Even many charter schools that are “nonprofits” are run by for-profit charter management organizations.

“The contracts are an example of how the charter schools sometimes cede control of public dollars to private companies that have no legal obligation to act in the best interests of the schools or taxpayers. When the agreement is with a for-profit firm like National Heritage Academies, it’s also a chance for such firms to turn taxpayer money into tidy profits.

“‘It’s really just a pass-through for for-profit entities,’ said Eric Hall, an attorney in Colorado Springs who specializes in work with charter schools and has come across many sweeps contracts. ‘In what sense is that a nonprofit endeavor? It’s not.’…

“While relationships between charter schools and management companies have started to come under scrutiny, sweeps contracts have received little attention. Schools have agreed to such setups with both nonprofit and for-profit management companies, but it’s not clear how often. Nobody appears to be keeping track.

“What is clear is that it can be hard for regulators and even schools themselves to follow the money when nearly all of it goes into the accounts of a private company.

“Take the case of Brooklyn Excelsior Charter School, another National Heritage Academies school. In 2012, state auditors tried to track the $10 million in public funding given to the school, only to conclude they were ‘unable to determine … the extent to which the $10 million of annual public funding provided to the school was actually used to benefit its students.’ From what auditors could tell, the school was paying above-market rent for its building, which in turn is owned by a subsidiary of National Heritage Academies. They also had concerns about equipment charges.

“The auditors couldn’t ultimately tell whether the charges were reasonable because National Heritage Academies refused to share the relevant financial details. The firm also refused to provide detailed documentation for $1.6 million in costs recorded as corporate services, claiming the information was proprietary, according to the audit. The board president of Brooklyn Excelsior did not respond to our request for comment.

“While the auditors in New York were disturbed by what they found, they could do little more than issue reports with advisory recommendations. ‘We can’t audit the management company,’ said Brian Butry, a spokesman for New York Comptroller Thomas DiNapoli.

“In Michigan, where NHA is the largest charter-school operator, state education regulators have voiced similar frustrations about the degree to which these private firms are shielded from having to answer to the public about how money is spent.”

http://www.propublica.org/article/when-charter-schools-are-nonprofit-in-name-only