The state believes a now shuttered Utah charter school has no plan to repay $400,000 it owes

(Courtney Tanner | The Salt Lake Tribune) The American International School of Utah will close on Aug. 15 after years of financial struggles.

A financially mismanaged charter school in Murray has closed its doors — though it still owes more than $400,000 in funds that were meant for special education but were instead misused to pay for salaries.

The state believes the charter has no plan to repay that. And it has missed two deadlines already.

So on Tuesday, in an effort to recover the money, the Utah state Charter School Board voted to forcibly remove the institution’s director. Members unanimously decided, too, to replace him with state Auditor John Dougall to finish out the process of shutting down the school. It’s a strong move — the first time it has ever happened — and comes as some in the education community have questioned in recent years the leniency given to charters for spending.

“We are trying our best to move forward in a way that protects taxpayer funds,” said Jennifer Lambert, executive director of the charter school board.

The charter, American International School of Utah in Murray, will officially be out of business on Aug. 15, though the school year has already ended and the more than 1,300 students there have been displaced. The institution was placed on “warning status” late last year for the money it owed. And in May, its board of directors voted unanimously to close under the pressure.

Tasi Young, the executive director of AISU who stepped into the position in 2018, called his removal “inappropriate and very questionable” in an email to The Salt Lake Tribune.

“The state charter board gave no reason for the decision so it is hard to argue with it,” he added. “However, I disagree that it was the right call.”

The school is on the hook for money that it owes to the state and federal government that was supposed to be used for special education. AISU, according to a scathing audit published by the Utah state Board of Education, spent that funding instead on teacher salaries and health care benefits.

Originally, the state calculated that the charter was indebted nearly $515,000 and “did not have an adequate understanding” or documentation of its allocations. But the school appealed in May, and the total was reduced to $415,689. That amount, the state board noted, was due on June 26. It was never paid.

The school also faces potentially millions of dollars in other unspecified debt, according to its previous spokesman. The hope was to pay that money by selling assets for 10 cents on the dollar. But it had no plans to liquidate its building — which is tucked near Interstate 15 and used to be the Utah Fun Dome — and it left thousands of private, sensitive student records there after it vacated.

That is a “clear violation of the statute,” said the assistant attorney general for Utah in a letter he sent the charter on July 8. The state charter school board has since secured those files, Lambert noted, and will begin archiving them or forwarding them to the new schools where past AISU students will be going this fall.

But Young said they never left any student documents there to begin with.

The school was also required to turn over all bank account information and provide a list of assets, too. And it was prevented from leaving the building as payment to its former landlord, which the the assistant attorney general said it planned to do but “smacks of favoritism.”

He also knocked the charter for having “no plan at all” to fix its financial situation.

“About the only operations left for this charter school are the liquidation of its assets [and the payment of its debts],” he said.

The issues began almost as soon as the school was founded five years ago. Its first executive director set up the charter as a unique public-private hybrid with students in kindergarten through 12th grade — free for Utah children but requiring international attendees to pay tuition. The idea was to teach students about different cultures and provide a level of diversity not seen anywhere else in the state.

In the first three years, funds were severely mismanaged. Then the director stepped down.

Young, the recently unseated director, was not at the school during that time.

“It is absolutely devastating to see the issues from years ago, which frankly probably should have been caught back then, come back and ultimately cause the school to be closed,” Young said. “I am saddened that the state took such an adversarial position in the last few months of closure when the AISU team needed the most support.”

Over at least the past two years, the charter had started to turn around. But not fast enough. And it remains unclear how much it owes to various debtors — it has been dinged previously for bad bookkeeping. Young said the charter was “working furiously” to repay what it owes.

Closure, though, does not absolve debts.

According to its own budgeting, AISU’s liabilities potentially include $5 million owed to investors and $1.5 million for violating the terms of its charter. State Auditor Dougall will take over and try to squeeze as much money from the remaining assets — including desk, computers and furniture — and the building as possible, Lambert said.

“He’ll be able to bring resources to be able to look into all the different issues,” she added.

The Utah state Charter School Board spent more than two hours deliberating in closed session Tuesday before the vote to remove Young and install Dougall. The meeting was not previously on the schedule.

The finance committee of the Utah state Board of Education was, though, separately planning to discuss AISU on Tuesday. It deferred action.

“In light of recent developments, we will pull this item from the agenda,” said board member Laura Belnap in a prepared statement. “It is vital to ensure that our limited public education funds are carefully use and accounted for and that the board recovers allowable expenditures of state and federal funds by taking advantage of any and all legal remedies.”

Beyond finances, AISU, a relatively new school has struggled to gain its footing academically. Last year, the state said it was below average in its test scores and graduation rates. Before that, in 2017, the charter received an F grade.