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Runaway Credit Cards; One Person Over the Money: Open Doors to Charter School Fraud

July 3, 2016

According to its “about” description on its blog, Procurify is “a cloud based procurement management solution. Our purchasing software is used by leading enterprises around the world to manage their procurement spending more effectively and efficiently.”

In other words, Procurify sells a cloud-based means for organizations to manage their purchases.

Several charter schools are part of the Procurify customer base.

On August 05, 2015, the Procurify blog carried a post entitled, “6 Reasons Why Charter Schools Fail.” The author is Jeannette Montroy, who is described on the Procurify site as “a content marketing professional with a wide ranging background including investment banking, natural health product distribution and tech start-ups.”

(Montroy has only written 3 posts for Procurify: 2 in July 2015, and the charter post, in August 2015.)

In her post, Montroy opens with a statement about the value of charter schools to American education (why tell potential customers anything other than their business is valuable?) and even that “in some jurisdictions, charter schools have been shown to out perform public schools – all while operating on smaller budgets.” (Word choice “some” is a safe bet, but Montroy offers no links to support her assertion.)

She continues:

And yet, many charter schools fail – leaving students in a precarious situation, and igniting politics that cause some to question the entire charter school system.

We have moved from “some” to “many.”

Montroy states that sure, scandals take down charter schools (Montroy offers two links: one from NPR in 2011, and another from Philly.com in 2012), but “many”— “many”— go bust for a more “mundane” reason: “Poorly controlled spending.”

Montroy then offers her 6 reasons that charter schools fail. What is interesting is that the 6 reasons illustrate a mammoth gateway for that rampant charter school fraud. (“Rampant” is my word, with a link to a major study released in the months prior to Montroy’s post, April 2015, and featured in the Washington Post.)

What I find interesting in Montroy’s 6 reasons is that they present a business insider’s perceptions of the problems with how charter schools are managed, presumably based on the “several” charter schools linked to as Procurify customers (Intrinsic Schools, Peak to Peak Charter School, Legacy Traditional School, and AltSchool).

What is even more interesting is that Montroy openly acknowledges the fraud gateway in 4 out of 6 of her reasons.

Here they are, with some abbreviation:

6 Reasons Why Charter Schools Fail

1. Rampant Credit Card Spending

We’ve come across many schools that hand out credit cards like candy directly to their teachers. Crazy? Yes.

The Fantasy: School administrators say that they trust their teachers to make smart decisions with the best interests of the school in mind. …

Sure, schools might say that they monitor expenditures, but it’s doubtful that they are going through credit card statements line item by line item…. A more likely reality is that the statements and receipts are unloaded on a poor bookkeeper who only brings issues up to administrators if they see red flags.

Best case scenario is that teachers are not procurement experts who end up wasting money needlessly. Worst case scenario is credit card statements are a great way to hide illegitimate, personal purchases that may otherwise look allowable on the cc statement.

2. Invoice Only Systems. No PO No Pay!

Some schools don’t have any purchase or expensing approval process in place, period. As in, anyone can purchase or expense anything, at anytime, without getting approval from management or school administration. …

Without a Purchase Order, there’s no way to know if the invoice is actually even legit. …

3. Expensing EVERYTHING.

With no approval system in place, staff can very quickly get the notion that it’s ok to purchase anything. New books? No problem. New computer? Go ahead! Free lunch for the entire class? Party! …

Aside from the fact that this can very quickly drain working capital from operating budgets, it also promotes rogue spending. Rogue spending is spending money on unapproved products from unapproved vendors.

[Schneider’s note: Rogue spending is an open door for fraud.]

4. Unplanned Buying & Lack of Vendor Control

Spending on the fly gives power to teachers that can seem beneficial… at first. It allows them to make last minute purchases on their way to school in the morning or their way home after work, or to go with their personally preferred brand of pens and pencils, or to support their sister-in-law’s computer store… wait, is that allowed? And what happens if the sister-in-law offers the teacher a kick back as a thank you for the valuable charter school business?

Unplanned and uncoordinated buying from a wide range of vendors prevents the school from taking advantage of bulk/volume discounts, wholesale prices, or group buying power. It also means that teachers may be duplicating what they purchase across several individual classrooms, instead of making coordinated orders that suit everyone’s needs. And that kick-back from the sister-in-law? It may seem innocent but is a slippery slope to additional unnecessary purchases to increase the kickback, and brings the school’s spending few steps closer to full on fraud.

5. Several Spending Data Sources

Without POs, approval systems, heck, even basic paperwork [getting a grip on your organization’s spending] may be a difficult task. …

Without the power of spend visibility that can be provided by having all of your purchasing data in one place, it’s hard to get a grip on where your money is going. Are you ordering too much paper? Is one department hoarding resources that other departments might need? How will you know where you can trim the fat if you can’t see everything on the plate?

[Schneider’s note: Lack of organized spending and absence of spending visibility also beg fraudulent spending.]

6. One Person Handles All

Is one person handling all your ordering, paying for, and receiving of items? Do they have complete control over expense reports, bill payments, and purchase approvals? Sounds efficient right? Give one person the responsibility so that no one else has to deal with it? Sure – if you want to open yourself up to fraud.

With no checks in place, giving one person the power to control all spending can lead to fraud. Finding ways to hide theft of company funds through making personal purchases that look legitimate, paying invoices for items that were never ordered or received, and splitting a large purchases amongst multiple smaller expenses are all ways to cover up fraudulent spending while keeping up appearances. …

Regarding the numerous stories of charter fraud regularly featured in national news: A neat game to play would be to see how many of the above 6 “charter failure” reasons fueled each fraud. Two that are increasingly familiar to me are unbridled use of credit cards and a single individual being in charge of finances.

credit cards 3

__________________________________________________________

Coming July 08, 2016, from TC Press (revised release date):

School Choice: The End of Public Education? 

school choice cover  (Click image to enlarge)

Stay tuned.

 

***

Schneider is a southern Louisiana native, career teacher, trained researcher, and author of the ed reform whistle blower, A Chronicle of Echoes: Who’s Who In the Implosion of American Public Education.

She also has a second book, Common Core Dilemma: Who Owns Our Schools?.

both books

Don’t care to buy from Amazon? Purchase my books from Powell’s City of Books instead.

From → Charters

13 Comments
  1. Laura H. Chapman permalink

    Excellent insights from marketing pitches. I have tripped on a couple of variants with bragging about complete cloud services for data storage, analyses, targeted marketing and so forth. Another source of insider pitch information comed from postings for jobs, duties, and qualifications..not generally known to the public. I tripped on two today for Bridge International (links on Diane’s blog). Others for charter school can be found at Bellwether, and executive search websites. Maybe this will be your next BOOK.

  2. Abigail Shure permalink

    I never cease to be amazed. Public school teachers would be more familiar with unreimbursed out of pocket expenditures for classroom supplies and teaching materials.

  3. Correct me if I’m wrong, but I think Procurify just blamed the credit card fraud on non-union, underpaid and overworked charter school teachers, but doesn’t mention that all the court cases have linked the credit card fraud to specifically top administrators.

    When something goes wrong, blame the teachers as usual. It seems to always work.

  4. teachingeconomist permalink

    Procurify claims that its software :… is used by universities, colleges and all types of educational institutions across the globe from charter schools to private schools and public schools.”

    I am glad that public schools are using this software because there has been a long string of procurement scandals in public school districts (most recently in Detroit and Chicago). Of course when there is a procurement scandal in a public school district the district does not fail, taxpayers just pay for the fraud and the district continues on.

    • The public pays for fraud that happens in the public schools and in the corporate charters, because both are publicly funded. The public also pays for the white collar crimes that take place against the Defense Department from private sector corporations that bribe public officials. The public also pays more than %6 billion annually for all the Walmart workers that are paid poverty wages that to eat must apply for food stamps that Walmart teaches them how to apply for.

      The big difference is that the community based, democratic, transparent, non-profit public schools are transparent (one of the key differences) and it is harder to get away with the fraud and because of this the amounts taken is almost always much less. In the public schools a few crooks steal hundreds of thousands of dollars knowing the risk of getting caught and prosecuted is high. In the corporate charter schools many crooks steel millions and know the risk of going to prison even if caught is low.

      The autocratic, often fraudulent and inferior, child abusing, cherry picking students and facts for profit even if they are labeled non profit, corporate charters fight tooth and nail to be opaque so they can hide what they are doing.

      For instance, there was a district accountant in the district where I taught who was stealing money from ASB accounts in the districts high schools, and that money didn’t come from taxpayers. It was raised by student clubs through the ASB so the students could fund their own extra curricular activities.

      Because of the transparency and open books, that accountant was eventually caught siphoning off pennies from all the ASB club accounts in the district and gambling it away in the nearest native North American reservation casino. Once caught, she lost her job, went to jail and was taken to court and sued by the district for the money she stole. She lost her house, her car, her retirement, everything. And all she took was about $60k spread out over twenty years – a little here and a little there.

      But what happens to many of the corporate charter school fraudsters that steal millions. I’ve read that they often settle out of court for a sum that is a lot less than what they stole, or pay nothing because the file bankruptcy and they seldom go to prison. They they move to another city or state to start all over again still protected by laws that allow them to operate in the dark.

      • teachingeconomist permalink

        Lloyd,

        I think you underestimate the scale of fraud in public school districts. A quick search finds these examples:

        “The unfolding drama in New York state’s 3,300-student Roslyn Union Free School District, located about 20 miles from Manhattan, heated up last week, when former Superintendent Frank A. Tassone was charged with grand larceny on July 6 for allegedly stealing more than $1 million from the system between 2000 and 2002…”

        “Cars, vacation cottages, golf carts and jet skis were just some of the kickbacks that a group from Wake County public schools and an auto parts company were enjoying in 2004.

        The multi-million dollar scheme put seven people in jail, some of whom are now free, but not free of the close to $700,000 in debt they owe.

        “It was an unfortunate chapter in the school system’s history and a very painful one,” said Wake schools’ chief business officer David Neter.

        The school system estimates at least $4 million to $5 million was diverted from the Wake school system in an automotive parts scheme involving then-employees of the school system’s transportation department and a Wilson-based automotive parts company, Barnes Motors & Parts.”

        ” With the additional $1.3 million reported Monday, the district’s loss now may total as much as $3 million. Sherry Carr, the Seattle School Board member who chairs the district’s audit and finance committee, said the $1.3 million alone is equivalent to the cost of the teaching staff for a small elementary school for an entire year.”

        “The Sentinel-News from Shelby County reports that Shelby County schools Director of Finance Greg Murphy has stepped down from his position in the latest development following the discovery of the embezzlement of nearly $600,000 from the school district’s substitute teacher funds.”

        Hundreds of thousands was the correct thing to type.

      • There you go again — ignoring the hundreds of millions of dollars lost to fraud to the autocratic, opaque, allegedly child abusive corporate charters, profit or non profit, and bring your devious agenda back to focus on those evil, community based, democratic, transparent, non profit public schools while ignoring all the other points I made about fraud. For instance, all the engineered legal fraud that brought us the global financial crises in 2007-08 that cost 9 million Americans their jobs, cost the CalSTRS teacher retirement fund $50 billion and trillions lost across the country.

        Most of the fraud in the public sector is linked to a private sector that is behind the fraud.

        And what do you do, dig up ONE small public school system in upstate New York with 3,300 students and allege that this is an example of alleged widespread fraud taking place in the other 15,000 public school districts.

        The public school district I worked in had 19,000 students and almost 3,000 were at the one high school where I taught.

        I’m going to bring the focus of fraud back to where the real risk exists:

        The Tip of the Iceberg
        Charter School Vulnerabilities To Waste, Fraud, And Abuse

        Escalating Fraud Warrants Immediate Federal and State Action to Protect Public Dollars and Prevent Financial Mismanagement

        http://populardemocracy.org/sites/default/files/Charter-Schools-National-Report_rev2.pdf

      • teachingeconomist permalink

        Lloyd,

        Surely we can agree that there are millions lost due to fraud in the public school system. My post was to simply support your initial claim that hundreds of thousands were stolen by crooks in the public schools. That number seems right to me.

        Remember that Dr. Ravitch supports the notion that 5% of spending by ANY organization is lost to waste, fraud, and abuse. That means that public school spending looses $32 billion a year, a much higher figure than is lost by charter schools simply because the public school sector is so much larger.

      • Fraud can be found in every profession from doctors to plumbers. But I think the loss to fraud in the traditional public education system pales in comparison to what’s being taken by the crooks in the corporate education system because of two reasons.

        1. The traditional public schools must be transparent with how they spend the public’s money and how they treat and teach the children.

        2. The corporate education sector has bribed their way to be opaque and are allowed to hide what they do with the public’s money and even what they do with the students they take.

        The Education Opportunity Network reports “Federal Funds For Charter Schools Go Into a ‘Black Hole’

        America’s experiment with charter schools has thus far generated academic results that are mixed, at best. Another promise, that these schools would be more educationally “innovative,” is also generally unfulfilled so far.

        “Adding to those uncertainties posed by charter schools is another: Very little is known about how these schools have spent over $3.7 billion the federal government has used to fuel expansion of the charter industry since 1995.”

        http://educationopportunitynetwork.org/new-report-federal-funds-for-charter-schools-go-into-a-black-hole/

        $3.7 billion goes to the growing autocratic corporate charter school industry, and more than $200 million of that has been linked to fraud and in time that number will climb. You can bet on it.

        The traditional public schools get more than $600 billion annually yet you only shared one example of fraud from a small district in upstate New York that represented less than $4 million.

        This is what happens when you write a crook a blank check and let him know he won’t go to jail if caught stealing public money he was trusted with, but you can bet anyone in the traditional public schools that gets caught with their hand in the public till will end up in jail and not be allowed to work in the public education system again.

        What happens to crooks in the corporate education sector when they get caught? Most if not all of them might pay a fine and then move to another city or state and start all over again.

      • teachingeconomist permalink

        Lloyd,

        I should add that those descriptions were for a public school district in New York where over a million dollars was taken, the Wake County schools where 4-5 million dollars were taken is in North Carolina, the Seattle school district where 3 million dollars were taken is, of course, in the state of Washington, and Shelby County, which only lost $600,000, is in Kentucky.

        Would you like me to find more? California is fertile ground. A Rialto Unified School District accountant was convicted last year of embezzling 1.8 million dollars from the school district (though she is suspected of taking about 3 million dollars). She often simply stuffed wads of cash into her bra. (link: http://abc11.com/news/california-school-accountant-sentenced-for-embezzling-$18-million-in-lunch-money/468656/ )

        If only these public school district used Procurify to process purchases, these scandals might have been avoided.

  5. I meant to say hundreds or thousands of dollars not hundreds of thousands.

Trackbacks & Pingbacks

  1. Mercedes Schneider: Charters and Credit Card Fraud, Like a Horse and Carriage | Diane Ravitch's blog
  2. Ed News, Tuesday, July 12, 2016 Edition | tigersteach

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