Charter shuts down, questions raised about state education funds

By: - September 17, 2013 8:00 am


State education officials want to know what happened to more than $600,000 in public education funding a Kinston charter school spent this school year despite only holding classes for 10 days.

Kinston Charter Academy, which opened in 2004 with the goal of educating low-income children in and around Lenoir County, voluntarily shut its door on Sept. 6, a few days into the new school year. The state Board of Education had been poised to try and close the charter school after hearing numerous complaints about financial instabilities at the school.

The sudden closure, two weeks into the school year, left the families of the 230 students in the K-8 school only a few days to enroll in nearby public schools in Lenoir and Pitt counties.

But it also brought up questions about what the school did with the $666,818 state education funding it received in July that was supposed to last through October. The school was also overfunded, receiving money to educate 366 students when only 230 students enrolled.

Most of the money has been spent” paying off debts owed by the school, said the school’s principal Ozie Lee Hall Jr.

The public charter school also paid nearly $10,000 in August to Hall for unused vacation and personal time. Hall denies any wrongdoing with the payment, and said it was owed to him after he announced he was leaving the charter school to make way for a new management group but well before the school’s board of directors made its Sept. 4 decision to shut down. Hall’s wife also serves as the board’s chairwoman.

The charter school, which Hall says only has $3,000 in its bank account, doesn’t have the money to pay teachers their final paychecks, Hall said, adding that he was under the impression the N.C. Department of Public Instruction would pick up the tab for the estimated 50 school staffers.

They’re going to make the payroll,” Hall said about the state education agency. “They know that we don’t have the money.”

But there is no plan to cover the charter school’s payroll, said Joel Medley, the head of DPI’s Office of Charter Schools.

They were supposed to budget their money accordingly,” Medley said. “It is the school’s responsibility.”

Kinston Charter Academy opened in 2004, aiming to serve students that come from low-income homes and weren’t succeeding in Lenoir and Pitt county schools. The school, unlike many charter schools, provided transportation and also took part in the federal school lunch program to help its primarily low-income, black student population succeed. But it struggled to keep on par with state standards, and only a quarter of its students passed the math and reading end-of-grade tests in 2011-12.

The financial issues at Kinston Charter Academy went back several years with the school running yearly deficits, and Hall said he was brought in to run the school in 2007 to help get the school on more solid footing.

Charter schools, a growing segment of North Carolina’s public education system, are funded with state, federal and local education dollars but are governed by private boards of nonprofit directors that are responsible for the school’s finances.

The state currently has 127 charter schools serving an estimated 65,000 students around the state, a fraction of the more than 1.5 million children who attend North Carolina’s public schools. But interest is growing, with 170 letters of intent from prospective charter schools operators hoping to open for the 2015-16 school year. Twenty-six new charter schools will open next fall.

Hall says Kinston Charter Academy used the more than $666,000 in state education funds to pay money it owed for employee participation in the state’s health and retirement plans, and $230,000 to satisfy two loans the school took out previously, Hall said. The loans included $30,000 in fees, according to Hall.

State education officials plan on reviewing those expenses and others to see if they’re legitimate expenses, and Hall confirmed that the state auditor’s office also subpoenaed the school’s financial records after an acrimonious meeting with the DPI financial office.

It appears DPI also gave Kinston Charter Academy too much money, with the $666,818 in state funding based on a projected 366 student-formula. The school only had 230 enroll, meaning they were entitled to less state funds. In most situations, DPI adjusts the reimbursements for charter schools in future payments, and it’s not know how or if the state will recoup the money from Kinston Academy, said Alexis Schauss, DPI’s director of school business.

Hall, who has accused staff from Schauss’ office of school business of conspiring with lenders and others to thwart the school’s efforts to get on sound financial footing, contends all the money was spent properly.

When asked why DPI sent a third of the yearly funding to Kinston Charter Academy, knowing the state board would soon consider revoking the schools charter because of financial issues, Schauss said DPI has to treat all charter schools the same and there were no concrete indications at the time the school would suddenly shut down.

If you don’t provide them funds, then they cannot operate,” Schauss said. “That’s not very fair to the school either.”

Questions? Comments? Reporter Sarah Ovaska can be reached at (919) 861-1463 or [email protected].

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Sarah Ovaska-Few

Sarah Ovaska-Few, former Investigative Reporter for N.C. Policy Watch for five years, conducted investigations and watchdog reports into issues of statewide importance. Ovaska-Few was also staff writer and reporter for six years with the News & Observer in Raleigh, where she reported on governmental, legal, political and criminal justice issues.