrant children. The federal charter grant program gave the school a grant to start the school through its Texas state grant.

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Shut It Down

There is only one way to deal with this blatant grift program for the charter school industry.

First, Congress must reject President Trump’s budget proposal for increasing funding for the charter school grant program. Then Congress must end funding for new charter grants coming from this program and demand thorough audits of previous grant awards and steps to ensure grant awards still under term are being responsibly carried out and that misspent money is returned.

And Congress also needs to consider the unintended consequences to districts caused by the unchecked expansion of charters. Resources are depleted for the students left behind, and public schools become more segregated and serve needier populations.

This article was produced by Our Schools, a project of the Independent Media Institute.


Report typos and corrections to: [email protected].
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