State Places Sequoia Pathway Operator Under Financial Scrutiny Amid Deficit and Compliance Issues

The Arizona State Board for Charter Schools has initiated “Financial Intervention” for Edkey, a major charter school operator, due to alarming results from a recent audit.

Operating over a dozen schools across Arizona, including Sequoia Pathway Academy in Maricopa, Edkey disclosed a staggering deficit of nearly $10 million and expressed “substantial doubt” about its future operations.

In a communication with InMaricopa, Arizona State Board for Charter Schools Executive Director Ashley Berg detailed the board’s forthcoming actions.

Berg emphasized, “The ASBCS takes the findings in Edkey’s audit seriously, particularly concerning its financial position and compliance. We have established procedures to address such situations.”

The ASBCS outlines in its Operational Guidance that Financial Intervention occurs when a charter fails to meet financial performance standards, including insufficient cash reserves or continuous deficits.

As part of Financial Intervention, Edkey must submit a written agreement within 30 business days to confirm that its governing board has reviewed the audit. Additionally, the school is mandated to file quarterly financial reports, including balance sheets and income statements.

These reports are due for the quarters ending in September, December, March, and June, and will be scrutinized by board staff to evaluate the charter’s financial health. The initial report was due this past Monday.

Should Edkey fail to rectify its financial issues for two consecutive fiscal years, it will be placed on probation. This could lead to increased state board oversight and potential revocation of its charter if no improvements are noted.

A performance audit conducted in 2023 highlighted weak financial oversight by the ASBCS, allowing schools like Edkey to ignore financial difficulties until they escalate.

Moreover, a report by the Arizona Auditor General criticized the board for not adequately identifying at-risk charter schools in time to intervene, relying on short-term financial data rather than tracking long-term trends. The report also pointed out a lack of investigation into declining student enrollment figures.

Jim Hall, a prominent critic of charter schools and head of Arizonans for Charter School Accountability, expressed concerns regarding financial discrepancies between Edkey’s reports and disclosures made to bondholders.

“The auditors claim no fraud, but I’m preparing additional complaints regarding inconsistencies,” Hall told InMaricopa.

Hall previously lodged a complaint against Edkey in February concerning enrollment figures.

In an effort to boost enrollment, Maricopa parents reported that Edkey is offering $100 Amazon gift cards for student referrals to the struggling Sequoia Pathway Academy.