Utah voucher program awards more than allowed for private school tuition and overspends on other costs, review finds

A Utah voucher program gave out scholarships that were $2,000 more than what some students were eligible to receive for private school tuition.

And administrators overspent significantly — well beyond what the law permits — to market and run the program.

Those findings are detailed in a new review from Utah State Auditor John Dougall that was released this week. And the oversights have come to light as the state prepares to roll out another even bigger, more costly voucher program in coming months.

The report looks mostly at the currently operating Special Needs Opportunity Scholarship, which was launched in 2021.

The program is run like a tax rebate. Donors can provide money to the scholarship fund and in return get a credit for 100% of that amount on their taxes at the end of the year. But the state also adds to the pot each year, with an allocation that comes from money paid by taxpayers.

The scholarship is open to all students from kindergarten to 12th grade. It was previously reserved for those who qualified for special needs services in public schools — which gave the program its name — but that was repealed.

The program now mostly factors in family income to award money; those with parents who make less are supposed to receive more in a scholarship. And the money is meant for those who want to enroll in private school or do home-schooling instead of attending a public neighborhood school.

Opponents say it takes money that is meant for public schools and transfers it to private companies, without the same accountability measures. Despite vocal opposition from several groups on those points during this legislative session, though, state lawmakers gave approval to another similar program — which will now be the largest school voucher program in Utah history — that will cost $42 million and is called the Utah Fits All Scholarship.

That’s supposed to come online during the 2024-25 school year.

Meanwhile, the limited review from the Office of the State Auditor shows that the existing Special Needs Opportunity Scholarship is struggling to be properly managed and financed. Auditor Dougall declined through a spokesperson to speak more about the findings, saying the report speaks for itself.

The 15-page review details shortcomings with the two programs already in operation here. Besides the Opportunity Scholarship, the state offers the Carson Smith Scholarship, which was started in 2005 and remains focused on students with special needs.

The Salt Lake Tribune has previously reported that the funds for each program are never depleted because there are never enough students interested in them who apply. In both, students typically receive scholarships to go to private school that are larger than the amount that would be allocated for them in the public school system.

The review from this week reiterates that lack of interest. Here’s a breakdown of the major findings.

Overspending by thousands on administration

For the first 18 months it was operating, according to the audit, the Opportunity Scholarship received about $3 million in donations. It gave out about half a million in scholarships, or about 15% of its total.

Under statute, it’s supposed to spend 92%, at least, of its budget on student scholarships. But that became skewed because too few students applied.

At the same time, the organization that runs it — the Children First Education Fund — overspent on marketing and administration.

It’s only supposed to spend 5% of its budget on program administration and 3% on marketing. But the Children First Education Fund spent 7.5% on administration — about $75,000 more than it should have — and 4.2% on marking — or $37,000 more than it should have — according to the auditor’s review.

(The remaining funds were either rebated back to the state, per code, or retained for future use in the program.)

The organization responded to the auditor’s report saying the numbers the state had looked at had “discrepancies.” The Children First Education Fund acknowledged it overspent where it shouldn’t have, but said it was by $18,932 total instead.

“CFEF takes seriously our obligation to remain within the statutory expense limitations, and our need to accurately report our financial accounting,” the group wrote.

The auditor’s review notes that the fiscal year 2022 data was the most recent audited financial information available, but it appears the program manager is in compliance, based on early numbers, for the fiscal year 2023.

The Children First Education Fund said the review highlighted problems and it now intends to provide a monthly financial report to the Utah State Board of Education to “serve as a checkpoint.”

Handing out too much money in scholarships

The Special Needs Opportunity Scholarship has had more interest this most recent fiscal year, giving out $4 million in vouchers. The problem that auditors found, though, is that some of those awards have been for amounts higher than what students were eligible for under the law.

Based on the formula for what students can receive based on family income, the maximum amount for a scholarship is a little more than $10,000 per year. That would be for a student who is essentially living well below the poverty level.

The Office of the State Auditor looked at 22 scholarships awarded between the Carson Smith and the Opportunity programs — or roughly 10% of the vouchers given out — for the fiscal year 2023.

Of those, it found that two scholarships — or 9.8% of the sample — were well beyond what was supposed to be awarded. The audit implies that could indicate that a larger review would reveal more issues.

Each of the students for those vouchers should have received $8,076, based on the funding formula. Instead, both received $10,095. That’s a total of $4,038 extra money handed out. Both of the errors were with the Special Needs Opportunity program.

The Children First Education Fund said it made errors with both of those scholarships. On one, it said, it based the award on the previous year’s federal poverty level criteria. But that changed recently, and so the students should’ve received a lesser amount.

The second mistake, the organization said was a “clerical error in reviewing the pay stubs from the family.” The clerk who put in the pay stubs thought the family was reporting a bimonthly salary, but it was actually a weekly amount.

The organization did not comment on whether the excess funding was clawed back.

But it said that going forward, it has started a new policy where families will have to update their information annually for all scholarship applications, and those will be verified against 1040 tax statements. “This will ensure accuracy and reduce human error,” the organization wrote.

More scrutiny is needed

To avoid issues with overspending, the auditor’s review calls for more oversight from the Utah State Board of Education.

The law for the vouchers expressly states that the state school board does not operate the scholarship programs, but it is supposed to oversee their administrators, which are selected in a state bidding process.

Where the lines of responsibility are, though, isn’t always clear. The State Board of Education, for instance, is chastised in the report for approving the application of an ineligible private school to participate in the Opportunity voucher program.

It quickly withdrew approval — after $900 in a $10,095 voucher was already paid out — but the review said the board didn’t do a thorough enough job in reviewing the qualifications of the school.

The law says to receive the voucher funding, a private school must have a physical location, contract with a certified public accountant who can audit the scholarship receipts, meet state health and safety standards and employ teachers with appropriate credentials.

According to the review: “The ineligible applicant appeared to intend to act as a middleman to allow unapproved schools to enroll scholarship students using the middleman’s approval.”

It’s unclear, though, why the state school board, instead of the scholarship administrator, is approving private school participants.

The Utah State Board of Education “should have identified the issues and exercised greater scrutiny,” the review states.

The review also says the state school board should be doing more to ensure schools approved maintain their eligibility over time, after the initial approval. “Failing to do so could result in previously eligible schools becoming ineligible but still receiving scholarship funds,” the review states.

Sydnee Dickson, the state superintendent, said in a letter in response that she “appreciates the recommendations as opportunities for improvement.” And she pointed out that the state board discovered on its own that the one school was ineligible and had been misleading in its application, prior to the auditors coming in.

Moving forward, she said, the state school board will institute a two-level review for all applications, including an in-person site visit to “ensure the private school is an actual school with a facility and faculty and students.”

Dickson pushed back slightly on the recommendation for more oversight from the state school board on private school eligibility. The state school board is responsible for overseeing all public schools in the state, and monitoring private schools for compliance will require “resources that come with a cost,” she said.

She promised to add the Special Needs Opportunity Scholarship schools into a three-year rotation, which is already set up for Carson Smith Scholarship schools, where state officials monitor eligibility.

Are home school students eligible for the vouchers?

The review also raises the question of whether home school students are eligible for the Special Needs Opportunity Scholarship. That was the intent behind the legislation when it was introduced, the auditors acknowledge, but the way the law was actually written leaves it fuzzy.

Still, the scholarship has been awarded to home school students — and the percentage has grown every year.

For the fiscal year 2022, in the first round of scholarships awarded, nine vouchers went to kids doing home schooling. That jumped to 188 students for this current fiscal year, 2024.

Home school students are currently receiving 35.6% of the scholarships, by number, and 40.2% by amount — more than $1 million.

The auditors said the Children First Education Fund is properly monitoring and has controls in place to check how the money is being spent on home schooling, requiring parents to submit documentation for expenses. That can include allowances for educational therapy, textbooks or for an online program.

But the review does recommend that the Utah Legislature revise the statute to be more clear.

• Correction: This story was updated to remove a reference to former Rep. Kim Coleman, who founded the Children First Education Fund but did not run the legislation for the Special Needs Opportunity Scholarship.