LANSING — The end of a yearlong battle likely will result in the state clawing back nearly $2 million from Traverse City Area Public Schools.

TCAPS is set to lose $707,000 in state aid and could lose an estimated additional $1.2 million after the Michigan Department of Education denied the district’s appeal regarding its virtual home-school program.

Sheila Alles, former interim state superintendent, sent a letter to TCAPS officials Wednesday informing them of the denial. MDE auditors and other officials investigated the pupil accounting method TCAPS used for the Northern Michigan Partnership, the district’s virtual home-school program, since July, 2018.

MDE officials said TCAPS received more funding for the 2017-18 school year than allowed under the State School Aid Act because of a misclassification of NMP students. An MDE quality control review conducted in July 2018 concluded TCAPS had erroneously reported the number of students enrolled in NMP as part of a home-school program at 0.75 FTE instead of part of a shared-time program at 0.15 in 2017-18. This resulted in the $707,000 deduction.

Traverse Bay Area Intermediate School District auditor Amy Larson did not find any issues with the FTE count when she conducted her audit, but she agreed with the findings of MDE pupil membership auditor Gloria Suggitt after the review, according to Alles’ letter.

Alles upheld that conclusion and said a shared-time class cannot generate a larger share of per-pupil funding than a comparable course offered in a traditional format.

“I’m so disappointed,” said TCAPS Board of Education President Sue Kelly. “When it comes down to educating children, anything innovative or anything new, the MDE is just stomping on it.”

Alles said the state was well within its purview to conduct a quality control review — a notion TCAPS officials disputed — and said TCAPS did not follow section 166b of the State School Aid Act that requires shared-time classes be available to full-time students in the same grade level or age group.

Alles stated she was “troubled by several facts related to the issue of availability” and pointed out that TCAPS provided no documentation that it prominently showcased the availability of NMP classes to full-time pupils nor did it present a course catalog that was readily available to full-time pupils and their families.

The denial and final report will be submitted to the MDE’s Office of Financial Management, State Aid and School Finance for implementation.

The finding also will affect the state aid received for the program from the 2018-19 school year when 264 students were enrolled, likely resulting in a deduction of about $1.2 million, said MDE Deputy Superintendent of Finance and Operations Kyle Guerrant.

“The year 2018-19 is still a great, big, fat question mark,” Kelly said.

The district has built up its reserves and has a “buffer” to absorb the financial hit, Kelly said.

The TBA auditor still needs to file the audit for 2018-19 with the MDE, but TBA Superintendent Nick Ceglarek said they will recommend the MDE reclaim the additional money.

“We understand what position the MDE is taking on this, and we’re going to have to comply with their finding,” Ceglarek said.

The proposed budget for the 2019-20 school year also banked on about $600,000 in revenue from the program. Both Kelly and new Superintendent Ann Cardon, who began in that post Thursday, have said NMP cannot run in the same format this year.

Kelly and Cardon said a letter will sent to all NMP parents and families and a meeting with them will be scheduled next week. Kelly said TCAPS staff is working on solutions because people have already registered and continue to register for the program.

“We’re going to need a few days to figure out what our path is,” Kelly said. “We’re going to lay out what we can do, whether it’s virtual school or bringing them in to our existing schools, whether it’s offering non-core classes — I don’t know.”

Cardon said she is working directly with state officials to see what can be done to remedy the issue.

The letter came on former TCAPS Superintendent Paul Soma’s final day as well as Alles’ final day, a move Kelly said was intentional. Soma engaged in a public battle with the MDE during the appeals process, calling the MDE’s actions governmental overreach and state-sanctioned bias.

He said in June the investigation was a “concerted effort to undermine programs specifically intended for home-schooled students” and the “result of people legislating from their desks with a bias against home-school families.”

Soma could not be reached for comment. A call to his cellphone was redirected to the TCAPS administrative office. A district official said Soma is no longer with the district and will not be commenting on any district business.

Deyar Jamil — former candidate for the TCAPS Board of Education who brought the issue to light in the public, calling it a “fiscal fire” — said this ruling is not anything she would wish for TCAPS.

“We could all step back and realize that we have to be open to what other experts or officials have to say about what we’re doing,” she said. “I’d say that Mr. Soma has been operating with his head in the sand, insisting that he knows all and that it’s not going to catch up with him. Well unfortunately, it’s now catching up with the new superintendent, who deserves better than to have started her first day getting news like this.”

Jamil also said there is still a lot of information that has not come out in the public about how NMP was run and the level of education the students received.

“The home-school kids are a really vulnerable segment of our student population,” she said. “From what I know and what I’ve seen that they are not getting what we have been billing the state for on their behalf.”

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