S.D. PROSECUTORS SAY A3 CHARTER DISTRICTS SHOULD PAY BACK FEES

Six small districts were paid millions to provide oversight

Prosecutors leading the A3 charter school criminal case want to take back potentially millions of dollars of charter school oversight fees that were paid to small school districts that were supposed to hold the A3 schools accountable.

Prosecutors with the San Diego County District Attorney’s Office said in a motion last week that six small school districts — including Dehesa School District in San Diego County — were paid millions of dollars by the A3 schools to oversee them but ended up providing little to no oversight of the schools, which prosecutors said turned out to be vehicles for fraud.

The districts also collected oversight fees from the A3 schools beyond state law limits and beyond the actual costs of oversight, prosecutors allege. They want the excess oversight fees, which are state educational dollars, to be returned to the state.

The districts named in the motion are Dehesa,

Trona Joint Unified in San Bernardino County, Bradley Union in Monterey, Cuyama Joint Unified in Santa Barbara, Acton-agua Dulce Unified in Los Angeles and Meridian Elementary in Sutter.

It’s unclear exactly how much the districts would have to repay the state if the prosecutors’ motion is successful. Those amounts would be determined at a future evidentiary hearing.

Some districts named in the motion dispute the prosecutors’ claims that they provided no oversight. They also say it could be financially devastating if they are forced to pay back charter oversight money.

Dehesa, for example, already is operating with a projected $1.5 million deficit this year and expects to make $701,000 in budget cuts for next year. Bradley Johnson, who became Dehesa’s superintendent just this month, declined to comment on pending legal matters.

Meridian Elementary says it is operating with a deficit and would be affected.

“We’re a school of 60 kids. We have a budget of less than a million dollars. You’re looking at a huge percentage of our yearly budget to pay back,” said Marty Ofenham, superintendent of Meridian Elementary, which authorized two A3 schools.

The A3 case has become one of California’s largest cases of alleged charter school fraud.

Prosecutors said that leaders affiliated with the charter school corporation A3 Education built a statewide network of 19 virtual schools that they used to fraudulently obtain at least $400 million in state educational funding from 2015 to 2019.

Prosecutors said the A3 leaders manipulated enrollment, bought children’s personal information to falsely enroll them as students and provided incomplete educational services while pocketing tens of millions of dollars for themselves.

Eleven people were indicted in May in connection with the A3 case; all but three have pleaded not guilty to all counts. One of them was former Dehesa Superintendent Nancy Hauer, who was charged for allegedly over-charging oversight fees. She pleaded not guilty.

All the A3 schools were closed by court order in June, and A3’s assets are being held by a receiver. The receiver filed the motion for excess oversight fees along with the prosecutors.

Much of the A3 indictment focused on the people who allegedly carried out the fraud. But prosecutors have recently turned more attention to others who profited from the A3 schools or allowed them to continue, including private vendors and school districts.

Charter schools are publicly funded schools run independently of school districts. Every charter school must be authorized and overseen by a public education agency, usually a school district, to operate.

According to state law, charter authorizers “may charge for the actual costs of supervisorial oversight of a charter school not to exceed 1 percent of the revenue of the charter school.” Authorizers can only charge up to 3 percent if their charter schools are using substantially rent-free facilities provided by the district.

“The statute makes clear on its face that school districts cannot profit from Oversight Fees and the Oversight Fees are meant only to reimburse school districts for actual oversight costs incurred in the past,” prosecutors wrote in their motion.

Prosecutors wrote that multiple districts were charging more than 1 percent and that the charter schools were not using substantially rent-free facilities. Dehesa, for example, was charging all but one of its authorized charter schools a 3 percent rate until last year.

State law leaves it almost entirely up to school districts to hold charter schools accountable, but critics say that makes for a weak accountability system, where oversight can vary widely in quality and diligence depending on the district. There are about 1,000 school districts in California.

When looking for districts to authorize A3 schools, A3 leaders targeted small districts with little to no experience in charter school oversight, prosecutors have said.

Dehesa’s former business manager, Anna Buxbaum, was supposed to help oversee the district’s charter schools but testified last year that she had no training in charters when she started her job. She testified that she did not always follow up on questionable findings in the A3 schools’ data.

Ofenham said he had no experience with charter school oversight when he became Meridian Elementary’s superintendent in 2018. He said he had so many jobs to take care of for his single-school district that overseeing charter schools was not his priority.

“We’re such a tiny school district that I’m not only the superintendent, I’m the principal and I teach a seventhand eighth-grade class full time,” Ofenham said. “And the previous superintendent had left me a challenging job, so my priority was not looking at the charters. I was trying to take care of instruction and school culture first.”

Ofenham added that Meridian’s chief business officer had raised concerns with education authorities about A3 schools’ enrollment and that he had declined to accept oversight fees from A3 schools last school year because of concerns he had about their enrollment.

Experts have said that oversight fees provide a financial incentive for small districts to authorize more charter schools, particularly virtual charter schools, like the A3 schools. Virtual schools can enroll far more students — and thus generate more state revenue — than small school districts, which are geographically limited in how many students they can get.

Some small districts had come to rely on charter oversight fees to fund their overall district budgets. At Dehesa, which has about 138 students, oversight fees used to be the district’s largest single source of revenue.

Former Trona Joint Unified Superintendent Keith Tomes testified in May that A3 leaders made a kind of “sales pitch” to Trona to authorize their charter school, telling Trona that “the oversight fee could come in handy.”

Trona officials could not be reached for comment.

Prosecutors say that oversight fees can incentivize districts to provide lax oversight.

“When an authorizing school district uses charter schools for revenue purposes, the school district becomes reliant on oversight funding, has divided loyalties when providing oversight,” and can’t fulfill statutory obligations, prosecutors wrote in the motion.

In an email, Cuyama Joint Unified Superintendent Alfonso Gamino said prosecutors and the court receiver “are overreaching” with their joint motion to recover oversight fees.

“The District Attorney and Receiver are misinterpreting the law and reading into the law rules that do not exist,” Gamino said. “This interpretation runs contrary to the virtually universal interpretation of those laws by charter experts, charter schools and charter authorizers across the entire state.”

He added that Cuyama “will vigorously defend itself against these allegations” and “pursue recovery of improperly withheld moneys from the receivership estate.” Cuyama previously filed a claim for $712,000 in oversight fees it says it was due from A3 schools for last school year.

Bradley Union Superintendent Ian Trejo declined to comment. Acton-agua Dulce Superintendent Larry King could not be reached for comment.

San Diego County Superior Court Judge Frederick Link is expected to hear the issue of oversight fees at a hearing in March.