Public school districts must account for every dollar they spend. Charter schools operated by for-profit companies often do not have to.
Charters can keep salaries of supervisors, academic consultants, back-office staff – sometimes even school administrators – secret and still abide by North Carolina’s public records law despite being funded by tax dollars. These positions are often considered employees of the management company instead of the school, and therefore not subject to disclosure.
These companies also are not required to disclose how much profit they’re making while running schools with public money. The discrepancy has frustrated traditional public school district advocates in North Carolina who consider this a double standard. In other states, that lack of transparency has contributed to abuse.
“Our budget is 3 inches thick, and you all get a copy of it,” said Charlotte-Mecklenburg Schools board member Rhonda Lennon. “Why is there so much difference if we’re all funded by tax dollars?”
Six private charter school management firms currently oversee millions in state dollars for public education in North Carolina.
The structure of these schools has benefits. The financial backing a company provides offers stability, and management organizations bring refined curriculums and training programs, said Eddie Goodall, executive director of the Charlotte-based North Carolina Public Charter Schools Association. They also often have strong records of academic performance.
But other states with longer charter school track records have had problems. In many cases, the lack of transparency at their management companies has made it more difficult to detect issues. Among the examples:
▪ The founder of Bay City Academy in Michigan was convicted of three counts last month related to tax fraud for shuffling money intended for the charter school through his management business and personal accounts to avoid taxes.
▪ A charter school in Washington, D.C., had its charter revoked in February after authorities accused it of improperly shifting public money to the management company. D.C. charter school officials said they had a hard time obtaining financial records from the company. Earlier, D.C. officials had accused another management company of receiving exorbitantly high prices for services at several charter schools.
▪ In New York, the Office of the State Comptroller sought to get information from National Heritage Academies after saying state officials couldn’t determine how $10 million in taxpayer money was being used. The company refused to provide full financial reports. New York no longer allows new charter schools to contract with for-profit companies.
“Transparency is a serious issue,” said Gary Miron, a professor at Western Michigan University who has studied charter schools extensively. In Michigan, nearly 80 percent of charter schools are run by for-profit management companies. “Transparency laws would help, but they must invade the proprietary space of (management companies) because of the public need to know.”
Charter school advocates say that as long as students receive a quality education, it doesn’t matter what type of organization runs the school. Company executives say the fees are needed to recoup substantial startup costs. Every school that a charter management company builds is one less that taxpayers fund in the public school system. The state doesn’t provide money for charter school buildings.
Management executives say that information such as profit margins and central office staff salaries are trade secrets that need to be private.
“It becomes a competitive disadvantage,” said Doug Haynes, president of Mastermind Prep and administrator of Rocky Mount Prep. A lawyer working with his company, former Charlotte Mayor Richard Vinroot, has argued that Haynes’ salary should be private.
“I don’t have anything to hide,” Haynes said. “It’s just the principle. If we want to encourage more entrepreneurs and more private investment to improving public education, that’s not the best incentive.”
But critics say for-profit education management organizations receive less public oversight than traditional school districts. A state law passed last summer seeking to make more charter records public left key pieces of information, such as fees, obscured. Half of the charter school companies in North Carolina have not revealed exactly how much they’re bringing in each year.
“We need to know what the money is being spent on,” said Charles Smith, president of the Charlotte-Mecklenburg Association of Educators.
In several cases, public money the schools receive flows directly to the for-profit company, which decides how every dollar is spent. And by design, they require that taxpayer dollars fund profit margins for investors.
Charter schools and public school districts compete for students and money. In public school districts, the law requires full disclosure.
“Open your books. Let the sun shine in,” said Jessica Swencki, director of quality assurance and community engagement at Brunswick County Schools. “What are you spending these taxpayer dollars on?”
Some seek more oversight
Charter schools are public, but which records are open has been a matter of legislative debate. Several bills in the last session of the General Assembly sought to lay out what should be disclosed.
The final version of the legislation required charter schools run by a management company to provide salary information for employees assigned to work at the school, and a budget and expenditure report.
That includes limited information about their management fees. Several companies provided the state Department of Public Instruction with specific dollar figures on the management fees they charge. Others simply said they hold on to substantially all of the school’s revenue and pay expenses.
“That is a line that I don’t believe we can cross,” said Bill Cobey, chairman of the state Board of Education. “We need to know all the money that’s being spent on a particular charter school, but I think we cross the privacy of corporations if we demand to know all about their business and what they’re spending internally and what their profit margin is. I think that’s a place we can’t go.”
Mike Tadych, an attorney with the N.C. Press Association, said the law should require more specific disclosure.
“I don’t think DPI gets to say what is public record,” he said. “In my view, any invoicing and records of payment of management fees by a charter school should be available as public records.”
State Rep. Tricia Cotham, a Mecklenburg Democrat and former CMS administrator, has introduced a bill this session that would require more disclosure from charter schools, including additional information on management company structures and what services the for-profit company provides. It would also require disclosure of salaries of everyone who works at a charter school, even if they’re technically an employee of the management company.
“We shouldn’t live in secrecy with taxpayer money,” Cotham said.
Several Republicans said they felt existing requirements are adequate.
“When you’re starting something new, you have to give it enough freedom to flourish,” said Rep. Rob Bryan, a Mecklenburg County Republican. He suggested oversight rules that give high-performing schools more leeway, while requiring more information of lower-performing schools.
Goodall, of the North Carolina Public Charter Schools Association, said the goal should be preventing charter school failures, not simply getting more information out in the open.
“It doesn’t necessarily need more oversight; it needs better oversight,” he said.
For-profit management firms in N.C.
Six companies reported data to the Department of Public Instruction about charter schools they manage in North Carolina.
Salaries for the charter school administrators listed below are accurate as of summer 2014. By comparison, in Charlotte-Mecklenburg Schools, elementary school principals earned between $58,000 and $143,000. Middle school principals earned between $73,000 and $150,000. High school principals earned between $90,000 and $165,000.
Accelerated Learning Solutions
North Carolina schools: Commonwealth High School, opened in 2014 in east Charlotte.
Top educator salaries: Thomas Hanley, executive principal: $110,000.02. Adrienne Robinson, assistant principal: $60,000.
Management fees: The budget includes a contribution from the company of about $740,000 for the 2014-15 school year.
The application says the school will send 97 percent of all revenue to the parent company, which will pay expenses. ALS will expect a net fee after expenses of 19 percent of revenues in years two through five.
Charter Schools USA
North Carolina schools: Cabarrus Charter Academy (2013); Cardinal Charter Academy (2014, Wake County); Langtree Charter Academy (2013, Iredell County)
Top educator salaries: Cardinal principal Crystal Scillitani, $87,500. Langtree principal Joan Roman: $85,000.
▪ Cabarrus Charter did not pay a management fee in its first year. This year, the school was budgeted to pay 5 percent of its revenues, or about $311,000. That will escalate next year to 11 percent of revenues, or about $831,000.
▪ Cardinal Charter did not report a management fee on the budget. The school also did not disclose a management fee scale.
▪ Langtree reported budgeting $325,425 in management fees in the 2015 fiscal year. Fees are budgeted to escalate to 11 percent of revenues, a fee that is expected to top $1 million within two years.
According to the N.C. Department of Public Instruction, fees will not exceed 15 percent of revenues.
Mastermind Prep Learning Solutions
North Carolina schools: Rocky Mount Prep (1997, Nash County)
Top educator salaries: CEO/school administrator Doug Haynes, $135,000. Angela Langley, director of teaching and learning, $80,000. Tim Everett, director of operations, $80,000.
Management fees: About 7 percent of revenues. $462,279 in the 2012-13 year; $621,861 in the 2013-14 year; $636,805 budgeted for 2014-15.
National Heritage Academies
North Carolina schools: Forsyth Academy (1999); Greensboro Charter Academy (1999); PreEminent Charter School (2000, Wake County); Queen’s Grant Community School (2002, Mecklenburg); Research Triangle Charter Academy (1999, Durham); Summerfield Academy (2013, Guilford); Wake Forest Charter Academy (2014, Wake)
Top educator salaries: Queen’s Grant principal Christy Morrin, $91,478.40. Research Triangle Academy principal Devon Carson, $91,448.24.
Management fees: Not disclosed. The contract with Wake Forest Charter states that all revenues, minus $35,000, are remitted to NHA and expenses are paid from there. They do not disclose a net-of-expenses fee.
Roger Bacon Academy
North Carolina schools: South Brunswick Charter School (2014); Douglass Academy (2013, New Hanover); Columbus Charter School (2007); Charter Day School (2000, Brunswick)
Top educator salaries: Steve Smith, Columbus Charter headmaster, $84,596. Barbra Jones, Douglass headmaster, $55,125.
Management fees: Typically 16 percent of revenues, as laid out in the contract.
▪ Charter Day School budgeted $1,122,840 for this school year, plus a $200,000 management incentive if academic targets are met.
▪ Columbus Charter budgeted $1,003,740 for this school year, plus a $150,000 incentive.
▪ Douglass Academy budgeted to pay $99,906 this year, its second.
▪ Management fees were waived for South Brunswick, a school that opened this year.
North Carolina schools: The Capitol Encore Academy (2014, Cumberland)
Top educator salaries: Principal Sylvia Adamczyk, $56,000.
Management fees: Not disclosed. The contract states that Romine will receive a “capitation” fee equal to 10 percent of revenues.
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