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entitled 'Charter Schools: Oversight Practices in the District of 
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Report to Congressional Committees:

United States Government Accountability Office:

GAO:

May 2005:

Charter Schools:

Oversight Practices in the District of Columbia:

GAO-05-490:

United States Government Accountability Office:

Washington, DC 20548:

May 19, 2005:

The Honorable Sam Brownback: 
Chairman: 
The Honorable Mary L. Landrieu: 
Ranking Minority Member: 
Subcommittee on the District of Columbia: 
Committee on Appropriations: 
United States Senate:

The Honorable Joe Knollenberg: 
Chairman: 
The Honorable John W. Olver: 
Ranking Minority Member: 
Subcommittee on Transportation, Treasury, and Housing and Urban 
Development, The Judiciary, District of Columbia, and Independent 
Agencies: 
Committee on Appropriations: 
House of Representatives:

In the 2004-2005 school year, District of Columbia (D.C.) charter 
schools enrolled more than 15,000 students, or approximately 21 percent 
of D.C.'s public school population--one of the highest proportions in 
the nation. Charter schools are public schools that are exempt from 
certain regulations in exchange for accountability in improving student 
achievement. Charter school authorizers--the entities that approve and 
oversee charter schools--are responsible for ensuring that charter 
schools achieve expected student outcomes and comply with applicable 
laws. In D.C., two entities, the D.C. Board of Education (BOE) and the 
D.C. Public Charter School Board (PCSB), were established by the School 
Reform Act as charter school authorizers. The law requires the 
authorizers to monitor charter schools, but little information is 
available about the performance of the BOE and PCSB in providing such 
oversight.

As required by the 2005 D.C. Appropriations Act, we examined the 
performance of D.C. charter school authorizers in their approval and 
oversight roles. In fall 2005, we will publish the full results of our 
research. However, as required by law, we provided your staff with an 
interim report on our work. For this interim report, we addressed the 
following questions:

1. What are the responsibilities specified for the D.C. charter school 
authorizers in the School Reform Act?

2. How are the D.C. authorizers carrying out these responsibilities?

To determine the responsibilities of D.C. charter school authorizers, 
we reviewed the School Reform Act as well as other applicable federal 
and District laws. To determine how the authorizers are carrying out 
these responsibilities, we reviewed charter school application 
guidelines, monitoring reports, evaluation criteria, school 
accountability plans, and authorizers' renewal and revocation policies 
and procedures. We also interviewed officials from the BOE and PCSB, 
other D.C. agencies such as the Office of the Chief Financial Officer 
and the Office of the Inspector General, and the U.S. Department of 
Education. We conducted our work between January and April 2005 in 
accordance with generally accepted government auditing standards.

This report formally conveys the information provided to your staff 
during a briefing held on April 25, 2005. In summary, we found:

* The School Reform Act outlines the responsibilities of the D.C. 
charter school authorizers. The law requires that the authorizers 
review charter school applications and approve qualified applicants. 
Additionally, the law requires the BOE and PCSB to monitor charter 
schools and determine if charters should be renewed or revoked. The 
authorizers are also required by the School Reform Act to create and 
distribute annual reports on their activities.

* Although the authorizers carry out their responsibilities in 
different manners, both the BOE and PCSB have developed processes to 
meet their legal responsibilities. Each authorizer has established 
timelines, guidance, and procedures for reviewing and approving charter 
school applications. Additionally, both authorizers conduct annual and 
5-year monitoring reviews to ensure that charter schools are complying 
with applicable laws, achieving student academic goals, and using sound 
financial practices. The BOE has revoked charters of schools that fail 
to meet required standards, and the PCSB is in the process of revoking 
a school's charter. Finally, each year both authorizers have created 
annual reports that include the information required by the School 
Reform Act.

We provided a draft of this briefing to officials at the BOE and the 
PCSB for their technical review and incorporated their comments where 
appropriate.

We are sending copies of this briefing to the BOE, the PCSB, the D.C. 
Board of Education, the D.C. Public Charter School Board, the Secretary 
of Education, appropriate congressional committees, and other 
interested parties. In addition, the briefing will be available at no 
charge on GAO's web site at http://www.gao.gov.

If you or your staff have any questions, please contact me or Deborah 
Edwards at (202) 512-7215. Tamara Fucile, Christopher Morehouse, and 
Sheila McCoy also made key contributions.

Signed by: 

Marnie Shaul: 
Director, Education, Workforce, and Income Security Issues:

DC Charter School Authorizers: 

Briefing for Staff of the Senate and House Committees on 
Appropriations: 

April 25, 2005: 

Introduction: 

Charter schools are public schools that are exempt from certain state 
and local regulations in exchange for accountability for improving 
student achievement. 

The DC School Reform Act established two independent entities with 
authority to approve and oversee charter schools in the District of 
Columbia. Called authorizers, these entities are: 

* the DC Board of Education (BOE) and,

* the Public Charter School Board (PCSB). 

The BOE began chartering schools in DC in 1996. PCSB chartered its 
first schools in 1997. At the beginning of the 2004-2005 school year, 
16 schools were operating under the BOE and 26 under PCSB. 

Congressional Mandate: 

The 2005 DC Appropriations Act required GAO to review the 
responsibilities and performance of the DC charter school authorizers. 

GAO's review consists of 2 phases: 

* Phase 1 (in this briefing): GAO will describe what the School Reform 
Act requires of DC authorizers and how they are carrying out their 
responsibilities. 

* Phase 2 (fall 2005): GAO will conduct a more comprehensive 
examination of the authorizers' processes and performance. 

Research Questions: 

1. What are the responsibilities specified for the DC charter school 
authorizers in the School Reform Act?

2. How are the DC authorizers carrying out these responsibilities?

Scope and Methodology: 

To determine the authorizers' responsibilities, we reviewed federal and 
District laws. 

To determine how the authorizers are carrying out their 
responsibilities, we reviewed: 

* application guidelines,
* monitoring reports,
* evaluation criteria,
* school accountability plans, and: 
* renewal and revocation policies and procedures. 

We also interviewed officials of: 

* the BOE and PCSB,
* U.S. Department of Education, and: 
* DC agencies, including: 

* Chief Financial Officer (CFO) and: 
* Office of Inspector General. 

We conducted our work from January to April 2005 in accordance with 
generally accepted government auditing standards: 

Results in Brief: 

Requirements of the School Reform Act: DC Authorizers must: 

* review and approve charter school applications,

* monitor charter schools,

* determine if charters should be renewed or revoked, and: 

* provide annual reports on their activities. 

Authorizer Practice: The BOE and PCSB have developed similar processes 
to carry out their legal responsibilities, but the two entities vary in 
how they implement these processes. 

Background: 

Parents, educators, nonprofit organizations, or other groups may apply 
to start a charter school. Charter schools are governed by a board of 
trustees. 

The academic goals of the school are included in its charter, which is 
the agreement reached with the authorizer on what the school intends to 
accomplish and how it will operate. 

Charter schools are subject to certain federal laws, including the 
Individuals with Disabilities Education Improvement Act (IDEA) and the 
No Child Left Behind Act (NCLBA). 

Charters in DC are granted for 15-year terms, which can be renewed an 
unlimited number of times. To date, no schools have reached the end of 
their first term. 

Local funds are allocated to charter schools in DC using the same per- 
pupil allocation formula for operating expenses used for all other 
public schools. During the 2004-2005 school year, this amount ranged 
from $6,904 to $8,077 for a regular education student depending on 
grade level. 

For fiscal year 2005, DC's appropriation included $13 million 
specifically designated for charter schools. Additionally, DC charter 
schools, like all public schools, are eligible for other federal funds, 
such as funding for IDEA and NCLBA. 

In School Year 2004-05, DC charter schools enrolled about 21 percent of 
the District's public school students, one of the highest proportions 
of public students in charter schools in the country. 

DC charter schools 2004-2005: 

[See PDF for image]

[End of table]

Various DC offices have responsibilities related to DC charter schools: 

[See PDF for image]

[End of figure]

Legal Responsibilities: Reviewing and Approving Charter Applications: 

Applicants seeking to form charter schools may file a charter 
application with either authorizer. 

Applicants must provide a detailed academic and business plan, 
including elements such as: 

* the school's academic focus,

* plans for community and parental involvement,

* a 2-year operating budget, and,

* articles of incorporation and bylaws. 

Authorizers must hold public hearings on applications received. 

After reviewing applications, an authorizer must approve any 
application if it determines that: 

* the application meets the legal requirements;

* the applicant agrees to any condition or requirement set forth by the 
authorizer; and: 

* the applicant has the ability to meet the educational objectives 
outlined in the application. 

If an authorizer does not approve an application, it must provide 
written notice to the applicant explaining why the application was not 
approved. 

Legal Responsibilities: Monitoring Charter Schools: 

Authorizers must monitor schools' operations and progress in meeting 
student academic achievement goals as set forth in the charter. 

Authorizers must ensure compliance with applicable laws and charter 
provisions and annual reporting requirements, including the submission 
of audited financial statements. 

Legal Responsibilities: Renewing and Revoking Charters: 

At the end of a charter's 15-year term, authorizers may renew a 
school's charter. 

Authorizers shall not approve renewals if the school: 

* committed a material violation of applicable laws or provisions of 
its charter or,

* failed to meet student academic achievement goals set forth in the 
charter. 

At least once every 5 years, authorizers must conduct a thorough review 
of each charter school to determine whether the school should be 
permitted to continue or have its charter revoked. 

Authorizers may revoke charters for failure to meet academic goals only 
as a consequence of the 5-year review; authorizers can revoke charters 
for other reasons, such as financial mismanagement and legal 
noncompliance, at any time. 

An authorizer may revoke a charter if it determines that the school: 

* violated applicable laws or provisions of its charter or: 

* failed to meet the academic goals set forth in the charter. 

An authorizer must revoke a charter if it determines that the school: 

* does not use generally accepted accounting principles,

* has engaged in a pattern of fiscal mismanagement, or: 

* is no longer economically viable. 

Legal Responsibilities: Issuing Annual Reports: 

Each authorizer is required to prepare an annual report that includes: 

* a list of its board members and board meeting dates for the previous 
year;

* the number of charter petitions received, approved, and denied, and 
reasons for denials;

* a description of new charters issued, charters renewed, refused 
renewal, and revoked; and: 

* any recommendations for improving the administration of charter 
schools. 

Each authorizer must submit its annual report to: 

* DC Mayor,

* DC Council,

* DC Board of Education,

* US Secretary of Education,

* House and Senate Committees on Appropriations,

* House Committee on Education and the Workforce,

* Senate Committee on Health, Education, Labor, & Pensions,

* House Committee on Government Reform, and: 

* Senate Committee on Homeland Security & Governmental Affairs. 

Authorizer Practice: Application Process: 

Consistent with the law, each authorizer: 

* requires that applications include elements mandated by law,

* holds public hearings on proposed schools, and: 

* provides written notification to applicants whose applications have 
been denied. 

[See PDF for image]

[End of figure]

Both authorizers require applicants to provide additional information, 
such as: 

* a student recruitment and marketing plan,

* a staffing plan,

* expected use of volunteers, and: 

* services sought from DC Public Schools. 

Both authorizers require applicants to submit their applications in two 
phases. BOE and PCSB officials stated this two-phase process enables 
them to identify potential problems earlier in the application process. 

Each authorizer has developed its own method for generating numerical 
scores to select successful applications and for assigning certain 
weights to the selection criteria. 

BOE is not accepting applications in the 2004-2005 school year, in 
order to re-examine its application process. BOE officials stated they 
expect to resume accepting applications in the 2005-2006 school year. 

PCSB has accepted applications each year since 1997. 

Authorizer Practice: Overview of Monitoring Reviews: 

[See PDF for image]

[End of figure]

Authorizer Practice: Monitoring: 

The BOE and PCSB have outside experts conduct reviews, including site 
visits, to assess schools' compliance. 

Both authorizers have developed processes for reviewing schools' 
finances, governance, legal and charter compliance, and academic 
performance. 

* BOE includes these components in one annual report. 

* PCSB conducts separate reviews to assess legal and charter compliance 
and academic performance. 

Authorizer Practice: Monitoring of School Governance: 

Authorizers verify background checks of school staff are conducted. 

During annual reviews, both authorizers: 

* review minutes of school board meetings and: 

* interview school board members. 

Authorizer Practice: Monitoring of School Finances: 

Both authorizers require charter schools to submit: 

* periodic financial statements,

* annual audits, and: 

* revised budgets in case of enrollment shortfalls. 

Both authorizers review contracts as required by law. 

PCSB conducts additional financial oversight. 

* During a school's first year, PCSB hires an outside CPA to assess the 
school's accounting practices and internal controls. 

* PCSB compares schools' expenditures with projected revenues. 

Both authorizers have provided extra scrutiny to schools facing 
financial problems. 

* BOE has referred cases to the DC CFO and DC Auditor. 

* PCSB has conducted its own interim financial reviews to assess 
problems and provide direction. 

Authorizer Practice: Monitoring of Legal Compliance: 

Both authorizers conduct annual monitoring reviews to ensure compliance 
with DC health and safety laws. 

The State Education Office conducts an annual enrollment audit each 
fall, as it does for all DC public schools. 

PCSB reviews compliance with provisions of the No Child Left Behind Act 
during annual monitoring reviews; BOE relies on DCPS to review 
compliance in this area for its schools. 

Both authorizers rely on outside consultants to review schools' 
compliance with IDEA. 

Authorizer Practice: Monitoring of Academics: 

Both authorizers require schools to submit accountability plans that 
outline 5-year academic goals. 

Accountability plans become part of the charter and are used as guides 
for the academic component of annual monitoring visits. 

Annual monitoring reviews assess progress toward academic goals; the 5- 
year review provides a comprehensive look at the accomplishment of 
academic goals set forth in the charter. 

Authorizer Practice: Monitoring and Sanctions: 

Both authorizers have used sanctions in an effort to achieve compliance 
from schools. 

* The BOE maintains a delinquent list that outlines reporting deadlines 
missed by individual charter schools. 

* The PCSB follows a Table of Remedies, which prescribes appropriate 
disciplinary actions depending upon the seriousness of the problems 
identified. 

[See PDF for image]

[End of figure]

Authorizer Practice: Renewal and Revocation: 

Every 5 years authorizers must conduct comprehensive reviews to 
determine if charters should be allowed to continue. 

Five-year reviews cover the same areas as the annual monitoring review, 
but are more comprehensive. Five-year reviews also include 
documentation from previous annual reviews to help identify trends. 

The result of this 5-year review can be charter revocation or continued 
operation of the school. 

[See PDF for image]

[End of figure]

Neither authorizer has developed standardized procedures to follow when 
a school closes. 

* BOE has closed schools on a case-by-case basis. BOE officials stated 
that legislative clarification on closure procedures would be helpful, 
such as what to do with student records and how to dispose of assets. 

* PCSB officials stated they are developing procedures for what to do 
when a school closes. 

[See PDF for image]

[End of figure]

Authorizer Practice: Annual Reporting: 

BOE and PCSB annual reports include all information required by the DC 
School Reform Act as well as other information not required by law. 

* BOE's annual reports include information about the academic 
performance of each of its charter schools. 

* PCSB's annual reports include information about the board's 
operations and official actions. 

BOE officials stated that they submitted their annual reports to the 
required DC offices and the US Department of Education, but not to 
Congress. BOE officials stated this omission was an oversight. 

PCSB officials indicated that they submitted their annual reports to 
all of the required recipients. 

Next Steps: 

In the second phase of this review, GAO will more closely examine the 
charter school authorizers' performance in their approval and oversight 
of DC charter schools. 

In addition, GAO will examine the resources devoted to DC public 
charter schools. 

The second phase of this review will be published in fall 2005. 

[End of slide presentation] 

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