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California State Auditor Report Number: 2016-117

Alliance College‑Ready Public Schools
The Nonprofit Did Not Spend Public Funds or Divert Classroom Resources in Response to Unionization Efforts

April 13, 2017 2016-117

The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814

Dear Governor and Legislative Leaders:

As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit report concerning our review of the Alliance College‑Ready Public Schools’ (Alliance) management organization and the charter schools under its operational jurisdiction.

In March 2015, a group of teachers and counselors working at Alliance charter schools announced their decision to organize a union and join the United Teachers Los Angeles (UTLA). In that same month, the Alliance home office—a private nonprofit corporation—began to take action in response to these unionization efforts and created a special account to track private donations and expenditures related to these purposes. Although the Alliance home office spent nearly $1 million from this account on consulting, legal expenses, and flyers and letters to parents and teachers, it did not use public funds for these activities. Further, we noted that Alliance did not divert funds from classroom activities to pay for its response to unionization efforts. In addition, the Alliance home office used private funds to reimburse its schools for any time principals or school personnel spent in response to the unionization effort—such as time spent distributing informational materials or attending training on how to respond appropriately to UTLA organizers.

As part of its response to the unionization efforts, the Alliance home office shared alumni data with the California Charter Schools Association, which then used this information to conduct outreach. The Alliance home office maintained that a provision in federal law related to the use of contractors allowed it to disclose these records without prior consent. However, we found that federal requirements would not permit Alliance to rely on this provision because, prior to correcting this problem for the 2016–17 school year, Alliance had failed to provide students and parents with annual notifications of their rights associated with their confidential information. Moreover, although Alliance had a process for parents to opt out of having their student’s directory information shared with third parties, it only recently began requiring the retention of those opt-out letters; therefore, we could not determine whether Alliance honored all opt‑out requests. Finally, we found that Alliance did not always follow its policies and procedures, did not establish adequate segregation of duties in its procurement process, and did not require retention of vendor conflict‑of‑interest disclosure forms.

Respectfully submitted,

State Auditor

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