Hawaii’s largest charter school has been directed to come up with a plan to be financially self-sufficient in its dealings with a mainland corporation as the next step in its recovery from a turbulent year that saw its principal fired and its money management faulted by auditors.
At issue is Hawaii Technology Academy’s relationship with K12 Classroom LLC, which provides services including the school’s online curriculum. In return for retaining that role, K12 has agreed to forgive payments owed when the academy has a shortfall — which amounted to $1.3 million in fiscal year 2011. Until January, K12 also employed the academy’s top administrator.
HTA opened in 2008 in Waipahu offering a largely online education and soon became the fastest-growing charter school in the state. By last fall it had 1,085 students in kindergarten through 12th grade.
That number dwindled to 843 over the school year. But enrollment is expected to climb to 1,161 students this fall, after major changes were made to its operations as recommended by auditors.
"We took a lot of heat, and we were highly criticized," said Louis Saint-Cyr, chairman of HTA’s governing board, looking back on December, when allegations surfaced of improper spending at the school. "But I’m very proud of the way we responded. It was done rapidly and it was done responsibly."
Unlike most Hawaii public schools, which are overseen by the Board of Education, charter schools are managed by their own boards, made up of volunteers, who hire the principal and oversee the campus. But Hawaii Technology Academy’s "head of school" was hired by the company that supplies its online curriculum. That arrangement came under fire from state Auditor Marion Higa in her report on the charter system released in December.
"HTA’s head of school, who controls millions of dollars in public moneys, is ultimately accountable to his employer, K12 Classroom LLC, not to the state or even his school," the report concluded, adding that the arrangement posed "serious management and ethical concerns."
Jeff Piontek, the head of school, had also publicly opposed the contract provision in an interview with the Star-Advertiser six months earlier, saying he should be a state employee like other public school principals. In December he was fired by K12 for undisclosed reasons.
"I was an at-will employee and was terminated from my contract without cause," he told the Star-Advertiser on Friday.
In January, when charter schools submitted their independent financial audits to the Charter School Review Panel, HTA’s was the only one that was "disclaimed," meaning the auditor was unable to form an opinion because of inadequate school records and internal accounting controls. The audit remarked that "abuse, waste or fraud" was likely.
The school had passed its previous annual audits. Saint-Cyr said the board took action as soon as it got wind of problems in December, and worked with the attorney general’s office, K12 and others to get the school’s financial house in order.
Saint-Cyr highlighted several changes:
» Any expenditure of more than $2,500 requires two signatures on the check.
» The board canceled the school’s credit card.
» School finances are now audited quarterly, rather than just annually as required.
» The board adopted the Hawaii State Ethics Code.
» Its executive director, in the position formerly called head of school, is employed by the local school board, not K12.
» The schools program manager is still a K12 employee, but she makes no financial or hiring decisions, Saint-Cyr said.
Hawaii Technology Academy has no need for expensive overhead such as a cafeteria, a gymnasium or even a large campus because its students work mostly from home. They spend time in the learning center, on the second floor of a commercial building in Waipahu, roughly twice a week. Their parents or guardians serve as "learning coaches" at home to supplement the teachers employed by the school.
The school receives most of its money from the state, roughly $5,900 per pupil per year, or more than $6 million for the school year that just ended. Its contracts with K12, a Virginia-based corporation, provide that 15 percent of that money goes to K12 for management and 7 percent for technology, on top of the money it pays for the online curriculum.
Under the contracts, the school may not run a deficit, and K12 agrees to make up the difference between what HTA owes and what it can pay K12 by issuing credits to the school, as long as K12 remains its exclusive curriculum provider. In the 2011 fiscal year, K12 agreed to forgive $1.3 million owed by HTA. Another $973,000 in charges due to K12 Inc. as of March will similarly be forgiven, according to a recent report from the Charter School Administrative Office.
Given those shortfalls, members of the Charter School Review Panel raised concerns last month about the school’s financial viability and the fact that the school is not building a contingency fund of its own. The K12 contract expires in June 2014, and panel members want the school to prepare.
"The real question is, What is the business plan going forward?" panel member Gary Kai asked in a meeting last month. "We should ask them to come up with a plan as to how to make this school viable. It’s really important that they start working on the plan."
The panel set a February 2013 deadline for the school to submit a plan on how it would end these shortfalls. "In order to run a charter school, you should have the money to run a charter school," panel member Ku Kahakalau said.
HTA’s leadership expresses confidence that the school will be able to stand on its own whether it renegotiates or ends its contract with K12. Leigh Fitzgerald, hired as executive director after Piontek’s departure as head of school, said that she and the business manager trimmed more than $1 million from the budget in the current fiscal year. "As we look at becoming self-sufficient, we will need to look at alternative revenue sources and grants," she said.
On the academic front, 81 percent of HTA students tested proficient in reading, well above the statewide average of 67 percent in 2011. Just 55 percent were proficient in math, the same as the state average. All of its teachers are fully licensed, according to state records, and more than 90 percent are expected to return next year.
"In terms of morale, I think there’s a resurgence of faith in the school and a very positive energy as we look forward to the future," said Fitzgerald, who used to work at Maui Preparatory Academy. "I do believe this school can be a model school for blended learning in the state of Hawaii … to further opportunities for students and not be bound by a bell schedule and four-walled classrooms."
