Flunking Out

Charter school scandals are teaching Texas a tough lesson -- one the state should have known four years and $77 million ago.

"Governor Bush believes innovation and competition will inspire our public schools while offering more choices for parents and students," says Mindy Tucker, a Bush campaign spokeswoman. "That's why he strongly supports charter schools and chose to highlight two successful charter schools on recent campaign stops."

Texans, however, might be better off if the governor had been paying more attention to charter schools that were failing in his own state.


State Board of Education member Alma Allen, a critic of charter schools, says the board was pressured to open them quickly by some legislators and the governor.
Phillippe Diederich
State Board of Education member Alma Allen, a critic of charter schools, says the board was pressured to open them quickly by some legislators and the governor.
Renaissance Charter School founder Don Jones says he created the school to reach middle-of-the-road students neglected by traditional public schools.
Mark Graham
Renaissance Charter School founder Don Jones says he created the school to reach middle-of-the-road students neglected by traditional public schools.

Four charter schools under the umbrella of Houston-based Life's Beautiful Educational Centers Inc. -- P.O.W.E.R., H.O.P.E., L.O.V.E., and F.A.I.T.H. -- are finding that life's ugly these days. In less than one year, the nonprofit corporation has racked up debts totaling several hundred thousand dollars.

All the power, hope, love, and faith in the world may not be able to salvage the good intentions of the recently deceased founder, Sylvia L. Terry, a teachers' union activist who started the schools as an alternative for African-American youths who were failing in traditional public schools.

"Some of the people who applied for charters said, 'Well, I want to help children,'" explains Allen, the Board of Education member. "Sure, there are a lot of people out there who want to help children, but they have no sense of the business side of education. And that's basically where they're getting in trouble."

Running a charter school is like running a business. Although free of many teaching regulations, charter schools still must strictly follow state and federal guidelines related to accounting and finance.

"Understanding even the minimum requirements is very difficult," says Bill Outlaw. "This field is very specialized." Outlaw was a public school budget officer from Houston who retired with more than 30 years' experience. He was hired by TEA to help clean up the Life's Beautiful mess.

Unlike the charter schools in Waco and San Antonio, Life's Beautiful appears to have made honest accounting mistakes. Still, it demonstrates the operator's appalling lack of financial sense and savvy.

"I haven't seen any evidence of misappropriation of funds," Outlaw says. "But I will say that, in my opinion, the wisdom of their spending is in question. I don't think they had a budget. I never saw it. If they did, they didn't pay a lot of attention to it."

Last fall, Life's Beautiful opened P.O.W.E.R. in the Pleasant Grove section of Dallas, H.O.P.E. in northeast Houston, and L.O.V.E. in Denton. F.A.I.T.H. was to open this fall in Carrollton. The future for the schools remains hazy as TEA auditors assess the corporation's debts. A recommendation to revoke the four charters is possible.

The amount of money a charter school receives from the state is based on the school's average daily attendance. Since September, the state has paid Life's Beautiful about $775,000. The charter operator was zapped when it grossly overestimated the number of students who would attend the three schools opening last fall. As a result, it took in far less money than anticipated. Yet Life's Beautiful officials inexplicably waited as long as three or four months to reduce expenses accordingly. Bottom line: Life's Beautiful spent its entire year's income in about four or five months, says Canby of TEA's audit division.

Life's Beautiful is several months behind in meeting payroll. Even when it was paying employees, it deducted money for health insurance from employees' paychecks -- even though the coverage had been canceled for failure to pay the insurance premium. For a while, Life's Beautiful paid no contributions to the state teachers' pension fund nor payroll withholding taxes to the IRS. Rent was late, as were payments to the bus company that transported students.

The corporation's bookkeeping was unbelievably shoddy. "Financial records had to be reconstructed from the beginning," Outlaw says. "Every receipt and every disbursement had to be re-coded. The student attendance records were the same way. Unless they can prove they had these kids in classes and taught them, the state is not going to pay for them."

Sherwin Allen of Dallas, who was on the board of Life's Beautiful, disputes the auditors' enrollment counts. At P.O.W.E.R., for example, auditors reported an average daily attendance that is far shy of the projected enrollment of 300 upon which the school based its expenses.

"From what I understand, the auditors said we had 35 kids at P.O.W.E.R.," Allen says. "Well, shoot. Please. I just finished doing a student roster for P.O.W.E.R., and we have 129 kids on it. That's how many kids were enrolled."

Allen says the state is basing P.O.W.E.R.'s attendance estimate on a head count done when auditors visited the school. The auditor counted heads a full hour before many of the students arrived at the campus, he claims.

However, Allen admits that the books aren't in good enough shape to back him up. He says one reason is that attendance records were stolen during a burglary earlier this year. Asked two weeks ago about the missing records, TEA officials shook their heads and said that's a new one on them.

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