Charter school in Surry County falsified enrollment to get state funding, NC audit finds
A state audit has found that a charter school in Surry County allegedly falsified enrollment records in order to obtain more than $400,000 in state funding.
The N.C. Office of the State Auditor received six allegations about Bridges Academy through its hotline and then initiated an investigation, according to the audit.
During the investigation into the over-reporting of students in the 2020-21 school year, the school's operations director told investigators that "some (of the records) have been burned because (the school) can't keep everything."
Of the 180 students enrolled in the academy, 72 were falsified, according to the audit. The director and finance director also indicated that the practice of falsifying records began approximately eight years ago.
In addition to the falsifying records allegations, the audit found that the school misused more than $78,500 of charter school funding to support a preschool.
Also, the school failed to prepare and submit required 1099 tax forms, the audit states.
These key findings are being referred to the district attorney for the 34th Prosecutorial District, the IRS, and the N.C. Department of Revenue.
Key recommendations from the audit call for the school to pay back the N.C. Department of Public Instruction $404,971 for the falsifying of records and $78,576 for the misused funds.
The DPI may consider to review enrollment records to determine if the school received funding for falsified students in previous years. However, the audit concludes that this would be unfeasible because of lack of records kept by the school, the lack of personnel because of the school's closure, and a limited timeframe.
The audit also recommends that the school should seek the help of a certified public accountant to prepare and file the required tax documents for contractors, such as, director, instructional, and support staff.
Bridges Academy started operating in 1997 with the preschool being added in 2020. The rural charter school based in State Road accepted students from four counties and Elkin City.
During the initial stages of the investigation, the school's Board of Directors decided to close the school and preschool. In June 2021, the school relinquished its charter in response to "financial irregularities" and insurmountable financial challenges.
In a response from Bridges Academy, its attorney agreed with the audits findings for the most part. Attorney John Paul H. Cournoyer said that some of the contractors whose compensation wasn't reported to the IRS were actually employees who received W-2 forms from the academy.
Falsifying student enrollment
The audit found that the falsifying of enrollment was caused by collusion between the director and financial director. In order to submit falsified records to the DPI and conceal the records from teachers and support staff, they used two different student information systems, PowerSchool and Jupiter Ed.
The directors limited staff access to PowerSchool, the official student information system for the state. This system was used to falsify records to the DPI.
In late 2020, a newly-hired principal requested access to PowerSchool and was denied, the finance director stated to investigators. The principal continuously expressed concern to the two directors about the lack of access of the system.
The two directors then purchased a second system, Jupiter Ed, which required an annual renewal of $1,200. The system did not contain the falsified records and was used as the school's main information system for recording attendance, grades, and other tasks.
By using the two systems, the directors could conceal the false records that were not questioned by the school's staff.
In 2020, an Early Learning Center was constructed for $2.6 million. The classrooms were used for preschool students, in addition to, kindergarten, first-, and second-grade classes.
The directors used charter school funds to support the operations of the center despite charging tuition and receiving funding from the N.C. Department of Health and Human Services for the care of preschoolers.
According to the audit, charter school money is not permitted to be used for a preschool. These funds were not tracked separately from the preschool money.
Analysis of the 2020-21 preschool revenues and expenses showed the salaries and mortgage associated with the preschool exceeded revenues by $78,576. DPI funds intended for the education of kindergarten through eighth-graders was used to close the gap between revenue and expenses, the audit states.
Taxes and the 'Social Security Club'
In 2019 and 2020, the academy didn't report $489,534 in compensation for contractors to the IRS.
During the two-year period, the finance officer failed to provide contractors with 1099 forms and did not provide the IRS with accurate earnings.
The academy contracted a number of retirees who the former testing coordinator said were referred to as the "Social Security Club." The former coordinator said she didn't receive tax documentation from the academy.
"(Management) offered me the job and I was on Social Security and I told them I didn't want it and they said well, we have a lot of people on Social Security. We can take care of everything, we can pay your taxes, we can do all that. So that's how I was paid," the former coordinator said.