Report Details Ohio’s Flawed E-School Funding System, Recommends Solutions

Thursday, December 13, 2018

Columbus – Auditor of State Dave Yost today released a report detailing significant flaws in Ohio’s system for funding online charter schools and recommending a number of fixes to the Ohio legislature.

“As I have been saying for years, Ohio’s funding method for e-schools fails to ensure that students are educated and that taxpayers are getting their money’s worth,” Auditor Yost said. “I’m pleased that the legislature has created a panel to examine this problem and this report is intended to provide background and suggestions.”

For the past three years, many of Ohio’s online community schools have been in turmoil, beset by new enrollment documentation requirements, accusations of malfeasance and punishing clawbacks of state foundation payments.

This is a matter of concern to the Auditor of State because the office is charged with auditing e-schools, including e-school enrollment, in accordance with rules and standards set by the Education Department. Recent changes in these enrollment standards have plunged some e-schools into financial crisis, leading to school closures, lawsuits and public controversy.

This report is based on AOS audits of e-school attendance, reviews of e-school learning management systems, interviews with e-school and Education Department officials, and observations by staff from the Auditor of State’s office.

Before 2016, e-schools essentially were paid to educate students based on enrollment, the same method used by the state to pay conventional public schools.

But in 2016, the Ohio Department of Education began requiring e-schools to document the time that e-school students spent in learning activities, whether those activities occurred online or offline. Online learning activities were to be documented with logs of students’ online time. Offline activities, such as reading books, writing reports or doing other homework, were to be documented by students and parents, who would periodically submit a log of these activities to the school, to be certified by school authorities.

E-schools would be paid only for the time that they could document. Problems resulted immediately. These included:

  • Incompatibility of software. E-schools typically use a variety of online education programs from a variety of vendors. Each has unique formatting, meaning that they don’t communicate well with each other, so totaling the time a student spends using a variety of different online programs is difficult. Because Ohio is the only state that requires documentation of online learning activities, and only started requiring such documentation in 2016, most online educational programs were not designed with this documentation in mind, and vendors periodically purged such information to free up digital storage space, leaving schools with no record of their students’ online activities.
  • Lack of uniformity in the functioning of educational programs. Educational programs from one vendor would measure student time online differently from those of other vendors. For example, an educational program typically counts a student as active based on how often the student clicks a mouse while using the program. Long periods of idleness will cause the program to stop recording the student’s time online, on the assumption that the student is not actually engaged in learning activities. However, programs often set a different idle-time threshold. One might stop recording a student’s time online after 30 minutes without a mouse click. Another might set the threshold at 45 minutes. Schools with longer time-out thresholds would report higher amounts of time spent in learning activities, earning more pay from the state than schools with shorter thresholds.
  • Failure to account for overlap times. It is possible for a student to log into several different educational programs simultaneously, meaning that each program will record the student as active even though he or she can work only in one of those programs at a time. Likewise, a student could log into an educational program, but then leave that program running while spending an hour on an offline homework assignment such as reading a book. The educational program would record the student at work for an hour online, and the student’s own offline log would show him reading a book for an hour. Unless the school was aware of the overlap, it might erroneously report two hours of learning activity when the true amount was one hour.
  • Poor training of Department of Education staff on how to apply documentation requirements. Auditor of State staffers found that ODE staff often were unaware of ODE requirements, applied the requirements inconsistently or erroneously, did not check e-school documentation for problems such as overlap, or accepted the e-school’s claim that it had eliminated duplication, when in fact it had not.
  • Inequities in treatment of conventional schools and e-schools. While e-schools now are subject to strict documentation of participation in online learning activities, conventional public schools that have adopted online learning are not subject to the same documentation requirements. E-schools lose funding if they fail to fully document online learning activities. Conventional public schools do not.

Faced with these unexpected documentation demands, many schools found they were unable to fully document student participation and were subjected to funding clawbacks by the Education Department. In some cases, the financial blow led the school to close.

For the schools that remain, these uncertainties about future funding have made e-school budgeting difficult.

Based on analysis of these and other problems, the report recommends that:

  • Ohio explore best practices for e-school funding, including performance-based funding, such as that used in New Hampshire, which pays schools based on a student’s competency or mastery of a subject. Other states, such as Florida, Louisiana and Minnesota use a hybrid system, with funding based in part on enrollment and in part on student exit exams.
  • Ohio clarify how e-schools will be evaluated under the current system by defining ambiguous terms and eliminating subjectivity from evaluations.
  • Legislators consider whether the Education Department’s duties should be divided or restructured. At present, the Department sets e-school policy, provides training to e-schools and enforces Department policies. This creates an independence issue as the Department essentially is reviewing its own work. The current confusion among Department staff and e-schools argues for a review of this structure.
  • Ohio establish standards for the training of Area Coordinators, the Education Department staffers who advise and review e-schools, to make sure Department policy is applied consistently.
  • Legislators adopt a law or direct the Education Department to adopt policies that would define when an e-school can expel a student, limit students from re-enrolling in the same school and limit the number of e-schools a student can attend before being barred from attending any e-school.
  • Legislators review how all Ohio schools are funded – whether e-school, conventional public school, or hybrids of the two – to identify and eliminate inconsistencies in the way they are evaluated and paid.
  • Legislators require that the Education Department’s handbook for evaluating e-schools be approved by the Joint Committee on Agency Rule Review.
  • E-school operators be provided with a list of Education Department-approved vendors of online learning programs and related systems.
  • The Education Department clarify policy on the use of correspondence courses by charter schools. Current policy bars the use of correspondence courses, but the Department has allowed some schools to use them.

A full copy of this report can be accessed online.


The Auditor of State’s office, one of five independently elected statewide offices in Ohio, is responsible for auditing more than 6,000 state and local government agencies.  Under the direction of Auditor Dave Yost, the office also provides financial services to local governments, investigates and prevents fraud in public agencies and promotes transparency in government.

Beth Gianforcaro
Press Secretary