Who Is In Charge

State audit faults CollegeInvest

A new state audit claims problems with how CollegeInvest manages some of its scholarship and loan forgiveness problems, along with some questionable administrative expenses and problematic financial controls.

StockCollegeInvestLogo92909CollegeInvest is an agency of the state Department of Higher Education but has its own board and operates largely autonomously in running student loan programs, 529 college savings plans and some scholarship and loan forgiveness programs.

The audit dealt only with scholarships and loan forgiveness.

“Overall, we found that CollegeInvest could significantly improve management of and participation in its scholarship and loan forgiveness programs,” the audit concluded.

Specifically, the audit found that the Early Achievers Scholarship, with assets of $67 million, didn’t follow its stated policy of giving 5 percent of its value in scholarships. In fiscal year 2009, the first year of scholarships, the program gave only $91,000 to 76 students, a distribution of .1 percent. The audit projected the program wouldn’t meet its goals through fiscal year 2013.

Auditors concluded the program lacks controls to ensure that recipients meet requirements, puts administrative burdens on colleges and has high administrative costs.

The program is designed to provide college financial aid to younger students who make a commitment to do well in high school. Students must be Pell Grant eligible (meaning lower income) and can receive up to $1,500 a year. Eligible students must have had a 2.5 GPA and have graduated from a Colorado high school.

In an interview Wednesday with EdNews, Debra DeMuth, director of CollegeInvest, said, “We were disappointed in the number of students that were eligible for the program.”

But, she said, the complexities of setting up an outreach program aimed at 8th and 9th graders and other obstacles have slowed things down. The program was created in 2005 but the first scholarships were awarded in the 2008-09 school year.

DeMuth said participation was hampered because the program initially required eligible students to meet the standardized Higher Education Admissions Requirements, which wasn’t necessary for student who attends open-admissions institutions such as community colleges. The program also originally was set up as a “last-dollar” program, meaning college financial aid officers could tap the program only after they had used all other possible aid sources for a student. Both those limitations have been removed, she said.

She said it’s also been difficult to track eligible students, particularly after they leave high school. “We struggle with effective ways to reach out to these students … to make sure they sign up and get these dollars.”

The audit also faulted CollegeInvest for investing all but $10 million of the Early Achievers trust fund trust fund in the agency’s student loans. The agency said that was done to put money in more conservative investment. But, the auditors said, “It appears the primary purpose of this decision was to bolster CollegeInvest’s student loan operations by providing liquidity,” adding the action “raises significant conflict-of-interest concerns.”

DeMuth Wednesday defended that investment strategy, saying the trust fund earned 2.9 percent a year on the loan investments while equity investments lost 41 percent and even fixed-income holdings lost 2.7 percent. “I think it was a very wise and prudent decision.”

The audit also found fault with administration of Service Scholarships and Opportunity Scholarships, which are awarded by lottery. From fiscal year 2005 to 2009 CollegeInvest failed to give out 330 of the 565 scholarships available, which made the odds of winning less than was stated in promotional materials. “The program’s advertising may have been misleading,” the audit said.

Auditors also criticized handling of some loan forgiveness programs, noting for instance that a program for nursing teachers only involved 11 recipients since 2007. The program “does not effectively target potential candidates” and in some cases “requires that applicants hold a CollegeInvest loan to participate, which presents a barrier to participation.”

DeMuth noted that loan forgiveness programs are difficult administer because her agency has to rely on outside parties, like teacher education programs, to get the word out to potentially eligible students. She also said that such programs may not have much of a future, giving changing federal requirements and lack of state funding to support them.

Finally, the audit examined more than $12 million in non-personnel administrative expenses in 2008 and 2009, criticizing donations to outside groups (the agency said they were sponsorships), meal reimbursements that didn’t fall within state guidelines, donations made to groups with which CollegeInvest board members had ties, fees paid to an outside lobbyist and promotional gifts of golf clubs (about $1,000 total) made to outside financial advisors.

The audit found that about half of some 40 administrative expenses examined didn’t have adequate documentation or approvals. “This significant error rates raise concerns about CollegeInvest’s management of administrative expenses.”

DeMuth said CollegeInvest works hard to get appropriate value for its sponsorships and that she feels the auditors were overly broad in criticizing the agency’s financial controls. She noted that annual financial audits for the last three years have found no problems with CollegeInvest procedures. She also noted that outside lobbying fees are allowed by a gubernatorial executive order, although clarification will be sought from the attorney general.

The audit made 10 recommendations, all of which are to be implemented by June 2010. The agency agreed or partially agreed with all 10.

The audit was released Monday at the monthly meeting of the Legislative Audit Committee.

According to The Associated Press, lawmakers weren’t happy. “I sense that the board is not really doing its job in monitoring how well this program is working,” said Sen. Dave Schultheis, R-Colorado Springs and committee vice chair.

“It seems like more money has been put into running the organization than getting kids in school,” said chair and state Rep. Dianne Primavera, D-Broomfield, according to AP.

CollegeInvest receives no tax funding. It has net assets in all funds of $3 billion and funds its operations with profits on student loans, fees on college savings plans and investments.

The agency’s future is cloudy, given legislation pending in Congress that would centralize student loans in the federal government, eventually putting agencies like CollegeInvest out of the loan business.

DeMuth noted CollegeInvest is one of only three state loan agencies that also run a 529 savings plan, which wouldn’t be affected by the legislation. “For us it [the bill] would end part of our business, but it wouldn’t put us out of business. … “I think the public partnerships [agencies like CollegeInvest] have been very positive for students. … You can’t replace that local presence and outreach from Washington, D.C.”

The study was done by state auditors with the help of Buck Consultants.

Do your homework

New mayor

Illinois charter PAC ready to spend millions in Chicago elections

PHOTO: Creative Commons

A pro-charter Illinois PAC will expand its focus from statewide politics into Chicago’s upcoming mayoral and alderman elections, with a plan to infuse millions of dollars into contested races where education is at issue.

“The stakes couldn’t be higher for urban public education,” Andrew Broy, president of INCS Action, a political action committee that advocates for charter schools in Illinois, told Chalkbeat. “We expect to spend a seven-figure sum in each of these races.”

INCS Action is the political advocacy arm of the Illinois Network for Charters Schools, and in the past has advocated for lifting a cap on charters statewide and against a statewide charter moratorium.

The expansion of charter schools is a live-wire issue in Chicago, with some advocates arguing that the growth of charters, which are publicly funded but privately run, pushes out resources for neighborhood schools in low-income areas. Charter advocates, meanwhile, argue the charter school model offers a faster way to bring high-quality education to students in Chicago.

Chicago Public Schools has 121 charter schools, down 7 percent from two years ago when the teachers union negotiated a cap on charter enrollment.

The upcoming elections make up just one part of a the network’s larger legislative agenda, with three of its five legislative goals already in place, Broy said. They’ve established the state charter school commission, secured charter funding equity in Illinois, and created a 10-year renewal term for charter contracts, he said, adding, “we still need to secure state facility funding and lift the cap on charter schools nationwide.”

INCS Action has not yet named the candidates it will support, but said its criteria for endorsement include contested races featuring candidates with different positions on charter schools. “For aldermanic races, if we can impact 2,000 or 3,000 votes in a ward, that offers a lot of opportunity,” Broy said.

Aldermen can introduce city-level resolutions against charter openings or ban a charter’s expansion into their ward or, if they are supportive, offer tax-increment financing for charter school buildings or other investments.

The Chicago Teachers Union also runs a PAC, through which it has supported candidates at the state, mayoral and aldermanic levels. The union opposes charter expansion. 

Broy expects his group will support candidates by sending out mailers, canvassing and telephoning voters.

According to election finance data obtained by Illinois Sunshine, the INCS Action PAC has already contributed more than $65,000 to the campaigns of state-level candidates for congressional seats in Illinois since Sept. 11. The largest sums went to the campaigns of Rep. Jim Durkin, R-Burr Ridge, the House minority leader, and Rep. Monica Bristow, D-Alton.

In state-level races, INCS Action has been a heavy hitter since it started in 2013. This past spring, the organization said in a press release that 13 of the 15 primary candidates for Illinois’ state Senate and House of Representatives supported by the group won their primaries.

The next governor could play a big role in the future of charter schools in Illinois, and by extension in Chicago, but Broy says the committee has declined to endorse a candidate because of the amount of spending required to sway a candidate or the election. The committee gets more bang for its buck focusing on local races.

Incumbent Gov. Bruce Rauner and challenger J.B. Pritzker have staked out opposing positions on the charter debate, with Rauner a supporter of charter schools, while his opponent says he’d place a moratorium on opening new charters.

Meanwhile, Broy said his political action committee will soon begin throwing money into campaigns he believes they can win. “In some races, we see a pathway to victory with our support.”


Heated Debate

Candidates clash over innovation schools and high school closures in IPS Board campaigns

PHOTO: Stephanie Wang / Chalkbeat
Candidates for the District 3 and District 5 seats on the Indianapolis Public Schools Board debated at a forum hosted Tuesday night by Chalkbeat, the Indianapolis Recorder, WFYI, and the Central Library.

In the races for three seats on the Indianapolis Public Schools Board, candidates are sharply split over whether the district is moving in the right direction.

The divisions were clear during a forum Tuesday night hosted by Chalkbeat, the Indianapolis Recorder, WFYI, and the Indianapolis Public Library. Some of the most heated discussions came over the district’s recent decision to close high schools and move to an all-choice high school model, and candidates also clashed over the district’s innovation partnerships with outside operators to run schools — including some where students have struggled the most.

“It’s just disruptive when you just keep changing and changing and changing,” said ceramics studio owner and IPS parent Joanna Krumel, who goes by Jodi, a challenger in the at-large race. “Especially when the district was doing a good job with the programs that they had.”

Retired IPS teacher Susan Collins, who is also running for the at-large seat lamented the closure of high schools that had long legacies in their neighborhoods: “Why do we let our good programs die?” she said.

But at-large incumbent Mary Ann Sullivan defended the district’s decisions, pushing back on the perception that schools have taken a turn for the worse.

“I don’t think we were doing well. I don’t think all was all right with IPS. I think we were patient for too long with strategies that weren’t moving the needle for kids,” said Sullivan, a former Democratic state lawmaker.

Read more: Sort through each school board district race and see candidates’ answers to a Chalkbeat survey

Candidates also debated the district’s low test scores, financial transparency, community engagement, and equity of access to highly sought-after magnet programs.

Often, their disagreements illustrated long-standing rifts between advocates and critics of school choice.

The at-large challengers denounced the district’s partnerships with charter schools, influential charter supporters such as The Mind Trust, and the Indy Chamber on finances and its referendum efforts.

“There is too much incursion by business interests in the education of our children,” Collins said.

Krumel said she didn’t support working so closely with charter schools, either: “I don’t think that charter schools are here to stay. At least I hope they’re not.”

But Sullivan called those “adult battles” over politics that distract from addressing the needs of children.

“I’m just very sad that we still have the same kinds of conversations that take our eyes off the prize of being able to offer every single kid in the city of Indianapolis a great opportunity,” Sullivan said. “I would like to have more conversations about where we’re going, what’s possible — and not a return to something that I don’t think were ever really glory days, especially not for too many of our students of color and students in poverty.”

In the race for the open seat in District 3, which represents the north side, one candidate supported innovation schools while two others expressed concerns.

“I see innovation schools, frankly, as the next generation of the district willing to take risks, to do what it takes to serve our students,” said Evan Hawkins, executive director of facilities and procurement for Marian University and an IPS parent. “Innovations schools are not the panacea, but innovation represents one of those options that the district has … [to] ensure that our schools stay locally controlled.”

But Sherry Shelton said she wanted to support ideas proven to work, and she didn’t believe the innovation schools showed enough positive results.

“I don’t think we should take a chance with our students,” said Shelton, director of information services for Pike Township schools. “I think we should stop the innovation schools, re-evaluate the program, tweak it, and if it’s something that we’re going to move forward with, that we develop a successful process to open those, evaluate, and keep them up to a certain standard.”

Michele Lorbieski, a trial attorney with Frost Brown Todd and an IPS parent, said the innovation schools cause disruption, and said they haven’t shown as much improvement as is often touted.

“I think we need to pump the brakes on these innovation schools,” she said. “We’re doing a pilot to figure out if our high school students should take the IndyGo bus, but we didn’t even pilot the innovation schools. So let’s make sure they’re effective before we keep going down this path at this pace we’re going.”

In the race for District 5, which represents the northwest side of the city, candidate Taria Slack outlined the challenges of teacher turnover that she has seen in the innovation schools that her three children attend.

“I think we need to stop replicating this program until we have better research on what’s really going on,” said Slack, a federal worker. “We need to make sure that our kids are hitting every last one of these benchmarks.”

But incumbent Dorene Rodríguez Hoops, an IPS parent, said families and community members sometimes feel innovation schools are the best fit for their neighborhoods.

“Sometimes the innovation school option is the best option,” she said. “So I see charter schools and innovation schools as part of our educational landscape, part of our toolbox if you will, to look at what’s the best option for our children in a specific neighborhood.”

Watch the full forum: