CALL7 Investigator Tony Kovaleski exclusively obtained internal records from one online school, Insight School of Colorado, showing only 21 percent of students were passing classes at the time and on average students spent less than four hours a day at the online school.

“What grade would the school get based on this report card?” Kovaleski asked.

“An ‘F,’" said Benjamin Valdez, a former Insight principal who said he sent the internal data to the Colorado State Board of Education board members and the education department commissioner last year.

“You saw it, tried to fix it?” Kovaleski asked.

“Yes,” Valdez said.

“What happened?” Kovaleski asked.

“I was terminated,” Valdez said.

And online students aren't the only ones affected by online schools run by for-profit organizations. Students at brick-and-mortar schools face larger classes and less funding, a CALL7 computer-assisted investigation found. Thousands of students left online schools for traditional schools after the count date so those traditional schools did not receive any money to educate the additional students, the 7News analysis shows.

Colorado is one of only 10 states that has one annual count date – the date the state determines how much to pay a school based on student enrollment. The 40 other states have quarterly or monthly count dates or pay on average attendance over the school year.

That one count date, usually Oct. 1 in Colorado, allows all schools to try to maximize their student population and get more state tax money. Valdez said that Insight administrators pushed hard to enroll as many students by the count date as possible but did little to retain them after the count date.

“As we led up to the October 1st count, everybody in the office -- all nine people in the office including the executive director -- were focused on enrolling students,” he said. “Getting applications processed and getting students computers in their hands so they can log in for that 15 minutes on October 1st so that student can be counted, and they can receive funding for that student.”

Valdez said his bonus was based on the school's financial success and not students' performance.

A spokesman for K12, in a written statement, pointed out the company acquired Insight just a few months ago and is investing money to turn it around. He also said K12 would like to see the single count date changed.

"K12 agrees that Colorado should move away from a school funding model based on a single count date to a better model, such as an average daily membership (average number of school days that students are enrolled during the year), which is used in many other states," K12 vice president of public affairs Jeff Kwitowski wrote. "We agree that schools and school districts should not be funded for students who are no longer enrolled with them. Average daily membership funding models are more fair for the state, its schools and students."

Kwitowski also wrote: "Our goal is to serve every student who chooses to enroll, including those who come in academically at-risk, yet we know that online schools are not for every student. Some students choose to transfer out mid-year because the program is too rigorous or not a good fit."

But K12 has run another online school for years and the state has placed that school, Colorado Virtual Academy, on a priority improvement plan, state records show. Kwitowski noted COVA positive results, including an 87 percent course completion and high average ACT scores.

"Parents are choosing schools such as COVA because their children were struggling or failing in traditional schools and are seeking a public school alternative," he wrote.

Our computer analysis of education department data of all online schools showed that in the past five years, 3,042 students left online schools after the count date and went to a brick and mortar district before the following year. So those districts had to educate the students for free for the rest of that year.

“I would like to look at different options for funding our schools beyond the October count date, personally,” said Amy Anderson, who oversees charter and online schools at the state education department. “I also need to see what our state BOE wants to pursue in terms of its strategy and make sure in my position I'm following what those priorities are.”

Senate President Brandon Shaffer, D-Longmont, reviewed the 7News records and data and asked for an emergency audit of the schools based on our investigation.

“I am outraged,” he said. “This is absolutely unacceptable, and I look forward to having this discussion next year when the legislature comes back into session. It's time we take a very close look at what we're getting from our online school providers.”

The legislative audit committee voted Monday to approve eight hours of preliminary research to determine whether to conduct Shaffer's audit. Auditors are scheduled to return in early November to ask legislators whether to approve a full audit.

CALL7 Investigators obtained data showing students who left all online schools for brick and mortar districts for the 2005-06 through 2009-10 school years. Of more than 11,000 students, 7News then cut down the data for students who registered before the Oct. 1 count dates, left after the count dates and registered in a brick and mortar district before the end of the school year, leaving 3,042 students. CALL7 Investigators removed any students, whose names were not provided with the date, if their information appeared corrupted or was conflicting.

Over the five years, the state would have paid more than $15 million to online schools for students who left to brick-and-mortar schools and those districts would have educated those students without the millions in funding, the CALL7 analysis shows.

The CALL7 analysis showed that three districts, Denver, Jefferson County and Adams-Arapahoe 12J had to absorb nearly 1,000 of those students since 2005.

View a list of the number of online students by school district

Another issue is that many of the online schools have poor academic performance records. Insight school executive director Chuck Wolfe conceded the school has problems but also noted that it was purchased by K12, Inc. in July.

“With internal reports shows students failing 79 percent of all classes, should this school get paid like traditional schools if it has that kind of failure rate?” Kovaleski asked.

“You have to look at the end result, and I would say there are a lot of schools within the state of Colorado that have very challenging statistics,” he said. “Come back next year and do a story on the successes of our school. I wasn't here for the past three years.”

Insight was authorized as an online school by the Julesburg School District Re-1, and data obtained under state open records show that the district gave Insight $7.8 million in state tax money in the past two school years. The Julesburg district kept nearly $400,000 in fees to the oversee the online school, which has had three corporate owners in a year.

Online schools contend they have worse academic performance records because they often take students who already failed at traditional schools.

The state has put Insight on the school “turnaround” school list, giving Insight five years to improve. If the school does not improve, the state will close it down, but in the next five years the school can continue to collect millions in tax money.

“If we have some schools in this state that are not serving kids well then we need to recognize that and do something about it,” Anderson said.

But the state education officials knew there was a problem with performance at online schools for years. A 2006 state audit recommended that the state education department do a better job of monitoring student performance at online schools.

Despite being fired by Insight leadership, Valdez said he would call attention to the problems at Insight and online education again.

“I’m glad of what I did,” he said. “If you're in a position of responsibility, it's your responsibility to do what's right.”