Halau Lokahi Public Charter School will cease to exist at the end of this month unless its governing board and director agree to resign and turn over all financial records, the Charter School Commission decided Wednesday.

The Hawaiian-focused charter school, which opened in 2001, ran up a $417,000 debt and stopped paying its rent in February and its teachers on June 5. It had 169 students enrolled as of last week and a staff of 23, including director Laara Allbrett and five members of her immediate family.

"We are going to do a forensic audit of all the financial records of the school," Commission Chairwoman Catherine Payne said after the meeting. "We are asking the governing board to resign effective upon the appointment of a new governing board, which we will appoint in consultation with the school community."

The commission is willing to offer the Kalihi school a new contract contingent on new leadership at the campus and implementation of a financial plan submitted by Halau Lokahi that projects enrollment of 225 students and repayment of debts in the coming school year. Those were among several conditions in an addendum to the proposed contract for the 2014-15 school year.

"If the new charter contract with the governing board addendum is not fully executed by June 30, 2014, Halau Lokahi Charter School will legally cease to be a public charter school," concluded the motion approved by the commission.

All commission members in attendance voted in favor of the motion, including Payne, Vice Chairman Peter Tomozawa, Mitch D’Olier, Peter Hanohano, Kalehua Krug, Karen Street and Roger Takabayashi.

The school’s current contract expires June 30. The decision to offer a contract with conditions allowed commissioners to avoid voting to close the school.

Instead, Halau Lokahi’s governing board was left with the decision to take it or leave it. The commission relaxed public notice requirements to allow the school board to meet promptly and determine what to do.

"If they say no, that means they are rejecting the contract and choosing not to open the school," Payne said after the meeting.

More than two dozen staff, parents and students from Halau Lokahi attended the meeting, but their numbers dwindled as the commissioners spent hours in executive session. After the decision was made, Allbrett and the chairwoman of Halau Lokahi’s governing board, June Nagasawa, left without comment.

A PARADE of parents, teachers and staff pleaded with the commission last week to keep the school open, saying it had rescued many Hawaiian children from academic failure and given them a home where they could believe in themselves and learn through project-based learning infused with Hawaiian culture.

The school is one of the state’s oldest charters and has had financial problems before, including a $425,000 debt at the end of the 2010 fiscal year.

The commission learned of the school’s latest financial straits a few weeks ago and rescinded its offer of a new contract until problems were sorted out.

Enrollment at the school dropped by 50 students to just 183 at the start of the past school year after the campus ended a relationship with a contractor that provided online courses. Some students chose to stay with the contractor rather than Halau Lokahi, although the charter school still offers online education.

The enrollment drop cut the school’s income by 20 percent. It had relied on $6,000 per pupil from the state, $1,500 per student from Kamehameha Schools and about $400 per Hawaiian student from the Office of Hawaiian Affairs.

The Hawaii State Teachers Association, which represents the 17 teachers at the school, filed a grievance after the school docked teachers’ pay in late May and issued no paychecks June 5. Teacher salaries are prorated throughout the year and the payments are for work they already have performed.

HSTA President Wil Okabe attended the commission’s meeting last week and Wednesday.

"I’m here because the commission needs to look at oversight," he said. "This definitely is a black eye to all charter schools."

He noted that with 17 teachers and an enrollment of 183 students at the start of last year, each Halau Lokahi teacher would be responsible for an average of just 10 students.

"In a regular public school you wouldn’t have this type of ratio," he said. "Even the private schools don’t have that. They would go broke."

On Wednesday, Allbrett and the school’s accounting consultant presented financial plans that relied on an increase in enrollment to generate more funds and a possible bailout from OHA to help cover the outstanding debt.

The staff size at Halau Lokahi has been relatively steady in recent years despite a substantial drop in enrollment last year. The school had 22 people on staff in 2011, when there were 244 students enrolled. This year it had 23 staff members, including six in administration.

Parents and students praise Halau Lokahi for its feeling of ohana, and indeed, it has long been a family affair. Allbrett founded the school in 2001 with the help of her children, and they continue to be heavily involved.

Although the subject didn’t come up in the public portion of the meeting, the Honolulu Star-Advertiser has determined that family members make up a quarter of the school’s staff.

Allbrett’s daughter is the business manager/registrar and another daughter is the operations specialist. Allbrett’s son teaches middle school while a son-in-law teaches high school social studies and Hawaiian studies. Her son’s partner, with whom he has children, is the school’s accounting clerk.

Previously, Allbrett has told the newspaper that "the staff have actually said, we look at your family as the glue that has held the school together when times are tough."

Staff members have also said that family involvement reflects a traditional Hawaiian approach to education.