Wednesday, November 21, 2012

How Arizona Charter School Officials Are Turning Public Funds Into Profit

Posted By on Wed, Nov 21, 2012 at 5:00 AM

Out west at the The Arizona Republic, Anne Ryman is out with an investigation into the state's charter schools that should be particularly resonant in Nashville.

The paper reviewed tax returns, audits, corporate filings and other records from the state's 50 largest non-profit charter schools, and all non-profit charter schools in the state with assets of more than $10 million. The tax records of for-profit schools are not public, so they could not be analyzed.

In the end, Ryman reports they found "at least 17 contracts or arrangements, totaling more than $70 million over five years and involving about 40 school sites, in which money from the non-profit charter school went to for-profit or non-profit companies run by board members, executives or their relatives."

One charter operator Ryman mentions will come as a familar name to Nashvillians.

The 15 schools under the non-profit Great Hearts Academies offer a college-preparatory curriculum that stresses classic literature. That means students get an intensive reading regimen.

To supply the books, the schools have been making regular purchases for at least the last three years from a Tempe-based textbook company called Educational Sales Co. Daniel Sauer, the company’s president and CEO and a shareholder, is also an unpaid officer of the Great Hearts Academies non-profit.

Since July 2009, the schools have made $987,995 in purchases from the company.

Great Hearts also gives parents the option of buying books directly from the company. Six of the Great Hearts school websites feature links only to Educational Sales’ website for parents who want to buy a second set of books for use at home.

Great Hearts CEO Dan Scoggin said he doesn’t believe there is a conflict of interest because Great Hearts has no mandates on where its schools buy books. Many Great Hearts schools use several vendors based on pricing, service and availability, he said.

Great Hearts schools are exempt from state purchasing laws. Scoggin said Great Hearts doesn’t have a contract with Educational Sales because schools have choices on where they make textbook purchases.

Scoggin said Sauer has been a generous donor to Great Hearts schools. Sauer has donated $50,400 since December 2007, according to Great Hearts. He also lent the non-profit $300,000 in February 2011 to buy an empty office building in Phoenix that was converted into schools. The loan, with monthly interest-only payments of $1,042 at 6.25 percent, was repaid in January 2012, Scoggin said.

“He’s just a great gentleman,” Scoggin said of Sauer. “All of our board members give to the schools.”

Sauer did not return a call seeking comment.

Great Hearts, as you'll recall, is not in business in Nashville, after coming out on the losing end of a nearly yearlong debate over their entrance into the city's school system. They've since indicated that they won't reapply with the Metro school board, and that they'll only engage with an "impartial" charter authority — by which they mean the unelected statewide charter authorizer they'll be asking the new GOP supermajority to create next year.

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