A third-party review of financials at The Village Charter School says “incompetent” financial management practices have put the Boise area charter “at great risk of closure,” according to documents obtained by Idaho Education News.
A report completed by Michigan-based MAST Financial Group said vendors were not paid on time, budgets were inflated, financials inaccurately presented to the board and that employees were concerned their wages and taxes may not have been properly reported to the Internal Revenue Service.
“The school is at risk financially, academically and operationally,” said the report, given to The Village board members last week.
Board chairman Ben Greenwood did not respond to questions from Idaho Education News. But in a letter to the school’s bondholder, Greenwood wrote that if the school is not financially stable by 2020, the bondholder can find The Village to be in default of the loan.
“We recognize that TVCS has significant financial challenges,” Greenwood wrote. “But we are also confident that … we will be able to overcome these challenges and move toward a strong and stable financial footing in the near future.”
The MAST report blames management and business oversight provided by Veritas Charter School Services Llc for many of the school’s financial troubles. Veritas contracted with The Village two years ago to manage finances and school operations.
The MAST report found:
- Consistent miscoding of expenditures.
- Inaccurate financial reports presented, repeatedly, to the board of directors.
- Incompetence with regard to following proper accounting practices.
- Federal and Medicaid revenue included in the general fund, inflating revenues.
- Multiple, unplanned short-term loans.
- Vendors were not paid on time.
- Employees worry wages and taxes have not been properly reported to the IRS.
- Use of multiple pay scales, so employee pay was not equitable.
Veritas “resigned” from the school during a March board meeting. However, Veritas is still operating at the school at a cost of $1,000 a week while the parties work out a separation agreement. It’s unclear what the separation will cost the school. Board documents say the relationship is expected to end by April 19.
The original contract between Veritas and The Village lasts through 2020 and calls for Veritas to be paid 9 percent of the school’s annual income, a rate that Idaho Public Charter School Commission director Tamara Baysinger called significantly higher than the industry standard.
The school’s expensive relationship with Veritas was one of many “daunting” financial commitments Baysinger pointed out in a letter to the school’s board last year. She also raised the question of whether the school might have to close and encouraged the board to develop a plan if they thought closure was on the horizon.
Board members insist they are not ready to close the school. They met with the charter commission on Friday to explain their plans for financial stability.
Documents that The Village board of directors gave to the charter commission on Friday outline how the school plans to move toward more stable financial ground.
The board plans to replace Veritas with a new business manager and contract with outside companies for payroll help and CFO services.
The school has also renegotiated parts of its bond agreement with a company called Tortoise Credit Strategies Llc.
The Village contracted with Tortoise for bonds to purchase their school facility off of Fairview Avenue in Boise. The school’s bond payments, totaling $4.9 million, are due by December 2021.
Documents show that in late March, Tortoise worked out an agreement to give The Village some leeway on the original bond requirements. That new agreement also contains a deadline: If The Village isn’t stable enough to have a “letter of financial concern” rescinded by the Idaho Public Charter School Commission by the end of the 2019-2020 school year, Tortoise can find the school in default of the loan.
Greenwood did not respond to calls or emailed questions from EdNews over the weekend seeking to clarify what it would mean for The Village if Tortoise declares the school in default.
The charter commission, which is responsible for oversight of most of Idaho’s public charters, is scheduled to be briefed on The Village’s financial situation during a scheduled meeting Thursday.
Data analyst Randy Schrader contributed to this report.