Superintendent of Instruction for the California schools, Jack O'Connell, initiated an audit more than a year ago into the fiscal concerns of the Options for Youth and Opportunities for Learning (OYO) schools. The OYO is a chain of independent study charter schools within the California schools system, which are privately run but funded by the state.

The OYO California schools serve students who have dropped out of the traditional high schools. They currently have about 15,000 students in 40 storefront locations across the state. These California schools students do most of their work at home, meeting with teachers twice a week. According to state records, student achievement test and high school exit exam scores are above average, as compared to other alternative high schools within the California schools system. According to a Los Angeles Times article of August 10th, only 11 percent of OYO students graduated during the 2003-2004 school year. The remainder of students that left school that year either dropped out, were expelled, or transferred to other schools.

The California schools' audit was conducted by the Fiscal Crisis and Management Assistance Team, who concluded their analysis and presented their findings in a report that was released in August 2006. The audit cites accounting defects, overpayments by the state, conflicts of interest, nepotism, excessive compensation, and mixing private business concerns with public schools.

The OYO was founded and still operated by John and Joan Hall, former teachers from Hollywood High School. They have fully cooperated with the California schools' audit, but dispute most of the findings.

Some examples from the audit report are:

" Accounting Defects and Overpayments. The Halls count each of their teachers as 1.92 full-time positions. Their spokesperson, Stevan Allen, stated that this is a common practice for charter schools in the California schools system and is a legitimate method for compensating school staff for longer days and year-round schedules. California schools superintendent O'Connell believes teachers should be counted only as one full-time position each. The auditors disagreed, citing that traditional California schools teachers spend much less time working each year than those at OYO. However, the auditors believed the 1.92 amount is inflated. This example, alone, accounts for more than half of the $57 million overpayment.

Additionally, the report noted several questionable expenses. One example of unrestrained spending, given by the Times was an $18,000 staff party held at Disneyland. Allen defended that event as an attempt at relationship building between staff members, who are scattered across the state. He noted that the costs was less than $50 per staff member.

" Conflicts of Interest and Mixing Private Business with Public Schools. Besides the charter schools, the Halls own and operate several private businesses that sell materials and services to schools. The Times noted that the Options in OYO was the nonprofit part of the setup, with the Opportunities part being for-profit. The audit calls this practice and setup into question.

" Excessive Compensation. The audit also questions the combined salaries for the Halls, which is $600,000 annually. The report states that it may be excessive for the amount of time the couple actually works.

" Nepotism. The Halls created a separate charity with $10.8 million of the California schools' funding, called Pathways in Education. The charity is run by their daughter, Jamie Hall. Little money has been spent toward education thus far.

The Halls contend that they previously had requested guidance on their operation from the California schools many times, but never received any response. Thus, they tried to follow California schools requirements as best they could with their understanding of the policies. Even O'Connell conceded that none of the cited practices are illegal.

The audit recommends the California schools should attempt to recover the $57 million in overpayment from the OYO. O'Connell has sent the report to the state's attorney general's office for review and any necessary action.