Tuesday, July 19, 2016

Charter school financing has a way of getting complicated

Via LGM.

I know I've made this point before, but emotions run hot in the education reform debate so it's important not to demonize people  on the other side. Most people starting and operating charter schools, like most people working in traditional schools, are primarily there to do good.

But it is also important to remember that, in its current form, the charter school system has tremendous amounts of money changing hands often through complex and opaque financial deals, with no-bid contracts between connected players, lucrative sinecures, questionable metrics and frequently misaligned incentives.

Here, the Charlotte Observer's Ann Doss Helms walks us through a not-that-unusual example of funding.

When the Thunderbird board got approval to open in 2014, it signed a contract with Banyan Strategics, a Mecklenburg firm that provides support for charter and private schools. The founders were involved in starting Lake Norman Charter in the late 1990s.


During the first school year, the relationship between Thunderbird and Banyan fell apart. Mojica declined to discuss details, saying the separation agreement prohibits it, and Banyan couldn’t be reached for comment. But the Thunderbird board ended up borrowing $450,000 to pay a penalty for breaking that contract.


The rest came from ALK Angel Holdings of Virginia, which gave Thunderbird a $250,000 line of credit, with interest-only payments of $4,167 a month, or $50,000 a year. That’s the one that really raised eyebrows among state officials.

“That just seems like a bad loan,” said Steven Walker, an advisory board member who is also general counsel to Lt. Gov. Dan Forest. Walker pressed Mojica for details about Angel Holdings, including whether any Thunderbird board members did business with general partner Alex Karakozoff.

Mojica said Karakozoff is a venture capitalist with whom he had done business in the past.


In addition to paying off the Chinese investors and the three loans, Thunderbird pays rent to Vertex – under an agreement that also makes the school responsible for all maintenance and repairs.

Some of the classrooms flood during heavy rains, which means the school is paying to install a new drainage system and get rid of mold, which sparked parent complaints about health and safety. Families also complained to the Health Department about rats in the school; Thunderbird is hiring a pest control company.

Mojica says rent on the building is capped at 20 percent of the per-pupil allotment Thunderbird gets from taxpayers to run the school.

“We are within the norms. We might be on the high side of the norms,” he said. “It may not be the cheapest rent around.”

In 2014-15, the first year Thunderbird was open, expenses outstripped the money it took in. The 2015-16 audit isn’t due until October, but the school provided the state panel an informal report showing it had ended the year in the black.

But Alexis Schauss, the state Department of Public Instruction’s director of school business, said those numbers don’t seem to match what she has seen on monthly reports. “I don’t feel comfortable with the data I have,” she told the advisory board.


The Thunderbird board hired human resources consultants to screen candidates for the school’s volunteer board and the top job. The March decision to hire Emmanuel Vincent, an educator who had most recently worked at a Georgia charter school, over Andrea McKinney, a longtime local educator who had been hired as interim director, infuriated some families, who petitioned for Mojica to resign.

State charter board members said they want to see improvements on all fronts: relations with parents, healthy classrooms, board governance and financial reporting.

Mojica says that’s in the works – with more outside help. Even before last week’s meeting, Thunderbird had signed on two school leadership consultants to advise the board on academics and governing. A financial consultant will “audit the audit,” Mojica told the board, and Thunderbird is taking bids for a bookkeeping firm.

The board recently added two members and will continue working with the HR consultant to add two more, Mojica said.

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