Weak Financial Accountability For Charter School Management Companies That Get Millions

Feb 14, 2017

With a nearly $900 million budget shortfall, Oklahoma lawmakers want accountability for every penny. But within the coffers of private charter school management companies are millions of dollars that lawmakers can't see. 

Senator Jason Smalley wants to know exactly how much schools are spending on administration. He filed a bill to find out, because right now he said it’s not clear.

“Are all the individuals that should be classified as administration costs, actually being reported as that?” he asked. “I think that’s what the greater conversation is.”

At most, schools can spend eight percent of their budget on administration. And to prove they’re not exceeding that cap they file a report to the state Department of Education.

But Smalley says those reports aren’t always accurate.

“I think for the most part—I think the public is being fooled,” he said.

But one thing Senator Smalley may never know is how much the superintendents at the state’s largest charter school make.

Epic Virtual Charter School has about 8,000 students enrolled, and like many other charters, Epic is managed by a private company. This company, called Epic Youth Services, keeps 10 percent of all the state and federal dollars the school gets. For the 2015-2016 school year that was $2.9 million.

And that $2.9 million, we don’t really know how the management company spent it,  and they don’t have to disclose that information, because they’re a private company. 

Dr. Gary Miron, who is a researcher for the National Education Policy Center in Boulder, Colorado, said this is legal and common, but he doesn’t think it’s right.

“It’s a problem for us as researchers or people who are interested in accountability,” Miron said. “It’s a whole transparency issue because these are privately owned and operated schools and they are receiving public money.”

Miron said, because the schools receive the public’s tax dollars, the public should see how they spend that money.

Republican Senator Gary Stanislawski wrote all the laws that established virtual charter schools in the state, and he agreed that Epic’s superintendent salary should be public information, but he’s not so worried that taxpayers can’t see where all of the management fee goes.

He equated it to the private sector. He said when the government pays a private company to do a job, they don’t ask how much everyone is getting paid, or how much the materials for the job are going to cost.

“Charter schools are somewhat similar,” he said. “Charters are given a dollar amount and as long as they are meeting the needs of the students then that’s really what the contract is all about.”

In contrast, traditional schools have a higher level of financial accountability.

Charters do have contracts with their management company, and these are public record. In Epic’s case, its contract says the management company oversees the administration, operation, and performance of the school.

David Chaney is the superintendent of Epic, and also the owner of the management company. He said much of that management fee goes to salaries and contracts.

“There’s lots of people, between consultants and employees and different things,” he  said. “Whether it’s technical consultants, developers, all those different things.”

Chaney’s salary also comes out of that management fee. But unlike with traditional schools, we can’t see how much it is, or how much those other services cost.

What can be seen, via Oklahoma’s Cost Accountability System website, is how the rest of the school’s money is spent.

Taking data from this site, KOSU’s analysis found that Epic spent $1.5 million dollars on their superintendents and principals, in addition to the $2.9 million they gave their for-profit management company.

All totaled, that’s just under $4.5 million of public money that appears to go to administration.

Compared  to 10 similarly-sized non-virtual schools Epic’s spending on administration is the highest. In fact, it’s a million dollars higher than the average of those 10 schools.

KOSU used the next five largest, and next five smallest schools-- in relation to Epic-- for their analysis. On average, these schools spent about $3.3 million on total school administration.

But Senator Stanislawski questioned whether that’s fair comparison.

“We don’t know, though, if that full $4.5 million is strictly administration do we?” he said.

He’s right—we don’t know.

Since August of 2016, KOSU has filed three open records requests with EPIC seeking to clarify their expenses, including for administration. All those records requests were ignored.

KOSU did check with the state Department of Education and Epic’s administrative costs do not exceed what the state allows. However, their charter management fees are not included in the state administration cost report.

OKLAHOMA'S SECOND LARGEST CHARTER

Oklahoma’s second largest charter school is Oklahoma Virtual Charter Academy with about 2,500 kids enrolled. It, too, is managed by a private, for-profit company—called K12.

K12 is a huge corporation that manages virtual schools all over the country, making millions in taxpayer dollars. But Sheryl Tatum, the Head of OVCA said that because of the way K12 operates in Oklahoma, they don’t make much off her school, and actually ends up providing a lot of services for free.

“There is a clause in our contract that if there aren’t funds available to pay for all the invoices, then K12 donates them as services in kind.”

The company’s management fee, which includes the superintendent’s salary, principals’ salaries, and other school manager salaries, would have been about $1.8 million for the 2015-2016 school year. But OVCA only ended up paying about $700,000.

Tatum also said that she, and other school employees that are paid by K12, are making their salaries public record even though they are not required to do so.

“So we can be publicly accountable. So we fill out those personnel reports just like everyone else and put those salaries in there.”

Tatum makes about $85,000 as Superintendent of Oklahoma Virtual Charter Academy.