The Privatization Scam Continues: Clark County Schools Version

“Five Clark County schools are still in the running to partner with charter operators as part of the new, controversial Achievement School District after a state Board of Education meeting Thursday.

From a list of nine, state board members removed four middle schools, citing those schools’ higher ratings on the state star system. The final decision of which schools will be in the inaugural run will be decided by achievement district officials before Feb. 1.”  [LVRJ]

Background

According to the Nevada Department of Education the Achievement School District has the following task:

The Nevada Achievement School District exists to partner with communities to provide vibrant, high-quality, in-neighborhood alternatives for students in the State’s underperforming schools in order to strengthen the educated, healthy citizenry across the State. Our purpose is critical: to provide students in persistently struggling public schools with the opportunity to attain an education that will prepare them to be college, career and community ready. Currently, over 57,000 students in Nevada attend persistently struggling schools. We must reduce that number; and, we will work to do so by recruiting excellent educators and empowering them to partner with neighborhoods to transform the educational experiences of these students. [DoENV]

Translation: The Department of Education would like to find private sector “operators” to take over the management of “struggling” schools.  Applicants are asked to contact Jana Wilcox Lavin, whose background is in marketing.  Leaving a person to ask what qualifications she might have as the “superintendent” of a school district with a BA from Tulane and an MA in Integrated Marketing Communication from Emerson College.  Not that those aren’t fine institutions, but exactly how this prepares a graduate and board member of a college prep boarding school in Connecticut (Hotchkiss) to run a charter system isn’t all that clear.  As a prep school product I’m not knocking the prep part, but there’s no Public in Hotchkiss, Tulane, or Emerson.  As close as Wilcox-Lavin has come to the Public part of the equation may be a stint as the executive director for a charter school operator in Memphis, TN.

Last August, the Comptroller of the State of Tennessee released its audit of the TN Achievement School District, and was less than pleased.  Among the findings:

“The first comprehensive performance audit of the state-run Achievement School District shows a lack of adequate control over processes in human resources and payroll, including reimbursement of excessive travel claims and payments for alcohol at an office celebration.”

According to the audit, the ASD, which operates 31 schools in Memphis and two in Nashville, failed to verify the education credentials of central office staff, and employees were able to approve their own travel expenses. Inadequate procedures for departing employees also resulted in overpayment of salary and benefits, according to the audit.

The audit states that management did not properly approve nine expenditure transactions totaling $83,363 and seven travel claims totaling $2,460.

Claims deemed “excessive” by the audit included a $698 expense for a single day of transportation services to drive the deputy superintendent from Nashville to Memphis and a $2,500 holiday party held at the Sheraton Hotel in Memphis for all ASD schools and staff and to recognize outgoing superintendent Chris Barbic.  “The event included expensive finger foods, alcohol, and a bartender,” the audit states.

In addition, “in recognition of ASD school leaders and support staff, management purchased $1,631 of alcohol using a purchasing card and charged the expense to Charter School Grant Funding, a private grant that provides restricted funding for operating expenses for school year 2015-16 Achievement Schools … .”  [Tennessean]

Perhaps someone with some public school experience might have guessed that spending $1,631 on booze probably wasn’t going to be met with applause in Tennessee.   “Inadequate internal controls” is an accountant’s polite way of saying that there’s no way to effectively monitor spending and control waste, fraud, and abuse.  Tennessee’s ASD lacked adequate “internal controls.”

“The Achievement School District’s management did not establish adequate controls over several key human resources and payroll processes
According to Section 49-1-614 (g) (1), Tennessee Code Annotated, “The ASD [Achievement School District] shall develop written procedures, subject to the approval of the commissioner, for employment and management of personnel as well as the development of compensation and benefit plans.” During our audit, we found seven key areas where ASD did not establish processes over key human resources and payroll functions, including segregating duties; maintaining personnel files; verifying education credentials; documenting time and attendance; completing performance reviews; documenting approvals of bonuses and pay raises; and exiting employees (see page 14).” The full report is available at this link as a PDF.

In a word – ouch.  With a performance audit such as this it’s hard to understand why Nevada would tout conformance with the Tennessee Achievement School District model?

Then there’s the What Do You Get For The Money question?

A 2015 study by Vanderbilt University’s Peabody College frankly didn’t find much in the way of significant progress among the students, finding more in locally operated “i-Zone” schools.  [Full report here pdf]  There were “small positive effects in math and science; overall the “i-Zone” schools had moderate to larger positive effects in reading, math, and science. “Overall ASD schools did not gain more or less than other priority schools that were in an “i-Zone.” [Vanderbilt pdf]  The TN ASD pleaded for “patience.” [Nashville NPR]

However, let’s not focus on Tennessee’s ASD to the exclusion of taking a more attentive look at the charter operators approved to function in Nevada.   Three were selected in November 2016:  Democracy Prep Public Schools, Futuro Academy, and Celerity Schools. [LVRJ]   Of the three, Celerity, granted conditional approval, is subject to the most questions.

On October 18, 2016 The Los Angeles Unified School District board revoked the charters of Celerity schools citing  “severe concerns about oversight and transparency from the parent company, Celerity Global…” [CBS]  More specifically, the Board was concerned about:

…Celerity, though a review of correspondence indicates the district is interested in three corporate entities closely linked with the school group. Officials appear to be concerned about conflicts of interest and whether senior officials inappropriately enriched themselves.

…The district faults both organizations for not providing requested documents to investigators. Their listed deficiencies will include incomplete descriptions of job duties and of suspension and expulsion procedures. [LATimes]

Tangled Alliances and Corporate Complexity?

If the LAUSD is concerned about transparency in Celerity Schools management, the Celerity Global home page doesn’t offer much in the way of information.  The Who We Are links describe services, not management or other personnel associated with the organization.  A bit of digging yields that the Chief Operating Officer is Vielka McFarlane, Los Angeles, CA.  Craig Knotts is listed as Regional Vice President (Louisiana), Kendal Turner is listed as CFO (CA) (AR app 2016).  Board members are listed here – none of whom have a background in education.

We can easily discover that McFarlane’s compensation for 2012 totaled $438,730.00 (990 part VII(a)); her compensation for 2015 is given as $227,306, with another $13,332 compensation for the “organization and related organizations.”  Celerity Global Development (501c(3)) reported assets of $11,127,842 in June 2014, and income of $10,834,558 as of June 30, 2014. [Guidestar] Other information on the form is either not digitized or not available.  Digging down to the pdf filing with the IRS, the 990 for 2015 lists associated contractors as Savantco Education (Los Angeles, CA) which provided “business management services” for $478,320 in compensation and CSMC, Temecula, CA which received another $288,600 in compensation for “business management services.”

Savantco  Education offers human resources, accounting, attendance accounting, business consulting and training, and grant writing as part of its services.  It is related to Savantco Financial and Savantco Global Enterprise. [CA registry]  Savantco has not been without its controversies, and one implosion in San Bernardino County, CA:

“On November 23, 2015, the Morongo Unified School District superintendent wrote a letter to the superintendent of the San Bernardino County Superintendent of Schools expressing concerns regarding conflict of interest. The concern focused on the involvement of the former superintendent/executive director of Hope Academy serving as a majority owner in SavantCo Education, the charter school’s back-office service provider. The master services agreement with the academy called for SavantCo Education providing finance, accounting and payroll services, business consulting, board meeting support, attendance and student information system management, charter development, grant administration, as well as financing support.
According to the auditors with the Fiscal Crisis and Management Assistance Team, Mecham, while yet serving as charter school superintendent, used Hope Academy’s relationship with SavantCo Education to reap hundreds of thousands of dollars in profit for himself and his wife.”  [SBCS]

CMSC is the Charter School Management Company, “CSMC is the nation’s premier business back-office provider to charter schools. We are committed to helping charter schools overcome the challenges they face by offering our expertise and solutions at an affordable price. Our charter school services include charter development, payroll, governance, finance, back-office, and a full range of business services.”

And, with contractors providing back office services we find more potential for a lack of – as the accountants say — “internal controls.”  The Inspector General’s Report (2016) on its review of charter school management wasn’t pretty, as evidenced in this chilling finding:

“We determined that charter school relationships with CMOs posed a significant risk to Department program objectives. Specifically, we found that 22 of the 33 charter schools in our review had 36 examples of internal control weaknesses related to the charter schools’ relationships with their CMOs (concerning conflicts of interest, related-party transactions, and insufficient segregation of duties).5 See Appendix 1 for details regarding the State summaries of 6 States and 33 charter schools we reviewed. We concluded that these examples of internal control weaknesses represent the following significant risks to Department program objectives: (1) financial risk, which is the risk of waste, fraud, and abuse; (2) lack of accountability over Federal funds, which is the risk that, as a result of charter school boards ceding fiscal authority to CMOs, charter school stakeholders (the authorizer, State educational agency (SEA), and Department) may not have accountability over Federal funds sufficient to ensure compliance with Federal requirements; and (3) performance risk, which is the risk that the charter school stakeholders may not have sufficient assurance that charter schools are implementing Federal programs in accordance with Federal requirements.” [Ed.gov. Inspector General/ pdf]

The Inspector General determined that not only did the schools, school districts, and states not have sufficient safeguards in place to prevent waste, fraud, and abuse, but that the Federal agency wasn’t prepared to fully audit and monitor this potential as well.  [Full report here IG/DoE pdf]

The Bottom Line

Nevada would do well to curb its enthusiasm about the expansion of charter schools in this state.

There is ample room to question the results of the experiment in Tennessee.  The gains have been small when compared to the expenditures involved. Further, for those who are concerned with waste, fraud, and abuse of taxpayer money – either state or federal – there are far too many examples of just such waste, fraud, and abuse by entirely too many non-profit organizations to lull any sentient observer into complacency.

Nevada officials are correct in being very careful of the corporate entanglements of management companies and charter school managers and operators.  California officials are correct in weighing the fiscal management of charter operators and questioning the corporate relationships between school and business operations.   There is no excuse for a “lack of internal controls,” these practices create havoc in both our public and private sectors, and any bid by any charter operator should satisfy the most detail oriented accountant.

Those who call for the mitigation of waste, fraud, and abuse; and, who clamor for transparency and accountability must demand that public funds used for any “Achievement School District” or charter operation be fully and completely audited – and the results available for public scrutiny.

Advertisements

1 Comment

Filed under education, Nevada, nevada education

One response to “The Privatization Scam Continues: Clark County Schools Version

  1. Those who call for the mitigation of waste, fraud, and abuse really are only looking for the MIGRATION of problems to someone else’s balance sheet.