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LAO and FCMAT Findings and Recommendations on Nonclassroom-Based Charter Schools Funding Determinations

The state Legislative Analyst’s Office (LAO) and the Fiscal Crisis and Management Assistance Team (FCMAT) have issued their much anticipated “Review of the Funding Determination Process for Nonclassroom-Based Charter Schools.” The report includes significant recommendations about authorizers.

The Legislature in SB 114 of 2023 required LAO and FCMAT to study the processes used to determine funding for nonclassroom-based (NCB) charter schools and identify and make recommendations on potential improvements, including recommendations for enhancing oversight and reducing fraud, waste, and abuse.

The report makes recommendations about:

  • The funding determination processes;
  • Authorizing;
  • Auditing; and
  • New ways these three things can interrelate, important because the report finds that the funding determination process alone, even an improved one, is insufficient to prevent profiteering and other concerns the process was intended to address.

The recommendations address public policy as well as practical considerations for charter schools, authorizers, and the California Department of Education (CDE). They include suggestions to:

  • Narrow the NCB definition, for example to apply to a school where less than half of instruction, not less than 80%, occurs in person;
  • For NCB funding determinations, use school spending data from all years since its last determination;
  • Align funding determinations to charter renewal periods;
  • Build in automatic adjustments to funding determinations for one-time funds and facilities;
  • Change determination rules relating to the school’s fund reserves;
  • Require a charter network operating as one school to apply for their determinations concurrently;
  • Subject charters to the audit process for school districts;
  • Require charter audits to include the percentage of in-person instruction, student-to-teacher ratio, a schedule of large payments and transfer, and composition of the school’s governing board;
  • Require specific training for auditors of charters; and
  • Require school disclosure of related organizations.

Actions the report says the Legislature could consider that relate specifically to authorizing include to:

  • Require authorizers to separately track expenditure and staffing data for NCB charter schools;
  • Require authorizers to conduct regular reviews throughout the school year of school expenditures, enrollment, and attendance data;
  • Require an authorizer to investigate and notify its county of education (COE) of any significant changes in school enrollment or attendance, or discrepancies between enrollment and attendance;
  • Require authorizers to attend regular trainings on these requirements;
  • Require that if district authorizers do not comply with these requirements, authorization be transferred to the local COE, or, in the case of a COE, to a neighboring COE;
  • Allow authorizers that comply with these requirements to charge an administrative fee for actual authorizing and oversight activities of up to 3 percent of the charter’s school Local Control Funding Formula (LCFF) revenue;
  • Set a cap on the NCB charter attendance that a district authorizer can authorize based on the district’s own attendance — for example by capping the NCB attendance at the district’s attendance – but possibly making an exception for rural counties that lack large districts; and
  • Consider an alternate authorizing structure altogether for virtual charters and virtual charter networks, such as a dedicated authorizing entity or, alternatively, a new expert agency with which districts would jointly conduct oversight.

CCAP is now finalizing the report of the broad, statewide Anti-Fraud Task Force it convened that makes broader recommendations on preventing, detecting, and prosecuting fraud in charter schools and the wider public education system. The LAO/FCMAT recommendations intersect in important ways with the Task Force’s recommendations — as both reports will intersect with the continuing work of the Multi-Agency Task Force on Charter School Audits led by the State Controller’s Office (SCO).

Read more here.

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