State Board of Education: Audit finds two Indiana virtual schools allegedly inflated enrollment

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INDIANAPOLIS, Ind. — Two Indiana online charter schools are under investigation.

The state found that Indiana Virtual School and Indiana Virtual Pathways Academy allegedly inflated their enrollment numbers.

The Indiana State Board of Accounts has the authority to audit schools in Indiana.

On Wednesday morning at the Indiana State Board of Education meeting, the State Examiner said what’s going on could be considered criminal.

“How did we miss this? How was this missed and by whom was this missed?” asked B.J. Watts, the Board Chair of the Indiana State Board of Education.

Brian Murphy, the Executive Director of the Indiana State Board of Education stated that the number of students in the school that’s reported to the Department of Education, over the past three years for one of the schools and two years for the other, was inflated by about twice as much.

Based on the audit report, the State Examiner says both schools have “substantially misreported.”

Watts added, “2016, 2017 exhibit two, 740 students no assigned courses for semester one. 1,048 students no assigned courses for semester two.”

“They were students who were added from a prior year that had been dropped off or in one instance, a deceased student,” said Paul Joyce, the State Examiner.

The report says the school even counted a student who had died. Not only that, but the school received state funding to educate that student along with many others.

“While their audit is ongoing, they have concluded already as part of their audit that the ADM’s (Average Daily Membership) were inflated 50 percent,” said Murphy.

The board voted to adjust that number to better reflect how many students are actually enrolled, which now impacts funding.

An ADM adjustment means future payments to the charter schools are suspended until the excess tuition funds from the last three years are recovered, around $40 million.

“In terms of roles and responsibilities, as far as the state board is concerned, we are concerned with making sure those average daily membership accounts are adjusted properly,” said Murphy, “So, state tuition support and tax payer funds are recouped.”

Also, the board voted to enhance monitoring of student procedures of the two charter schools.

Daleville Superintendent, Paul Garrison attended the meeting.

“This isn’t one of my proudest moments,” said Garrison.

Daleville Community Schools, located near Anderson is the district that oversees the two virtual schools. As the authorizer, they receive three percent of the state funding.

During the meeting, the board questioned why Daleville allowed Indiana Virtual School to open the second school in the first place.

Superintendent Garrison said the services could have been provided through the first school.

Here’s the statement provided by Daleville Community Schools:

Today’s determination by the State Board of Education is further proof that greater oversight of charter and virtual charter schools is essential, a position long held and advocated by Daleville Community Schools (DCS).

Daleville Community Schools (DCS) in August of 2018, contacted State Board of Accounts (SBOA) with concerns regarding irregularities and inconsistencies of the Indiana Virtual School (IVS) and the Indiana Virtual Pathways Academy (IVPA). Prior to August 1, 2018, DCS did not have authority to access the data records of the charters that it authorized, making it impossible to verify the reports received from the charter schools. In addition, DCS, the SBOA and other agencies had great difficulty getting cooperation from IVS and IVPA when data was requested.

The current findings from the SBOA investigation, while still ongoing, are consistent with the DCS investigation that resulted in the decision to revoke both charters on February 25, 2019. DCS supports those findings and will continue to cooperate with any further investigations and determinations, but objects to recouping inflated ADM funds provided to the authorizer by both charter schools on the following basis:

  • The State did not distribute the authorizer fees to Daleville, nor does it require them. Authorizer fees are part of the terms of the charter agreement.
  • As the fiscal agent for the charter schools, Indiana Virtual Education Foundation (IVEF) received funds from the State and distributed those funds.
  • Daleville accepted those fees in good faith and without malfeasance and had no role in incorrect reporting to the State.
  • Daleville had no means of accessing data submissions from the charter schools until August, 2018, thus had no way to verify accuracy prior to that time.
  • Once inaccuracies and inconsistencies came to light in the Fall of 2018, Daleville spent authorizer dollars on legal fees and investigations which resulted in issuing the Notices of Revocation.
  • Both the SBOE and SBOA have benefited from those investigations.
  • Retroactively recovering any overpayment of authorizer fees from Daleville Schools would put a chilling effect on other authorizers coming forward to report potential irregularities.

Finally, it is important to understand that the SBOE, as an advisory body, has provided its determination as a recommendation to the Department of Education. It is the responsibility of the IDOE to respond to DCS objections.

The Superintendent of the two virtual schools, Percy Clark provided a statement found in the audit, calling this a rush to judgement and stating that the online schools are a last chance for many students.

“The State Board of Accounts, as their investigation continues that may result in additional actions, Daleville and perhaps the two schools, what the state board has authority over by law is reducing the enrollment to make sure it’s accurate, like if it’s in this case, it’s way off,” said Murphy.

The investigation will now continue to determine if the inflated enrollment cases should be passed on to prosecutors.

“When we identify anything that would be fraudulent in nature, we will turn it over to the attorney general for a civil action and involve local prosecutors or federal prosecutors for anything that is criminal,” said Joyce.

On behalf of Daleville Community Schools, Donna Petraits said, “Based on its own investigation, the Daleville School Board voted to revoke the charters on February 25, 2019. It then reached a resolution with the charters in June for a closure procedure that provided Daleville with significantly more oversight in the process, and was a better outcome for the students.”

There’s no timeline as to when this investigation could be completed.

The next Indiana State Board of Education meeting will be held on July 25.

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