Top state education leaders called it a “scandal” and “serious” that two Indiana virtual charter schools are accused of counting toward their enrollment thousands of students who either never signed up for or completed classes.

“This should be a massive alarm bell that outright fraud has been committed against Hoosier taxpayers to the tune of millions of dollars,” said Gordon Hendry, a state board of education member who led a committee last year to review virtual schools. “If this isn’t a scandal, I don’t know what is.”

The harsh words came a day after Indiana Virtual School and its sister school, Indiana Virtual Pathways Academy, were put on notice that their charter agreements could be revoked by their oversight agency, the small rural Daleville public school district. The virtual schools, which purported to educate about 6,000 students, could close if they do not find another authorizer to oversee them.

In the meantime, the district made the right choice, said Rachel Hoffmeyer, a spokeswoman for Gov. Eric Holcomb, who has made repeated calls for the state to take action regarding its poor-performing virtual charter schools.

“Based on the evidence, it looks like Daleville School Corporation’s decision to take steps to revoke the charters is the right thing to do,” Hoffmeyer said in a statement. “Indiana’s students deserve the best education possible and schools that have unacceptable performance for a substantial amount of time should not be allowed to continue.”

Rep. Bob Behning, the House Education Committee chairman who is pushing legislation this year to address problems in Indiana’s fast-growing virtual schools, said he thinks the district needed to act sooner.

“I think it’s serious if the kids didn’t receive services,” Behning, R-Indianapolis, said. “I’m a little disappointed if (Daleville was) aware of it, it took them so long to respond to it.”

The schools also failed to properly accommodate students with disabilities or file required audits in recent years, said Daleville Public Schools Superintendent Paul Garrison. One school also allegedly failed to follow protocols for administering state standardized tests, and the schools are accused of trying to use public special education funds to reimburse employees’ travel expenses and pay for a trip to Hawaii.

The superintendent of the two virtual schools denied the allegations Tuesday, saying the data presented by Daleville was “inaccurate and incomplete.”

“We look forward to setting the record straight and, more importantly, continuing to provide educational opportunities for thousands of Hoosier students,” Percy Clark Jr. said in a statement released by Bose Public Affairs Group, a major Indianapolis firm that also lobbies on behalf of the schools.

A spokeswoman from Bose said school leaders are reviewing the data to “account for the inaccuracies” and will complete the review by March 19 deadline set out in the letter from Garrison to the Daleville board.

But the district says all the data came from the schools themselves in information that they are required to report to the Indiana Department of Education on what courses students complete, how often they are marked as attending, and how many students the schools enroll. A spokeswoman for Daleville said before August, the district did not have access to this data — a recent change in state law made it possible.

The state data paint the scope of the issues at the schools as vast. Last spring, none of the 1,563 students reported as attending Indiana Virtual Pathways Academy for the full year were enrolled in any classes, according to the data analyzed by the district. That year, the school received $17 million from the state.

In fall 2016, none of the 2,372 students reported as attending Indiana Virtual School for the full year earned any credits, according to the district’s analysis. That year, one out of five students enrolled all year were never signed up for any classes. In each semester of the 2017-18 school year, the majority of students reported as attending the school for the full year did not earn any credits. Nearly 60 percent earned zero credits at the end of the year — a year in which the school received $20 million in state funding.

Still, some Indiana policymakers and school choice advocates were mixed on whether Daleville’s allegations against the virtual charter schools revealed holes in the state’s methods for holding charter schools accountable.

Betsy Wiley, executive director of the Institute for Quality Education, a group that advocates for school choice, said the problems Daleville raised show how important it is that competent agencies are put in charge of monitoring charter schools. She shared concerns with Behning about the district’s ability to appropriately oversee statewide virtual charter schools.

“What this highlights is a real difference between charter authorizers,” Wiley said. “This is an example of the system working. I think, unfortunately, Daleville’s board was sort of ill-prepared to act as a strong authorizer.”

She said lawmakers have already suggested solutions to the problem — namely, a bill from Behning that would prohibit school districts from being statewide virtual charter school authorizers. A similar bill is also moving through the state senate.

But Hendry said the state needs to play a stronger role, too, and that what’s happening at Indiana Virtual School and its sister school reflects “a complete breakdown of the system.”

“Ultimately the state is responsible for making sure this doesn’t happen,” he said, though he didn’t let the district off the hook, referencing a recent state hearing where Garrison defended the schools’ performance to the state board.

“We were appalled by (Daleville’s) enormously rosy outlook on their performance. We didn’t believe them then, and I think this evidence proves that they recognize now that they have some grave problems with their schools,” Hendry said.

In his statement, Clark defended virtual schools as “an important choice” for students who want to learn outside of traditional settings.

“We believe it is vital to protect and respect that choice,” he said, adding that “there is an opportunity to improve and move forward to ensure the future of virtual education.”