Online charter must repay millions to CA

SACRAMENTO—State Superintendent of Public Instruction Tom Torlakson announced today that the California Virtual Academies (subsidiary of K-12 Inc.) and three Insight Schools (together CAVA) must remit nearly $2 million to the California Department of Education (CDE) in improperly used Common Core education funds.

This and several other actions required by the CDE stem directly from an audit conducted by the State Controller’s Office and commissioned by the CDE. The audit, which covered July 1, 2014, to June 30, 2016, was released today and is available here:

“The California Department of Education is committed to ensuring public schools follow the laws and regulations that safeguard taxpayer funds. It’s critical that our students receive all the resources they need to succeed,” Torlakson said. “As a result, my department is requiring payment of nearly $2 million from CAVA; a new audit of its average daily attendance records; and additional documentation regarding oversight fees, pupil-teacher ratio, progress of students between 19 and 22 years old, memorandums of understanding, and organizational independence.”

The actions are outlined in an attached CDE letter to the head of California Virtual Academies.

In the letter, CDE states that CAVA must commission an independent audit to determine the extent of the unsupported average daily attendance (ADA) it claimed. Based on the state audit results, attendance records were not adequately supported for 12 to 15 percent of the students sampled (40 of 289 students over a two-year period). If those percentages apply to the nearly 13,000 students enrolled by CAVA, it could mean that attendance records may be insufficient for between 1,500 to 1,900 students.

ADA is the most important factor in determining the amount of state funds each school receives.

CAVA operates online charter schools in 45 of 58 California counties. These schools are funded by taxpayers and offer an alternative to brick-and-mortar schools that allows students to receive assignments, complete lessons, and interact with teachers online or, in some cases, via telephone.

Each school’s charter is authorized by a local educational agency (the authorizing entity) and governed by a separate board of directors. However, the schools operate collectively by sharing teachers, administrators, and some costs. CAVA schools each contract with K12, which provides curriculum, management, accounting, operational, and record-keeping services. To avoid conflicts of interest, CAVA and K12 must be independent organizations.

In its findings and observations, the state audit determined that CAVA was not organizationally independent from K12 because it assigned too much authority to a K12 employee, improperly gave K12 check-writing authority, and devised a fee structure that bound the two entities too closely together. CDE is requiring CAVA to provide documentation showing that it is organizationally independent of K12.

CDE is requiring that CAVA pay back nearly $2 million based on the audit finding that CAVA’s restatement of prior years’ financial statements may have violated the schools’ memoranda of understanding with authorizing entities.

The audit reported these additional findings:

  • CAVA inaccurately calculated supervisory oversight fees paid to authorizing entities.
  • CAVA lacked sufficient documentation to support its claimed ADA.
  • CAVA lacked sufficient documentation to support satisfactory progress of students between 19 and 22 years old.
  • CAVA may have miscalculated its pupil-teacher ratio.

CAVA schools contracted to pay their authorizing entities oversight fees in excess of legal limits.