For-Profit Charters: Whose Interest is Being Served?

money-40603_1280Lots of money easily available can lead to abuse, and it did–over and over again in Miami.  It is so much money that it may be time to follow New York’s lead and ban for-profit education management companies.  In this post we look at Academica, Florida’s largest for-profit education management firm.

Its schools are consolidated into at least four non-profit entities that allow Academica to operate legally as a contractor to its own schools. Their 100 schools are organized into the  Mater, Somerset, Pinecrest and Doral networks.  They also manage several Ben Gamla schools as well as others.  Academica operates in five states plus D.C. including Florida, Utah, Texas, Nevada, California.

The Doral and Mater charter governing boards keep appearing in the Miami Dade Inspector General reports.  There is a lot of money involved and continued poor governance citations.  You can follow the money.  Do these schools do more with less?

Charter School Facility Financing

Make Money Building Charter Schools explains how some charter schools are financed through the charter loan company, Building Hope.  It is clearly written in a step by step manner using Academica‘s Doral Academy as an example.   This school has strong links with Florida legislators.  There are other ways to finance charter schools.  Wall Street hedge funds are behind charters.  We did a post on charter school funding that explains a variety of funding sources.  The Building Hope example below follows the money from its source to how it is spent.

Building Hope has access to millions of dollars of public money through Sallie Mae, the Community Development Financial Institutions Fund, and the U.S. Department of Education.  The private Clavert and Walton Family foundations also support Building Hope.  In 2011, the company loaned Doral Academy $5.2 million at 7% interest the first four years and 12% the remaining two years.  It’s an interesting way to make money–get public dollars from the federal government and make high interest loans to non profit schools, which turn the money over to private real estate companies such as School Development, LLC controlled by the for-profit Academica management company.  Doral Academy then pays back Building Hope with the per student allocation provided by the Florida tax payers.

Weak Charter Board Governance

Academica’s network of schools has been the subject of investigations since 2003. While problems were reported, the State Attorney did not press charges.  Finally, the federal government began an investigation.  The stories illustrate how interwoven and self serving charter governing boards can be.  Board membership is determined by the management company, and members are tied directly or indirectly to the management company.  Once again it is an example of the priority for quantity over quality with self interest rather than public interest in how decisions are made.

  • 2003.  The Mater schools signed a $5.8 million deal whose contractor was serving on the governing board.
  • 2006. The Office of Management and  Compliance Audits functioning as the Inspector General found undisclosed related party transactions for the capital outlay programs of the Mater schools.  The report was titled Poor Governance Results in Apparent Self Dealing. Past and present board members were employed by and/or served on other Academica schools and had direct ownership in the management company and had other undisclosed interests in for profit companies established to provide financing and lease the facility back to the schools.  The school was paying $1.3 million in excessive lease payments.  The State Attorney declined to initiate a criminal investigation.
  • 2009. A report that the Mater board overcharged $1.3 million for warehouse where school was housed.
  • 2010.  Doral Academy’s governing board transfered $400,000 to Doral College, an unaccredited private college run by two Florida legislators, Anitere Flores and Manny Diaz, Jr. (who is a member of the House Education Committee).  Luis Fuste, vice chairman of Doral Academy and Andreina Figuerora, chair of Somerset Academy (another Academica managed school) and head of ADF lobbying firm, both served on the board of Doral College when agreements with the charter high school were made.  Principals of two Academica schools also were on the board.
  • 2013. Miami Dade auditor questioned the Mater Academy board independence from Academica because the board includes principals of other Academica schools.  The board dismissed the concerns.
  • 2014.  The Mater board transferred $7,405,000 to Mater Foundation from some Mater charter schools.  The two boards have the same membership.  These transfers were long term non interest advances.  Another $166,586 of public funds was transferred to other Mater entities.
  • 2014.  Academica is under federal investigation for conflict of interest between it and the Mater schools it manages.  The citations go back to facility leases to the firm while the CEO, Fernando Zulueta was chair of the Mater governing board.  In addition, the audit questions the transfer of funds from Mater schools to the Mater foundation.  Representative Fresen, Zulueta’s brother-in-law and chair of the House Education Appropriations Subcommittee, was included due to contracts issued to his employer, Civica.
  • 2015.  A Miami Dade audit questioned the Mater board transfer of $2,987,000 to a corporate account and to other schools from three Mater schools.  The allegations included illegal transfer of funds and facility leases to board members.
  • 2015. A Miami Dade auditor questioned the benefit to high school students who take dual enrollment courses at Doral College, an unaccredited private university operated by Academica and run by two Florida legislators.

 Controlling For-Profit Charter Management Excess

Three states in particular have a high percentage of for-profit management companies:  Arizona, Florida, and Michigan.  Six states ban for-profits: Mississippi, New York, Washington, Tennessee, Rhode Island and New Mexico.  Massachusetts has such stringent rules that for-profits have chosen not to open charters there.

Banning new for-profit charter schools would reduce but not eliminate the opportunities for wide spread abuse of public funds.  Adopting stringent rules to ensure board member independence from charter management companies would revolutionize the structure of charter school governance in Florida.  Even requiring transparency of charter management company expenditures would make the public aware of where their tax money goes.  Current audits simply state what the management companies charge for services and leases, but where the money actually is spent is hidden from the public.  The Annenberg Institute called for many of these reforms in its 2014 report: Public Accountability for Charter Schools:  Common Sense Regulation and Oversight for the Future. 

Description of Doral and Hialeah Elementary Schools

Doral charter school serves a relatively small percentage of  low income students.  The family median income is over $76,000.

Doral Academy has 1139 students.

  • 90% Hispanic
  • 37.6% economically disadvantaged students compared to 71% in the district
  • 91% kindergarten ready on the FAIR test compared to 70% in the district
  • 37.5% teacher turnover
  • School Grade A

Mater Academy charter in Hialeah has 746 students.  The median income in the city of Hialeah is $35,227.  Mater Academy demographics include:

  • 98% Hispanic
  • <3% disabled
  • 90% economically disadvantaged
  • 79% kindergarten ready on FAIR
  • 21% teacher turnover
  • School Grade A

Hialeah traditional public schools had similar demographics to the Mater Academy.  Four of 20 TPS elementary schools earned ‘C’ grades.  Most schools earned ‘As’, and there were no D or F graded schools.  It is not clear why charter schools exist in these areas.

 

Posted in California, Charter Schools, Facilities, Florida, Funding, Nevada, Uncategorized, Utah, Washington D.C..

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