Schooled by
—
SCHEMERS
A COLLABORATIVE REPORT FROM
Fraud, Waste, and the Money
That NEVER Reached Kids
Schooled byW
hen school administrators with access to funds go unchecked, embezzling and misusing
public money, it’s a loss for the students. If it’s in a smaller district, the waste, fraud
and abuse impacts in such a profound way that it may take years to recover.
U.S. Department of Education administers more than 100 programs, which involve 56 state
and territorial educational agencies, more than 17,000 public school districts, about 128,000
schools, and numerous other grantees and subgrantees.
Open the Books reviewed more than six years’ worth of U.S. Department of Education Office
of Inspector General’s (OIG) Semiannual Report to Congress. Auditors compiled a dataset
of approximately 90 instances of confirmed and prosecuted fraud and abuse of federal
education tax dollars by state education departments and school districts between Oct. 1,
2019, and March 31, 2026.
The fraudulent spending totals approximately $225 million over that time period. The OIG
ordered restitution paid in some criminal cases; other civil cases, an allegations settlement
included cash payments from the accused. It’s unclear how much has been collected, but the
total potential repayments among these cases amounts to approximately $67 million.
The fraud and abuse took place in 24 states and Puerto Rico, and ran the gamut of schemes:
from school district officials embezzling funds, creating fake invoices and pocketing the
money; to inflating student enrollment numbers to collect for more aid; to bid-rigging in order
to hire friends and family as contractors; to taking part in kickback schemes.
Across every sector, defrauding public programs leaves tax dollars unavailable for critical
objectives and the Americans who truly need assistance. But when the crisis hits public
schools and potentially harms student outcomes, it’s uniquely damaging to America’s future
and position in the global economy.
REPORTINTRODUCTION T
he state with the most fraud in total dollars was Indiana, the result of a single
fraudulent scheme.
Leadership at two online charter schools, Indiana Virtual School and Indiana Virtual Pathways
Academy, inflated their enrollment figures between 2016 and 2018, according to the OIG.
The schools’ founder, the director of one school, the superintendents of both schools, and a
school operations manager were implicated in the scheme.
The schools received $44 million more funding from the state than they should have,
including unspecified federal funds, the OIG found.
The four directed millions of dollars to fraudulent companies controlled by the founder,
which were then funneled to his co-conspirators and others, according to the OIG. They also
fired an employee who attempted to inform the state education department of the fraud,
the OIG said.
The schools closed in 2019 and the four were charged in 2024.
The states with the most fraud, measured by the number cases, were Florida and Illinois.
Each state had 11 cases during the period studied, costing $24.7 million and $14.5 million
respectively.
Puerto Rico and Texas were not far behind, with 10 cases each, totaling $39.6 million and
$19.9 million respectively.
WORST STATESCase Study: Broward County Public Schools Bid Rigging
Broward County Public Schools Information Officer Anthony Hunter is alleged to have steered
$17 million worth of district funds to a friend’s business without going through the required
bidding process and personally benefiting from the sales, according to the Florida Department
of Law Enforcement and Education Department OIG.
From 2015 through the beginning of 2019, Hunter intentionally bypassed the bidding process
and steered the business to David Allen, a resident of Georgia, and his company, Education
Consultants, Inc., also known as Edco.
Hunter had the district purchase thousands of Recordex interactive panels, used for
classroom instruction for Broward schools, according to prosecutors.
During that time, Hunter and his family leased a large lake house from Allen, who ultimately
sold it to Hunter for approximately $150,000 below market value, prosecutors claim.
Allen also hired Hunter’s son, Brian, to work for Alertpoint, LLC, a separate business owned by
Allen. That same company later hired Anthony Hunter as well.
Hunter was indicted by a statewide grand jury in 2021 for bypassing the bidding process for
school equipment and steering business to a friend. But jurisdictional issues led a judge in
2024 to dismiss the indictment, arguing the state grand jury didn’t have jurisdiction over the
case because the alleged crimes occurred only in Broward.
$72
APPROXIMATE LOSS
PER STUDENT
$17 MILLION
ACROSS BROWARD COUNTY’S
237,000 STUDENTS
=
CASE STUDIESCase Study: Puerto Rico Tutoring Services Scheme
In the second largest single fraud scheme, a tutoring services company was allegedly
responsible for $24 million in fraudulently obtained funds.
The president and three other employees of Creative Educational and Psychological Services
were indicted on charges of fraud, conspiracy, and theft.
From 2011 through 2014, the company’s president and employees defrauded the Puerto Rico
Department of Education for tutoring services that were not provided or were not payable
under its contract with the company, the OIG found.
They charged the Puerto Rico Department of Education for federal Supplemental Educational
Services-funded tutoring services never provided and created false attendance and other
records and documents to support their fraudulent efforts, according to the OIG.
Case Study: Houston ISD Bid-Rigging and Bribery
Chief Operating Officer Brian Busby and Houston Independent School District (ISD) contractor
Anthony Hutchison allegedly led a more than $6 million fraud scheme.
Busby allegedly helped award Houston school district construction and grounds maintenance
contracts to Hutchison in return for cash bribes and hundreds of thousands of dollars in
home remodeling, according to the Department of Justice.
Both were indicted and charged with conspiracy, bribery, filing false tax returns and witness
tampering. Busby allegedly awarded no-bid contracts to Hutchinson’s company, which
overbilled the district and gave Busby kickbacks from 2011 to 2020.
The loss to the district was more than $6 million.
Five other school officials pleaded guilty to conspiracy charges for their roles in the scheme:
the board of education president; officer of construction services; general manager of
facilities, maintenance and operations; area manager for maintenance (south); and area
manager for maintenance (north).
Those five conspired with Busby and
Hutchison to accept bribes from Hutchison
for helping to award, or not interfering in
the award of, the contracts to Hutchison,
the DOJ said.
What’s more, prosecutors said, Busby
and Hutchison interfered with the federal
criminal probe once they heard it was
taking place.
When authorities executed search warrants
at Busby and Hutchison’s homes in 2020,
they discovered over $186,000 in cash,
which was to be forfeited.
$100
APPROXIMATE LOSS
PER STUDENT
$24 MILLION
ACROSS PUERTO RICO’S
240,000 STUDENTS
=Case Study: Chicago Public Schools
The district was required to return $1 million in Indian Education formula grants that were
intended for educational and cultural programming to students of Native American and Alaska
Native Ancestry.
In 2021, the OIG reviewed the student database at Chicago Public Schools and found more
than 1,000 students who identified as Native American but whose last name indicated that
they were of South Asian ancestry: Indian, Burmese, Bangladeshi, Nepali, and Pakistani.
School officials couldn’t verify and document the number of students in the program between
2016 and 2023 after the OIG investigation identified the discrepancies in the student data
count associated with the program.
Besides repaying the funds, district leaders said they would skip applying for the grant for
Fiscal Year 2026 and would ensure full compliance in the future.
Small Schools Hit Hardest
Of the 20 largest school districts in the country with the most federal funding, only three
(Broward County Schools, Houston Independent School District and Chicago Public Schools)
were included in the more than 6 years’ worth of fraud investigations uncovered by Open
the Books.
Fraud investigations among the other 17 large districts were not found in OIG records. But
dozens of smaller districts did turn up reports, along with individual schools, charter schools,
online schools and individual programs.
Of course, fraud and abuse are no joke in large city districts like New York, Los Angeles and
Chicago, where hundreds of thousands of students rely on public schools for their educations.
But when millions of dollars are stolen from small districts, online schools or charter schools,
it has an even more profound impact on that district’s smaller budget. On a per-taxpayer and
per-pupil basis, the damages and opportunity costs are proportionally far greater.
Community Preparatory Academy, CA
The former head of the Community Preparatory Academy charter school pleaded guilty to
stealing over $3 million from the school over five years.
