Report: $225M in K-12 fraud found across six years

OJ Oleka, CEO of the SFOF, said the fraud schemes happened due to a lack of oversight in education departments and the ability of bad actors to take advantage of certain programs.

“These entities are engaged deliberately in trying to take money out of the hands and literally the mouths of kids,” Oleka told The Center Square. “It’s a pretty disgusting thing.”

The report found Indiana schools documented the largest fraud scheme over the last six years. Leadership at two virtual online charter schools in the state inflated their enrollment numbers and received an additional $44 million from the state than they should have. Leaders at the school directed the fraudulent fund to several companies, according to the Office of the Inspector General.

Rhyen Staley, a former educator and director of Research at Defending Education, said fraud schemes in K-12 schools erode public trust between teachers and staff.

“You start to become suspicious of good people on the inside unfairly,” Staley said. “It does create a lot of animosity toward teachers.”

In Boone County, West Virginia, a former maintenance director pleaded guilty to defrauding the school district of $3.4 million. He falsified documents requesting janitorial supplies in order to buy vehicles and make home improvements.

“It's a problem because it erodes the trust in education systems that erode the trust in schools,” Oleka said.

The report also found Florida, Illinois, Puerto Rico and Texas had numerous cases of fraud over phe last six years. Florida and Illinois both accounted for 11 cases of fraud totaling $24.7 million and $14.5 million, respectively.

Chicago Public Schools lost $1 million in Indian Education formula grants that were intended for Native American and Alaska Native ancestry students. An investigation found that grant funds went to students of Indian, Burmese Bangladeshi, Pakistani and Nepali descent instead.

Staley said programs associated with diversity, equity and inclusion are ripe for fraud. He said they do not have specific disbursement requirements to avoid succumbing to fraudulent schemes.

“When you start throwing around that much money, you're going to lose it to fraud,” Staley said. “It's just inevitable.”

Kimberly Yee, Arizona’s state treasurer, said grants related to DEI often lack teeth that prevent them from being defrauded. She said the programs are often nebulous and lack a specific enforcement mechanism.

“They should have had some sort of provision in place for the grant,” Yee told The Center Square. “If they don't use the funds for the required purpose, they will have the money pulled.”

The report also found that Puerto Rico lost $24 million to a tutoring services company that fraudulently obtained funds. Four individuals charged the Puerto Rico Department of Education for services that were ultimately never provided, according to the OIG.

Yee said smaller schools are often hit the hardest by fraud schemes. She said unassuming actors take advantage of relationships in the system and cause greater individual loss to students.

“When you talk about a small district, each individual student is going to be hit the hardest,” Yee said. “We do have to take a look at giving those smaller school districts and schools.”

A fraud scheme at the Community Preparatory Academy in California took $3 million over the course of five years. This amounted to ⅓ of the school’s overall state and federal funds, or $9,090 per student.

Yee, who is running for school superintendent in Arizona, said the U.S. Department of Education’s planned shift to state enforcement will be an enormous change for fraud in schools. She said states with more discretion over fraud enforcement will lower costs to taxpayers.

“Fiscal responsibility should rest with the states,” Yee said. “Many of these types of issues really require better transparency and accountability and you don't have that when you're in this giant building in Washington, D.C.”

“The states can see what's happening with their taxpayer dollars and ensure that that accountability and that fiscal management is there in their own individual states,” Yee added.