- Associated Press - Monday, February 2, 2015

RALEIGH, N.C. (AP) - A Kinston charter school that an audit said mismanaged money for years before closing and three Charlotte charter schools shuttered after running into first-year financial problems have some state leaders seeking more oversight of the non-traditional public schools.

Both the top Democrat in the state House and the former state Republican Party chairman who now heads the State Board of Education said they want tighter controls over taxpayer money going to charter schools in trouble.

State school board chairman Bill Cobey and House Minority Leader Rep. Larry Hall were reacting to a report last week by state Auditor Beth Wood’s office that found a collection of questionable financial choices preceded the sudden shutdown of Kinston Charter Academy weeks after it opened for its 2013-14 academic year, its ninth overall.

“I don’t want to be responsible for public funds being squandered. That’s what it’s all about,” Cobey said. “This is a nonpartisan issue. Nobody wants state tax dollars to be lost, and we have now an illustration (of that happening) - a pretty dramatic illustration.”

Charter schools are tuition-free public schools operated by a nonprofit board of directors with much greater financial and academic flexibility than traditional schools. The first opened two decades ago, but their numbers were capped at 100 statewide until lawmakers lifted that limit in 2011. There now are nearly 150 charter schools statewide, with 11 more set to open in August.

Ten charter schools are on a financial watch list kept by state monitors. Six in the most serious category receive state funds on a monthly basis instead of the normal three payments per year, state records show. They include Entrepreneur High School in Charlotte, which shut down in January with just $14 in its bank account.

Hall, D-Durham, said he will file legislation this week in the Republican-led Legislature to increase the financial accountability requirements for charter schools.

“There is an alarming pattern being established of charter schools’ reckless mismanagement and eventual collapse after diverting public school funds,” Hall said in a statement. “When the smoke clears, our children are denied their constitutionally mandated education.”

Though the Kinston charter school was cited for financial deficiencies multiple times over six years, it received a third of its annual state operating revenues based on student enrollment - $667,000 in taxpayer funds - for the upcoming 2013-14 academic year, the report said. Some of the money went to pay off two loans totaling $230,000 borrowed to keep the doors open that carried interest rates of up to 515 percent, auditors said. Because charter school boards manage their own finances and operations, they aren’t required to inform state school officials when they take on additional debt, the report said.

The Kinston school closed in September 2013 and state officials are considering suing to recover taxpayer funds.

Former school CEO and principal Ozie Hall Jr. disputed the audit’s findings and said financial limits forced by state education officials worsened the school’s fight to survive. Hall is now involved with a charter school in Harnett County.

Concrete Roses STEM Academy got its initial allotment of taxpayer funds in July based its projection of enrolling 300 students when it opened for its first year. The school opened with fewer than half that estimate.

A subsequent audit found the charter school’s founder and chairman used $3,000 for fuel and two personal car payments of $650 dollars, was reimbursed for cellphones though no school staffers had one, and kept all the financial records at his home. State officials have told the chairman to repay almost $45,700 in state funds spent without proper documentation, said Alexis Schauss, school business administration director at the state Department of Public Instruction.

Eddie Goodall with the North Carolina Public Charter Schools Association said it might be wise to limit state funds to enrollment charter schools can demonstrate.

“I’m first in line to say let’s keep charter schools accountable for their finances. A lot of us thought they were,” said Goodall, a former GOP state senator. “We’ve just got to look at what the existing rules are, why they didn’t give us information faster regarding Kinston, and also the new schools” in Charlotte.

Some charter schools will fail, Cobey said, when dissatisfied parents vote with their feet and move their children back into traditional schools or a private school. That’s the price of giving parents options, he said.

“I believe in parents having options because if you live in a certain area and the local public school is not working for you, for your child, I think there should be options and one of the options is public charter schools,” Cobey said.


Emery Dalesio can be reached at https://twitter.com/emerydalesio

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