State charter officials will discuss Monday whether to stop paying for the deeply indebted StudentFirst Academy or let the board keep trying to save the Charlotte charter school that foundered after opening in August.
State officials have been investigating reports of academic, management and financial problems since November. But they learned about more serious financial irregularities last month when the Observer reported on documents filed in response to a lawsuit by fired administrators Phyllis Handford and Sandra Moss.
“Several of these allegations are serious and could be violations of the Charter Agreement and, quite possibly, violations of law,” Joel Medley, director of the N.C. Office of Charter Schools, wrote in a February letter summoning StudentFirst board Chairman Victor Mack to appear before the state’s Charter School Advisory Board.
Mack’s response indicates the school is trying to pay off almost $400,000 in overdue bills and will end the school year in the red, even after slashing payroll and taking out $225,000 in loans. But he and other board members, who say they were misled by founders Handford and Moss, say they’re working to turn things around.
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“We believe that the best hope of serving SFA’s vendors, and advancing the original vision of SFA for the benefit of our students, is to remain open, with close board supervision of every expenditure and constant scrutiny of the personnel and operating budgets,” Mack wrote.
StudentFirst, located in the old Wilson Middle School in west Charlotte, was among 23 charter schools in North Carolina authorized to open in August. The state approved a first-year budget of almost $3 million in state, local and federal money to run a K-8 school for 432 students. StudentFirst currently has fewer than 300, and the board recently dropped its plan to add a ninth grade next year. The board has hired a new head and deputy head of the school.
The N.C. Board of Education, which gave the StudentFirst board a 10-year charter, holds authority over the school’s future. The advisory board, made up mostly of charter school administrators and board members, works with state staff to monitor quality and makes recommendations to the Board of Education.
StudentFirst Academy began in 2001 as a small private school run by Handford and Moss.
It won testimonials from such Charlotte community leaders as then-Mayor Pat McCrory (now governor), then-Mayor Pro Tem Patrick Cannon (now mayor) and neighborhood activist Thelma Byers-Bailey (now a member of the Charlotte-Mecklenburg school board).
Mack, outreach director for UNC Charlotte’s College of Education, met Handford through work at the university. He agreed to head a board of businesspeople and educators seeking to turn StudentFirst into a publicly funded charter school that would serve more students.
Mack and the rest of the board now blame Handford and Moss for getting the school into financial trouble. The two were fired from their administrative posts and removed from the board in December.
Handford and Moss sued the board for wrongful dismissal. Among other things, they cited illegal secret board meetings held at a hotel and a board member’s home to fire them. A hearing on that suit is scheduled for Tuesday.
In documents filed in court and with the state charter school office, Mack, vice chair Jennifer Winstel and consultants hired by the StudentFirst board say Handford overstaffed the school, put family members on the payroll, failed to pay bills and document expenses, arranged big raises for herself and Moss, and let the school fall into academic disarray.
“Once operations were underway, we met monthly and received glowing reports from the school’s leaders – reports that we would later discover were mischaracterizations at best and outright fabrications at worst,” Mack wrote in his Feb. 19 response to Medley.
Handford has said allegations by the board are false but says the attorney representing her and Moss has advised both women not to talk.
Dealing with debt
One of Medley’s questions was whether any government money is unaccounted for.
In response to the lawsuit, the StudentFirst board filed a consultant’s report that said Handford and Moss had spent more than $92,000 without proper documentation and opened a separate checking account.
Mack said in his February letter that much of the early spending came from a loan and a private grant. While proper paperwork is lacking, he said, charges to the debit card indicate “many of these expenses appear legitimate.”
“It appears to be more a case of sloppy record keeping than dishonesty,” he wrote.
The report to state officials details 23 overdue accounts, where StudentFirst fell behind on payments for technology, security, food, financial services and other items. Many creditors, including the N.C. Employment Security Commission, have agreed to gradual payback plans, but some “are insisting upon prompt payment,” Mack wrote.
Mack and Winstel have said in interviews that StudentFirst has sacrificed many of the academic extras that were promised, such as cultural arts opportunities and a specialized literacy program, to cover basic expenses. Payroll has been reduced by more than $100,000 a month, the February letter states.
The school’s debts are ultimately the responsibility of StudentFirst board members, Medley said. If the school were to close, “assets would be liquidated to cover the debts,” he said. “If debt remained, creditors could pursue legal action against the board.”
Mack argues that everyone will benefit from letting the StudentFirst board solve the problems. He cites Carolina International School, a Harrisburg charter about 22 miles east of uptown Charlotte, as a school that recovered from deep financial problems.
Carolina International opened in 2004. Four years later, its finance officer was convicted of embezzling $195,000. The school had also fallen behind on taxes; all told, the charter school ended up owing more than $600,000 in legal fees, back taxes and interest.
The school is back in the black, but it has been difficult, Board Chair Scott Elliott said last week: “It took years to get the budget to a level where it could sustain itself.”
Elliott said Carolina International tapped a base of parents who were dedicated to keeping the school open; they raised $80,000 immediately to cover payroll. “We cut the staff to the absolute bone,” he said.
Elliott’s advice is to figure out whether StudentFirst can cover its expenses with the public money that’s coming in. “If they can’t operate with just that revenue,” he said, “they’re going to have a difficult time.”