School Choice & Charters

Calif. Charter Network Misused Millions in Aid, Audit Finds

By Joetta L. Sack — April 19, 2005 2 min read

California’s largest charter school operator misused millions of dollars in state money through numerous legal and ethical lapses, an audit by the state department of education released last week found.

“Extraordinary Audit of the California Charter Academy,” April 14, 2005, is available online from California’s Department of Education. ()

The audit chronicles the demise of what was believed to be the nation’s largest network of charter schools, the California Charter Academy, which claimed 4,500 K-12 students and 7,000 adult students at more than 50 campuses and online in the 2003-04 school year.

In response, the state’s leading charter-advocacy group is calling on state officials to crack down on districts that authorize charters but fail to keep a close eye on them.

The audit found that the 5-year-old CCA had illegally spent upward of $20 million in state and federal money on schools that were illegally opened, salaries that could not be justified, and questionable contracts. Further, the audit found that the CCA had overcharged teachers and school administrators for health-insurance premiums that it never paid.

State officials launched the investigation last fall. (“Calif. Charter Failure Affects 10,000 Students,” Sept. 1, 2004.)

State Superintendent of Public Instruction Jack O’Connell said that his office would try to recover at least some of the misspent funds.

“The magnitude of waste of precious education funds outlined in this audit is appalling,” he said in announcing the findings. “We will pursue every legal option to track down the adults involved who funneled money away from students in California.”

Claim Filed

The state education department will file a $23 million claim in bankruptcy court against the CCA’s for-profit management company, the Education Administrative Services Corp., and its founder, C. Steven Cox. The investigation found that the CCA’S board of directors also was negligent because it allowed Mr. Cox to serve in conflicting roles as the head of the CCA and his management company.

The 107-page audit report alleges that Mr. Cox bilked CCA schools out of millions dollars by overpayments to his management company.

The audit says that “in these multiple positions, [Mr. Cox] had an opportunity to direct millions of dollars of CCA funds to benefit himself, his corporation, his family, and his friends and associates. He took advantage of that opportunity.”

Mr. Cox could not be reached for comment last week. The Victorville, Calif.-based CCA office phones had been disconnected

Mr. O’Connell, the state superintendent, is forming a committee of education department officials and charter school stakeholders to analyze the state’s existing charter school laws and recommend changes.

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