California Schools Superintendent of Instruction Jack O’Connell launched an audit more than a year ago into the fiscal concerns of Options for Youth and Opportunities for Learning (OYO) schools. The OYO is a chain of independent study charter schools within the California school system that are privately run but state funded.

OYO California schools serve students who have dropped out of traditional high schools. They currently have about 15,000 students in 40 stores across the state. Students at these California schools do most of their work at home and meet with teachers twice a week. According to state records, student achievement test scores and high school exit exam scores are above average when compared to other alternative high schools within the California system. According to an August 10 Los Angeles Times article, only 11 percent of OYO students graduated during the 2003-2004 school year. The rest of the students who dropped out of school that year either dropped out, were expelled, or transferred to other schools.

The California audit was conducted by the Fiscal Crisis and Management Assistance Team, which concluded its analysis and presented its findings in a report published in August 2006. The audit cites accounting defects, overpayments by the state, conflicts of interest , nepotism, overcompensation, and mixing private businesses with public schools.

The OYO was founded and is still operated by John and Joan Hall, former Hollywood High School teachers. They have fully cooperated with the audit of California schools, but dispute most of the findings.

Some examples of the audit report are:

o Accounting Defects and Overpayments. Salons count each of their teachers as 1.92 full-time positions. Their spokesman, Stevan Allen, stated that this is common practice for charter schools in the California school system and is a legitimate method of compensating school staff for longer days and hours throughout the year. California Schools Superintendent O’Connell believes teachers should be counted as only one full-time position each. The auditors disagreed, citing that teachers in California’s traditional schools spend far less time on the job each year than those at OYO. However, the auditors believed that the amount of 1.92 was inflated. This example alone accounts for more than half of the $57 million overpayment.

In addition, the report noted several questionable expenses. An example of unbridled spending, given by the Times, was an $18,000 staff party held at Disneyland. Allen defended that event as an attempt to build a relationship between staff members, who are scattered across the state. He noted that the costs were less than $50 per staff member.

o Conflicts of interest and mixing of private companies with public schools. In addition to charter schools, the Halls own and operate several private businesses that sell supplies and services to schools. The Times noted that Options at OYO was the not-for-profit part of the setup, and the Opportunities part was for-profit. The audit questions this practice and setting.

o Excessive compensation. The audit also questions the Halls’ combined salaries, which are $600,000 a year. The report indicates that it can be excessive for the time that the couple actually works.

or nepotism. The Halls created a separate charity with $10.8 million in funding from California schools, called Pathways in Education. The charity is run by his daughter, Jamie Hall. Little money has been spent on education so far.

The Halls say they had previously asked California schools for guidance on how they operate many times, but never received a response. Therefore, they tried to follow the requirements of California schools to the best of their understanding of the policies. Even O’Connell admitted that none of the cited practices are illegal.

The audit recommends that California schools try to recover the $57 million in OYO overpayment. O’Connell forwarded the report to the state attorney general’s office for review and any necessary action.

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