Audit: Virtual school paid millions to founder’s company

A 2015-16 audit report for Indiana Virtual School was released last week, and it shows the school continued to pay millions of dollars to for-profit companies run by the school’s founder and his son.

Chalkbeat Indiana laid out the details of this arrangements in an investigation published in October 2017. The online charter school, while organized as a nonprofit entity, paid management, administrative and technology fees to AlphaCom Inc., a business run by school founder Thomas Stoughton.

It also paid A Simple Reminder, a business run by Stoughton’s son, for IT and marketing services. Thomas Stoughton, the AlphaCom head, also served as chairman of the Indiana Virtual School board.

In 2015-16, according to the audit report, the school was charged:

  • $6,156,179 by AlphaCom.
  • $1,255,000 by A Simple Reminder.

That’s the bulk of the $9.8 million that Indiana Virtual School received from the state in 2015-16 and almost all the money that it spent. Nearly all the school’s revenues came from the state budget.

The school paid $270,194 in authorizing fees to Daleville Community Schools, the small public school district that is the charter school’s authorizer.

It paid only $832,892 – 11 percent of its expenditures – for instructors. As Chalkbeat reported, Indiana’s other online charter schools spend about two-thirds of their expenses on instruction.

In 2015-16, Indiana Virtual School received an F on Indiana’s school-grading scale. Twelve percent of its students in grades 6-8 and 9.5 percent of its 10th-graders passed state ISTEP exams that year. Its high-school graduation rate was 5.7 percent.

The audit report says that Thomas Stoughton sold AlphaCom in July 2016 and resigned from the Indiana Virtual School board in October 2016. The current president of AlphaCom, according to the Indiana Secretary of State’s office, is Christopher King. On LinkedIn, King identifies himself as also the owner of Castle Defense Group, a company that provides firearms and terrorism defense training.

The report notes that the operator of the school opened a second online charter school, Indiana Virtual Pathways Academy, in 2017. It says the two schools received a total of $56.6 million in state funding in 2016-17 and 2017-18 and anticipate receiving another $45.5 million during the current school year.

This audit report should have been filed two years ago. Failure to file timely reports was one factor cited when Daleville Community Schools took steps last months to revoke the charters of the two virtual schools. Bigger concerns, however, had to do with the schools’ performance: Reports indicated over 1,500 students enrolled last year at Indiana Virtual Pathways Academy but did not sign up for any classes, and 2,000 students enrolled in Indiana Virtual School but did not complete any credits.

However, the Daleville school board voted last week to give the charter schools more time to respond to allegations against them. A board hearing is now scheduled in June.

Meanwhile, state lawmakers are working on legislation that would increase regulation of online schools, including a provision that would prevent public school districts like Daleville from authorizing them.

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1 thought on “Audit: Virtual school paid millions to founder’s company

  1. Pingback: Reckoning for virtual schools | School Matters

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