The almost-300 page indictment alleged a conspiracy to misappropriate public funds by falsely claiming and obtaining apportionment funding for students attending A3 charter schools when the students were not attending or receiving any services. According to the indictment, the two executives paid private schools, high schools and youth programs for enrolling students in a summer program or in an A3 charter school the students never actually attended, for which A3 collected approximately $2,000 per student in state funding. A3 also collected state funding multiple times for the same pupil by transferring students from one nonclassroom-based charter school to another without parental consent. The indictment states that McManus and Schrock used state funds for their own personal benefit, including for their own investment opportunities, rather than investing the funds generated by their fraudulent attendance scheme back into A3 charter schools.

The provisions of AB 1316, if enacted, would impose robust new oversight responsibilities on chartering authorities, including requiring them to certify charter school average daily attendance and perform new auditing obligations. In addition, AB 1316 as proposed revises independent study requirements for all local educational agencies and ends multitrack year-round calendars unless approved by the State Board of Education.

Many of the provisions of this new charter reform bill address specific issues that were raised in People v. McManus. For example, beginning in the 2022–23 school year, AB 1316 would prohibit multitrack, year-round calendars. The author’s analysis states that this provision is directed at nonclassroom-based charter schools that may have used such calendars to move students between schools in the same year and collect ADA more than once for one student per year. As another example, the bill would base a school district’s capacity for authorizing nonclassroom-based charter schools on the district’s ADA (the lower the ADA, the lower the required ADA for each nonclassroom-based charter school authorized by the district). This appears to address the charge in People v. McManus that A3 had targeted smaller districts because they had less capacity for oversight, especially for large ADA nonclassroom-based charter schools, allowing A3 to engage in misappropriation of funds.

• Revises provisions regarding the calculation of ADA for charter school nonclassroom-based instruction. For example, when pupils are engaged in classroom-based instruction for only 19 percent of their attendance or less, the reported ADA for funding their nonclassroom-based attendance will be reduced by 30 percent.
• Requires charter schools to adhere to designated minimum school day requirements contained in statutes that now apply only to school districts.
• Requires nonclassroom-based charter schools to provide classroom-based instruction (e.g., a parallel site-based program) for those pupils for whom the charter school determines must return to another program in the charter school due to the existence of conditions that would be a basis for revocation of the pupil’s independent study agreement. These conditions include lack of satisfactory educational progress and/or missed assignments or failure to attend.
• Requires the governing body of each charter school to either provide for an audit of the books and accounts of the charter school, including an audit of income and expenditures by source of funds, or make arrangements with the chartering authority to provide for that audit.
• Requires the State Board of Education to adopt new regulations setting forth criteria for the determination of funding for nonclassroom-based instruction.
• Creates the Office of Inspector General department within the California Department of Education. The Inspector General would oversee and supervise audits and investigations in CDE programs, including SBE-authorized charter schools.

• Limits the total size of nonclassroom-based charter schools that a school district may authorize based on the ADA of the school district.
• Requires chartering authorities to certify and verify nonclassroom-based charter schools’ reporting of ADA.
• Adds oversight duties for charter authorizers specific to nonclassroom-based charter schools, including verifying: (1) an appropriate method exists for teachers to determine the time value of pupil work product used to compute ADA; (2) the ADA-to-certificated teacher ratio used by the charter school; and (3) the ADA at the first, second and annual principal apportionment reporting.
• Requires each chartering authority to provide for an audit of all funds of authorized charter schools.
• Requires chartering authorizers to reviewing the audit exceptions contained in an audit of a charter school and, by May 15, certify to the county superintendent of schools, the State Superintendent of Public Instruction, and the State Controller that the audits of authorized charter schools for the prior fiscal year have been reviewed, any audit exceptions corrected by the charter school have been identified, or that the charter school has prepared an acceptable plan for their correction.

• Sets a specific teacher-to-pupil ratio for independent study programs for all LEAs, including charter schools, at 1 to 25 or less, unless otherwise specified in a collective bargaining agreement.
• Requires contact between the supervising independent study teacher at least once every three school days. The contact must be in person, or by any other live visual and audio connection.
• Prohibits all LEAs, including charter schools, from claiming ADA for independent study for students residing in adjacent counties.
• Requires charter schools to implement independent study policies pursuant to Education Code 51747 (already required for school districts and county offices of education).

• Beginning in 2022–23, prohibits school districts, county offices of education and charter schools from operating a multitrack year-round calendar unless authorized by the SBE.
• The SBE will only authorize the operation of multitrack year-round calendars if a school district, county office of education or charter school is able to demonstrate impacted facilities.

As AB 1316 makes its way through the legislative process, CSBA will keep its members updated regarding the bill’s status. People v. McManus appears to be largely resolved, as McManus and Schrock have pleaded guilty — with pleas that include retuning $210 million in funds, houses and shares in third-party companies they obtained through the A3 scheme, and a sentence of up to four years in prison. However, the case has not been resolved as to all of the defendants and McManus and Schrock have not yet been sentenced based on their plea.

Please note that the information provided here by CSBA is for informational purposes and is not legal advice. Please contact your district or county office of education’s legal counsel for legal questions related to this information.