Audit: Charter school falsified student records and misused funds
- Bridges Academy falsified student enrollment records to obtain $404,971 in state funding to which it was not entitled.
- misused $78,576 of charter school funding to support a preschool.
- underreported $489,534 after failing to file 1099 tax forms in 2019 and 2020.
Surry County charter school falsified student records and misused funds according to a State Auditor report.
An investigative report by State Auditor Beth Wood’s office has revealed that a now-defunct charter school in Surry County falsified student enrollment records to obtain state funding, misused school funds, and failed to prepare and submit 1099 tax forms.
The report on Bridges Academy in State Road, N.C. was conducted after the auditor’s office received six tips through its hotline concerning the school.
Bridges Educational Foundation, Inc. was founded in 1996 and began operating as a charter school, Bridges Academy, the following year for kindergarten to 8th grade. In 2020, the foundation also opened a preschool for children ages two through five years old. The school employed approximately 21 personnel and reported an average of 166 students. The school closed its doors in June, relinquishing its license to operate as a charter school in the state.
Wood’s office said they needed substantial resources to investigate the allegations because of the lack of student enrollment records maintained by the school. When they were requested, the report said the school’s operations director stated, “Some of them have been burned because we can’t keep everything.”
There was also a lack of personnel to assist with inquiries because the school closed during the initial stages of the investigation, and the bank foreclosed on the school buildings, which required the available student enrollment records and financial documentation to be secured and relocated to the NC Department of Public Instruction.
There were three key findings in the report.
First, the report said that Bridges Academy falsified student enrollment records to obtain $404,971 in state funding to which it was not entitled. The director and finance officer of colluded to submit inflated student enrollment records to DPI and concealed falsified students from Bridges Academy teachers and support staff. The Principal Monthly Report that Bridges Academy submitted to DPI in September 2020 included 180 students, 72 of which were falsified, inflating Bridges Academy’s reported enrollment by approximately 40%. DPI uses the Report to determine the amount of state funding a charter school receives.
The director and finance officer confirmed enrollment numbers were falsified for the 2020-2021 school year and indicated the process of inflating student enrollment began approximately eight years ago.
The testing coordinator explained that she was responsible for overseeing and administering North Carolina End-of-Grade testing and stated that any students in third grade and above would automatically be included on the testing rosters. She told auditors that, “the (falsified) students were kept in grades K(kindergarten) through two (second grade) so they would not show up for testing.”
According to the finance officer, in late 2020, a newly hired principal requested access to PowerSchool, the official student information system of North Carolina. The director and finance officer denied the request, even though the principal continuously expressed concerns to the director and finance officer.
The director and finance officer purchased a second student information system, Jupiter Ed, which did not contain the falsified student enrollment records and was used as the main student information system at Bridges Academy for recording attendance and grades, and other daily tasks. The use of both systems allowed the director and finance officer to conceal the falsified students and produce class rosters (from Jupiter Ed) that were not questioned by the school’s staff.
Wood’s office recommends that DPI should seek repayment of $404,971 from Bridges Academy or the Receiver, DPI should consider reviewing the enrollment history of Bridges Academy and determine if the school received funding for falsified students in previous years, and DPI should review and assess its current procedures and determine if improvements can be made to safeguard state funding by preventing and/or detecting when charter schools falsify student enrollment records.
The second finding shows that Bridges Academy misused $78,576 of charter school funding to support a preschool. The misuse of charter school funds occurred due to the failure to segregate the business activities of the preschool from the charter school and the adoption of a budget where the preschool’s expenses exceeded the revenues by $80,000.
DPI manuals state that charter school funding is based on the number of students attending the school and pre-kindergarten students are not included in these funding calculations because charter school funding is not permitted to be used for a preschool.
In 2020, the Foundation constructed an additional building, the Early Learning Center, at a cost of $2.6 million. The classrooms in the Early Learning Center were used by both the preschool and Bridges Academy for its kindergarten, first, and second-grade classes.
The school’s operations director and finance officer used charter school funding to support the operations of the preschool despite charging tuition fees and receiving government funding from the NC Department of Health and Human Services for the care of preschool-age children.
The auditor’s office recommends DPI should seek repayment of $78,576 from Bridges Academy, or the Receiver.
The audit found that school also failed to prepare and submit the required 1099 tax forms in 2019 and 2020 resulting in underreported compensation of $489,534. The failure to provide and submit accurate tax information appeared to be an effort by the school to assist the contractors in avoiding tax and retirement benefit implications while also securing staffing resources for the school.
The auditor’s office recommended that the school or the Receiver, should seek the assistance of a Certified Public Accountant to prepare and file the required 1099 tax forms for contractors (director, instructional, and support staff).
Both Attorney John Paul H. Cournoyer, Northern Blue, LLP, the court-appointed receiver for Bridges Academy, and DPI accept the findings and recommendations of the report. DPI said it plans to update the student enrollment process for the 2022-23 school year that will detect and attempt to prevent schools from falsifying student enrollment records.