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Success Academy’s First State Audit: Let the Pouting Begin

December 19, 2016

On December 19, 2016, New York Deputy Comptroller Marjorie Landa released this financial audit of Eva Moskowitz’s Success Academy charter schools.

In March 2014, Moskowitz sued to prevent then-Comptroller Thomas DiNapoli from auditing her schools, and a Manhattan judge ruled in her favor. The judge declared that the Comptroller did not have authority to audit New York charter schools because the schools are not “units of the state.” This meant that Moskowitz could receive state funds and public accounting for such funds was now out of view of the public.

In April 2014, the law changed; New York State charter schools would no longer escape audit, and in October 2014, Success Academy charter schools made the list of those to be audited.

No surprise.

The audit has taken two years and spans July 01, 2012, to June 30, 2015– or fiscal years 2013 to 2015.

In a letter that summarizes Landa’s findings regarding fiscal management of Success Academy schools, Comptroller Scott Stringer tells the public that Success Academy “did not adequately oversee its fiscal affairs,” including “bill[ing] the Department of Education (DOE) for special education services that were not documented.”

The full audit document is 81 pages long and includes a 27-page response from Success Academy. (The inclusion of a written response from the audited party addressing the auditor’s findings is usual procedure.)

I was especially interested in the Success Academy response, primarily because Eva Moskowitz is so controlling that I did not expect her to be sloppy with finances.

Here is where I write what might surprise many of my readers:

After reading the Success Academy response to the irregularities cited in the audit, I believe that Success Academy has accounted well for such seeming discrepancies.

Success Academy believes it has been unfairly treated and that the comptroller was not being “objective.” An excerpt from Success Academy’s response:

It has become increasingly clear that the Comptroller is not conducting this investigation in an impartial and objective matter. The Comptroller’s standard operating procedure is to share a Preliminary Draft Report with the entity being audited and then conduct an Exit Conference at which the entity may propose corrections and provide additional documentation. In every single case over the last six months in which the Comptroller has issued an audit report indicating the date of the Preliminary Draft Report and Exit Conference, the Comptroller has allowed the entity being audited at least 10 business days to prepare for the Exit Conference after issuing its Preliminary Draft Report. In the case of the sole charter school with such information to be audited during this period, the exit conference did not take place until 21 business days after the Preliminary Draft Report….

However, with respect to Success Academy, the Comptroller issued a 31-page Preliminary Draft Report on the afternoon of November 23, the day before Thanksgiving, and then insisted that the Exit Conference be held on one of the next two business days, Monday, November 28th or Tuesday, November 29th. Success requested that it be given 10 business days to prepare for the Exit Conference, the same amount of time that the Comptroller has afforded to all other entities. This request was particularly reasonable given the enormous scope of the audit that took the Comptroller over two years to complete. Nonetheless, this request was denied. The Comptroller was only willing to give Success Academy until the morning of Wednesday, November 30, which meant that Success Academy would have had only two business days – Monday and Tuesday – to review a report that took the Comptroller two years to prepare and obtain relevant documentation. Incredibly, however, the Comptroller claimed that this afforded Success Academy ample time to prepare because the Exit Conference would be a “full week” after the issuance of the Preliminary Draft Report, although this “full week” included the Thanksgiving holidays. When Success Academy stated that it was unable to comply with this timeframe, the Comptroller denied Success Academy an opportunity to have an Exit Conference.

The Comptroller provided no rational basis whatsoever for denying Success adequate time to prepare for the Exit Conference. Having taken over two years to complete its audit, giving Success Academy a few more days to prepare for the Exit Conference would not have materially affected the overall timing of the report. One can only conclude, therefore, that the Comptroller’s real interest was not the timing of the report but rather a desire to limit Success Academy’s ability to correct the many errors in its report. This audit by ambush clearly indicates bias.

I agree that the comptroller expected an unusually brief period between release of its preliminary draft and its requirement for the associated exit conference and that such could be characterized as an “ambush.” However, what is missing from the Success Academy argument is any acknowledgement of its own role in creating a hostile relationship with the comptroller’s office.

Not one word.

Here’s the point: If Success Academy could account for public money all along, then it should have done so peaceably. Instead, Moskowitz chose to sue.  Thus, Success Academy instigated a hostile relationship with the comptroller over the auditing of the public funding that Success Academy (and other New York charter schools) receives.

Now, in December 2016, Success Academy sees itself as only on the receiving end of some unfairness, March 2014, comptroller-slap-in-the-face litigation forgotten.

Frankly, it is refreshing to see Success Academy have to publicly account (in detail) for use of public finances.

Perhaps the next audit will go more smoothly for Moskowitz and her public-money-receiving Success Academy charter schools.

A public apology for suing to prevent the comptroller from doing the work of auditing entities that receive public money might help.

eva-moskowitz-3  Eva Moskowitz

_____________________________________________________________

Released July 2016– Book Three:

School Choice: The End of Public Education? 

school choice cover  (Click image to enlarge)

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

One Comment
  1. Laura H. Chapman permalink

    Duplicate comment. same on Diane Ravitch’sblog.

    A couple of points.
    On December 16, 2016, Success Academy objected to the conduct of the audit, disagreed with most of the findings, and did not respond to any of the audit recommendations.

    The reply to the auditor did include the following blast of verbal swagger, superfluous except for the intent to tell the auditor: “You are not smart enough to get us.” Begin quote from addendum, (p. 2-3)

    Success Academy’s board members and supporters are among the most sophisticated and highly respected business men and women in the world. They are founders, partners, principals, and CEOs of some of New York’s most successful, well-respected firms and non- profits. Collectively, they have earned 10 undergraduate and graduate degrees in finance and 14 MBA degrees from Harvard, University of Chicago, Stanford, MIT’s Sloan School of Management, and the Wharton School of the University of Pennsylvania, among others. Among them are lawyers and a former law professor, assistant U.S. attorney, management consultant, as well as film producers and media executives. Eight board members are currently CEOs, seven have founded non-profits, and 11 have founded companies. Collectively, they manage more than $103 billion in assets. In addition to their commitment to Success Academy and providing the children of New York with high-quality education, our board members have also served as trustees for such institutions as Princeton, Stanford, and Tufts universities; Mt. Sinai Hospital, Carnegie Hall, United States Olympic Committee, the Museum of Contemporary Art in Los Angeles, Students First New York, and Democrats for Education Reform.

    Success Academy’s auditor, BDO, is the fifth-largest accounting firm in the world and serves as auditor to scores of Fortune 500 companies. In addition, Success Academy’s authorizer, the Charter Schools Institute of the State University of New York (“SUNY”), is nationally recognized for its rigorous oversight and evaluation process. Both BDO and SUNY have consistently given Success Academy a clean bill of health with respect to its financial practices. End quote.

    For information about the members of the board of Success Academy and the Success Academy Network go to http://www.successacademies.org/about/

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