NEWS RELEASES 2014-15 :: JANUARY 28, 2015

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An audit of Kinston Charter Academy confirmed the NC Department of Public Instruction’s (NCDPI) concerns about the school’s financial dealings and highlighted the need to give the department more authority to take action with charter schools before they become embroiled in financial difficulties.

The findings and recommendations were included in an audit concerning the Kinston Charter Academy, today released by State Auditor Beth Wood. The audit was conducted at the Department’s request. It confirmed significant financial and operational irregularities including mismanagement of state funds, inflated student enrollment, hiring unqualified members of the school principal’s family and a lack of qualifications and oversight by the school’s board of directors.

Key findings of the audit include findings that the school:

  • Hired unqualified relatives of the CEO/Principal (his wife and daughter) at a cost of $92,500 during the school’s final year of operation.
  • Made questionable payments of more than $11,000 to the CEO and his wife when the school owed more than $370,000 in payroll obligations – such as salaries and retirement contributions - to its teachers and staff.
  • Failed to provide adequate oversight due to an inexperienced and limited board, particularly during a time of declining student attendance, unrealized private donations and high operating costs.
  • Borrowed funds for working capital at interest rates of 515.29 percent and 247.74 percent.

State Board of Education Chairman Bill Cobey said it is important to strengthen the authority of the Board to take corrective and disciplinary actions earlier with charter schools facing obvious financial irregularities.

“We plan to seek legislation this year to strengthen our authority in situations where a charter school is on probation for financial difficulties,” Cobey said. “This would allow us to quickly cease expenditures if necessary. We also intend to seek legal counsel immediately regarding civil action related to the mismanagement of the 2013-14 initial allotment of state funds.”

State Superintendent June Atkinson said that the NCDPI staff worked with Kinston Charter Academy for five years in good faith, giving it repeated opportunities to address its financial concerns and move forward.

“The Office of Charter Schools and School Business Division staff recognized that the school faced financial difficulties, helped develop corrective action plans and limit disruptions to the school’s more than 300 students,” Atkinson said.

“It became clear the school couldn’t continue to operate and it was during the financial close-out procedures, that we noticed the potential for more serious financial and operational irregularities and asked Auditor Wood’s investigative unit to step in.”

Atkinson noted that while the Kinston Charter situation was extreme, it underscored the need for the Department and the Board to have stronger tools to assist and deal with troubled charters.

In particular, Atkinson said there is a critical need for strong, independent boards at charter schools to avoid conflicts of interest and financial mismanagement.

Recommendations included in the Auditor’s report include:

  • Requiring charter schools to include at least one board member with training and/or experience in school administration, one board member with a business background and one senior administrator with a school administration background.
  • Prohibiting familial relationships at charter schools between board members and senior administrators.
  • Pursuing legal action to recover any misspent funds, including more than $11,000 of vacation payouts to the CEO and his wife.
  • Establishing guidelines, by the State Board of Education, regarding the frequency and significance of financial performance compliance issues that are allowed before a school’s charter is revoked or not renewed.
  • Reviewing a school’s projected financial solvency closely when approving the initial charter or renewing charters.
  • Seeking legislative changes to revise the annual funding model for charter schools to require documentation from schools to support projected attendance increases, particularly for schools with financial performance or compliance issues.

North Carolina has 148 public charter schools currently open for students with 11 more slated to open in the fall of 2015. Public charter schools operate at no cost to students and their families and receive state and local funds and, in some cases, federal funds. Charters are operated under the direction of local nonprofit boards outside of the locally elected school boards that govern traditional public schools.

The State Board of Education grants charters annually through an application process. Charter schools operate outside of some of the rules and regulations governing traditional public schools and were initiated to improve student learning, increase learning opportunities, encourage innovative teaching and provide students and parents with expanded educational choices, among other purposes outlined in the charter law.

The full audit is at

About the North Carolina Department of Public Instruction:
The North Carolina Department of Public Instruction provides leadership to 115 local public school districts and 160 charter schools serving over 1.5 million students in kindergarten through high school graduation. The agency is responsible for all aspects of the state's public school system and works under the direction of the North Carolina State Board of Education.

For more information:
NCDPI Communication and Information Division, 919.807.3450.