Mr. Chairman, I have an amendment at the desk. Mr. Chairman, the Castor amendment directs the Secretary of the Department of Education to develop and enforce conflict of interest guidelines for any charter school receiving assistance under…
Mr. Chairman, I have an amendment at the desk.
Mr. Chairman, the Castor amendment directs the Secretary of the Department of Education to develop and enforce conflict of interest guidelines for any charter school receiving assistance under this law.
These guidelines must include disclosures of any person affiliated with the charter school that has a financial interest in the charter school.
We all know that a conflict of interest is a situation in which an individual who has an obligation or duty to act for the benefit of the public--in this case, students and schools--exploits that relationship for personal benefit--typically for money--if the individual tries to perform that duty while, at the same time, trying to achieve a personal gain.
In the context of charter schools, there have been very serious cases all across the country over the past few years involving conflicts of interest in charter schools. Despite the overriding duty and responsibility to students and schools, individuals have acted to benefit or enrich themselves with public money--taxpayer money.
In my State of Florida, we have had a number of cases of conflict of interest in the approval and operation of charter schools. Recently, the Department of Education raised serious questions in an audit about expenditures of money and conflicts of interest of Florida's largest charter school management company. The preliminary audit report findings are very disturbing.
It appears that the charter school corporation entered into leases with development companies tied to the president of the company's family, that they hired an architectural firm that employs the president's brother-in-law, and that the board of directors transferred public funds to another organization with the same board of directors.
In Arizona, The Arizona Republic has reported that boardmembers and administrators from more than a dozen State-funded charter schools are profiting from their affiliations by doing business with the schools they oversee.
The newspaper reviewed thousands of pages of Federal tax returns, audits, corporate filings, and records with the Arizona State Board of Charter Schools.
The analysis looked at the 50 largest nonprofit charter schools in the State, as well as schools with assets of more than $10 million. They found at least 17 contracts or arrangements totaling more than $70 million over 5 years and involving about 40 school sites in which the money from the nonprofit charter school went to for-profit and nonprofit companies run by board of directors, executives, or their relatives.
In Colorado, an audit report took a certain charter school network to task for egregious financial improprieties and for severe nepotism. The report said that the CEO was paying himself over $340,000 per year. He hired his wife as chief operating officer and paid her over $200,000 a year, and the chief financial officer was paid over $320,000 per year.
This far exceeds what the standard salary is for a charter school or even when you look at the salaries for our larger district superintendents.
This charter school company then hired 20 members of their own family, according to the report and audit, and they racked up over $400,000 in credit card charges in one year.
In California, State auditors found that the president of the American Indian Public Charter School in Oakland had given $350,000 in improper payouts to his wife. They also found another $350,000 had been spent on unauthorized construction projects, all going to companies owned by the CEO.
Also, Mr. Chair, just last week, a report was issued by the Center for Popular Democracy and Integrity in Education entitled, ``Charter School Vulnerabilities to Waste, Fraud, and Abuse.'' That title was borrowed from the title of a section of a report that appeared in the Department of Education's Office of Inspector General's recent report.
The report stated that the OIG experienced a steady increase in the number of charter school complaints, State-level agencies were failing to provide adequate oversight needed to ensure Federal funds were being properly used and accounted for. They estimated over $100 million in taxpayer losses due to fraud, abuse, and waste in charter schools.
We can do much better. The conflict of interest problems afflicting charter schools across the country endanger the outstanding work being done by many charter schools.
For example, the Pepin Academies in my hometown of Tampa is a tuition-free public charter school for students with identified learning disabilities. They have an individualized education plan. They serve a very important population, and I believe in their mission.
If charter schools are going to effectively carry out their mission for students, using public funds, it is clear that we need more accountability and better procedures in place to protect taxpayer investment.
I include for the Record the press report that I referenced, along with the letters of support from First Focus, School Superintendents Association, NEA, and AFT.
[From the Republic, Nov. 17, 2012]
Insiders Benefiting in Charter Deals
(By Anne Ryman)
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 has 535 charter schools that enrolled about 144,800
students this school year, or about 14 percent of students in
public schools.
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.
In one case, school officials in Phoenix thought they were
exempt from purchasing laws and failed to put a contract out
to bid for non-academic services that were worth hundreds of
thousands of dollars. In another case, a Glendale school
purchased a van for almost twice its value and had to get the
money refunded.
It's impossible to know whether any money was potentially
diverted from classrooms through insider transactions or lack
of competitive bidding. Several charters said they saved
money but were unable to provide specifics; others did not
respond to interview requests. Some said they contracted with
a school official's company because the quality of the
product or service was better than what was on the market.
Educators and ethicists say the arrangements raise
questions about whether the schools are being used partly for
personal gain.
``This is crony capitalism,'' said Alex Molnar, an
education professor at the University of Colorado-Boulder who
has studied charter schools. ``This is greasing the palms of
special-interest and favored individuals.''
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 macle a profit on the transactions. Others said
they lost money. Some refused to comment.
Charter-school leaders say most executives and board
members operate with good intentions when they conduct
business transactions with their schools. The schools want to
stretch their funding, and school leaders who own businesses
can give the schools a good deal on products or services.
Being exempt from purchasing laws gives schools more
flexibility, allowing them to focus more on the classroom and
less on red tape, charter-school officials say.
``I see a lot of my schools really using thrifty, cost-
effective methods,'' said Eileen Sigmund, president and CEO
of the Arizona Charter Schools Association, a non-profit
group that provides support services for charter schools.
For example, she said, one charter-school leader picked
through Northern Arizona University's surplus equipment to
get desks for classrooms.
Because Arizona charter schools receive on average $1,700
less in annual state funding per child than district schools,
charters ``really have to be efficient,'' she said.
Charter schools are public schools that are independently
run by non-profits, for-profits, school districts or state
universities.
Charters get less funding on average largely because,
unlike school districts, they can't ask voters in their
surrounding areas to pass bonds and overrides to bring in
more money. About 96 percent of charter schools operating now
are authorized by the state and the rest by school districts
or state universities.
Molnar, the education professor, said because charters are
publicly funded, they should be subject to state procurement
laws. Board members shouldn't be allowed to do business with
their own schools, either.
I ask for approval of this amendment regarding conflict of interest.
I yield back the balance of my time.
Mr. Chair, I demand a recorded vote.