State ethics panel probes Puna charter school

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A financially troubled Puna charter school is under investigation by the state Ethics Commission, according to a letter obtained by the Tribune-Herald.

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A financially troubled Puna charter school is under investigation by the state Ethics Commission, according to a letter obtained by the Tribune-Herald.

The April 6 letter from commission staff attorney Bonita Chang to Daniel Caluya, principal of Na Wai Ola Public Charter School in Mountain View, said the commission “is conducting an investigation regarding potential violations of the State Ethics Code.”

“The alleged violations concern salary advances and/or loans that were made to Na Wai Ola Public Charter School employees, payment of unused accrued vacation, travel per diem payments, debit card purchases, and certain other expenditures that were made using school funds,” Chang wrote.

A document attached to the letter indicates that between July 25, 2012, and Sept. 1, 2015, $64,564 in salary advances were paid to school employees. The lion’s share, $35,804, went to Caluya, who took 10 salary advance checks in varying amounts, according to the document.

“They’re not supposed to give salary advances to employees,” Sheryl Turbeville, state Public Charter Schools Commission spokeswoman, said Wednesday.

The largest advance allegedly received by Caluya, $13,000, was on July 20, 2015.

According to the document, other advance checks drawn by the school’s top administrator were for $7,000 on Dec. 22, 2014; $6,000 on Jan. 15, 2015; $2,000 on Aug. 5, 2015; $1,800 on Dec. 11, 2014, and Aug. 10, 2015; $1,500 on Nov. 16, 2012, and Dec. 7, 2012; $804 on May 13, 2013; and $400 on May 5, 2015.

Turbeville said the commission “was provided a schedule of advances made to employees and the repayment schedule showing repayment in full by the end of May 2016.”

According to the minutes of the July 9, 2015, meeting, Na Wai Ola reported to the commission the previous month that it would not be able to make its July 2, 2015, payroll. In response, the commission advanced the school a Federal Insurance Contributions Act reimbursement, about $40,000, to help the school cover payroll.

“The timing of this refund is out of the school’s control, and the Commission had sufficient funds to advance the amount pending the reimbursement. Under the Hawaii charter school law, a school that fails to make payroll is deemed to have surrendered its charter contract and is to be closed. This action by the Commission avoided that result,” the minutes state.

The intention of the law, enacted by the state Legislature last year, was to avoid protracted closures for insolvent schools, such as the one experienced at Halau Lokahi. The Oahu school lost its charter in March 2015 after struggling for months to stay open despite having no money. An attorney general’s probe is looking into alleged misuse of public funds and theft by the school’s former director.

Cash-flow problems revealed by the school’s quarterly financial reports prompted the commission to impose monthly examinations of Na Wai Ola’s finances last summer.

Na Wai Ola, which has about 200 students, receives yearly state per-pupil funding of about $1.43 million. The first and largest installment, 60 percent, occurs in late July. The school receives 30 percent in December and the final 10 percent in May. As of January, the school projected total revenue at about $1.936 million, with expenditures of about $1.949 million for the school year, a deficit of about $13,000.

Turbeville said commission staffers will meet with school officials today.

“Even with their numbers, after the July 15 payroll, they would be in the negative,” she said. “Our people did the numbers, as well, and it was in the negative, as well. When our people did the numbers, it was a negative $49,059 after July 15 payroll.”

The school’s financial report as of March 31 estimated cash on hand of $4,941 on June 30, almost a month before the school will get its first and largest state funding installment for the new school year. The school’s salary and wage estimates are $99,612 monthly for the next three months.

“Commission staff has serious concerns with the financial sustainability of the school through the July 5th payroll and possibly beyond,” wrote Yvonne Lau, the commission’s acting executive director, in an April 28 report to the Performance and Accountability Committee.

The Ethics Commission is requesting, as part of its probe, all financial reports submitted to the Charter School Commission since July 2014, all bank statements since January 2014, the application and signed agreement for a $12,000 loan issued to the school by Lei Hoolaha Community Development Financial Institution in February 2015, records of all payments for that loan — including any payments by Na Wai Ola to Caluya to reimburse him for out-of-pocket expenses — financial statements and current balance of the loan, documents concerning repayment of loans and salary advances to employees, and receipts for per diem payments, debit card expenditures and other expenditures.

The letter directed Caluya to produce the requested documents to the Ethics Commission by April 18.

“I’m not able to confirm or deny whether or not we have an open investigation because they are confidential,” Chang said when asked if the commission received the requested documents.

Turbeville said the commission was “unaware of the loans through (Lei Hoolaha).” She said if the school took out the loan, it apparently did so without getting approvals required by law from the state Department of Budget and Finance and the state attorney general.

An official at Budget and Finance said Wednesday the department had not received a loan request from Na Wai Ola.

Lei Hoolaha’s website touts itself as an entity “that provides financial training and loans to charter schools and community centers in the state of Hawaii with the overall goal of making them creditworthy. Initially our primary focus will be on Hawaiian charter schools.” The website lists bankers, educators and charter school officials as board members, and its president as Roberta Chu, Bank of Hawaii’s Hawaii Island senior vice president.

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The school said Wednesday Caluya is off-island and referred the Tribune-Herald to Melissa Costa, the board’s acting chairwoman, who didn’t return a phone call by press time.

Email John Burnett at jburnett@hawaiitribune-herald.com.

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