Rocketship, a publicly funded chain of private charter schools, ran afoul of the law by blowing past deadlines to submit financial audits for two years in a row to the Santa Clara County Office of Education. Per state Ed Code, that alone puts the franchise at risk of losing its charter at all eight schools authorized by SCCOE.

Worse yet, a hearing to address the lapse brought another serious violation to light.

Failure to ensure proper teacher credentialing at three of Rocketship’s 13 Bay Area charter schools resulted in a combined $400,000 penalty. In response to deficient compliance audits at Rocketship’s Spark and Alma academies in San Jose and Redwood City Prep on the Peninsula, the California Department of Education will withhold $238,000, $46,000 and $117,000, respectively, from the schools’ next-year budgets.

SCCOE trustee Anna Song grilled Rocketship officials at a board meeting last week, asking how a company that makes national headlines for its rapid expansion and ostensibly reformist ambitions could falter on core accountability measures. A similar issue recently arose about an hour north in the Antioch Unified School District, which put Rocketship on notice for failing to submit its yearly site-specific financial audits by the same Dec. 15 deadline required by law.

From the dais on March 6, Song reminded the room how Rocketship co-founders Preston Smith and John Danner launched their enterprise here in Silicon Valley, testing their concept of software-assisted learning at local low-performing schools before going on to pioneer a rapid expansion of the charter movement.

Preston and Danner had a lofty aim and simple strategy: to boost test scores by slashing labor costs. And Song said they promised to stay accessible to SCCOE, whose historically charter-friendly governing board helped jumpstart Rocketship’s dizzying ascent.

“This noncompliance happens,” she granted, “but it didn’t happen to a small charter school where you could expect that oversight could happen. It happened to Rocketship. It happened to Rocketship. … I’m trying to grasp how this big [organization] … who had the audacity to ask for 20 charter schools all at once had this mistake happen.”

Rocketship officials characterized the mishap as symptom of the organization’s increasing scale and complexity. In just the Bay Area, Rocketship serves 6,600 students at 13 sites through charters granted by several local school districts. The vast majority of those sites and students are here in the South Bay.

“Our failure was breaking your trust in our word and our commitment to comply with the letter of the law and our MOU,” Rocketship San Jose Regional Director Maria O’Hollearn told SCCOE trustees. That she brought to the meeting two C-suite Rocketship officials—namely Chief Financial Officer Keysha Bailey, Chief Talent Officer Lynn Liao—“shows the seriousness of delivering our audits late for a second year,” O’Hollearn added.

In an email to San Jose Inside, Bailey echoed O’Hollearn’s remorse. “We deeply regret the delays in our audit but are now 100 percent confident that we have the systems and staff in place to meet our needs as well as ensure we are fulfilling our compliance requirements on time,” she wrote. “Additionally, our auditor has recognized the need to dedicate a larger team and more senior staff to our annual audit moving forward.”

SCCOE trustee Claudia Rossi amplified Song’s concerns, which she said call into question Rocketship’s stewardship of public money. “The tardiness of the financials, to me, is suspect because a budget is a living document,” Rossi said. “It’s not something you look at once or twice a year. It is adjusted, revised and presented to the board.”

SCCOE Charter School Department Director Khristel Johnson, whose five-member team oversees dozens of charters in addition to Rocketship’s, declined to directly address the late audits or credentialing oversight. But in written responses to questions about Rocketship’s compliance channeled through SCCOE’s communications team, officials said they’re still in the process of gathering information from the charter franchise.

“We have asked they submit a reason for the 2017 and 2018 audit delays and the changes they will make to their auditing practices to adhere to the timeline,” SCCOE officials said. “Late audits can be a symptom of systemic issues.”

Liao said she’s confident that Rocketship has corrected course on both the late fiscal reporting and the lapsed credentialing. Though the California Education Code grants SCCOE the right to revoke charters over such matters, most revocations involve issues more directly related to students, such as academic performance.

The auditing issue will be remedied now that Rocketship has formed a dedicated committee to oversee the yearly reports, she explained. And the credentialing will be kept in check because of improved communication policies requiring teachers to keep supervisors in the loop about key deadlines.

The latter problem, Liao said, speaks to a larger challenge for charters and public schools alike: a widespread teacher shortage, which is all-the-more dire in Silicon Valley because of the exorbitant cost of living. She pointed to a 2018 study by The Learning Institute, in which 75 percent of California school districts surveyed reported being unable to fill all their positions with fully credentialed teachers at the start of each academic calendar.

“This is a challenge facing all public schools in California, including Rocketship,” Liao said. “Over the past several years, we have been working to develop new pathways to education and investing in new systems and supports to ensure 100 percent of our teachers have a valid credential 100 percent of the time.”

SCCOE trustee Joe DiSalvo, a retired principal and one of the most vocal local champions of the charter movement, said at the March 6 board meeting that he understands those challenges and can see how credentialing oversights could happen.

Brett Bymaster, a local watchdog who’s been highly critical of Rocketship, was less sympathetic, saying the company’s inability to comply with basic governing laws should cause alarm. “Rocketship’s systemic inability to complete even the most basic financial and teacher credentialing audits is appalling,” he said. “It raises serious concerns about the potential for the misuse and waste of millions of dollars in taxpayer money.”

These problems became so rife in the charter industry, Bymaster said, that the public demanded greater accountability. One sign of that trend is teacher union-backed Tony Thurmond’s victory over charter-funded Marshall Tuck in last year’s race for state superintendent of public instruction. Another indicator is the new law that passed to hold private charters to the same transparency standards as their public counterparts.

“Eight years ago I watched Rocketship receive thunderous applause as they laid out compelling promises for a massive new education system in San Jose,” Bymaster said. “I think the public has finally taken notice as they've broken almost all of those promises.”

SCCOE expects to hear an update from Rocketship at its March 20 board meeting.