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State threatens to revoke Outreach Academy's charter

By BY GABE SEMENZA
May 17, 2011 at 12:17 a.m.


outreach academy TIMELINE April 2002: State Board of Education creates charter school

January 2003: School fails for the first of many times to turn in yearly financial audit

September 2006: IRS freezes school's accounts because of delinquent taxes. School files Chapter 11 bankruptcy

August 2008: Texas Education Agency warns school it needs annual financial audits for previous years

October 2008: Academy asks state to release suspended funding so it can meet payroll

November 2008: Education commissioner appoints financial conservator to oversee school's financial operations

December 2008: TEA requests repayment of $783,093, expenses the school could not document

April 2009: State deems Outreach a high-risk grantee, forces it to submit reports before receiving funds

July 13: Education commissioner sends notice of intent to revoke school's charter

Monday: State Office of Administrative Hearings will determine whether to revoke charter

SOURCE: Texas Education Agency

Outreach Word Academy is in danger of losing its charter school status because of financial problems and a repeated failure to provide standard documents to state auditors.

The Victoria school has a history of problems since it opened in 2002. Yet despite years of accounting, payroll and tax troubles, personnel shakeups and even bankruptcy, it continues to operate. That could change next week.

Texas Commissioner of Education Robert Scott sent the school a notice of intent to revoke its open-enrollment charter. A contested case hearing is scheduled for Monday in Austin.

If Texas revokes the school's charter, it would no longer receive state funds and thus likely cease to operate. The elementary school's 310 students and 50 employees could finish the year, the state said, but they would then have to enroll or work elsewhere.

School administrators said not to worry. The state's concerns refer to problems of the past and do not reflect the school's current-day standing, they said.

The Texas Education Agency provided the Victoria Advocate with 182 pages of documents, correspondences and state warnings that detail the charter school's problems since 2002.

Charter schools operate with state and federal tax dollars and are subject to fewer state laws than other public schools. The idea behind such schools, according to the state, is to ensure fiscal and academic accountability without undue regulation of teaching.

Critics of the state's oversight of charter schools note more traditional public schools would never receive such leniency.

Consider that Outreach Academy failed repeatedly since 2002 to meet fiscal accountability and other requirements. The school:

Did not maintain financial records that document the use of $783,093 of federal grants.

For years failed to file timely annual financial audits. For just three such audits, the school was 752, 616 and 428 days late - or late by two years in one case and more than a year in others.

Remained insolvent for several years.

John Sweet, president of the school's board of directors, and Emett Alvarez, a board member, declined comment, citing next week's hearing.

Letters to the school from the state, however, detail the problems.

"Outreach Academy has been informed numerous times by multiple sources that its accounting system is seriously deficient," Scott, the commissioner, wrote in July. "Despite these interventions, the charter school failed to take the actions necessary to correct its poor financial performance."

Because Outreach Academy can't account for $783,093 in federal funds, the school cannot receive any more such money until it repays that amount. Federal funding accounted for between 11 and 17 percent of the school's yearly funding.

Since 2006, the school often operated in the red - ranging from net deficits of $38,000 to $1 million - and maintained overdrawn bank accounts - by $56,000 in 2009.

Outreach Academy also owes delinquent payroll taxes to the Internal Revenue Service - $71,695, according to its last annual audit and as much as $185,000.

Even when the school received warnings and advice, state documents show, it continued to repeat similar mistakes.

In 2008, Scott assigned Donald Egg, former Ganado schools superintendent, to be the Outreach Academy's financial conservator. Scott charged Egg with monitoring the school's progress.

Egg advised the school in 2009 to refrain from incurring any new expenses except for the purchase of food, medical supplies and fuel. Yet, the school then paid $19,000 for new portable buildings and $10,200 for moving the buildings to the campus, records show.

Lorrine Hernandez, the school's superintendent and principal, and Elaine Phillips, the director of business, refuted claims the school is in poor financial standing.

Hernandez became the superintendent in 2007 and Phillips has worked for the school since its inception.

Since receiving the education commissioner's July notice, the school has righted the ship, the women said. The school has $10,000 in its bank account and is current on repayment plans with the IRS, other federal agencies and vendors, they said.

Because of Monday's hearing, neither Outreach Academy nor the state would provide the school's most recent financial statements.

Asked to explain the school's problems, Phillips said administrators fought meager funding and a lack of the proper software to produce financial audits and documentation for the use of $780,000 in federal funds. The school now has updated software, she said.

The school purchased portable buildings - even when instructed not to incur new expenses - to make room for more students and the associated increase in funding, Phillips said.

"That's why we're in the positive, and that's how we're going to get out of debt," she said. "Our goal is to have 350 to 400 students next year."

Hernandez stressed Monday's hearing is one step in a several-step process. When a school's charter comes up for renewal, the commissioner must decide whether to renew or revoke it.

"Every issue brought to our attention has been addressed," Hernandez said. "If you're a parent, don't worry about your children. We're going to do everything necessary to be renewed."

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