Charter schools often hire for-profit management companies to handle their finances and operations, with much of the public funding going to these private firms. An audit found that most of the revenue from one nonprofit charter school went to a large management company, with little board involvement in running the school. While partnerships with private firms are under scrutiny, "sweep contracts" that funnel almost all public money to these companies have received little attention due to the lack of access regulators have to company financial records. Experts argue this setup allows private firms to profit at the expense of charter schools fulfilling their public function.

1. Profitable Non-Profit Education
Jonathan Offt

2. Charter schools are essentially non-profits
who often hire for-profit companies to
handle their finances and operations

3. A few years ago, auditors found that most
revenue from the non-profit Buffalo United
Charter went to a large management firm
called National Heritage Academies (NHA)
and the board’s involvement in running the
school was almost ceremonial

4. This has caused ripples in the education world and this
tradition of ‘sweeps’ contract, where almost all of the
tax payers’ money is swept into a private management
company, is brought into light for the first time

5. The public concern regarding surrendering
responsibility of charter schools to private
management is mostly about how these
companies are not legally obligated to act
in the best interest of the taxpayers

6. The money is likely to be spent irresponsibly
and unfortunately, more often than not, that is
the case with most of these firms

7. For companies like National Heritage
Academies, their relationship with public-funded
institutions can conveniently pave
the path to steady profits for themselves

8. Buffalo United’s board defended their decision to
place faith on an external firm by saying that having
someone else taking care of operational tasks, the
board members can focus on fundraising

9. They also asserted that National Heritage
Academies fully adhered to all state and
federal laws, academic regulations and
authorizer oversight requirements and all
this was done under full transparency

10. While the partnership between schools and such
companies are under scrutiny, sweep contracts
themselves haven’t received much attention and
as of today, are not widely monitored

11. It is mostly because regulators or even the
schools themselves do not have much
access to the accounts of private companies

12. Alex Medler of the National Association of
Charter School Authorizers says that this is an
issue that requires immediate attention since
sweep contracts demonstrate a blatant
inefficiency in fulfilling public function and in
some cases, a series of questionable spendings

13. The auditors noticed inexplicable charges in
terms of rent and equipment costs in the case of
Buffalo United and NHA, but were unable to verify
these suspicions or satisfactorily account for the
school’s $10 million spending because they were
denied access to the financial books of NHA

14. The auditors could do nothing more than issue
‘advisory recommendations’ on the matter since
most of the audit process remained incomplete

15. In the past few years there have been situations
where the charter schools have pushed their
management companies for more transparency,
including the case in 2010 where 10 charter school
boards sued the management firm, White Hat
Management, when it refused to disclose basic
information about expenditures

16. Heeding from these examples, some charter
schools now understand the implications of
their limited access and are beginning to
push for more authority for its regulators

17. Unfortunately, the management firms are putting up an even
stronger fight and so far, the dynamics have not changed
particularly in favor of charter schools across the nation

18. To read full article, visit:
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http://www.propublica.org/article/when-charter-
schools-are-nonprofit-in-name-only