Final report asserts mismanagement at 2 Magnolia charters
Vanessa Romo | October 8, 2014
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LA Unified today finally released a report that confirming that two charter schools, Magnolia Science Academy 6 and Magnolia Science Academy 7, were operating with insufficient funds and for years and have been financially mismanaged.
The 78-page report, prepared by an outside firm for the district’s Office of the Inspector General, concludes that the Magnolia schools in Palms and Reseda are financially insolvent, spending more money than they’re bringing in.
Other accounting irregularities found on the OIG report included loans between schools, payment of immigration fees for unspecified persons, the possible use of school funds for a European field trip, and what seems like an unsustainable over-payment to a charter management organization providing services that are the purview of the charter group.
The review, which was completed in mid-June but withheld by the district, does not examine the Magnolia schools’ parent company, Magnolia Educational and Research Foundation, known as MERF, beyond June 2014 despite assertions by Superintendent John Deasy that the Inspector General would be looking into all eight of the district’s Magnolia schools.
The district’s Charter School Division based its denial of the two schools’ charter renewal petition on the findings of the report as presented to the school board over the summer. But the revocation of the charter was overturned in court and the schools were allowed to reopen this year. A court hearing is scheduled for January to determine whether they can continue to operate.
Officials from the Magnolia schools said they were heartened by the release of the report, saying that the detailed findings, now public, would help them mount a stronger legal case against the district in arguing to keep the schools open.
Kim Onisko, MERF’s accountant, sounded relieved after reviewing the executive summary. “Getting the numbers lets us trace back to where their figures came from to see if they’re right or wrong,” he told LA School Report.
“Basically the discussion is exactly the same as it was in June, it’s just we have more meat in this report so we can actually give a better response than we did to the prior report which didn’t tell us very much.”
What MERF officials contended then — and now — is that they operate as a company, not as individual entities, a difference that might show deficits at individual schools but not with the company.
“There is no inter-company borrowing because Magnolia operates as one entity, under one tax number. As such, you can not make a loan to yourself,” Onisko explained. “You can transfer money between departments, but there are no loans because you can’t contract with yourself.”
Onisko also denied the use of public money to fund a student field trip to Europe in 2011.
LA Unified officials declined to comment citing pending litigation.
Previous Posts: Magnolia schools remain open but relationship with Accord changes; Magnolia Charter troubles in LAUSD highlight larger concerns; Fiscal mismanagement’ cited in closing 2 Magnolia charters
* Clarifies that the report released yesterday was completed in June.