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Charter Schools' Founder Fudged Attendance Worth Extra $1.4 Million In State Aid

St. Louis College Prep charter school is expected to graduate its first senior class this summer. The Missouri State Auditor has agreed to investigate the school's attendance reporting.
File photo | Ryan Delaney | St. Louis Public Radio
St. Louis College Prep charter school's founder over-reported student attendance worth at least $1.4 million, a state audit found. The school closed in May.

The founder and leader of St. Louis College Prep submitted phony attendance sheets to the state education department for several years in order to funnel more than $1.4 million to his charter school fraudulently, a state audit released Tuesday found.

St. Louis College Prep, an independent public charter school, shuttered in May after graduating its first senior class. Its founder, Mike Malone, resigned last November after the school’s sponsor and board confronted him regarding the financial irregularities. 

“The executive director admitted to falsifying attendance records and reporting false information to the state,” State Auditor Nicole Galloway said on Tuesday, just ahead of the release of her office's audit. “And then payments were made based on fraudulent information. So in my mind, this is fraudulent activity.”

The revelations left the school in financial disarray, as first reported by St. Louis Public Radio in January. 

The state education commissioner requested the audit after the Department of Elementary and Secondary Education learned of the misappropriations. It also quickly curtailed aid payments to the school.

Auditors found Malone over-reported student attendance in several ways in order to take advantage of a complicated state funding formula and collect at least $1.4 million in overpayments over the three years they formally reviewed, though investigators noted that it could be as high as $2.36 million going back seven years. 

Per-student state funding is based on average daily attendance  — or how often students are reported to be in the school — rather than enrollment. Malone used a number of tactics to inflate that attendance, according to the audit, such as reporting students as attending summer school or remedial programming when the courses didn’t meet those parameters. 

There were also times more students were reported to be in the building than were enrolled in the school. In four of the past seven school years, auditors found the school had an average daily attendance higher than its enrollment — which was 306 students in its final year.

At the peak of the school's overreporting in the 2016-17 school year, St. Louis College Prep took in an overpayment of $672,775.

“Certainly no surprises,” said Steve Singer, the board’s president, adding the audit contained “nothing new we hadn’t already reported to the state.”

St. Louis College Prep opened in 2010 as a charter middle school called South City Prep. It moved to the near south side a few years later and changed its name. Malone started the school after working as a teacher and then for a charter advocacy organization. He declined an interview request from St. Louis Public Radio.

Singer said auditors found no indication the money went to personally enrich Malone.

“He must have felt he needed more money for kids, but there is no justification for this,” Singer said.

There is no clear proof Malone personally benefited, Galloway said, in part because Malone refused to provide testimony to auditors. But she did point out that her office found questionable credit card purchases. 

The findings have been referred to the state attorney general’s office, which could not confirm an active investigation.

Attendance fraud by schools is rare. An audit found the former Hope Academy charter school in Kansas City collected $4.3 million in state aid it wasn’t due. A 2015 audit of the St. Joseph School District found summer school attendance was inflated in order to collect an addition of $3.5 million in state funds.

St. Louis College Prep sold its building to KIPP St. Louis, a national charter school operator.

A DESE spokesperson said in an email to St. Louis Public Radio the department will work with the school to determine proper resolution for the money it’s owed. Singer, the board president, said the school does not have any money on hand to pay the state education department or its vendors what it owes.

Follow Ryan on Twitter: @rpatrickdelaney

Send questions and comments about this story to feedback@stlpublicradio.org

Ryan was an education reporter at St. Louis Public Radio.