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Yost refers ECOT audit findings to US attorney, county prosecutor


COLUMBUS – The Electronic Classroom of Tomorrow (ECOT) inflated the amount of time it claimed its students were engaged in learning by failing to deduct the time students were inactive online, according to an audit released May 10 by Ohio Auditor Dave Yost.

State auditors also found ECOT provided no documentation to show its students were engaged in learning during the time it claimed for payment. Despite receiving information showing only when a student was logged on – but not what they were doing – the Ohio Department of Education paid the school for 81.5 percent of its requested funding.

Auditor Yost has referred the audit and related work papers to the U.S. Attorney’s Office and the Franklin County Prosecutor’s Office for possible criminal prosecution. In addition to information obtained by auditors during the financial audit, the Auditor has preserved relevant information from ECOT’s computers and computer servers. Although the 2016-17 audit is complete, the office’s investigation continues.

“Our auditors documented that ECOT officials had the ability to provide honest, accurate information to the state and they chose not to,” Auditor Yost said. “By withholding information, ECOT misled state regulators at the Department of Education, and ECOT was paid based on that information. I believe this may rise to a criminal act.”

The audit includes a $249,962 finding for recovery related to political advertisements attacking members of the Ohio General Assembly and Ohio Department of Education. The finding is against Third Wave Communications LLC, Altair Learning Management Inc., and IQ Innovations LLC, jointly and severally, in favor of the Electronic Classroom of Tomorrow Enterprise Fund. The three companies are controlled by William Lager, the founder of ECOT.

ECOT officials declined to sign a routine letter attesting that they provided all information needed for the Auditor’s office to perform the audit, that the information was accurate and complete, and that they made auditors aware of any potential fraud or violations of relevant rules or law. As a result, auditors could not issue an opinion on ECOT’s financial statements.

Auditors found:

– Nearly 94 percent of the time ECOT submitted to support its claims for funding came from ActivTrak, tracking software that records all activity on a computer, including which websites, documents or programs a student is using and for how long. ECOT did not include this important data in what it submitted to ODE.

– The number of unique data sources or records ECOT obtained during 2017 totaled 211,298,592 while its 2016 data sources totaled 6,542,249. ActivTrak was responsible for 197,691,197 of those records. However, ECOT did not submit information to ODE detailing what students were doing during the time tracked by ActivTrak.

– With the exception of a minor variance, the Ohio Department of Education was satisfied with ECOT’s claim for time without evidence supporting the student participation in learning and without deducting idle or inactive time.

“With the level of incompetence displayed by both the school and ODE, the regulator, it’s amazing that any money went to education whatsoever,” Auditor Yost said. “The Department of Education did not require proof that the students were engaged in learning, and ECOT was more than happy to oblige in providing watered-down information that the Department inexplicably accepted, even though they knew more-detailed information was available.”

Beginning in 2013, the Auditor’s office has identified serious deficiencies in the system Ohio uses to fund virtual schools. The General Assembly made significant improvements toward accountability by passing House Bill 2 in 2015 at the Auditor’s request. “Clearly, more work is needed,’’ Auditor Yost said. “The Department of Education cannot be trusted to fix these problems. The General Assembly needs to act because what is happening remains unacceptable.”

In May 2017, an individual identifying himself as an employee of ECOT contacted the Auditor of State’s office saying he had information to show how the school was manipulating data to increase its funding. The lead staff auditor assigned to the ECOT audit contacted the individual and twice met with him. Two criminal investigators with the Public Integrity Assurance Team (PIAT) interviewed the individual, also.

The information confirmed what the audit staff knew about how ActivTrak gathered information and how ECOT might utilize the information given the weaknesses in the Department of Education evaluation process of online schools. However, until the school year was complete and ECOT submitted its FTE report, the Auditor of State could not begin compliance testing. Schools have until July 31 each year to correct their FTE submissions.

Testing by the Auditor’s staff confirmed what the auditors suspected: ECOT officials did not provide information detailing inactive time by students, nor did they report sufficient detail to prove educational engagement activity.

“I commend this individual for showing the courage to come forward and speak up,” Auditor Yost said. “What the complainant could not have known is how much our staff already knew. Our auditors knew what ECOT was collecting, the weaknesses in ODE’s requirements and procedures, how an unscrupulous operator could take advantage of these weaknesses and they created a comprehensive audit plan to sniff it out. As we suspected, ECOT took maximum advantage of the situation and may have violated the law in the process.”

Referral for possible prosecution

Auditors found no evidence that ECOT deducted idle time or the time students spent online in non-educational activities from its funding request of the state, even though ActivTrak collects this information. As a result, Auditor Yost believes school operators may have committed one or more crimes.

“ActivTrak monitors all activity and ECOT administrators had that information available to them,” Auditor Yost said. “Instead of doing the right thing and subtracting non-educational time and idle time from their students’ school day, ECOT misled the Department of Education and submitted inflated timesheets – garnering an improper windfall for the school.”

Other virtual schools that use ActivTrak report idle time separately from student learning time, giving the Department of Education discretion on whether to pay for idle time.

Yost said the prosecutors will be able to review the audit work papers and electronic data auditors collected during the financial audit. In addition, information preserved from ECOT’s computers and computer servers will be available as well.