Can consultant under ethics investigation save troubled Charlotte-area charter school?

A year after narrowly averting a forced closing, Thunderbird Prep charter school has turned to a consultant who is under ethics investigation in South Carolina for help making a fresh start.

Last summer North Carolina charter school officials put the small suburban school, which got about $1.6 million in public money last year, under extra supervision because of state concerns about finances and parent complaints about building safety and school leadership.

Now the school, which continues to spend more than it takes in, is seeking new leadership and grappling with questions about its consulting firm.

The ongoing struggle for state officials to monitor Thunderbird’s operation – and for school leaders to rebuild in the glare of public scrutiny – illustrates a national challenge as school choice flourishes: How should states encourage charter-school innovation and excellence while cracking down on those that shortchange students or waste tax dollars?

The Charlotte region has seen both extremes in recent years, with some schools thriving and growing while others have closed amid academic and financial turmoil. Thunderbird, which opened in 2014, has hovered on the bubble for the past year. Now the school is working with a consultant who inspired South Carolina’s inspector general to urge that state to tighten its scrutiny of charter schools.

As of July 25, the state’s top charter school official sounded optimistic about Thunderbird. “They are in complete compliance. I feel like they’ve turned the corner,” said Dave Machado, director of North Carolina’s office of charter schools.

But Machado said he was not aware of what others were circulating from reports in the Spartanburg Herald-Journal and other South Carolina media: Lori Manning, former CEO of High Point Academy charter school in Spartanburg, was the subject of a December 2016 report by the South Carolina Inspector General’s Office that found “evidence of Manning’s fiscal mismanagement and potential ethical conflicts.” The South Carolina Ethics Commission is reviewing whether Manning’s actions violated any laws.

In January Manning created the Spartanburg-based Veritas Charter School Service, which took over Thunderbird’s operations this spring. (Manning’s firm is not connected with Veritas Community School, a Charlotte charter school.)

In late July Manning said the inspector general’s report is full of errors and she believes she’ll be vindicated. Her hiring of family members and consulting arrangements with a Texas business partner were legal and approved by her board, she said, and were only criticized when a new board took over.

Even the inspector general’s report says that despite the areas of concern “Manning and the HPA Board have established a successful charter school with over 1,100 students in its third year of operations with a waiting list of several hundred.”

Manning said she believes that experience makes her the right person to help Thunderbird overcome its sagging enrollment and deficit spending by rebuilding the school culture and winning families’ confidence.

The school had hoped to have more than 900 students by now. Instead, after publicity about the state’s review last summer, enrollment plunged from 500 the previous year to 160. And fewer students mean less state, local and federal money to pay faculty and cover the cost of a flood-prone building.

“Butts in the chair equal dollar bills,” Manning said. “That’s the bottom line.”

Who’s watching?

Thunderbird’s future affects a small number of students and a wide network of lenders and consultants that left North Carolina’s charter school advisory panel marveling as they tried to sort it out last summer. Even Chinese investors who got visas in return for sinking $3 million into Thunderbird have a stake in the small school on Old Statesville Road.

The question of charter school oversight is crucial. In North Carolina charter school enrollment is growing while traditional public schools lose students. Thunderbird was one of of 168 charter schools serving almost 92,000 North Carolina students last year. That included approximately 40 schools serving almost 17,000 Mecklenburg County students.

Scrutiny from the state’s Charter School Advisory Board, made up of charter school leaders, is part of the system that’s supposed to ensure that North Carolina students and taxpayers are protected. Looking at mounting debt and parent complaints about mold and rodent infestation, that board voted in June 2016 to ask the state Board of Education to revoke Thunderbird’s charter. Shortly afterward, the advisory board reconsidered, giving the school’s board a year to turn things around.

But despite Machado’s optimism, concrete signs of progress remain scarce.

Still in debt, turmoil

With enrollment down to 160 – a slump school leaders attribute to bad publicity connected with the state review of Thunderbird’s problems – Thunderbird finished 2016-17 more than $360,000 in the red, according to a preliminary report presented at Thunderbird’s July 27 board meeting. The state provides a per-pupil allotment, and school districts are required to pass along a proportional share of their county education money, based on the number of students in their zone who attend the charter school.

The school reported receiving just over $896,000 in state money and $455,000 in local money, most of that from Mecklenburg County taxpayers. Cabarrus, Gaston, Iredell and Rowan counties made smaller contributions.

The classroom flooding that led to complaints about mold hasn’t been fixed, despite installation of French drains that were supposed to keep storm runoff from coming into the building, board members and Veritas consultants say. The school is now working with a church that shares the building to finance repairs and flood control. Meanwhile, the building has been sold for a second time since Thunderbird took possession in 2014.

Leadership churn continues, with managing director and principal Emmanuel Vincent resigning in June as a new board took office. Founding board chair Peter Mojica, a Charlotte-area tech entrepreneur who had vowed to restore the state’s confidence in the school, was among those who stepped down.

Two of the five current members live in Utah. The board is chaired by Taft Morley, an executive with Utah-based American Charter Development, which financed the former board’s purchase of the former Montessori school in 2014. Most board meetings require conference calls so Morley and Angela Hansen, a Utah educator and nonprofit operator, can participate. North Carolina law allows up to half of charter board members to live out of state.

Janice Davidson, a retired Charlotte-Mecklenburg Schools principal who joined Thunderbird’s board last summer, is now the only remaining member who was serving when the board decided to hire Veritas in March. When an Observer reporter showed her a copy of the inspector general’s report on Manning after Thunderbird’s July 27 board meeting, Davidson said she hadn’t seen it.

“I believe it is something that we will look at,” she said. “I know we will certainly discuss it.”

What happened in Spartanburg?

Manning opened High Point Academy in Spartanburg in 2014, the same year Mojica launched Thunderbird.

Before that Manning had co-founded Faith in Action Fort Worth, a Texas nonprofit group created to establish charter schools. The main complaint in the inspector general’s report is that Manning contracted with her former Texas business partner, Katie Stellar, to act as a consultant for the South Carolina school while Stellar paid Manning for similar services at a Fort Worth charter school.

The report says Stellar received $824,570 in South Carolina charter money during the first two years, describing that as “windfall profits” that were not justified by the work done. Meanwhile, the report says Manning received $410,486 from the Fort Worth school, which opened in 2015.

The report also raises questions about Manning contracting with her husband’s business to install white boards and projectors at the school, with her brother for seven months of computer services, and later putting her husband on the High Point Academy payroll, earning $48,000 as director of transportation and logistics in 2016-17. The contracts and positions weren’t open to others, according to the report.

Manning says the consulting arrangements between her and Stellar were approved by the High Point Academy board and provided a better rate than the school could have gotten from most charter management companies. Likewise, she said her husband and brother provided services at lower rates than she could get elsewhere, and no law prohibited hiring her husband when the school opened. Later, when the state’s nepotism law changed, Manning said she asked her board if she needed to remove her husband, who did not report to her. She was told no, she said.

In summer of 2016, Manning says, she was given a “very good” performance review and a “substantive raise.” Just a few days later, she said, a new board took office and she was put on administrative leave and escorted out of the building. She resigned the High Point Academy job in October.

Waiting for findings

The inspector general’s report came out in December. Then-Inspector General Patrick Maley forwarded the report to the state Ethics Commission to review whether Manning violated laws related to conflict of interest, nepotism and fiscal mismanagement. He also urged the South Carolina Public Charter School District to establish clear ethical standards and better control and oversight of its schools.

Steven Hamm, executive director of the Ethics Commission, said the office does not confirm or deny investigations until they’re resolved. The subject of any investigation is notified once his office concludes its work, he said.

Manning said she has cooperated with the commission’s inquiry and has received no word on findings.

Manning says she told Veritas leaders, including Mojica, about the inspector general’s report and gave them her explanation. “I wanted them to know,” she said.

Morley, the new board chair, said he was aware of the investigation but “no real findings came out of that” and Manning got good references from other schools Veritas has worked with.

Since last summer, the Charter School Advisory Board has received two updates from Mojica and Emmanuel, the Thunderbird leaders who left this summer.

Machado, who took over the state’s top charter job last summer after serving as head of Lincoln Charter School, said his staff has continued to track Thunderbird’s progress through the board’s meeting minutes and monthly budget reports. But Machado acknowledged that the minutes are sparse on detail, a challenge he says the staff is working on with several schools.

On July 25, when the Observer first asked Machado about press accounts of the inspector general’s report on Manning, Machado said he hadn’t seen it. However, one family that had visited Thunderbird and planned to enroll a child later sent the Observer a copy of a July 19 email to Machado and Assistant Director Deanna Townsend-Smith with links to the coverage. That family, who asked not to be named in the Observer’s report, wrote to the Observer saying they’d gotten no response from the state about the concerns they raised.

When the Observer asked about that email, Townsend-Smith said charter boards have the authority to hire and fire contractors and consultants without state review. The state could “inquire and alert” if it receives complaints, she said, adding that she would “check with staff to determine any communication received and where we are with the process.”

After at least one more public complaint and another query from the Observer, Townsend-Smith said July 28 that the state will investigate. “Currently, we are reviewing the information and will determine next steps,” she emailed.

The timing of more public scrutiny is hardly ideal for Thunderbird, which is trying to recruit students, teachers and a managing director for its Aug. 28 opening. As of July 28 the school had 209 K-7 students enrolled, a far cry from the 920 K-8 students projected when the initial board applied for a charter.

Both Manning, the consultant, and Morley, the new board chair, say they hope to shift the focus to building a stable school where students can build academic success and leadership skills.

“We are on a trajectory to get back to being highly successful,” Morley said. “We’re excited about the future and we have a lot to offer the community.”

Ann Doss Helms: 704-358-5033, @anndosshelms