"This letter constitutes formal notice of failure to comply with the terms and conditions of the fully executed MOU and law and provides a reasonable opportunity to remedy this violation. Failure to successfully remedy this violation and/or future incidents of noncompliance may result in the issuance of a Notice of Violation with Intent to Revoke."When writing on July 6, 2023, about reports that the Los Angeles County Office of Education (LACOE) had begun the process of revoking the charter for the North Valley Military Institute (NVMI), I sent an email to the school's "Superintendent" asking if he had any comments about the report. Not seeing a response before publication, I published the article, noting that the school had been given an opportunity to present its side of the story but had not done so yet. The next evening, July 7, I received an email from Ryan stating that he had "responded at 12:15 the same day you requested a comment." I found it strange that he did not mention what that response was.
- LACOE
Using the 12:15 time that Ryan had provided, I was able to track down the missing email in my files. Because NVMI's mail system had changed the subject line, I had not recognized it as the response. It stated:
"NVMI is unaware of actions by the Los Angeles County Board of Education to revoke its charter petition. NVMI has not received a Notice of Violation, which is the first step to begin revocation procedures."
Perhaps the reason Ryan did not simply repeat this answer in his email on Friday night is that it was no longer accurate. On that day, July 7, NVMI was sent a "Notice of Violation of Law and Memorandum of Understanding" by LACOE that ended with the following admonition: "Failure to successfully remedy this violation and/or future incidents of noncompliance may result in the issuance of a Notice of Violation with Intent to Revoke." Ryan himself now acknowledges that LACOE staff did indeed make a "recommendation to close down NVMI".
The "Violation of Law" notification sent by LACOE was a broad-based takedown of a charter school that has suffered through operational deficiencies and "fiscal mismanagement" throughout its history:
- By rejecting "the Los Angeles Unified School District Prop 39 proposal for the 2023-2024 school year" and not securing "any other site to operate its charter school", the charter school has left students and staff "in Limbo." This "uncertainty for operations isdetrimental to the wellbeing of its students and community."
- The NVMI Board violated its current charter by voting "to suspend [the] operation of grades sixth through eighth". Without these grades or a school site, "the school will not be able to pursue most, if not all, measurable pupil outcomes".
- The charter school missed a May 15, 2023, deadline to submit a request for a material revision covering proposed "changes in program, facilities, and enrollment". LACOE further notes that "to this date, NVMI has failed to provide" this document. (1)
- "During the 2022-2023 school year, NVMI has submitted unreliable and erroneous budget and financial reports, including substantial overstatement of revenues and understatement of expenses."
- "Despite our repeated concerns, NVMI has continued to engage in rampant deficit spending, continuing to grow its operating deficit without any apparent means to pay its debts."
- "LACOE suspected NVMI mismanaged and misappropriated over $90,000 of public funds due to imprudent fiscal practices, gifting of public funds, and by misappropriating funding."
In addition to the above, the letter from LACOE included a new revelation that NVMI "failed to remit its CalSTRS payments from April 2023 through June 2023 totaling $467,294." This violated the portion of the California Education Code that requires payment within 44 calendar days after the end of the month in which the compensation was earned. "The delinquent amounts owed to CalSTRS are accruing penalties and interest."
The failure of NVMI to pay into the retirement fund for teachers is perplexing given the fact that the charter school admitted to paying $450,000 to Synergi Partners Inc., a company that assists clients with their application for the IRS Employee Retention Credit (ERC). (2) At least $255,000 was paid before it was due. As stated in the contract NVMI signed with Synergi, 40% of the $450,000 fee was due according to a payment schedule that began after the company delivered the paperwork needed to apply for the ERC. However, 60% of the fee ($270,000) was not required to be paid until 30 days after the "receipt of the funds by the Client". With $1.7 million of the "expected" $3 million payment being "under review" by the IRS, NVMI should not have paid any of the final payment to Synergi, especially when they had other outstanding obligations that were past due.
The contract with Synergi raises significant questions about how NVMI handled government funds. This itself should trigger the need for another audit of the school's operations. These include:
- The methods used to select Synergi: Is the 15% fee customary for this type of service? Was a competitive bidding process used to ensure that the school's students received the best possible deal? Could this have been filed using the school's regular accounting firm or with the assistance of board member Daniel Epstein, who was also Executive VP and Chief Credit Officer of Mission Valley Bank, the same bank that submitted NVMI's PPP loan application and also issued Lines of Credit?
- The methods used to vet Synergi: Was NVMI aware of lawsuits that have been filed against Synergi for either inflating the amount of the ERC in order to increase their contingency fee or demanding an upfront payment even though that is not what's in the contract? Did the Board heed the warnings issued by the IRS about fraud within the ERC filing industry?
- Preventing NVMI's leadership from personally benefiting from the contract: Did anyone from the school receive payments from Synergi? Did anyone unduly influence the decision to pay the company early?
On August 1, 2023, the LACOE board will hold a public hearing about the recommendation to revoke NVMI's charter. This will be followed by a vote on August 8th. If the past is any indication, the school will provide a stream of children in faux military uniforms to tell the board that the school is the only one that can meet their needs. Ryan will then speak and blame everyone but himself for NVMI's failures. The LACOE Board needs to look past this dog and pony show and finally hold Ryan and the other leaders responsible for failing their students and taxpayers.
The LAUSD's decision to let NVMI's charter expire should have been upheld in 2018. Instead, LACOE overruled both the local school district and its staff to let an obviously mismanaged school continue operating. It is time to right that wrong and shut NVMI down.
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