Most Michigan Charter School Companies Don't Follow Financial Disclosure Law
Michigan law requires certain levels of transparency in how its schools spend taxpayer money. Many charter companies that operate charter schools across Michigan do not follow Michigan's financial disclosure law, a law that requires school operators to publish detailed information including teacher compensation, maintenance costs, and vendor agreements.
"Michigan’s charter schools offer the public scant information on how they spend taxpayer money.
That stands in stark contrast to what the state demands and gets from traditional schools.
The companies that run most charter schools say they are private contractors not subject to disclosure laws, although the schools they run are public just like traditional schools, receiving taxpayer dollars from the same pot.
And the state has never seriously challenged the lack of transparency from most charter schools, although Michigan law seems clear:
■ All public schools must post on their websites certain operating expenses such as maintenance and instruction. The Michigan Department of Education says a summary is enough to satisfy the law, although MDE says schools can post more details.
■ All public schools must post on websites compensation information — such as salaries and perks for school leaders, employees making more than $100,000, total salaries, employee benefit costs.
■ All public schools must make available their contracts with vendors if anyone — parents of students, media, any members of the public — ask for them.
That’s the law.
Here’s the reality: Most charter schools disclose little information beyond posting summaries of operating expenses, which give a bare-bones window into expenditures. They often refuse to post employee compensation or make available their vendor agreements. They argue that teachers and other school staff are employees of the private company, not public school employees.
The state doesn’t challenge that assertion. And even if it did, state law provides no penalties for not complying.
From the basic information found on websites, it’s impossible to know where the taxpayer money goes. For example:
At Choice Schools’ Dove Academy of Detroit, the school lists $1.7 million in expenditures on basic programs in instruction for the 2013-14 school year. The website provides no details.
At the Academy for Business and Technology in Melvindale, run by the Leona Group, the website lists $502,685 to be spent on general administration in the 2013-14 school year. It gives no details.
In contrast, information for traditional school districts is more often available on their websites, or it can be obtained under state laws allowing the public to request records of a public body. Detailed budgets, salaries for all school employees, vendor contracts and more are accessible.
School boards that hire management companies and authorizers that provide oversight could try to force more disclosure, but many decline to do so. Cindy Paavola of Northern Michigan University said in an e-mail the university [']has no authority to act on a charter school’s individual budget and/or operational decisions.[']
But parents and taxpayers should know where their money is going, said Amber Arellano, executive director of the Education Trust-Midwest, a nonpartisan education policy and advocacy organization in Royal Oak.
[']Who is running the school and how they are spending taxpayer dollars is basic information and should be readily available for anyone who wants to find it. In many of these schools, that’s not the case.[']
In the best scenario, advocates of more open disclosure say detailed financial information should be posted on all schools’ websites. And some charter schools do provide a wealth of information.
The website for GEE Edmonson in Detroit, run by for-profit Global Education Excellence, includes several pages of line-item expenses. At the elementary level for the 2013-14 school year, Edmonson planned to spend $3,000 on printing and binding, $10,000 on equipment and furniture, and $7,000 on textbooks. GEE officials say they post the details so families can see how taxpayer money is being spent.
At Honey Creek Community School, a self-managed Washtenaw County charter, the website specifies how the school planned to spend its $2.45-million budget for 2013-14, including $600 for art supplies in its elementary school and $500 at the middle school. And it will break even on the yearbook — $2,000 in expenses, $2,000 in revenue.
Honey Creek also lists the salary for its director.
Most charter management companies skirt the requirement to post employee compensation on websites by lumping the totals in a category called [']purchased services,['] with no listing of top administrator salaries, those making more than $100,000, or how much they spend in total on personnel.
The companies defend the lack of disclosure on school websites. A Free Press sampling of several schools from each of the six largest charter management companies found postings similar to this by National Heritage Academies:
[']NHA is an educational service provider ... Consequently, the school does not have any employees who would be subject to the reporting requirement of (the state’s 2009 transparency law).[']
In a 2011 law lifting the cap on charter schools, lawmakers included a provision that would require the schools to publicly disclose teacher salaries and compensation as reported to the state’s registry of personnel. The move came after tougher transparency language was defeated.
[']Simply put, the intent of the legislation is for (charter schools) to report all personnel working at the school, regardless of their employment status,['] Mark Eitrem, head of the MDE’s charter school office, wrote in a Feb. 29, 2012, memo. [']It is expected that ‘purchased services’ will no longer be used for reporting compensation to teachers, administrators, and support staff working at a school.[']
However, that law has a loophole. The registry’s instructions on reporting data specify that reporting salaries is optional. Eitrem also noted that his thoughts were just a recommendation from the department, which cannot enforce compliance.
It’s also difficult to get vendor contracts from management companies. The Free Press asked four schools, each managed by a different for-profit company, for records showing payments to suppliers and other vendors over an academic year. Only the Leona Group, which manages Hope of Detroit, turned over details — spreadsheets showing more than 500 individual payments totaling $5 million
Jennifer Dukarski, an Ann Arbor lawyer who specializes in First Amendment issues, said she believes charter management companies are subject to Michigan’s Freedom of Information Act because they are primarily funded by state tax dollars and perform a [']public education function.[']
The law defines the public bodies that are subject to FOIA, including [']any other body which is created by state or local authority or which is primarily funded by or through state or local authority.[']
Experts say that failing to disclose vendor contracts makes Michigan vulnerable to conflicts of interest in charter schools and raises questions about whether deals are competitively bid.
The lack of transparency makes it tough for a school board or anyone who’s interested to evaluate a management company, said Gary Miron, a Western Michigan University professor who has studied charter schools extensively.
[']You need to be able to see the whole package,['] he said.
Attempts by some lawmakers to mandate more disclosure and oversight — such as posting management company contracts, disclosing management fees and putting limits on which for-profit companies could operate schools — have not been successfulin the Legislature.
But state Sen. Phil Pavlov, R-St. Clair Township and the chairman of the Senate Education Committee, said he believes charter schools are already transparent enough.
[']They have to be transparent with how they spend their money,['] he told the Free Press. [']The number of parents lining up to send their kids to charter schools shows they are doing a good job.['}