Education Still Can't Verify Who Runs Its Charter Schools
Summary
In January 2022, GAO -- Congress's independent auditor -- found that the federal data the Department of Education relies on undercounted, by more than half, how many virtual charter schools have handed financial control to outside management companies: states reported 33%, GAO's own review found 56.1%. Education agreed to find out why and fix it. As of GAO's July 2026 letter to the Secretary, that fix remains one of just ten priority recommendations the department has not implemented -- one of only three problems GAO says needs the Secretary's personal, timely attention.
What a management-organization contract actually hands over
A charter management organization, or CMO, runs some or all of a charter school's operations -- often everything from curriculum and staffing to the school's books -- under contract with the school's own board. GAO's report⧉ found nearly 42% of all virtual charter schools nationwide were under a for-profit CMO's management as of its 2021 review, and virtual charter schools account for about 70% of all students enrolled in virtual schools. The risk isn't hypothetical: Education's own officials told that when a school cedes too much control to a management organization, it can lose the ability to ensure federal grant money is spent as required -- and that risk is amplified when the manager is a for-profit company, because its interest in profit can outweigh its interest in complying with federal program rules.
The Department was warned about this in 2016
This isn't a new blind spot. Six years before 's 2022 finding, Education's own Office of Inspector General⧉ -- the department's internal watchdog, empowered by statute to audit it -- reviewed CMO relationships at 33 charter schools across six states and found 22 of them, two-thirds, had internal-control weaknesses tied to those relationships: conflicts of interest, related-party transactions, and boards that hadn't kept enough separation of duties from the companies running their schools. 's verdict on the department itself was blunt: it "did not have effective internal controls to evaluate and mitigate the risk that charter school relationships with CMOs pose to Department program objectives," in part because officials didn't think CMO risk was materially different from the risk posed by any other federal grantee.
View data as table
| For-profit share of management orgs, per EDFacts | 34% | state-reported |
|---|---|---|
| For-profit share of management orgs, per GAO | 73.9% | GAO's independent estimate |
| Schools EDFacts wrongly listed as non-profit management | 7 | per GAO's comparison |
Education agreed to fix it. Four years on, it hasn't.
When published its 2022 findings, it made three recommendations, including that the Secretary of Education "identify the factors that cause underreporting and misreporting of information on management organizations that contract with charter schools" and help states report accurate data. Education agreed with all three. That agreement is what calls a recommendation being "open" -- the department accepted the finding and committed to act, but nothing legally compels it to follow through, and checks back and tracks the gap between agreement and action every year.
As of GAO's July 1, 2026 letter⧉ to Secretary Linda McMahon, Education had 111 open recommendations in total, 10 of them designated priority -- meaning judges their implementation could realize large savings, eliminate mismanagement, or close a high-risk gap. Managing CMO financial risk is one of just three areas the letter singles out as needing the Secretary's own "timely and focused attention," alongside the FAFSA student-aid system and protecting students' personal data. The letter sets no deadline; it simply repeats, four and a half years after the original recommendation, that the reporting gap has not been closed.
The takeaway
- Education is managing a system it cannot accurately measure. The government's own two counts of virtual charter schools' management-company contracts are 23 points apart, and the state-reported version -- the one that feeds federal oversight -- is the smaller number.
- The department has known about this specific mechanism since at least 2016. 's internal-control audit found two-thirds of its case-study schools had CMO-related weaknesses years before quantified the reporting gap nationally.
- Agreeing to fix a problem and fixing it are different things tracks separately. Education agreed with 's recommendation in 2022; as of July 2026, it remains open, with no date attached for when the data will be reliable.
's 56.1% and 73.9% figures are survey estimates from a generalizable sample (95% confidence intervals of +/-7.9 and +/-11.5 percentage points, respectively), not a full census -- but itself describes the gap against EDFacts as statistically significant. 's 2016 finding (22 of 33 schools) comes from a judgmentally selected six-state case-study sample, not a national estimate, and predates 's 2022 review by six years; it is cited here as the earliest documented instance of the Department itself acknowledging this class of risk, not as a national rate. None of the 33 schools in 's sample received Department grants directly -- the federal-funds risk in both reports runs through state- and district-administered dollars passed through to charter schools, not through direct federal grants to the management companies themselves.
Sources(3) ▾
- U.S. Government Accountability Office, K-12 Education: Department of Education Should Help States Address Student Testing Issues and Financial Risks Associated with Virtual Schools, Particularly Virtual Charter Schools (GAO-22-104444) (2022-01-31) — 's nationally representative review (July 2020-January 2022) of virtual charter school academic outcomes and financial oversight, including its own independent estimate of how many virtual charter schools contract with management organizations versus what states reported to Education's EDFacts system. Source for the reporting-gap figures, the three recommendations (one on the management-organization data gap), and Education's 2022 agreement with all three. Fetched directly as a PDF. gao.gov · original document
- U.S. Government Accountability Office, Priority Open Recommendations: Department of Education (GAO-26-108975) (2026-07-01) — 's annual priority-recommendations letter to the Secretary of Education, dated July 1, 2026 and publicly released the same week. Source for Education's current open-recommendation count, the status of the 2022 management-organization recommendation, and 's framing of it as one of three areas needing the Secretary's personal, timely attention. Fetched directly as a PDF. gao.gov · original document
- U.S. Department of Education, Office of Inspector General, Nationwide Assessment of Charter and Education Management Organizations, Final Audit Report (ED-OIG/A02M0012) (2016-09-29) — Education's own Inspector General audit of charter schools' relationships with charter and education management organizations (CMOs), covering case studies in 6 states and 33 charter schools plus a review of the Department's internal controls. The earliest primary source establishing that this specific oversight gap -- the Department's inability to see and manage CMO-related risk -- was flagged internally nearly a decade before 's 2022 finding. Fetched directly as a PDF via oversight.gov, the federal inspector-general report mirror. oversight.gov · original document
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The Department of Education does not reliably know which of the country's virtual charter schools have turned their finances over to an outside management company -- or whether that company is a for-profit or a non-profit. GAO⧉, Congress's independent auditor, found in January 2022 that states self-reported to Education's EDFacts database that 33% of virtual charter schools had a management-organization contract; 's own review of school websites, financial records, and management-organization filings put the real figure at 56.1% -- a 23-point undercount. Of the contracts that do exist, states told Education just 34% were for-profit; found 73.9% were.