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Fraud Allegations at Calif. Charter Will Go to Prosecutors, County Says

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EdWeek readers will recall a story from earlier this year about a group of high-scoring California charter schools that came under scrutiny amid allegations of financial impropriety and fraud. Now, a full investigative audit on activities at the American Indian Model Charter School has found numerous instances of financial irregularities and questionable spending, and a county schools leader says the results of the investigation will be referred to the local district attorney's office.

Alameda County schools superintendent Sheila Jordan said in a statement that "the lack of oversight by the AIMS board and the unethical practices by its founder are unacceptable and an abuse of the public trust." Citing California law, she said she was turning over the case to prosecutors "for further action."

The audit was conducted by the Fiscal Crisis and Management Assistance Team, which provides reviews of districts' finance, often at their request or that of state officials. The FCMAT was given a contract by the Alameda County Office of Education to conduct the investigation, after county officials had become aware of claims of financial irregularities at the school, which is based in Oakland.

The report concludes that Ben Chavis, often referred to as the founder of AIMS, and his spouse were allowed to gain financially because of conflicts of interest, and that there was no real separation between the "public and private interests" related to the couple's private businesses and the operations of the schools. The allegations of mismanagement cover school officials' direction of a number of major grants and programs, as well as school facilities, construction, and other areas.

The report also details the co-mingling of thousands of dollars worth of personal and school-related credit card charges, many of which the auditors refer to as "questionable." Several purchases are charged to school accounts originated in North Carolina, where Chavis has a farm, the report says. Other charges are for San Francisco Giants tickets, DIRECTTV, and Amazon purchases. The school administration evidently told the auditors that somer of the Amazon purchases covered textbook costs, but the report says the back-up documentation for much of that spending is missing.

The audit sums up the lack of oversight and accountability at the school this way:

"While the governing board and all employees in the organization have some responsibility for internal controls, the founder and his spouse had a fiduciary duty and responsibility to ensure that the assurances in the charter petition and the governing board fiscal policies and procedures were conducted responsibly and ethically.

Based on the documentation reviewed by FCMAT, there is sufficient evidence to demonstrate that fraud, mismanagement and misappropriation of the charter school funds and assets may have occurred. A significant material weakness exists in the charter school's internal control environment, which increases the probability of fraud and/or abuse. These findings should be of great concern to the AIMS governing board, Oakland Unified School District and the Alameda County Office of Education and require immediate intervention to limit the risk of fraud and/or misappropriation of assets in the future."

School officials have not yet responded to my request for comment. Before the allegations of impropriety surfaced, the American Indian charter schools had received widespread attention, and both controversy and praise, for their focus on tough discpline and demanding academics. The school is one of several charter operators around the country that has faced accusations of financial wrongdoing in recent months.

Jordan, the county superintendent of schools, said American Indian Charter allegations were an indication of the need for greater oversight at small, independent charter operators, some of which lack proper financial accountability systems. "We must work to protect children and ensure that schools are operating legally and ethically," he said. "This will require a rethinking of legislation and current funding to provide additional resources to monitor and support schools appropriately."

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