Recently in our TN Op-Ed, a few commenters wondered about fraud. The question went, “Wouldn’t fraud be easy with types of school choice that offer control of public funds to parents?” It’s a valid question, and one I would respond to with another question. We live in an imperfect world where fraud is inevitable. So, which systems are least susceptible to fraud and are most likely to detect it when it occurs?
ESA FRAUD - Hand in the cookie jar?
Whether the commenters on this piece were familiar with the first year audit of the Arizona ESA program, I’m not sure, but let’s use it as our example. The Arizona Department of Education performance audit report found,
“Between August 2015 and January 2016, department staff identified more than $102,000 in misspending, which included parents who spent program monies after enrolling children in public school, parents who did not submit required quarterly expense reports, and parents who purchased unallowed items.”
Here is a breakdown of the misspending:
Notice that 100 parents, and about a third of the misspending, occurred where parents bought items that did not qualify for the program. The average misspending for these parents was $357.
About a third of the spending may have been appropriate, but the parent didn’t file the appropriate paperwork. And about a third of the money was lost to people who might really have been engaged in fraud. Their child was still attending a public school or was otherwise not qualified to use an ESA. Unfortunately, the report does not tell us whether these parents actually spent the misallocated money, or whether the money sat dormant in these accounts. Anyway, on average, for the 27 parents who received inappropriate benefits, the size of the misallocation was $1,322.
I’m pretty impressed that the administrators were able to detect such small-scale misspending/fraud in the first year of the program. Some people might be surprised that the level of fraud isn’t much higher, but it’s important to remember that parents who are participating in the program have very little incentive to engage in fraud at all. Here’s why.
Even though the legislature has an interest in all children getting a good education, the vast majority of parents care even more about their own child’s education than the government does. When ESA funds are misspent by the parent, they are literally stealing from their own child’s educational piggy bank. So, who are people least likely to steal from? A faceless government program? Neighbors? Their child? If you guessed “their child,” I suspect you are right.
Total payments and program spending in the audited year was almost $26 million. And it’s a good thing that the audit process was able to identify misspending, even if it amounts to less than 1% of the total. But the real reason that the level of misspending was so low here is simple and straightforward. People love their own children and don’t want to rob them of an education.
FLOYD COUNTY SCHOOLS AND RICO CHARGES
Now consider a different level of fraud. This isn’t a case of someone raiding their child’s piggy bank. In a school system just outside Atlanta, what was found on a school maintenance man’s property was shocking. Exorbitant spending littered each property; zebra-skinned chairs, numerous vehicles, some 60 firearms, and the list went on and on. Not to mention the home and duplexes themselves were worth $725,000. Richardson was charged with using inflated and false invoices for supposed maintenance for over a decade. In the end, he stole $6.3 million dollars from the Floyd County School System. When interviewed, Richardson admitted, “What I did was wrong, but it was just too easy.” The school system has now regained a small fraction of the money back with the help of the police department, property seizure, and an auction of all his possessions.
In December of last year, as Chief Mark Wallace delivered the 3,000-page case summary to the DA’s office, he commented, “It’s kind of like the taxpayers had to pay twice.” The nearly three-year investigation took almost 20,000 man-hours and cost $429,920.94.
HARD REALITY
The sad truth is this story is not an uncommon one. A simple google of the phrase “school staff member stealing” will turn up numerous stories like this one. The reality is systems that take advantage of parents’ love for their own children are going to experience less fraud and abuse than systems that depend on school administrators’ love for taxpayers. Not to mention, it is easier to catch unsophisticated parents (and the dollars end up being smaller) than when administrators in large, centralized systems engage in misspending or fraud.
If we really want to minimize the level of fraud and misspending in k-12 education, the best thing we can do is to make sure that when parents think that they are not getting their money’s worth, they can take the child and the money to another school.