Seventeen years after the first charter school opened in Minnesota, this examination of fiscal year 2007 charter school financial audits shows that the vast majority of charter schools do not follow basic financial guidelines or, in some cases, state law. Since this analysis agrees with a recent report by the Office of the Legislative Auditor and audit examinations written in 2001, 2002 and 2003, we conclude that these financial problems are not being adequately addressed by the Minnesota Department of Education (MDE) and, further, are endemic of the charter school system.
Efforts by the 2009 Legislature to provide more accountability to charter schools was welcome, but shorthanded. The charter school program is financially flawed and basic concepts about charter schools – such as unelected school boards and under informed business management – need to be changed.
In November and December, 2008 and January, 2009, Minnesota 2020 combed through the financial audits of 145 charter schools for the fiscal year that ended on June 30, 2007 – reports that were filed with MDE by December 31, 2007. Our research found several trends in charter school financial management:
* 83 percent were found to have at least one financial irregularity in their audit – five years earlier, that figure was 73 percent;
* 51 percent of those schools with problems identified on their 2007 financial audits had the same problems identified on their 2008 audits, according to the MDE;
* 29 percent did not respond to a request for board minutes – five years earlier, that figure was 33 percent;
* 55 percent were found to have “limited segregation of duties,” a requirement that ensures no single charter school official has control of the school’s funds;
* 26 percent didn’t have proper collateral for deposit insurance, a requirement that ensures the charter school can pay its bills.
Unlike private schools, charter schools are funded by taxpayer dollars. While traditional public schools get roughly $9,500 per-student from the state, charter schools get $10,500 for each student from the state. State officials say charter schools deserve more taxpayer money because they can’t ask local taxpayers for additional taxes to operate their schools or for bonds to build school buildings the way traditional districts can.
A major component of the 1991 charter school legislation allows the taxpayer dollars to follow the student: if a student leaves a traditional school and enrolls in a charter school, the per-student money leaves the school and is allocated to the charter school.
Although charter schools receive taxpayer funds, they are not subject to the same checks and balances taxpayers have the right to expect. Traditional schools are governed by elected school boards. Taxpayers who disagree with the way their money is being spent need only go to the school board meeting and voice their concern. Ultimately, voters can exercise their rights and vote school board members off the body.
There is no such remedy for taxpayers concerned about the financial dealings of charter schools. Their boards are not publically elected and taxpayers have no say in how their money is spent. As mentioned above, many charters are poorly run and almost one-third refused to provide school board meeting minutes.
The financial audits used to create this report were stored in the basement of the Minnesota Department of Education building. Other than the 2008 OLA report and the audit examinations conducted in 2001-03, we are aware of no other attempt to make this information available to the public.
The fact that so many charter schools have difficulty following state law and balancing their own books using taxpayer money, and have had these problems for many years, does not speak well about the charter school movement. Almost every charter school has some difficulty meeting state laws and financial standards while receiving millions of dollars of taxpayer money. If a public entity can’t manage the money it gets from taxpayers, then why do taxpayers give it money? The state should reconsider its agreements with the 121 charter schools that cannot successfully pass a financial audit. Further, taxpayers should not continue to fund the 50 percent of charter schools that do not resolve financial problems.
Schools with finances that have been stunningly mismanaged for years should be cut off from public funds and closed.
If charter schools can’t run their schools in a financially competent manner, Minnesota should reconsider whether charter schools are worthy of public funding at all.
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