The two nonprofits that administer the country’s largest private school choice program recently received their first top-to-bottom review by state auditors.
The results, released last month by Florida’s Office of the Auditor General, detail how Step Up For Students and AAA Scholarship Foundation have kept track of nearly $625 million over two school years.
The audits were required under 2014 legislation that expanded eligibility for Florida’s tax credit scholarships and created Personal Learning Scholarships Accounts (now known as Gardiner Scholarships). Auditors combed through the organizations’ policies, internal controls, bank accounts, investments, and administrative funds (the full list takes up two pages, on pp. 7-8).
Step Up, which managed the vast majority of scholarship funds during the period, also publishes this blog. On Thursday, the state Board of Education approved both organizations to continue funding scholarships in the 2016-17 school year.
Auditors uncovered two issues at Step Up and one at AAA. They found Step Up had not performed bankruptcy checks on its top executives, though Step Up performed the checks after the audit began, and found no issues. They also found the organization had not recouped more than $1 million in scholarship funds from schools that either lost their eligibility to participate in the program, or had students give up their scholarships mid-year.
Auditors wrote the scholarship organizations could have been more diligent about collecting the money – which amounted to a tiny fraction of one percent of all scholarship funds during the period covered by the audit. If the money had been recouped, they wrote, it could have been used to fund more scholarships.
“Documentation of collection efforts and periodically reporting to the President and the Board the delinquent accounts receivable and amounts written off would promote accountability for Step Up operations,” they noted in their report.
In their response, Step Up officials said they have since beefed up their collections effort, and put that procedure in place.
For AAA, auditors noted the organization needed stronger policies to prevent fraud. The organization told auditors it tightened its anti-fraud policies as a result.
Doug Tuthill, the president of Step Up For Students, said the audit helped his organization improve its administration of the scholarships. Other states, he said, should consider similar auditing requirements. They would result in better-run programs, and at a time when school choice critics charge scholarships lack financial accountability, he said an annual audit “takes the wind out of our opponents’ sails.”
State audits are hardly foreign to other school choice organizations in the state.
Step Up is audited annually by the McGladrey accounting firm. Those audits are submitted to the state, and help bolster its No. 4 ranking among all nonprofit organizations in the country by Charity Navigator. School districts and Florida Virtual School are subject to annual reviews, and charter schools are now required to post detailed financial reports on the Auditor General’s website. In the tax credit scholarship program, private schools where students receive more than $250,000 in scholarships must have their finances reviewed annually by a Certified Public Accountant.
“Having the Auditor General come in and see how well the program is run is a real positive thing for school choice advocates,” Tuthill said.
