GloucesterTimes.com, Gloucester, MA

October 11, 2013

Audit cites lost debt at charter

By Marjorie Nesin
Staff Writer

---- — The Gloucester Community Arts Charter School’s post-shutdown asset sale — the trustees’ last ditch effort to recoup some $154,000 in debt after the school’s sudden January closure — brought in only about a third of the money owed, according to a state audit released earlier this week.

But the school’s abrupt closure, after the state cut off funding and a local bank retracted its tentative loan agreement, likely saved the charter school from at least doubling its debt last spring, according to State Auditor Suzanne Bump’s 33-page report on the school.

According to Bump’s report, the $50,000 that trustees reeled in during the multi-day sale of everything from computers to kick balls, paled in comparison to the additional $5.8 million in outstanding “facility lease obligations” not even included in the net asset deficit.

Though the state would typically seize all of a school’s remaining physical assets post closure, the Department of Elementary and Secondary Education had allowed the charter to sell off its assets to recoup some of the money.

Had the charter trustees managed to sell all of the items at “buy it now” prices once listed on a special sale website, the school could have collected over $100,000. The school’s trustees had offered up an assortment of objects including desks, musical instruments, exercise equipment and some electronics.

The audit also includes submissions from the chairman of the charter school’s trustees, James Caviston. In a response, Caviston addresses the audit’s criticisms, including excessive rent paid for the use of the building under what the auditor decried as a non-bid contract, and inflated enrollment numbers that, throughout the school’s 21/2-year run, fell consistently lower than projected.

He also outlined steps the trustees have taken since the closure — such as designating the Gloucester Public School District as the “trustee” responsible for future maintenance of charter school records and turning the records over to the district. The trustees are also documenting remaining financial obligations through a formal claim-filing process, and are working with the state’s education department to examine the charter school’s compliance with federal grant funding requirements.

Caviston said that, despite the trustees’ efforts to comply with regulations and make good decisions, none of the administration had “direct experience in public school administration,” and that created difficulty. He suggested that the state, in the future, require charter boards to include a person with experience in public school administration.

“The school made every practical effort to develop good governance and to provide for best financial practices,” Caviston wrote. “In retrospect, these steps, which the school believed would insure best financial management practices, were not enough to prevent the school’s insolvency.”

Caviston said the state education commissioner’s determination that the school may not be viable at its inception “adversely and chronically” affected enrollment at the school from day one onward.

“The matter of a school’s viability must be decided with clear and unambiguous guidelines,” Caviston wrote.

The report from Auditor Bump’s office concluded that, to minimize the risk of similar financial issues with other new charter schools in the future, the state’s education department should make sure all schools “comply with all applicable laws, rules, and regulations, including restrictions on incurring debt beyond the charter period.”

Marjorie Nesin can be reached at 978-283-7000, x3451, or at mnesin@gloucestertimes.com.