Ind. audit shows virtual schools got $68M extra
INDIANAPOLIS – Early estimates of just how much two online schools were overpaid by the state of Indiana were too low, according to a report filed Wednesday by the Indiana State Board of Accounts.
A special investigation into malfeasance by Indiana Virtual School and Indiana Virtual Pathways Academy found that the schools inappropriately received more than $68.7 million collectively. Last summer, state investigators revealed that the charter schools had inflated their enrollment to defraud the state – by enrolling students who’d simply requested information on the schools’ website, re-enrolling students after they’d left the schools or, in one case, by keeping a deceased student on their books more than a year after their death.
The state funds public schools – which include virtual charter schools – based on the number of students enrolled each year. At the time, investigators estimated overpayments to be around $40 million.
The new report details widespread fraud, misuse of state funds and a severe lack of oversight by school officials and the schools’ charter authorizer, Daleville Community Schools.
Officials with Daleville have said they did not have access to the charter schools’ data until August 2018, at which point they took concerns over irregularities in the schools’ reporting to SBOA.
Daleville closed both last year.
Now, the state is looking to get back the cash it paid for students who weren’t actually attending the online schools – plus millions more that investigators say was funneled through the schools and into companies owned by their administrators and their family members. The $68 million overpaid to the schools came from thousands of students improperly included in enrollment counts. From 2011 until last year, more than 14,000 students were counted as enrolled when they should not have been.
While SBOA found instances of enrollment inflation each year, the number of falsified student records ballooned in the fall of 2017.
In the 2017-18 school year, SBOA found more than 3,200 ineligible students were counted in enrollment figures. In 2018-19, that number was 5,694, according to the report.
Only a fraction of registered students were actually listed as “active” in the student lists provided to teachers, according to the report. SBOA also raised questions about course completion reporting figures, self-reported by the school.
From the 2016-17 school year to the 2018-19 school year, the two schools received more than $103 million in state funds and funneled more than $85 million to related parties, including several companies run by the schools’ founder, Thomas Stoughton, and his son.
The state is requesting reimbursement of the $85 million, improperly paid to 14 different vendors that were related to the schools through a common employee or family member.
SBOA said it has sent its findings to local and federal prosecutor’s offices, the Indiana Inspector General’s Office and to the Indiana Attorney General’s office.