State Sen. Eddie Melton

State audit says Marion County online charters misspent $85 million in state funds

Contributed By:The 411 News

Melton pushes for accountability and transparency as Indiana faces charter schools' financial scandal

In June 2019, time was running out on 2 Marion County virtual charter schools -- Indiana Virtual School and Indiana Virtual Pathways Academy. The Indiana State Board of Accounts had initiated an audit of the finances of Indiana Virtual Education Foundation, the two online schools' owner. And earlier that year came reports the schools had inflated their enrollment numbers.

By July 2019, the Indiana State Board of Education was asking IVEF to return $40 million in state funds.

The February 12th, 2020 report released by the Counsel for the State Board of Accounts has revealed new information in the special investigation into the two schools, alleged to have defrauded the state out of millions of dollars.

According to the report, the misspent funds include more than $68 million that the schools improperly collected from the state — far more than initially reported — by recording inactive students more than 14,000 times over eight years. In some cases, those were people who merely requested information through the schools’ website or students who had moved out-of-state — and in one instance, a student who had died.

Companies affiliated with the schools owner received $85 million in extra state money.

In what has become one of the nation’s largest virtual charter school scandals, Indiana Virtual School and Indiana Virtual Pathways Academy officials showed “substantial disregard” for following the rules and may have “focused on maximizing profits and revenues by exploiting perceived vulnerabilities” in local oversight and state funding processes, the report said.

“This new information further reinforces the need for Indiana to require greater transparency and accountability in our virtual charter schools,” State Sen. Eddie Melton (D-Gary) said. “Last year, when it was discovered that these virtual schools had fraudulently inflated their enrollment numbers by engaging in a number of illegal actions, including reporting kids who were not actually enrolled in the school as students, I introduced legislation to hold those schools accountable. My bill, Senate Bill 183, would have put provisions in place to tighten the reign fiscally around virtual charter schools and put an accountability system in place, but that bill was never given a committee hearing.

The schools paid vendors to recruit 93 teachers and to run 765 background checks on teachers — at a time when the two schools had 54 teachers combined, the state report said. The schools spent money on consulting services for a 401(k) provider, despite not offering or contributing to a 401(k) plan. They hired a political lobbying firm, even though 501(c)(3) nonprofits are limited in their ability to lobby.

Melton added, "I call on the General Assembly to take the necessary steps to ensure that nothing like this happens again. Every school in Indiana that receives state funding must be held accountable to taxpayers and must maintain complete transparency.”

Story Posted:02/15/2020

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