Marian Wang of ProPublica reports on a curious phenomenon in the charter sector: “nonprofit” charters that are run by for-profit corporations.
“A couple of years ago, auditors looked at the books of a charter school in Buffalo, New York, and were taken aback by what they found. Like all charter schools, Buffalo United Charter School is funded with taxpayer dollars.
“The school is also a nonprofit. But as the New York State auditors wrote, Buffalo United was sending ” virtually all of the School’s revenues” directly to a for-profit company hired to handle its day-to-day operations.
“Charter schools often hire companies to handle their accounting and management functions. Sometimes the companies even take the lead in hiring teachers, finding a school building, and handling school finances.
“In the case of Buffalo United, the auditors found that the school board had little idea about exactly how the company – a large management firm called National Heritage Academies – was spending the school’s money. The school’s board still had to approve overall budgets, but it appeared to accept the company’s numbers with few questions. The signoff was “essentially meaningless,” the auditors wrote.
“In the charter-school sector, this arrangement is known as a “sweeps” contract because nearly all of a school’s public dollars – anywhere from 95 to 100 percent – is “swept” into a charter-management company.
“The contracts are an example of how the charter schools sometimes cede control of public dollars to private companies that have no legal obligation to act in the best interests of the schools or taxpayers. When the agreement is with a for-profit firm like National Heritage Academies, it’s also a chance for such firms to turn taxpayer money into tidy profits.
“It’s really just a pass-through for for-profit entities,” said Eric Hall, an attorney in Colorado Springs who specializes in work with charter schools and has come across many sweeps contracts. “In what sense is that a nonprofit endeavor? It’s not….”
“In Michigan, where NHA is the largest charter-school operator, state education regulators have voiced similar frustrations about the degree to which these private firms are shielded from having to answer to the public about how money is spent.
“I can’t FOIA National Heritage Academies,” said Casandra Ulbrich, Vice President of the Michigan State Board of Education, referring to the right to request public documents from public agencies. “I don’t know who they’re subcontracting with, I don’t know if they’re bid out. I don’t know if there are any conflicts of interest. This is information we as taxpayers don’t have a right to.”
“Last year, Ulbrich and the State Board of Education had called for more transparency to be brought to the financial dealings of charter-management firms. They specifically asked the legislature to outlaw sweeps contracts. “Unfortunately,” Ulbrich said, “it fell on deaf ears.”
Do taxpayers know that they are funding for-profit corporations that are not subject to public audit?
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