Florida private schools face potential sanctions over financial reports

Travis Pillow

The state’s new annual accountability report shows dozens of Florida private schools could face sanctions ahead for failing to turn in proper reports on their finances.

Those sanctions reflect both the growing number of students at private schools participating in state K-12 scholarship programs and a 2017 law that gives the state education commissioner more authority to act on faulty financial reports.

State law requires private schools that receive more than $250,000 each year in Florida Tax Credit Scholarships for economically disadvantaged students or Gardiner Scholarships for students with special needs to submit reports, written by certified public accountants, on their finances to the nonprofit organizations that administer the scholarships. Step Up For Students, which publishes this blog, is the largest such organization and currently reviews all the financial reports. The scholarship organizations, in turn, must report to the state any schools that don’t submit a report or submit one that contains a material finding.  

A state accountability report issued last month shows 31 schools had not submitted their financial reports by the Sept. 15 deadline in state law. Another 280 schools had incomplete reports.

In the months since the deadline, the number of schools that have filed incomplete reports has fallen to 72, according to updated figures from Step Up For Students. There are still 18 schools that have not submitted reports. And five schools that submitted incomplete reports, or no report at all, had material issues in previous years. Those schools could soon face heightened scrutiny.

The new law targets schools that don’t file their reports as required, or where certified public accountants find “material exceptions” in multiple years. A material exception is a flaw in a school’s accounting practices that could open the door to fraud. For example, there should be multiple eyes on a school’s financial records, not just a single bookkeeper’s.

The growth of scholarship programs means more schools have to submit the financial reports. In 2012, 258 private schools received more than $250,000 in scholarship funds. Five years later, that number has jumped to 689.

The latest accountability report covers the period from Nov. 1, 2016 to Oct. 31, 2017 and tracks the scholarship school oversight activities by the state Department of Education (DOE). Over that period, DOE officials cracked down on dozens of private schools that they suspected were not meeting financial, health, safety and regulatory requirements in the state’s private K-12 scholarship programs. In many cases, schools fixed problems after the department alerted them. That means they can continue serving students who receive Florida Tax Credit, Gardiner or McKay Scholarships.

The report also reflects the growth in DOE workload as Florida expands educational choice. Three scholarship programs now serve more than 140,000 students. During the 2012-13 school year, two programs served just over 76,000 students. The number of participating schools has also climbed.

Last year, state regulators suspended 13 schools for suspected fraud. Five years ago, the annual report showed seven schools faced similar sanctions. In both years, state officials ultimately banned four schools from receiving scholarship funds. The remaining schools either sorted out their problems or appealed the department’s decision to revoke scholarships.

The number of complaints lodged about the schools, however, has not grown. The department received 107 written complaint forms about schools that accept scholarships five years ago, and deemed 58 of them legally sufficient. In the latest report, those numbers were 103 and 52, respectively.

The number of schools the department visited has remained constant, at 14. That’s in part because state law limits the number of private schools Department of Education staff can visit each year. During a recent legislative hearing, several school choice advocates proposed lifting those limits and, possibly, getting the department more resources for the additional workload.

Step Up For Students has published six years’ worth of state accountability reports on its website.

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