The Arizona State Board for Charter Schools announced Edkey, one of the state’s largest charter schools, is being placed under “Financial Intervention” following a recent audit that raised significant concerns about the charter school operator’s fiscal stability and compliance.
Edkey, which operates Sequoia Pathway Academy in Maricopa along with more than a dozen schools statewide, reported a nearly $10 million deficit and acknowledged “substantial doubt” about its ability to continue operations.
In an email to InMaricopa yesterday, Arizona State Board for Charter Schools Executive Director Ashley Berg outlined the board’s next steps.
“The ASBCS takes the findings in Edkey’s audit seriously, particularly the concerns regarding Edkey’s financial position and overall compliance,” Berg said. “The board has established procedures outlined in its Financial and Operational Performance Frameworks, which guide how we respond in situations such as this.”
According to the ASBCS Operational Guidance, Financial Intervention is a formal process triggered when a charter school fails to meet required financial performance standards, such as having too little cash on hand or operating with ongoing deficits.
Once under a formal Financial Intervention, Edkey is required to submit a written agreement within 30 business days confirming that its governing board has reviewed the audit and has a plan to correct its failures. EdKey is required to file quarterly financial reports, including unaudited balance sheets, income statements, budget comparisons and financial performance calculations.
These reports are submitted for the quarters ending in September, December, March and June, and are reviewed by the state board staff for accuracy and progress. The first report was due Monday. ASBCS uses these filings to gauge financial health of the charter.
Like all charters in the process, if EdKey remains in financial failure for two consecutive fiscal years, it goes on probation. From there, the state board gets more involved in the day-to-day operations and decides whether the charter can continue operating. In the most serious cases, the process can lead to a revocation of the charter altogether.
A 2023 performance audit of the ASBCS found that the board’s weak financial oversight practices may allow struggling charter schools, like Edkey, to go unchecked until their financial issues becomes severe.
According to a 2023 report by the Arizona Auditor General, the board’s Financial Performance Framework fails to identify charter schools at risk of closure in time to stop it. The report criticized the ASBCS for relying on single-year financial snapshots instead of tracking long-term trends like cash flow and net asset declines. It also found that the Board lacked effective procedures to investigate steep drops in student enrollment, another key warning sign of financial trouble.
Outspoken charter school critic Jim Hall, who runs Arizonans for Charter School Accountability, said today that he’s flagged large financial differences between Edkey’s annual financial report and what they told their bondholders, through Electronic Municipal Market Access, or EMMA, filings.
“The auditors claim no fraud, but I’m still preparing an additional AG and SEC complaint regarding … inconsistencies,” he told InMaricopa.
Hall last lodged a complaint against EdKey in February over the number of enrolled students.
Maricopa parents told InMaricopa that Edkey is offering $100 Amazon gift cards if they refer other students to the struggling Sequoia Pathway.
