- Financial review of D.C. charters includes new scrutiny of management contracts [Options PCS, Community Academy PCS, Imagine Hope PCS, D.C. Bilingual PCS and D.C. Scholars mentioned]
- Financial health of D.C. charters difficult to evaluate [Options PCS, Community Academy PCS, D.C. Bilingual PCS, Eagle Academy PCS and BASIS PCS mentioned]
- One charter pleads for the right to give neighborhood kids a preference in admissions, with Henderson's apparent support [Two Rivers PCS, Eagle Academy PCS and Latin American Montessori Bilingual PCS mentioned]
Financial review of D.C. charters includes new scrutiny of management contracts [Options PCS, Community Academy PCS, Imagine Hope PCS, D.C. Bilingual PCS and D.C. Scholars mentioned]
The Washington Post
By Emma Brown
7/17/2014
The D.C. Public Charter School Board released its annual review of charter school finances this week, and for the first time, the board offered a snapshot of schools that have contracts with outside management companies, expenditures of taxpayer dollars that are difficult to track.
At least 14 schools — about 25 percent of the city’s charters — pay fees to nonprofit or for-profit management companies, and those companies’ public financial disclosures vary widely, according to the board’s review. The schools pay management fees ranging from 3 percent to 100 percent of their total revenue.
Several schools “have an operating agreement with a management organization that prevents the kind of transparency necessary to assure that schools are operating appropriately,” the board wrote. But the board’s executive director, Scott Pearson, said the majority of contracts do not present cause for concern.
“In many cases, management companies can be a strong force for quality and choice in schools, because they allow for the transmission of best practices from one school to another and they allow for the sharing and centralization of costs,” Pearson said. “But we thought it was important that we put all the information out there that we have about each of these relationships so it could be publicly available.”
The new scrutiny of management contracts comes after two lawsuits alleging that D.C. charter school leaders used outside companies to divert millions of taxpayer dollars into their own pockets. In both cases, defendants have argued that they did nothing wrong and that their financial transactions mirrored those of other city charter schools.
During last year’s financial year, the board concluded that both of those schools — Options Public Charter School and Community Academy Public Charter School — had “shown no patterns of fiscal mismanagement.” That review, which emphasized the improving fiscal health of city charter schools, did not report on schools’ relationships with management companies, over which the charter board has almost no authority.
Charters, which are required by law to be nonprofit organizations, receive more than $600 million in city tax dollars each year. In return, the schools are required to submit independent financial audits, annual budgets, large contracts and other financial data to the city charter board.
But when charter schools pay outside management organizations, the charter board has little ability to monitor how those tax dollars are used. The board is seeking legislative changes that would give it the additional authority to examine management companies’ books and records.
The board’s summary of schools’ contracts with outside companies shows that some schools pay not just management fees to outside companies, but also rent payments to affiliates of the same companies.
Imagine Hope Community Charter School, for example, pays a 12 percent management fee ($1.7 million) to Imagine Schools Inc., a Virginia for-profit company that runs dozens of schools across the country. Imagine Hope pays an additional 19 percent of its revenue ($2.7 million) in lease payments to Schoolhouse Finance, an affiliate of Imagine Schools that specializes in real estate.
Pearson said that although there have been instances elsewhere in the country of fraudulent rent charges for charter schools, the board is not concerned about Imagine Hope’s fees or rent payments.
“In many cases, the management company has the financial resources to purchase the building and undertake the renovations, and it’s fully appropriate to charge a reasonable rent to the school,” Pearson said.
The compensation of top executives at some management companies isn’t clear because of limits on the charter board’s authority to examine those firms’ expenditures. The salary of the chief executive of Imagine Schools is unknown, for example, while the chief executive of Schoolhouse Finance earns $390,000, according to the charter board’s review.
In cases where executive compensation is known, salaries vary. For example, the chief executive of CentroNia, a nonprofit that serves as a management company for D.C. Bilingual, earned $141,000 in 2012, while the chief executive of the nonprofit that manages D.C. Scholars earned $220,000.
The board’s annual financial review is meant to flag signs of fiscal distress to ensure that schools can make changes before they become insolvent. During the past four years, the number of high-performing schools has increased from 13 to 31, while the number of low-performers has fallen from 11 to five.
“We used to have a situation where charter schools would run out of money in the middle of the year, and ever since we put this system in place, that hasn’t happened anymore,” Pearson said.
Financial health of D.C. charters difficult to evaluate [Options PCS, Community Academy PCS, D.C. Bilingual PCS, Eagle Academy PCS and BASIS PCS mentioned]
The Examiner
By Mark Lerner
7/18/2014
The D.C. Public Charter School Board released the latest version of its CHARM report that reviews the financial performance of the institutions it oversees. The level of scrutiny has increased because as I pointed out Option's books last year were deemed satisfactory only to find that millions of dollars were being pulled out of the school by former administrators. Therefore, as the Washington Post's Emma Brown discovered, there are now new details about the arrangements charters have made with outside management firms. Still the document has me asking for more.
For example, under Community Academy it is stated "$2,372,970 to Community Action Partners for management fees." But no mention is made that this charge is the subject of a legal complaint by D.C.'s Attorney General. Other comments almost beg for additional information. D.C. Bilingual paid CentroNia $962,000 for management and another $4.5 million for personnel costs and other expenses. It would be valuable to understand what the management fee covers and the arrangement concerning employee expenses. This is especially important since the report states that the school's financial audit shows it is not bidding out contracts over $25,000 and above as is required.
Eagle Academy compensates its board chair for consulting services related to developing "medical services" for the school. The report says that it remunerated this individual $20,000 but it is not clear it this is tied directly to the above contract. The charter also reimbursed EES for Medicaid billing. This is one of the companies that is involved in the Options mess. A board member of this school is also an executive with the company.
I could go on and on. For the many charters that have management fees like Basis there is a statement that says "Obtain and review separate consolidated financial statements for BASIS School, Inc. But apparently when this report was issued the financials statements were not obtained, and therefore it is not clear how the almost $1.3 million dollars were used. This does not include $2.6 million for "leased employees wages and benefits."
I think as a movement we are asking for trouble. The report makes me feel like every dollar of public funds that is spent by these schools must be reviewed for appropriateness, which is of course impossible. In the past I've called for the financial performance of charters to be a part of the Performance Management Framework. Perhaps we need a tier system for the way a school allocates its funding.
One charter pleads for the right to give neighborhood kids a preference in admissions, with Henderson's apparent support [Two Rivers PCS, Eagle Academy PCS and Latin American Montessori Bilingual PCS mentioned]
Greater Greater Education
By Natalie Wexler
7/17/2014
Should some charter schools be able to decide for themselves whether to give a preference to applicants who live in their neighborhood? The leaders of at least one DC charter think so, and the DCPS Chancellor seems to agree.
At a DC Council hearing last month on proposed new boundaries and feeder patterns, two top officials at a highly ranked charter school in Ward 8 pleaded for a change in the law that would allow them to give an admissions preference to families who live nearby.
Later at the same hearing, DCPS Chancellor Kaya Henderson expressed surprise at the charter school's stance, given the general lack of enthusiasm for such a change in the charter sector, and seemed supportive of its plea. She also connected the issue to the charter community's recent opposition to joint DCPS-charter planning. Charters have said such planning would infringe on their autonomy.
"If that's not autonomy—a school saying I would like to be able to serve neighborhood kids," Henderson said in exasperation, "then what is autonomy?"
Under current law, charter schools must admit any child who applies and must hold a lottery if there are more applicants than seats. A task force that considered the neighborhood preference issue two years ago recommended against it, saying it might exclude low-income children in Wards 7 and 8 from high-performing charters elsewhere in the District.
For example, if highly sought-after charter schools in gentrifying areas, such as the vastly oversubscribed Two Rivers, exercised a neighborhood preference, low-income applicants from other areas would be shut out.
The task force did consider allowing individual charters the option of adopting a neighborhood preference, as Eagle Academy wants to do, provided that it would be "educationally advantageous to the city as a whole" and would not harm "disadvantaged populations." But no charter leaders indicated strong support for that idea, and the task force didn't recommend it.
In fact, Eagle Academy's founder, Cassandra Pinkney, was one of two charter leaders who spoke against neighborhood preference when the task force held a public hearing. But she says her understanding was that the task force was only considering a mandatory neighborhood preference rather than an optional one.
"You cannot require charters to be neighborhood schools, because some are specialized," said Joe Smith, Eagle Academy's chief operating and chief financial officer, in an interview. "We are a community school, so for our own school it would be very important to set aside a number of seats for kids in the neighborhood."
But it's not clear how many other charters feel the same way. When Smith testified at the DC Council hearing, he acknowledged that the school's position was "a little heretical."
Eagle Academy isn't typical
Eagle Academy, which serves 3-year-olds through 3rd-graders, is in an anomalous position. Most charters in low-income locations already draw largely from their neighborhoods, so a neighborhood preference might not make much difference. In 2012, the neighborhood preference task force found that over half the charter students attending schools in Wards 7 and 8 go to schools within their own wards.
But recently, according to Smith, some parents from affluent Ward 3 have begun enrolling their children at Eagle Academy's Ward 8 campus, drawn by its innovative technology program and award-winning new building. Meanwhile, the school has to turn many neighborhood applicants away.
While the number from Ward 3 is small—fewer than 20 children out of over 700 enrolled—the school wants to ensure that it primarily serves students from the surrounding low-income community.
Still, some charters in predominantly low-income neighborhoods oppose the idea of allowing charters a neighborhood preference option. That's the view of Diane Cottman, executive director of Latin American Montessori Bilingual (LAMB), a school near Military Road and 13th Streets NW that is popular with middle-class parents from around the District.
She acknowledged that LAMB staff members find it difficult to turn away parents from the neighborhood who come in hoping to enroll their children, not realizing there were application deadlines and a lottery that they missed.
"In my heart of hearts," Cottman said, "I'd say yes, we might want to reserve 10 or 15% of our slots" for neighborhood kids.
But, she continued, "the devil is in the details." She questioned how a neighborhood would be defined, and what would happen with a "hardship case" a block outside the boundary. She also said that some bilingual schools, like hers, might prefer the option of a preference for children who speak languages other than English, and that other charters might lobby for other kinds of preferences.
"Once you inject preference," she said, "it opens a wide array of what people would like to include."
Those kinds of questions appear to have kept change at bay. Councilmember David Grosso introduced a bill last year that would have allowed new charters to give a preference to neighborhood children, but it hasn't gone anywhere.
And a spokesman for Councilmember David Catania, chair of the education committee, echoed Cottman's concern that the neighborhood preference issue was complex.
"We would need just as thorough an analysis of it as any other issue, like boundaries and feeder patterns," said Brendan Williams-Kief, adding that Catania has been talking to "lots of different folks" about the idea and is "willing to have conversations about it."
DCPS's position
You might expect DCPS to oppose allowing a neighborhood preference for charters. After all, a charter that draws primarily from its neighborhood could lure away students from a DCPS school in the same area, leaving the DCPS school under enrolled.
But Henderson's impassioned statement at last month's Council hearing indicated that she supports the idea, at least in some cases.
A DCPS spokesperson said that a neighborhood preference for charters would "require lots of planning and lots of conversation." But Henderson is particularly interested in a certain kind of preference: she wants a charter that takes over a building vacated by a closed DCPS school to be able to guarantee admission to the DCPS school's former students.
That's not allowed under current law, a problem that has derailed Henderson's plan to have a high-performing charter in Ward 8 take over a struggling DCPS elementary school, Malcolm X. Still, that proposal appears to have a better chance of becoming a reality than the kind of preference Eagle Academy would like to exercise.
True, guaranteeing slots for students from a closed DCPS school is a more pressing need than a general neighborhood preference. And it would encourage the kind of DCPS-charter collaboration that could lead to better outcomes for many students.
But, as Henderson said in her DC Council testimony, it's hard to see why Eagle Academy shouldn't be allowed to give priority to low-income kids in its neighborhood, even if—or perhaps especially if—it's the only charter that wants to do so.