ReNEW Schools may have violated its charter agreement and state law when it enrolled 21 ineligible employees in the state pension system and failed to enroll 41 people who were eligible, according to an audit released Monday.*
The Louisiana Legislative Auditor gave ReNEW a D in the investigative audit.
Charter schools may elect to enroll in the Teachers Retirement System of Louisiana (TRSL), one of the pension systems for Louisiana government employees. If they do, the school contributes a portion of its payroll to the teachers’ retirement.
The problem came about when ReNEW took over SciTech Academy in 2010. ReNEW officials elected to have the school participate in TRSL, but later withdrew it.
School officials indicated that SciTech teachers who wanted to participate in the state pension system would be assigned to Reed Elementary (now Dolores T. Aaron Elementary), the only ReNEW school that participated in the teachers’ pension system.
Twenty-one employees at SciTech and the network’s four other schools were enrolled in the state pension system. The employees — teachers, administrative staff and paraprofessionals — were classified under Reed Elementary even though they didn’t work there.
Meanwhile, 41 of Reed’s teachers were not enrolled.
State pension law is all-inclusive: if a school decides to pay into a pension plan, then all of its eligible staff must participate. If a school withdraws, then all of its staff must withdraw.
Schools around the state have long complained about the rising cost of teachers’ pensions. They must contribute more each year as the state looks to plug an $18.5 billion hole in the state pension systems.
Charters, unlike traditional schools, can opt out of the teachers’ retirement pension system – and many do. Only 26 of the city’s charters participated in the 2012-2013 school year.
Enrolling the 41 additional employees at Reed would have cost ReNEW $376,643, according to the audit. Enrolling the ineligible employees cost $347,363.
ReNEW may have violated federal law, too. Public employees who are part of state pension plans are excluded from paying Social Security taxes, normally paid by the employer and the employee. The failure to pay those taxes for the 21 employees improperly enrolled in the teachers’ pension system could violate the federal Social Security Act, the audit noted.
To remedy the issue, the auditors recommended that ReNEW make the appropriate payments to Social Security and TRSL for employees who should have been enrolled in each program. And the network should “always provide complete and accurate information to TRSL.”
In a response to the auditors’ findings that was included in the report, ReNEW Chief Executive Officer Gary Robichaux said it “was never the school’s intention to violate the spirit or intent” of state law.
He said ReNEW wanted to attract quality employees, “no matter their years of experience or retirement needs.” To do so, the charter organization treated employees at schools who desired a pension plan as “leased employees” of Reed Elementary.
Robichaux said he believed that practice was in line with the spirit of the state’s charter school law, which allows flexibility in how schools are managed. However, “after review or [of] your findings and our own records, we do believe we could have been more diligent in perfecting an auditable document trail to support our practice.”
The network will settle the issue with TRSL and Social Security directly, he said.
In 2012, state lawmakers passed a law to allow charter schools to enroll part of their staff in a pension plan. But the changes are on hold until the Internal Revenue Service weighs in.
The audit was triggered by the teachers pension system, which notified the Legislative Auditor in August that ReNEW was providing inaccurate information.
Auditors compared the 109 Reed employees that ReNEW officials reported to TRSL from January 2012 to September 2013 to the number of teachers on Reed’s payroll and in state records.
Read the audit
This story was updated after publication with additional information about possible violations of Social Security law and to note that a law passed in 2012 would allow what ReNEW did, but it’s on hold. (June 2, 2014)
*Correction: This story originally reported that ReNEW violated state law and its charter, but the audit said the organization “may have” done so. (June 2, 2014)