Charters schools got COVID-19 loans for struggling businesses while getting full taxpayer funding

The CPS inspector general found that some of the 38 charter school operators that got federal COVID-19 loans used it to pad their reserves.

WBEZ
The inspector general of Chicago Public Schools looked into spending of COVID-19 relief dollars in his annual report. Bill Healy / WBEZ
WBEZ
The inspector general of Chicago Public Schools looked into spending of COVID-19 relief dollars in his annual report. Bill Healy / WBEZ

Charters schools got COVID-19 loans for struggling businesses while getting full taxpayer funding

The CPS inspector general found that some of the 38 charter school operators that got federal COVID-19 loans used it to pad their reserves.

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Thirty-eight Chicago charter school operators received almost $43 million in federal COVID-19 forgivable loans intended to help businesses offset revenue loss during the early days of the pandemic even though their main source of funding — public dollars from Chicago Public Schools — remained consistent, according to the annual report from the Chicago Public Schools’ inspector general’s office.

In the report released Monday, Inspector General William Fletcher highlighted several issues related to pandemic funding and spending. The school district is getting nearly $2.8 billion in federal COVID-19 relief money and he said it’s imperative that the spending of those dollars and the outcomes of that spending be transparent.

“The OIG has taken and will continue to take an active role in monitoring CPS’ use of pandemic relief funding to ensure that these resources are used appropriately and identify any instances of fraud or waste,” Fletcher wrote in the report.

After the Sun-Times wrote about charter schools getting the forgivable loans through the Paycheck Protection Program, school district officials asked the inspector general to investigate. His office found that five of the charter schools repaid $7.3 million, but the rest were allowed to keep the extra money. The charter schools qualified for the Paycheck Protection Program because they faced economic uncertainty at the start of the pandemic and could be forced to lay off some employees. The PPP was designed to help companies and organizations avoid layoffs. But by fall 2020, the school district had committed to continue funding charter schools at the same levels as always and without interruption.

In July 2020, the head of the Illinois Network of Charter Schools told the Sun-Times that charter school operators needed the forgivable loans to help pay for new expenses related to remote learning, including spending on computers and to connect students to the internet.

But ultimately, the inspector general found that the money was not needed to prevent layoffs, and there’s evidence that some of the charter schools used it to build cash reserves. The inspector general found that at least eight charter schools had more than $1 million in reserves and that a handful had double the amount of cash on hand than CPS recommends, suggesting they had ample cash.

The inspector general recommended that CPS reduce future payouts of federal COVID-19 relief dollars to the charter schools to compensate for the forgivable loans. However, school district officials said they don’t think that is legally permissible.

In the annual report, the inspector general also took the school district to task for handing out more than $60 million in payments to companies, even though their services were not needed during the shutdown and in some cases they accessed other government money to offset revenue loss. The inspector general calls these “good faith” payments.

Bus companies did this most often, according to the inspector general’s report. In the early days of the shutdown, the school district continued paying bus companies so drivers and aides would not be left in a lurch.

However, the inspector general says the school district never required bus companies to keep workers on staff and many laid off hundreds of workers for varying lengths of time. Not only did these companies pocket the CPS money, but many of them also applied and received the forgivable loans under the Paycheck Protection Program.

Further, the laid-off bus drivers and other workers applied for and got unemployment benefits. As a result, three separate sources of government funding were available to cover these salaries, yet the workers only got paid once and the companies benefited.

The school district has required bus companies to repay some of the overlapping money.

Other pandemic-related investigations resulted in a finding that security guards at 22 schools were allowed to manipulate their schedules so they could qualify for state unemployment benefits. In only one case was a school left without a security guard because of a changed schedule.

The inspector general’s report also detailed a host of miscellaneous misdeeds, including an assistant principal who embezzled almost $200,000 and a counselor who was paid by a university to recruit students from her school.

The most tragic involved a student who collapsed and died in a school gym during an unauthorized event. The event was held in an unairconditioned gym in July 2020 when COVID-19 restrictions prohibited more than 10 people from gathering indoors. The staff member, who opened the gym, has since resigned and a “do not hire” notice has been placed on his file.

The office of the inspector general also is responsible for investigating allegations of sexual misconduct involving staff. This year it closed 756 investigations with 65 substantiated for sexual harrassment or abuse and another 175 for violating district policy that prohibits adults from crossing boundaries with students.

The inspector general also makes the case in the report for shoring up laws so that a greater number of perpetrators of sexual misconduct are charged criminally and prevented from working with children again.

The Illinois State Board of Education is responsible for deciding whether educator licenses are revoked if a person is not criminally charged. But the report lists several cases where a staff member’s license is still active despite findings of serious misconduct.

Further, the report notes that despite changes in the law, some perpetrators of sexual misconduct are still able to transfer between districts and potentially offend again. Some school districts are still reluctant to share information due to liability concerns, according to the report.

The inspector general said his office only launches investigations into about a third of the complaints received, mainly because it does not have sufficient staff to pursue each one. He notes this opens up the school district to fraud and mismanagement. The two subjects receiving the most complaints are sexual allegations in which an adult is an offender and complaints about a staff member living outside of Chicago in violation of a CPS residency requirement.

Sarah Karp covers education for WBEZ. Follow her on Twitter @WBEZeducation and @sskedreporter.