State is taking steps to limit misuse of education savings money
The nation’s longestrunning education-savings account program for K-12 students, Arizona’s Empowerment Scholarship Accounts, continues to grow — and with such growth has come criticism. Some have expressed concern over misuse of account funds and have taken examples of this misuse as proof that the program is fatally flawed.
No misspending of student funds is acceptable, but with the amount of fraud that has plagued government generally for generations, the public deserves a sense of scale.
More than 2,000 Arizona families received $8.5 million in Empowerment Account Funds between August 2015 and January 2016, and they used those dollars to find educational therapists for children with special needs and personal tutors for students previously assigned to failing public schools. As The Republic has reported, the Arizona Auditor General found that parents misspent $102,000 of those funds in that period. Troubling, certainly, but that amounts to just 1 percent of total dollars disbursed.
This is not the first time that public funds have been misused. The state auditor found fraud and misuse of public funds in four traditional public schools in 2015-16, including a Tolleson Union High School District employee that embezzled $120,000 and made 76 visits to a casino, where she spent more than $73,000. The auditor also found fraud with student funds in Glendale ($70,000), Roosevelt ($31,000), and Yucca ($4,000) public schools.
Public schools are not the only institutions vulnerable to fraud. In 2016, a Northern Arizona University employee misused $350,000, and the Pine-Strawberry Water Improvement District had multiple violations of a $90,000 contract. Another report found that a Show Low Fire District employee defrauded the district of $1.7 million in the last decade.
In the auditor’s 2016 report on Empowerment Scholarship Accounts, the auditor wrote, “The Department (of Education) has established various processes to help ensure program monies are spent appropriately, including preventing transactions at merchants whose goods and services are not related to education, such as fast food restaurants and lodging and hotels, and has worked with the Treasurer’s Office and bank to automatically deny these transactions.”
So while preventing fraud across different service sectors is impossible, the Arizona Department of Education, to its credit, implemented the nation’s first education savings accounts and allowed parents to customize a child’s education while keeping misuse to 1 percent of funds distributed.
The auditor’s report said that the Department’s method of reviewing every account transaction will not keep up with the volume of activity; the Department anticipates disbursing $46 million in Empowerment Accounts this year, a 64 percent increase over last year.
The auditor recommended that the agency use better online tracking tools to monitor account activity and prevent misuse — and State Treasurer Jeff DeWit’s office, which works with the Department of Education to administer the accounts, is doing so. Last month, the treasurer put out a request for proposal looking for payment-processing companies to assume account management responsibilities, a prudent decision given the growing volume of transactions.
Contracting for digital payment activity is becoming more common around the country. In Missouri, the state has contracted with Visa to manage childsupport payments. Participants use a Visa card and online banking services to pay bills and track their accounts. In Arkansas, state lawmakers partnered with a mobile application company to create a system that allows taxpayers to pay personal property and real estate taxes with their smartphone.
No one should be satisfied with any misuse of funds meant for a child’s education. Sadly, such activity is a constant struggle for policymakers across the country. But Arizona is taking steps to make sure education savings accounts continue to be an educational option we can be proud of. That’s something we all can agree on.
Jonathan Butcher is education director at the Goldwater Institute and senior fellow at the Beacon Center of Tennessee. Email him at jbutcher@goldwaterinstitute.org; Twitter, @JM_Butcher.