A Charter With Its Hand in the Cookie Jar?

It was discussed how and why Granada is running in the red

- El Camino Real Charter High School Board Meeting Minutes, September 18, 2013

Under California law, Associated Student Body (ASB) organizations are “student organizations that are established to raise and spend money on behalf of students”. Under the law, these funds are “to be used to finance activities for noninstructional periods”. These include “goods and services that promote the students’ general welfare, morale and educational experiences”, but not for “those which the school entity should provide from its own funding sources.” These funds may also be loaned “to any student body organization established in another school of the district for a period not to exceed three years” or to “invest in permanent improvements to any school district property”. When investing in a district property, the ASB is entitled to receive any rental income from that property until their investment plus a reasonable amount of interest is paid back.

In response to a Public Records Act Request that requested “bank statements for accounts that hold any of the funds belonging to the Associated Student Body (ASB)” at Granada Hills Charter High School (GHCHS), I was provided with documentation that shows the school’s ASB held $781,672.60 at the beginning of 2012. This amount raised a red flag as these funds were held in a single account at the California Credit Union, which is insured by the National Credit Union Association. However, this insurance only covers “up to $250,000”. Therefore, $531,672.60 of the students’ money was left unprotected despite the fact that the California Education Code Section 48933 states that if these funds are deposited in a bank, it must be one “whose accounts are federally insured.”

The second red flag was triggered by a withdrawal of $310,000.00 on January 4 that was labeled “Emergency transfer - LACOE ACH”. Although, I requested copies of the agendas and approved minutes for meetings of the ASB, none were provided to me. Therefore, they either do not exist or they (were) withheld in violation of the California Public Records Act. In either case, there is no way to determine if the students’ elected representatives were aware that the school was removing these funds. Also, since the school’s Governing Board’s archived minutes have been removed from their web site, it cannot be determined if they were aware of this action.

The funds were returned to the ASB account on January 10, 2012. However, even though these funds were taken from an interest bearing account, it appears that no interest was paid on the loan as the amount returned was exactly what was borrowed. This seems to be a sweetheart deal for a management team facing an “emergency” cash crunch.

Unfortunately, this was not the only time the school borrowed money from the ASB during 2012, as shown in the following transactions:

  • June 28  Emergency loan for cash flow $600,000.00
  • August 7 Emergency Transfer              $  25,000.00
  • July 13   Emergency Transfer              $100,000.00

This not only raises questions about the school’s fulfillment of their fiduciary responsibility for the ASB funds, it opens the possibility that they were not financially solvent during this time period. The administration itself labeled the need for these loans as emergencies which seems to be an admission that something was amiss.

On April 14, I notified the LAUSD Charter School Division (CSD) of my findings in an email that was copied to all of the Board members and asked if these transactions were disclosed during the school’s 2014 charter renewal. The CSD’s Administrative Coordinator, Dr. Robert Perry, responded that he was “turning this over to our fiscal team for review”, but that was the last time that I heard from anyone in the District about this subject. It appears that, once again, the CSD is not up to the task of oversight even if a charter can be revoked for a “violation of generally accepted accounting standards of fiscal management” or “violations of the law.”

This represents another example of GHCHS’ unwillingness to comply with the California Education Code. The school has refused to refund money collected in violation of a prohibition on student fees. They have changed their governance structure without approval of the LAUSD Board. In cases of policies that threaten punishment for students who have been opted out of testing and ignoring written directions of a parent, they have proven that they have no interest in respecting the rights of parents. It is clear that the District needs to take a deep look into the operations of this school. With a CSD that is unable or unwilling to perform this function (perhaps because they are led by a former employee of the California Charter School Association), the Board needs to appoint an outside organization, like FCMAT, that can conduct a thorough and independent audit.