Recent Wisconsin legislation allowing virtual charter schools to continue operating included the requirement that the Legislative Audit Bureau (LAB) “perform a financial and performance evaluation audit of virtual charter schools.” (2007 Wisconsin Act 222). The 116-page LAB report, “An Evaluation: Virtual Charter Schools” (Report 10-3), was published in February 2010. The purpose of the LAB as stated in the report is “to provide assurance to the Legislature that financial transactions and management decisions are made effectively, efficiently, and in compliance with state law and that state agencies carry out the policies of the Legislature and the Governor.” For reasons discussed below, the LAB’s report does not provide this assurance. (The full text of the report is available at http://www.legis.state.wi.us/lab/reports/10-3highlights.htm.)

Because virtual charter schools are public schools but are sometimes confused with homeschools, it is important to maintain the distinction between them and homeschools. Therefore, WPA has been tracking issues surrounding these schools. WPA was invited to provide information concerning this audit. A WPA representative met with two of the principal auditors and provided a substantive memorandum on July 24, 2008. (For the full text, go to http://issues.homeschooling-wpa.org/2008/07/information-wpa-provided-the-wisconsin-state-legislative-audit-bureau.html#more or go to the WPA Web site and click on Issues and Legislation and then on Virtual Charter Schools.)

Here are some of the most serious reasons why the report does not provide the required assurance to the Legislature.

• The LAB doesn’t understand the basic logic required to answer a key question the audit was required to address. The question is: How do virtual charter schools affect the budgets of both the sending districts in which virtual charter school students reside and the districts that operate virtual charter schools (and thus increase their enrollment through open enrollment)?

An example of this lack of understanding appears in the discussion of Revenues and Expenditures on pp. 5-6. The report states, “. . . most sending [public school] districts experience negative financial effects when resident pupils attend virtual charter schools in other districts, because the loss of enrollment is not sufficient to reduce their fixed costs to operate traditional schools.” This claim is not supported by factual information. It takes into account only students who were enrolled in one of the district’s public schools the preceding year. As WPA pointed out in its memo of July 24, 2008, sending districts on average gain $6,000 (and often never see the student) for each resident student who was not enrolled in a public school in the district during the preceding year but who then enrolled in the district’s public schools in order to attend a virtual charter school outside the district through open enrollment.

In order to determine what effects virtual charter schools have on school districts’ budgets, one needs to know how many virtual charter school students were enrolled in a public school during the preceding year and how many were enrolling in the district for the first time because they had been attending private schools, including homeschools. (Another small group consists of children who were too young to attend school the previous year.) Virtual charter schools, particularly Connections Academy in Appleton and Wisconsin Virtual Learning in Northern Ozaukee, two of the oldest and largest virtual charter schools, have consistently reported that the majority of their virtual charter school students were former homeschoolers. In addition, the results of a survey of students and parents done by the LAB (which is of questionable accuracy; see below) indicate that over half of virtual charter school students were enrolling in public schools for the first time. Specifically, the LAB’s survey shows that only 40.2% of students had been enrolled in another public school prior to enrolling in a virtual charter school. This would indicate that 60% of virtual school students were actually increasing rather than decreasing the budgets of the school districts in which they reside. (Approximately 11% of these students were below school age the previous year.) The reality of this increase in the budgets of sending districts is completely missing from the report, which raises questions about the quality of the thinking and investigation that went into the report.

• Information on the costs of virtual charter schools is flawed. The LAB developed statistical tables with few qualifications to show the costs of operating virtual charter schools. This gives the impression that these numbers are accurate. However, the report itself admits that the figures may not be reliable. For example, it states, “DPI reports expenditures for each school district, but it does not collect expenditure information for individual schools. We requested school-level information from virtual charter school administrators, but complete information was unavailable because districts do not typically track all expenditures at the school level or maintain cost accounting data needed to determine all administrative and operational expenditures of the schools that incur them.” (page 31) It also states, “The available data they [virtual charter school administrators] provided were sometimes incomplete or based on estimates because of limitations in district accounting systems.” (page 28) The report then admits that, “Despite these limitations, we compiled all available data on those virtual charter school expenditures that could be identified.” (page 31)

Thus, the LAB relied on incomplete data from the very people they were supposed to be auditing and then, with a few qualifications, reported these data as if they were an appropriate basis for evaluating the operations of virtual charter schools and deciding whether the Legislature needs to take further action regarding them.

• The per pupil expenditures for virtual charter schools appear to be highly inflated compared with a reasonable estimate of the work involved. Especially questionable are figures showing that most of the larger virtual charter schools claim that their per pupil costs are just under the magic number of dollars they receive for each pupil. If they don’t claim to have needed those dollars, they are very likely to lose them. The report does not provide a reasonable estimate of what costs should be. If good data for determining reasonable costs do not exist, the report should state this clearly. At least then Wisconsin taxpayers would know that this remains an unanswered question, making it unclear whether or not tax dollars are being well spent.

• Data from the LAB’s survey of students and parents are used to answer key questions, but evidence to support the survey’s reliability is not presented. The report does not indicate the basis on which teachers, students, and parents were selected to participate in the survey, how many responded to individual questions, and other information that is essential to determine how accurate and reliable the survey results are. In fact, the sample selection is questionable because the LAB was unable to independently contact students, parents, and teachers for the survey and was forced to rely on lists supplied by the virtual charter schools. This gave school administrators an opportunity to choose a sample that would promote their self-interests and desire to look good. For example, it is unclear whether students who had left the school and their parents were included in the survey. Readers of the report do not have a way of determining how accurate and reliable the survey and the information based on responses to the survey are.

Conclusion

Although the LAB’s report is long and includes tables and appendices presenting concrete and precise statistical information, these tables and the report’s conclusions have not been shown to be reliable and accurate because the LAB did not rigorously support its findings. Nevertheless, the Wisconsin Legislature may decide to continue to fund virtual charter schools without accurate and reliable answers to important questions. If so, it should be made clear that the Legislature is using questionable information. The LAB report should not be cited as an accurate and reliable basis for making public policy decisions.