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SALT LAKE CITY — More than $415,000 of funds within the State Charter School Board's budget will be set aside to cover state and federal special education funding owed to the state by the now-closed American International School of Utah under a proposal approved Thursday by the Utah State Board of Education.
Work is underway to find other funds to address the obligation, such as the sale proceeds of the school's buses, vans and other assets.
Funds from State Charter School Board's budget would not be accessed until Aug. 31, if it is deemed necessary. By then, it is hoped that other funding will be identified to address the repayment of $170,438 of federal special education funding and about $245,251 in state special education funding, said Deputy Superintendent of Operations Scott Jones.
Dipping into the budget of the State Charter School Board, the school's authorizer and overseer, is one means for the board to demonstrate its "resolve to ensure the taxpayers are held harmless as far as this process," Jones said.
AISU's board of directors voted in May to close the school after growing concerns about its financial viability. Prior to the closure vote, state officials had demanded repayment of the state and federal education funds for the 2016, 2017 and 2018 fiscal years.
According to state education officials, repayment was sought because the funds were improperly spent or there is insufficient or no documentation to support expenditures.
The school also struggled financially after it received and paid a $250,000 property tax bill.
The school's administrators have said most of the school's financial and record-keeping problems occurred before their tenure.
The federal government insists on repayment of federal education funds. According to one court decision, closure does not absolve a school from repayment.
Board member Carol Lear said she philosophically agreed with the approach but worries the result could conceivably result in cuts to the charter board staff, leaving it "less able to monitor schools and prevent this moving forward."
Jones said the State Charter School Board has $400,000 in a school closure fund that may be used to address AISU's obligations as well.
Jones said there is time to consider other options before dipping into the State Charter School Board budget.
Task force created
Earlier in the day, the board voted to create a task force to study public charter schools' accounting practices and operations.
After the recent closures of some charter schools, the State School Board's audit and monitoring results and input from the Office of the State Auditor, the board's Audit Committee recommended that the board establish a task force to take a deep dive into issues such as accounting practices and use of restricted funds.
Board member Scott Hansen amended the motion to include implementation of government accounting standards by public charter schools, or GASB for short.
The board's Internal Audit director Debbie Davis said for the vast majority of Utah public charter schools, "maybe 90-95% are using the financial standard, which are called FASB (Financial Accounting Standards Board)."
"Governmental entities should be using GASB. The difference between those two is largely about accountability. There is a much higher standard for accountability when you're talking about governments and their fiduciary responsibilities to taxpayers and stakeholders," she said.
Board member Janet Cannon said the recent closure of a charter school brought to light questions over accounting practices, she said without naming the school.
"This would be a way to help alleviate anything like that happening," Cannon said.
Some board members wondered aloud why the task force wasn't looking into financial accountability at all schools, not just charter schools.
Board chairman Mark Huntsman said uniform accounting practices would be a "preventative measure so we don't have these challenges."
Recent events indicate "we need to clean it up. We have some problems," Huntsman said.
Davis also pointed to a draft alert issued by the State Auditor's Office on school use of restricted funds. These include funds for special education, Title I programs and child nutrition. These funds must be used for their designated purpose.
"These risks indicate a potential lack of accountability to stakeholders of public education," board documents state.
State Auditor John Dougall served briefly as executive director of American International School of Utah after the public charter school in Murray closed in June. He resigned after three days, but his office is reviewing the school's operations.
Royce Van Tassell, executive director of the Utah Association of Public Charter Schools, said charter school officials knew this conversation was forthcoming, "certainly in light of the closures of AISU. It's hardly surprising that some questions were going to arise. As a community, we're happy to participate in that and trying to work through those things."
As for the accounting practices, "it does seem premature to assume the GASB/FASB question in so far as the auditor's alert remains a draft. They haven't finalized anything. To assume that's the standard is going to be premature," Van Tassell said.
