For Immediate Release - October 07, 2013

State Audit Explains Gloucester Charter School Closure

BOSTON, MA — State Auditor Suzanne M. Bump today issued an audit of the Gloucester Community Arts Charter School (GCACS) which found that a series of management deficiencies rendered the school insolvent and led to its abrupt closure earlier this year.

GCACS, in its three-year existence, had repeated lower-than-expected enrollment, with the number of students averaging 65% of the school’s pre-enrollment figures. With lower enrollment, the school’s tuition revenues were over estimated by as much as $571,000 at the start of the 2012-2013 school year, but today’s audit found GCACS failed to adequately adjust its staffing and budgeting to reflect the revenue shortfall. Despite extreme cash-flow control measures including delayed payments, pay cuts, and staff reductions, GCACS closed with a deficit.

The audit also found GCACS spent more to rent its facilities than was planned for in its approved charter proposal and also indebted the school for lease payment 10 years beyond the term of its charter. The Lease, a result of a no bid contract, increased GCACS’s actual annual occupancy costs more than 23% above planned amounts, resulting in additional stress on the budget beyond that created by the revenue shortfall.

In addition, the audit found GCACS did not effectively manage its administrative staffing costs. In Fiscal Year 2013, management costs amounted to more than 19% of its tuition revenue, exceeding the 11.5% written into in its charter and a 10.8% statewide average for charter schools.

Prior to its closure, GCACS received critical reviews from several external bodies  including the Inspector General, the Attorney General, the Department of Early and Secondary Education, a private CPA firm, and a private charter-school  management consultant. Each report highlighted deficiencies related to procurement, accounting, record keeping, education performance, or compliance with the state’s Open Meeting Law. Today’s audit found that the GCACS Board of Trustees or administration never adequately addressed the numerous findings in these reviews.

“The ripple effects of this school’s closing were widely felt by its students, their families, their teachers, and administrators, as well as the students, teachers, and administrators of the schools that had to absorb the displaced students mid-year.” Auditor Bump said. “What makes this especially troubling is that it was preventable. I hope the lessons learned here will be appropriately incorporated into management and oversight practices to ensure a solid foundation for learning and to make this the last mid-year closing of a charter school.”

The Office of the State Auditor conducts technical and performance assessments of state government’s programs, departments, agencies, authorities, contracts, and vendors. With its reports, the OSA issues recommendations to improve accountability, efficiency, and transparency.