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California State Auditor Report Number: 2016-117

Alliance College‑Ready Public Schools
The Nonprofit Did Not Spend Public Funds or Divert Classroom Resources in Response to Unionization Efforts



Summary

Alliance College Ready Public Schools (Alliance) is a private nonprofit corporation that supports the operation of a network of 25 charter schools throughout the Los Angeles area and serves nearly 12,000 students. Charter schools are public schools and are subject to the Educational Employment Relations Act (EERA), the State’s collective bargaining laws pertaining to teachers and other school employees. Under the EERA, charter school employees are free to unionize, and charter schools must refrain from unlawfully interfering with union activities. In March 2015, a group of 67 teachers and counselors working at Alliance charter schools announced their decision to organize a union and join the United Teachers Los Angeles (UTLA).1 In that same month, Alliance began to take action in response to these unionization efforts, and by June 2016, Alliance had spent roughly $1 million on its response. For this audit, we reviewed whether Alliance used public funds to finance its response to the unionization efforts and whether its response decreased classroom spending. This report draws the following conclusions:


Although the Alliance Home Office Spent Nearly $1 Million In Response to Unionization Efforts, It Did Not Use Public Funds for This Purpose

Alliance created a special account to track donations and expenditures related to its response to the unionization efforts at its charter schools. This account is supported entirely by private contributions, and the Alliance home office did not spend any public funds as part of its response. As of June 2016, it had spent $915,000 from this special account—including $426,000 in consulting fees for public relations and other services—in response to the unionization efforts at its charter schools.


Alliance Did Not Divert Funds From Classroom Activities to Pay for Its Response to Unionization Efforts

Because Alliance raised private funds specifically to respond to the unionization effort, these funds were not otherwise slated to go to the schools to pay for classroom expenses. In addition, the Alliance home office used private funds to reimburse its charter schools for any time principals or school personnel spent in response to the unionization effort, such as time spent distributing informational materials or attending training on how to respond appropriately to UTLA organizers.

Moreover, we found that per pupil classroom expenditures at the three Alliance charter schools we reviewed increased between fiscal years 2013–14 and 2015–16.2 Specifically, the Alliance home office provided more private funds to its schools in fiscal years 2014–15 and 2015–16 than it had in fiscal year 2013–14, before the unionization effort began.


Alliance Did Not Fully Comply With Federal Requirements Before It Shared Confidential Student, Parent, and Alumni Information With Third Parties

Before the 2016–17 school year, Alliance was not meeting all federal requirements that restrict the manner in which confidential student data can be shared with third parties. Specifically, Alliance did not annually inform parents and students about their rights under federal law. Further, until the 2016–17 school year, Alliance did not require the retention of all letters from parents who choose to opt out of having their students’ directory information shared with third parties; therefore, we could not determine whether Alliance honored all opt out requests received during the period we reviewed.

Alliance has agreements with numerous third party entities requiring it to share confidential data for a variety of reasons, including analyzing student achievement data. One such agreement is with the California Charter Schools Association (CCSA). CCSA used confidential alumni contact information to conduct outreach in response to the unionization effort. Alliance maintains that a provision in federal law related to the use of contractors allows them to disclose these records without prior consent. However, according to federal guidance, Alliance cannot rely on that provision because it failed to provide annual notification of rights as federal regulations require.



In addition, we reviewed the Alliance home office’s contracting and procurement policies and procedures. State law grants charter schools broad discretion in how they spend public funds, and federal regulations place only a few requirements on how charter schools procure certain goods and services. For the 80 Alliance home office and charter school expenditures we tested, Alliance had adequate support and the expenses appeared to be for an allowable schoolwide or charterwide purpose. However, we could not determine that the expenditures we tested were reasonable because Alliance did not generally require its staff to document how they determined that a particular vendor’s costs were reasonable. We also found that it did not always follow its contracting policies and procedures and it did not establish adequate segregation of duties in its procurement process. Further, the Alliance home office did not require retention of vendor conflict of interest disclosure forms.

Summary of Recommendations

To ensure that it complies with federal laws regarding student privacy, Alliance should document its revised process for collecting, tracking, and monitoring the list of Alliance students and families who have opted out of sharing their directory information with third parties.

The Alliance home office should fully implement its revised procurement policies and procedures, including retention of vendor conflict‑of‑interest forms, and provide adequate training to ensure that appropriate staff members at both the Alliance home office and Alliance schools comply with the new policies and procedures.


Agency Comments

In its response to the audit, Alliance agreed with our report’s conclusions and indicated that it has already implemented, or has begun to implement, our recommendations.




Footnotes

1 As of February 2017, UTLA representatives confirmed that Alliance charter schools are not represented by a union and there is currently no vote pending regarding unionization at the Alliance charter schools. Nevertheless, an active committee of teachers and counselors at Alliance charter schools is continuing to work to form a union with UTLA. Go back to text

2 As discussed in the Introduction, the Alliance home office response to the unionization efforts at its charter schools began in March 2015 and extended through fiscal year 2015–16. Go back to text



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