The audit, released Thursday by State Auditor Elaine M. Howle, also found that the expenditure of $127,000 by the Magnolia Educational and Research Foundation to process immigration papers for foreign staff was lawful and reasonable.
In addition, the audit criticized L.A. Unified for trying to shut down three campuses in Palms, Northridge and Bell using limited information and without giving Magnolia officials adequate time to respond to charges of mismanagement. It said the district "may have acted prematurely."
Caprice Young, chief executive officer of Magnolia Public Schools, hailed the report.
"What's important about this report is not just that we're being vindicated, but that LAUSD has been called to task for its unfairness and lack of professional practices," she said.
Board of Education member Bennett Kayser, Magnolia's most vocal critic, said the district's scrutiny helped drive the charter organization's financial reform measures.
"I am glad this charter chain is fixing up its act. It is too bad it took this much effort to force them to do so," he said in a statement. "Charters in California live by very few rules but one is that they need to keep clean books."
In a statement, the district said it "acknowledges the actions on the part of the new leadership of Magnolia Public Schools to address the substantive concerns" and said it would continue to monitor the organization as legally required.
L.A. Unified sought to close the campuses after an outside audit performed last year alleged that the organization was $1.66 million in the red, owed $2.8 million to the schools it oversees and met the federal definition of insolvency. The Palms academy also was insolvent, the audit said.
In addition, the review alleged fiscal mismanagement, including a lack of debt disclosure, weak fiscal controls over the principals’ use of debit cards and questionable payments for immigration fees and services.
The statewide charter organization, which enrolls 4,000 students in 11 academies focused on science and math, denied the allegations and sued the district last year to overturn the decision to close the campuses. In March, the district agreed to keep the schools open under a legal settlement.
Charters are independent, publicly funded campuses; most are nonunion.
The audit found that some of L.A. Unified's concerns had merit. It confirmed that some of the academies were insolvent at points in the last three fiscal years, in part because of delays in state funding, but that all were back in the black. It also questioned 52 of 225 transactions reviewed, the financial relationship with one vendor and controls over fundraisers.
Young, who was hired in January, said her new leadership team has moved swiftly to address the concerns. Magnolia's improvements, she said, include a new chief financial officer and controller, stronger controls over spending and staff training. Under the legal settlement with L.A. Unified, the charter chain also agreed to submit to fiscal oversight by a state financial management organization.
Was part of the deal that Caprice Young cut with LAUSD the separation of "certain" Magnolia staff largely attached to the Gulen movement like this idiot who spent more time in Sacramento, CA trying to sway government opinion that he knew nothing about.
LA's Magnolia charters 'grossly' underreported truancies, state auditors find
The California state auditors found all four Magnolia Public Schools reviewed "grossly" underreported truancies – errors the charter network said it is addressing.
One Magnolia school, Academy 5, reported no truancies in the 2012-2013 school year, but in a report released Thursday, the auditors discovered the rate was more than 30 percent.
State auditors said the errors "could mislead parents of potential students and other interested stakeholders regarding the school environment."
Auditors also found issues with payroll and vendor payments, but concluded the once-struggling charter network was solvent as of July 2014
Magnolia's CEO Caprice Young said her staff didn't fully understand the state's truancy definition and are making corrections. Young said the truancy errors did not impact the organization's public school funding tied to average daily attendance, which she said is calculated separately.
The Los Angeles Unified School District moved to close two Magnolia Public Schools' eight campuses last year after the district's inspector general found missing and misused funds.
Magnolia disagreed with many of the findings and fought the closures in court with the help of the California Charter Schools Association.
Los Angeles County Superior Court Judge Luis A. Lavin sided with the charter network, and the schools remain open.
State auditors agreed "LAUSD may have acted prematurely when it rescinded its conditional approval of two academies," because it did not give Magnolia "sufficient time to respond to its criticisms."
"Was this vindicating? Absolutely!" Young said. "Do we have a lot of work to do? Yes."
Late Thursday, LAUSD issued a statement, saying it “acknowledges the actions on the part of the new leadership of Magnolia Public Schools to address the substantive concerns that the District raised in fulfillment of its oversight responsibilities.”
The District will follow through on its stated responses to the Auditor’s recommendations as part of our ongoing commitment to high quality charter school authorizing, as well as monitor Magnolia’s implementation of its action steps. As noted in the Audit, the District and Magnolia Public Schools were able to reach a settlement that allows both parties to move forward together in the best interest of students and in protection of taxpayers’ trust.
Did Caprice Young know that Magnolia Schools are modeled after Yamalar College in Turkey?
A state audit of Magnolia Public Schools, a charter network operating in LA Unified, has found that the group’s financial controls need improvement but that the district acted too hastily in its attempts to close three of the chain’s eight campuses.The report, issued today, brings to a close a long running episode involving Magnolia’s parent company and LA Unified efforts last year to revoke the charter renewal applications for three Magnolia Science Academy schools — in Palms, Van Nuys and Bell — over fiscal mismanagement and other financial irregularities.
The audit confirmed that the schools were insolvent at points during the past three fiscal years, but said that was due to a delay in state funding. As a result, the cash-strapped academies borrowed from schools with surplus revenues to pay off debts. While the district was critical of Magnolia for engaging in these types of inter-agency loans, the state audit concluded that “these loans served a useful purpose because they enabled the struggling academies to continue to serve their students.”
As of July, all but one of the loans was repaid, and eight academies are operating in the black with sufficient reserve funds.
However, despite an overall clean fiscal bill of health auditors say Magnolia must strengthen its financial and management processes, especially with respect to fundraising and documenting expenditures.
Another failing by Magnolia identified in the report is that it “grossly underreported truancy data to the California Department of Education.”
About 2,300 students attend Magnolia academies. Complaints of fiscal mismanagement and low enrollment have plagued nearly all of the campuses since the first charter was founded in 2002.
Still, Magnolia officials put a positive spin on the report.
Caprice Young, a former LA Unified school board president and the newly hired CEO, told LA School Report that the audit was long-awaited good news and proves that the organization is fiscally stable.
“It is a real vindication for us,” she said, adding that, “it is very, very critical of the way that LAUSD treated Magnolia.”
Young explained that Magnolia has implemented more stringent policies allowing for more transparency, including the manner in which schools report student truancies. “The problem there was that the staff was not counting all of the tardies as truancies,” she said. “But it didn’t have any impact on test scores or the amount of money we received for funding.”
“What the auditor came up with is a fix-it ticket. What LAUSD came up with was a death sentence,” Young said.
Ultimately, the report determined that “LAUSD may have acted prematurely when it rescinded the charter renewal petitions of two academies.”
Further, it said, the district did not provide sufficient time for the charter school company to respond to criticisms.The audit also said the district failed to share the complete results of an independent audit commissioned by the district with Magnolia until after it had rescinded the academies’ charter petitions.
The two sides reached reached a settlement agreement in March, resulting in the renewal of all three academies’ charters.
NOTE TO CAPRICE; A known fact around political and academic circles that you are working very hard to remove the Turks from the charter ownership. You have pushed them into the background and put new faces "Hispanics" and other non-Turks to the front. Until the members of the Gulen Movement are entirely removed from this charter school, it's all show for now. You have retained some of their models for education and they should be removed as all the Turkish teachers remaining should be removed. Hire American teachers that are not affiliated with the Gulen Movement, it isn't necessary to "target" the support of one particular ethnic group. They as you know, have their own private schools and will never trust you or your motives.
Keep waving the money around and making improvements, hopefully you can keep up the show long enough to push the Gulen Movement completely out of California. Then the money can 100% go into your pockets.