Acknowledgements NPE Executive Director, Carol Burris, and journalist Jeff Bryant were the authors of this re- port. We thank them for their extensive research and analysis. Thank you to Leigh Dingerson for her skilled and careful editing of the report, as well as her advice regarding structure and content. Thanks also to the Network for Public Education’s Director of Communications, Darcie Cimarusti, who designed this report. Darcie Cimarusti and Marla Kilfoyle of NPE also con- tributed to research efforts. We are also grateful to researcher and scholar Roxana Marachi for her summary of the prob- lems associated with the CMO known as Rocketship. The report would not have been possible without the effort and commitment of the Board of Di- rectors of the Network for Public Education (NPE), with special thanks to Diane Ravitch, Presi- dent of NPE. Diane generously gave her support, guidance and advice throughout the writing of this report. Finally thank you to all of our generous donors who make our work in support of public educa- tion possible. This report was funded solely by the Network for Public Education. The Network for Public Education (NPE) is an advocacy group whose mission is to preserve, promote, improve and strengthen public schools for both current and future generations of stu- dents. The goal of NPE is to connect all those who are passionate about our schools – students, parents, teachers and citizens. We share information and research on vital issues that concern the future of public education at a time when it is under attack. For more information, please visit our website at www.networkforpubliceducation.org. 1 About the Authors Carol Burris is the Executive Director of the Network for Public Education. Carol served as principal of South Side High School in Rockville Centre, NY from 2000 to 2015. She received her doctorate from Teachers College in 2003. In 2010, she was recognized by the New York School Administrators Association as their Outstanding Educator of the Year, and in 2013 she was again recognized by NASSP as the New York State High School Principal of the Year. Carol has co-au- thored three books on educational equity, and served as a consultant on desegregation cases for the U.S. Department of Justice. She is the author or co-author of numerous journal articles on educational equity, teacher evaluation, and detracking. Carol is a frequent guest blogger for the Answer Sheet of The Washington Post. Jeff Bryant is a communications expert and advocacy journalist whose award-winning re- porting and commentaries have been published by Salon, AlterNet, The Progressive, and The Washington Post. He currently serves as a Chief Correspondent and Writing Fellow for the Inde- pendent Media Institute's Our Schools project, and he is the Director of the Education Opportuni- ty Network, a public education advocacy center created through a partnership between the Schott Foundation for Public Education and the Campaign for America's Future. 
 2 Table of Contents 
 Executive Summary ..............................................1 Introduction .........................................................4 Asleep at the Wheel ...............................................9 Conclusion ...........................................................32 Recommendations ................................................34 Executive Summary 
 Executive Summary In 2015, the U.S. Department of Education took an charter schools in California has reached nearly unprecedented step--it told the state of Ohio to four in ten. put on hold the $71 million that it gave the state for the purpose of opening more charter schools. The federal outlays we examined are not modest What is even more remarkable is that the cut-off expenditures amounting to little more than of funds was championed by Ohio Senator Sher- rounding errors. In its 2015 analysis, CSP stated rod Brown, who expressed concern about the that since its inception in 1994, the program had charter fraud and abuse that was happening in provided $3.3 billion to fund the startup, replica- his state. tion, and expansion of charter schools, creating 40 percent of operational public charter schools Brown’s mistrust was well founded. Shortly after in the nation. We estimate that program funding the announcement, Innovation Ohio and the has grown to well over $4 billion. That could Ohio Education Association issued a joint report bring the total of the potential waste to around $1 showing that more than one in three schools that billion. had received federal grants from the U.S. De- partment of Education’s Charter Schools Program The waste of public dollars on closed charter (CSP) had never opened, or opened and soon schools is not the only concern. Of the grant re- closed. The report also noted that of the remain- cipients that manage to stay open, we uncovered ing grant-funded charters, 63 percent, were extensive evidence that raises serious questions among the lowest performing schools in the state. as to whether or not these schools are truly "high- quality," meeting the CSP goal of providing equi- Was the Ohio scandal a unique event, or was it table access for disadvantaged students. typical? That is the question this investigative re- port sought to answer, and after two months of Through detailed examination of CSP's applica- analysis, the answer is clear. The Ohio scandal tion process, and by comparing claims made by was far from unique. We found that it is likely that charter grant applicants to information on state as many as one third of all charter schools receiv- databases and school websites, we found numer- ing CSP grants never opened, or opened and shut ous examples of federal tax dollars being mis- down. In fact, the failure rates for grant-awarded spent due to an inattentive process that routinely accepts applicants’ claims without scrutiny. 1 In short, despite the scandal of Ohio and numer- journalist Michael Winerip referred to as an “invi- ous critical reports by their own Office of Inspec- tation for fiction writing.” This process resulted in tor General, the U.S. Department of Education numerous examples of awardees that claim they has been asleep at the wheel when it comes to the seek to enroll high percentages of minority and management and supervision of hundreds of mil- disadvantaged students, even while their pro- lions of taxpayer dollars every year. grams and policies are designed to draw from advantaged populations. Finally, we found in- Below is a summary of our findings: stances where achievement and/or demographic data on applications were cherry-picked or mas- 1. Hundreds of millions of federal taxpayer dol- saged, with reviewers instructed to accept what lars have been awarded to charter schools that was written as fact. never opened or opened and then shut down. In some cases, schools have received federal fund- 3. Grants have been awarded to charter schools ing even before securing their charter. that establish barriers to enrollment, discourag- ing or denying access to certain students. Our investigation barely skimmed the surface of the hundreds of charter school grant recipients Multiple schools we examined enroll smaller per- that never opened or opened but then closed. centages of students with disabilities and students Among the scores of schools examined, we found who are English language learners than the sur- a Seattle private school that converted to a char- rounding schools. Some appear to be designed to ter with grant money only to shortly flip back to a encourage “white flight” from public schools. private school, leaving 90 economically disadvan- Thirty-four California charter schools that re- taged children scrambling to find a new school ceived CSP grants appear on the ACLU of South- mid-year. We found two Delaware charter schools ern California’s list of charters that discriminate— started by the same financial firm that won mul- in some cases illegally—in admissions, and 20 CSP tiyear grants two years apart from each other. funded Arizona charters appear on a similar list One opened its doors but closed midyear, and the created by the Arizona ACLU. One Pennsylvania second never opened at all. We found a Hawaii charter receiving multiple grants totaling over charter that won a CSP award in 2016 that has yet one million dollars from CSP states on its website to find a location, while its website continues to that its programs are “limited to students with say it is accepting new enrollees. Of the schools mild handicaps." awarded grants directly from the department be- tween 2009 and 2016, nearly one in four either 4. Recommendations by the Office of the In- never opened or shut its doors. The CSP’s own spector General have been largely ignored or analysis from 2006-2014 of its direct and state pass- not sufficiently addressed. through funded programs found that nearly one out of three awardees were not currently in operation by the end of 2015. We reviewed numerous OIG audits that found significant concerns over how CSP money is 2. The CSP’s grant approval process appears to spent and about the general lack of monitoring the Department carries out to ensure those funds be based on the application alone, with no at- contribute to the intended goals of the grants. tempt to verify the information presented. Each audit includes specific recommendations to Schools have been approved for grants despite correct this lack of oversight. But not only is there serious concerns noted by reviewers. little evidence the department has adopted any of these recommendations; the current Secretary The CSP’s review process to award grants does not has denied responsibility for oversight, believing allow the verification of applicants’ claims, thus that it falls outside the federal government’s leading to what award-winning, New York Times 2 purview—even though this is a federal grants Based on our review of grant awards to SEAs and program. non-SEAs in 2017 and 2018, we contend the quali- ty of the applications and the receiving grantees 5. The department does not conduct sufficient are likely getting worse, and the department’s oversight of grants to State Entities or State Ed- willingness to provide oversight has nearly disap- ucation Agencies, despite repeated indications peared, which may result in increased fraud, that the states are failing to monitor outcomes mismanagement and charter failure. or offer full transparency on their subgrants. Recommendations Although the vast majority of public charter school grants are awarded to state education Our investigation finds the U.S. Department of agencies (SEAs), our investigation reveals that the Education has not been a responsible steward of Department has shown little oversight when SEAs taxpayer dollars in its management of the CSP. pass that funding along directly to individual Based on what we found, we believe it is likely charters or charter organizations as subgrants. that one billion dollars of federal “seed money” We found a continuing record of subgrantee has been wasted on charters that never opened or schools that never opened or closed quickly, shut their doors. We were equally dismayed to schools that blatantly discriminate in their disci- find that many of the CSP-funded charter schools pline, curricular, and enrollment practices, that survived did not fulfill their stated mission, schools that engage in outright fraud as well especially in regard to enrolling proportionate schools that engage in related-party transactions numbers of disadvantaged youth. As public dol- that result in private individuals and companies lars are pulled from public schools and a more pocketing huge sums of money at taxpayer ex- disadvantaged student body is left behind, the pense. students who attend their neighborhood school have fewer resources and greater challenges. 6. The CSP’s grants to charter management or- ganizations are beset with problems including Finally we fear that the department’s indifference conflicts of interest and profiteering. to accountability and its unwillingness to super- vise the hundreds of millions of taxpayer dollars The Office of the Inspector General’s 2016 audit of that flow through the program are likely to in- CSP funded CMO’s and/or their related schools crease under the current Secretary who presses found that of the 33 schools they reviewed, 22 had for choice for the sake of choice, regardless of the one or more of the following: conflicts of interest cost to the American taxpayers and the disruption between the CMO and the charter, related-party it causes to children and families. transactions and insufficient segregation of du- ties. We found troubling examples of CMOs that Therefore, we recommend that Congress end received massive grants that engaged in practices funding for new charter grants coming from CSP. that push-out low-performing students, violate We also recommend thorough audits of previous the rights of students with disabilities and cull grant awards, steps to ensure grant awards still their student bodies through policies, programs under term are being responsibly carried out and and requests for parental donations. that misspent money is returned. 7. Under the current administration, while We cannot afford to continue to pump hundreds of millions of dollars into a program whose stew- Congressional funding for the CSP rises, the ards are clearly asleep at the wheel. quality of the applications and awardees has further declined. 3 Introduction 
 Intro- duction During a June 2018 hearing before the U.S. House The CSP operates inside the department’s Office Education and Workforce Committee, Jonathon of Innovation and Improvement and includes Phillip Clark, an Iraq War veteran and African- seven different funding streams. Two of these American parent with seven children in the De- provide loans or credit enhancements for the troit public-school system, described his oldest purchase and renovation of charter school facili- daughter's troubling experience attending a char- ties. Two others provide technical support and ter high school. The school, University Yes Acad- dissemination of best practices among charter emy, promised academic courses and school pro- schools. Three programs—which are the focus of grams it never delivered. The school had five our analysis here—offer start-up funds or expan- principals in three years. An audit of the school sion dollars to prospective charter schools, exist- could not account for $300,000 of Title I funds. ing schools or to charter management organiza- After the money went missing, the school tions (CMO). The program was established in 1994 switched to a different management firm run by and over its 25-year existence, has funded as the same person. Then the school’s contract was many as 40 percent of charter schools across the transferred to a third management firm, which country. closed the school a week before classes were to start, leaving students and families stranded. For over a decade, Congress has poured money into CSP at rates much higher than overall Educa- What Clark didn't explain, perhaps because he tion Department spending has increased. We es- didn't know, is that his daughter's charter was timate that approximately $4 billion federal tax considered a "high-quality" school by the federal dollars have been spent or allocated to start, government and worthy of receiving a federal replicate and expand charter schools. Over the grant. Some time prior to 2015, University Yes past four years, while funding for the department Academy was the recipient of an $830,000 grant essentially flatlined, with an average increase of from the U.S. Department of Education's Charter only 2.12 percent annually, funding for charter Schools Program (CSP). CSP, according to its web- school grants surged, with an average yearly in- site, "provides money to create new high-quality crease of 13.32 percent. public charter schools, as well as to disseminate information about ones with a proven track Last year, Congress appropriated $440 million for record.” the CSP, an increase of $40 million. That 10 per- 4 cent increase is one of the largest of any educa- published a report, based on records obtained tion department program in the budget. Under through open records requests, in which it found the Every Student Succeeds Act, the grant pro- key information was “severely lacking” on how gram was expanded in a number of ways, includ- federal funds were spent on charters. The report ing opening the grant competition to many more identified hundreds of schools that received fed- government agencies and charter school support eral money but never opened their doors or organizations, doling out state grants much more quickly closed after brief periods of operation. frequently, and explicitly adding the competition The report likened the CSP grant program to a for charter management organizations as federal “black hole.” education law. Two months after the CMD report appeared, CSP Yet, while University Yes Academy was called on to released a dataset showing all grants awarded account for what happened to the missing Title I between school-years 2006-07 and 2013-14, with money, the school was never called on to account information on grants given to start-up, replicate, for what it did with the grant money from CSP. In and expand charter schools. The dataset included fact, none of the thousands of charters receiving grants awarded to individual schools, to State Ed- grants from CSP are ever compelled to provide an ucation Agencies (SEAs), and to charter manage- account to U.S. taxpayers of how federal grant ment organizations (CMOs). funds were spent. CSP said the grants "facilitated the creation of Instead of providing that accounting, the man- over 2,600 charter schools that were operational agement firm that closed Yes Academy, New Par- as of SY 2013-14." According to the dataset, ap- adigm for Education, applied for and received a proximately 430 additional charter school grant CSP CMO grant of $5,084,100 in 2017. In its appli- recipients were closed by SY 2013-14. And approx- cation, New Paradigm spoke highly of its success imately 699 additional grantees were considered with another of its schools, New Paradigm Glazer "prospective schools"—cases where an operator Academy, a school which had actually closed and planned for, but had not yet opened, a school. So, merged with another school in 2016. Yet, review- by the department's calculations, of the 3,729 ers of New Paradigm’s application gave the firm charter schools receiving CSP grants between high marks for “the extent to which charter school-years 2006-07 and 2013-14, about a third— schools operated or managed by the applicant 1,129 schools—were closed, never opened, or not have not been closed,” with one reviewer remark- yet operational by the end of SY 2013-14. ing, “there have been no reported issues of non- compliance, closure, and statutory and regulatory compliance with New Paradigm schools.” In 2018, As the following report shows, the depart- New Paradigm announced plans to double the number of students it serves in the next two ment has likely learned very little if anything years, despite the firm running a $546,834 deficit from the flaws in the federal charter schools in 2016 and a "similar loss" in 2017. grant program—even as that program ex- pands. CSP has been the subject of numerous critical reports by the department's own Office of Inspec- tor General (OIG), which have raised significant CSP's analysis also found that, over the eight concerns over how CSP grant money is spent, as school years accounted for, the average grant well as the general lack of monitoring the de- award per open charter school, as of SY 2013-14, partment conducts to ensure those funds con- was $461,813. What the analysis doesn’t provide is tribute to the intended goals of the program. In an average award amount for the charters that 2015, the Center for Media and Democracy (CMD) never opened or opened and then quickly closed. 5 If that average award applies to those charters as evidence of strong demand for the school from well, it would mean that $198,579,590 of federal the surrounding community. tax money was wasted on charter schools that were no longer in operation as of SY 2013-14, and Three Funding Streams Under Scrutiny perhaps as much as $322,807,287 could be at risk on “prospective schools.” Even after CSP’s analy- The CSP program was established in 1994 as a sis, however, those schools continued to close. We way to kick-start the creation of new charter found that 38% percent of the California charter schools, as the independently-managed schools schools in that CSP dataset had either never were being legalized and licensed across the opened or shut their doors by 2019. country. Over its 25-year existence, the U. S. De- partment of Education estimates that the pro- CSP's explanation for the high cost of failure was, gram has offered federal dollars to as many as 40 "As with any start-up, school operators face a percent of charter schools. The CSP is authorized range of factors that may affect their school’s under the Elementary and Secondary Education opening. And as with any provider of start-up Act (currently the Every Student Succeeds Act, capital, the department learns from its invest- Title IV Part C) and operates inside the depart- ments.” ment’s Office of Innovation and Improvement. The CSP includes seven different funding As the following report shows, the department streams. Two of these provide loans or credit en- has likely learned very little if anything from the hancements for the purchase and renovation of flaws in the federal charter schools grant pro- charter school facilities. Two others provide gram—even as that program expands. technical support and dissemination of best prac- tices among charter schools. Three programs— While congressional appropriations to the CSP which are the focus of our analysis—offer start-up continue to climb, our investigation, the first of funds or expansion dollars to prospective charter its kind, found that not only does grant money schools, existing schools or to charter manage- awarded to charters by the CSP continue to go to ment organizations (CMO). schools that never open or quickly close, but hundreds of millions of dollars have been provid- ed to schools that don't resemble "high quality" Time and again, huge sums of grant money schools, including many that engage in exclu- sionary practices that keep some economically have been awarded to charter schools that disadvantaged students, students of color, stu- have inadequate business plans, discrimina- dents with disabilities and English language tory enrollment practices, or no evidence of learners (ELL) out. Through our detailed exami- strong demand for the school from the sur- nation of the CSP's application process, we found rounding community. a system in which the program awards grants based on which schools can write (or hire some- one to write) the most compelling narrative in its Those programs are: application, knowing that the facts they present will never be checked. As we compared informa- Charter Schools Program State Entities tion on state databases and school websites with (SE): The SE grant program provides federal application data, we found startling discrepancies dollars to state departments of education or between what charter applicants promised and other approved “state entities” which then what they ultimately delivered. Time and again, subgrant the funds to charter operators huge sums of grant money have been awarded to looking for seed money to create a new charter schools that have inadequate business charter school. It is the largest of the CSP plans, discriminatory enrollment practices, or no 6