Charter schools in Texas are granted autonomy from many state regulations in order to create innovative programs that promote student achievement, but a lack of public oversight has too often led to fraud, waste and abuse. Texas needs to create a strong proactive system of oversight as instances of mismanagement of public funds are well documented within the state’s charter sector.
State regulations make the Texas Education Agency commissioner responsible for authorizing charter schools after “thoroughly investigating and evaluating” each charter applicant’s “financial, governing, educational, and operational standards.” The commissioner is also tasked with monitoring, investigating and making closure decisions when appropriate.
Despite these regulations, local stakeholders have raised serious concerns about unethical and unlawful financial practices. For example, in 2020, the former IDEA founder and chief executive apologized for what he called “really dumb and unhelpful” plans to lease a private jet and spend thousands of dollars on San Antonio Spurs tickets. He walked away from IDEA months later with a $900,000 severance package, which raises additional concerns about how tax dollars were being managed.
On May 25, IDEA’s board announced that it conducted a “thorough and independent review” led by a former federal prosecutor that found “a small number of IDEA senior leaders directed the use of IDEA financial and staff resources for their personal benefit on multiple occasions.” The audit also concluded that several actions “appeared to be done in a manner to avoid detection by the standard external audit and internal control processes.”
Prior to the recent review, state Rep. Terry Canales already asked the Texas Education Agency and the state auditor to conduct a joint audit of IDEA. Now, the TEA will probably respond by appointing a monitor or conservator.
IDEA is just one example and not the only charter organization to have fiscal management problems.
A recent report found that at least 72 of the 232 Texas charter schools that received money from the federal charter schools program between 2006 and 2014 were already closed or never opened at all. The amount received for these schools was about $24 million.
The U.S. Office of the Inspector General in 2016 conducted an audit of 33 charter schools in six states (including Texas) to detect fraud, waste and abuse. The audit found that 22 of the 33 schools were in violation of federal conflict of interest rules, which posed significant risks to the U.S. Department of Education’s funding objectives. In Texas, the audit provided several examples of conflicts of interest. In one instance, a member of a Texas charter school was also part of the charter management board and provided legal services to the charter but did not recuse himself from voting on his compensation for legal services provided to the charter.
These ongoing problems represent a state scandal, and the state needs to take several proactive steps to improve oversight so problems do not escalate over time. The TEA should immediately evaluate its charter oversight and auditing policies to ensure appropriate protocols and resources are in place to effectively monitor all charter schools and public schools. No new charter school should be authorized until this evaluation is complete.
The commissioner should then ensure any new organization seeking to open its first charter school is adequately vetted and any existing charter management organization seeking to open more campuses is in full compliance with state and federal regulations.
Finally, the TEA should engage in random audits of charter schools and their management organizations. Audits should focus on identifying financial risks as well as other relevant state and federal requirements.
These commonsense improvements to charter policy can significantly reduce fraud and waste in the state’s charter sector, which will benefit Texas taxpayers and students who deserve an efficient and effective public education system.
David DeMatthews is an associate professor in the Department of Educational Leadership and Policy at The University of Texas at Austin.
David S. Knight is an assistant professor of education finance and policy at the University of Washington.