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1. Superintendent of Instruction for the California schools, Jack O'Connell, initiated an audit more than a year ago into the financial issues of the Options for Youth and Opportunities for Knowing (OYO) schools. The OYO is a chain of independent research study charter schools within the California schools system, which are privately run however funded by the state. The OYO California schools serve students who have left of the conventional high schools. They presently have about 15,000 trainees in 40 storefront locations throughout the state. These California schools students do the majority of their work at home, meeting with teachers two times a week. According to state records, trainee achievement test and high school exit examination scores are above average, as compared to other alternative high schools within the California schools system. According to a Los Angeles Times short article of August 10th, only 11 percent of OYO trainees finished throughout the 2003-2004 academic year. The remainder of trainees that left school that year either dropped out, were expelled, or moved to other schools. The California schools' audit was carried out by the Financial Crisis and Management Assistance Group, who concluded their analysis and provided their findings in a report that was launched in August 2006. The audit cites accounting defects, overpayments by the state, disputes of interest, nepotism, extreme compensation, and mixing personal business concerns with public schools. The OYO was founded and still run by John and Joan Hall, previous instructors from Hollywood High School. They have completely cooperated with the California schools' audit, however conflict many 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 representative, Stevan Allen, mentioned that this is a typical practice for charter schools in the California schools system and is a genuine method for compensating school personnel for longer days and year-round schedules. California schools superintendent O'Connell thinks teachers must be counted only as one full-time position each. The auditors disagreed, citing that standard California schools instructors invest much less time working each year than those at OYO. However, the auditors thought the 1.92 amount is inflated. This example, alone, represent majority of the $57 million overpayment. Furthermore, the report kept in mind several questionable expenditures. One example of unrestrained costs, given by the Times was an $18,000 staff party held at Disneyland. Allen safeguarded that event as an effort at relationship building in between personnel members, who are scattered throughout the state. He noted that the expenses was less than $50 per employee. • Disputes of Interest and Mixing Private Company with Public Schools. Besides the charter schools, the Halls own and run numerous personal organisations that offer products and services to schools. The Times noted that the Alternatives in OYO was the nonprofit uso car donation part of the setup, with the Opportunities part being for- profit. The audit calls this practice and setup into concern. • Extreme Settlement. The audit likewise questions the combined salaries for the Halls, which is $600,000 every year. The report states that it might be excessive for the amount of time the couple in fact works. • Nepotism. The Halls created a separate charity with $10.8 million of the California schools' financing, called Pathways in Education. The charity is run by their daughter, Jamie Hall. Little money has actually been invested towards education so far. The Halls compete that they previously had actually asked for guidance on their operation from the California schools often times, however never received any reaction. Therefore, they attempted to follow California schools requirements as best they might with their understanding of the policies. Even O'Connell conceded that none of

2. the pointed out practices are prohibited. The audit advises the California schools should try to recover the $57 million in overpayment from the OYO. O'Connell has actually sent the report to the state's attorney general of the United States's office for review and any required action.