Minnesota charter school loses $1.3 million in state funding over inflated enrollment

A charter school with campuses in Minneapolis and St. Paul lost $1.3 million in state funding after the Minnesota Department of Education investigated allegations that the school deliberately inflated its attendance figures.

The sanction against the Minnesota Internship Center was disclosed in a recent filing by the Minnesota Supreme Court, which upheld the department’s actions after the school appealed.

Education Department officials declined to provide records involving the case, but the Supreme Court filing shows that the investigation found in 2021 that the high school improperly received reimbursement for 137 students who were not actually attending the Minnesota Internship Center.

School officials “acknowledged that its previous administration had fabricated student attendance records in prior years, but claimed to have made all necessary corrections for the 2018-19 school year,” according to court records.

Tracy Eberlein, school principal and board chair, said none of the administrators involved in falsifying records continues to work at the school. The school’s executive director is one of the few holdovers and he was working as assistant director at the time, she said.

“We had a big staff turnover,” Eberlein said. “The people who weren’t doing their jobs were let go or quit on their own.”

Enrollment fraud has been a significant and growing problem among charter schools in the U.S. In the past five years, charter school leaders have been criminally charged with stealing more than $300 million in taxpayer funds by falsifying attendance figures, according to a review of cases in California, Indiana, Missouri, Oklahoma and North Carolina.

In Ohio, concerns over irregular enrollment practices by the state’s 381 charter schools prompted the state auditor to conduct a random review of 30 charter schools in 2015. The auditor found half of those schools significantly overstated enrollment, which helped spark major reforms of Ohio’s charter school system later that year.

In Minnesota, some charter school leaders have acknowledged that they initially received more funding than their schools deserved because some students switched schools after leaders submitted their initial enrollment reports to the state. Those reports are used to calculate the amount of funding those schools are able to collect.

However, state officials routinely withhold a percentage of a school’s funding until the end of the school year in order to take enrollment changes into account.

At the Minnesota Internship Center, a former employee told state officials that many of the high school’s problems were centered in its special education program, which accounts for 20% of the school’s 353 students.

“There was little to no direct instruction taking place,” the former teacher told state officials, according to a summary of the Education Department’s investigation. “Most special education classes were being run as a study hall and students would work on their regular education classwork, sleep or just hang out in the room.”

State regulators documented multiple violations of special education rules by the Minnesota Internship Center and ordered the school to make changes in the way it operated, according to the 2019 report.

State records show just 2% of the students at the Minnesota Internship Center regularly attend school, well below the state average of nearly 70% and one of the lowest attendance rates in the state. It also has one of the lowest graduation rates, with about 5% of seniors receiving their diplomas in 2023, down from 21% in 2019.

So few students have taken standardized tests that proficiency rates have not been publicly posted since 2019, when less than 4% of students were at grade level in math and about 14% were proficient in reading. No students were at grade level in science that year, state records show.

About 20% of the students are homeless, according to state records.

“We intentionally recruit students who have been pushed out of other schools, who have not been in school for years on end,” Eberlein said. “We give them a place to come that is going to meet their needs.”

After the Education Department found widespread reporting inaccuracies in attendance, the department withheld $868,793 in general education funding and another $487,753 in compensatory funds for meals, records show. The school also was put on probation by its authorizer, Pillsbury United Communities, Eberlein said.

“As far as I am aware we are not on probation anymore,” Eberlein said. “We have corrected all of the things that were in the complaint.”

Though other states have conducted far-reaching investigations of charter school funding after finding evidence of enrollment fraud, officials with the State Auditor’s Office and the Office of the Legislative Auditor said the Education Department has not asked them to find out whether other schools have inflated attendance figures in Minnesota.

“We would do that because we try to be good stewards of taxpayer money,” said Donald McFarland, spokesman for State Auditor Julie Blaha. “But we don’t have any information about any of this... That’s a great question for MDE (Minnesota Department of Education) and the new office that they have.”

McFarland was referring to the Minnesota Department of Education’s new inspector general, an office that was created in 2023 after the department was criticized for not taking stronger action to root out fraud related to the $250 million Feeding Our Future case. The new office was created by the Legislature and will conduct independent investigations of fraud, waste and abuse.

Education officials did not respond to questions on whether they are reviewing other schools to see if there are larger problems involving falsified attendance.

Staff writer Jeff Day contributed to this report.