Arizona charter schools (analysis finds insiders made $70M)

“Insiders benefiting in charter deals, Board members, school officials did more than $70mil in business.” The Arizona Republic, 11/17/2012 

Board members and administrators from more than a dozen state-funded charter schools are profiting from their affiliations by doing business with schools they oversee.

The deals, worth more than $70 million over the last five years, are legal, but critics of the arrangements say they can lead to conflicts of interest. Charter executives, on the other hand, say they are able to help the schools get better deals on services and goods ranging from air-conditioners to textbooks and thus save taxpayers money.

The Arizona Republic reviewed thousands of pages of federal tax returns, audits, corporate filings, and records filed with the Arizona State Board for Charter Schools. The analysis looked at the 50 largest non-profit charter schools in the state as well as schools with assets of more than $10 million. For-profit schools were not analyzed because their tax records are not public.

The Republic’s analysis 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...

Arizona’s regulations on charter schools are relatively lax. The state allows charters to seek exemptions from state laws that require schools to obtain competitive bids for goods or services. Nearly 90 percent of the state’s charter holders have gotten permanent exemptions from the state Board for Charter Schools, according to the state’s database.

The schools’ purchases from their own officials range from curriculum and business consulting to land leases and transportation services. A handful of non-profit schools outsource most of their operations to a board member’s for-profit company. The transactions are legal provided schools report the relationships on their federal tax forms and board members abstain from voting on their own contracts...

Educators and ethicists say the arrangements raise questions about whether the schools are being used partly for personal gain...

A for-profit company paid by a charter school, even a company that operates most of the school, does not have to disclose spending details or how much profit it makes. Some board members who did business with their schools told The Republic they made a profit on the transactions. Others said they lost money. Some refused to comment...

An ethics expert says it’s generally problematic to have board members also doing business with the schools they govern. The transactions — even if well-intentioned, as many are — can erode public trust when people find out, said Judy Nadler, a senior fellow in government ethics at Santa Clara University. The perception may be that the board members received the contract because of insider knowledge or relationships with their colleagues, she said.

In the end, a board member needs to differentiate between being a businessperson from being a policy maker, she said. Boards that oversee non-profit schools are there to serve the public, she said.

“If you’re tempted to get involved in the business end of the deal, you have to really look at which one of these will you give up,” she said...