Education Fraud at the Margins: Using the Federal False Claims Act to Curb Enrollment Abuses in Online, For-Profit K–12 Schools

By Chapman, Erin R. | Michigan Law Review, February 2018 | Go to article overview

Education Fraud at the Margins: Using the Federal False Claims Act to Curb Enrollment Abuses in Online, For-Profit K–12 Schools


Chapman, Erin R., Michigan Law Review


Introduction

In online charter schools across the country, enrollment numbers are not adding up. The situation looks something like this: A well-established education management organization (EMO) partners with a state or local school district to open a new online charter school. The school aggressively recruits students away from traditional, brick-and-mortar schools by highlighting the flexibility online learning provides. Students and families who are dissatisfied with their current schools sign up. These students include a few high achievers and athletes but are mostly students who were overlooked by or pushed out of traditional schools-among them, students with behavior records and students on the verge of dropping out.

School starts and classes begin. Most students log in and complete all their classes, but some do not. Others log in only occasionally. On the one day a year that the state requires the school report its enrollment, the new school reports that all the students it recruited are enrolled in its program, including the ones who have only completed a couple of class sessions. Based on the numbers the school reported, it receives state and federal funding proportional to the number of qualifying students on the rolls.

A little while later, some of the students who struggled in their physical school find themselves struggling with their new online school as well-a few of them even stop logging in all together. Without daily attendance or teachers to note the absence, the students fall increasingly behind. And without a system in place to track enrollment, the online charter does nothing either to get the students to log back in or to adjust its reported enrollment numbers.

That means that a portion of the school's students have stopped receiving any educational benefits from the school. But, because the state funding associated with that student was already disbursed, the online provider continues to be able to use-and profit from-the funds the state allocated for the students' education.

This scenario has played out in varying degrees in schools across the country. School district officials in Stockton, California, for example, closed Renew Virtual Academy in May 2015 after they received information that the school was overreporting the number of students enrolled in the school by "roughly double."1 Two years earlier, a whistleblower at a Pennsylvania school alleged that an online charter kept one special education student enrolled in order to continue receiving state special education funds, despite the fact that the student missed 140 consecutive days of school.2 Another whistleblower in Ohio revealed that an online charter school kept 400 truant students enrolled.3 The recent growth in online schools4 combined with current count practices and funding levels make such schools particularly susceptible to abuse. Despite these concerns, regulators are not currently using any consistent strategy to deal with enrollment fraud in K-12 online charter schools.5

This Note explores options to regulate enrollment fraud at online charter schools to ensure that public money spent on online education supports students and not for-profit providers. This Note begins by providing context on online charter school enrollment and funding. Part I describes the unique potential for enrollment fraud in online charter schools and why such fraud is a problem that deserves the attention of plaintiffs and prosecutors. Part II surveys the federal False Claims Act (FCA) and chronicles the emergence of expanded theories of FCA liability in the health-care context that have made the statute a more potent waste-fighting tool. Part III analyzes the only FCA case to date brought against an online charter for enrollment issues and suggests that courts are open to hearing similar cases. Additionally, Part III argues that plaintiffs and prosecutors could use the expanded theories of false claiming pioneered in health-care cases to curb enrollment abuse. …

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Education Fraud at the Margins: Using the Federal False Claims Act to Curb Enrollment Abuses in Online, For-Profit K–12 Schools
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