Nationwide Audit of Oversight of Closed Charter

In this audit, we sought to determine whether the Department had effective oversight of the programs provided to charter schools and whether it sufficiently monitored State educational agencies to ensure that (1) procedures and internal controls were in place to identify the causes for charter school closures and for mitigating the risks of future charter school closures, (2) close-out procedures for Federal funds received by a charter school are performed in accordance with Federal law and regulations, (3) assets acquired with Federal funds by a charter school that closes are disposed of in accordance with Federal law and regulations, and (4) student information and records from closed charter schools are protected and maintained in accordance with Federal law and regulations. We found that the Department’s oversight and monitoring of the States was not effective to ensure that the States performed the charter school closure process in accordance with Federal laws and regulations. Specifically, we found that the Title I, Individual with Disabilities Education Act, and Charter School Program offices did not always (1) provide adequate guidance to the States regarding their charter school closure procedures and (2) sufficiently monitor the States to ensure they had adequate internal control systems regarding charter school closures. This occurred because the Department did not consider charter school closures to be a risk to Federal funds, and, therefore, did not prioritize providing guidance to the States on how to manage the charter school closure process or monitor the States’ charter school closure processes. As a result, the Department lacked assurance that the State educational agencies ensured all applicable Federal requirements for the closed charter schools were consistently performed and documented. During follow-up work in September and October 2017, we found the program offices had issued some guidance regarding requirements related to charter school closures and also updated some of their State monitoring procedures. These State monitoring procedures addressed some issues related to monitoring and oversight of closed charter schools, but we did not verify whether the new procedures have been fully implemented.