1 gen 2017 anni - 2017: NEPC interviews Dr. Preston Green on conflict of interest behaviors and business structures in privatized edu

Descrizione:

Jennifer Berkshire: Our Secretary of Education is visiting a Florida charter school that is best known for being started by rap-u-preneur, Pitfall. But a lesser known true fact is that the school’s powerful and politically connected management company, Academica, ran afoul of the feds for a little something something called *related-party transactions.* What is a related-party transaction? And why do I have the feeling that Betsy DeVos didn’t drop by to, um, continue the investigation?

Preston Green: Related-party transactions occur when you have two entities that have a pre-existing relationship. For example, if two entities have common management, or in the charter sector context, you could have an EMO that also has a real estate arm, which then leases property back to the charter school at a greatly inflated rate. In the case of Academica, which is the management company that runs the school Secretary DeVos visited, it’s *all of the above.* You see different entities sharing the same board of directors, conflicts of interest and questionable real estate dealings, including charter schools paying rents that are well above the market rate to companies that Academica owns. Berkshire: Whenever I post something related to charter school fraud, I get the same response: There’s fraud in public schools too. Why don’t you go on a crusade against that?

Green: You’ll often hear people say that, and they’re correct. But there is a type of fraud that is unique to the charter school sector. Because of the education management organization relationship, there is this sort of Enron-set up in which these EMOs can then have related party transactions with other companies and work against the interests of the charter schools that they’re serving. This is important because EMOs are primarily in the charter school sector. You don’t see them in traditional public schools. The creation of EMOs that provide educational services to charter schools creates what we call an agency issue. There is an inherent conflict between the charter school boards that want to ensure that charters are operating legally and fiscally responsibility and EMOs, either for profit or nonprofit, that want to make money or cut their expenses.

Because of this inherent conflict, you’ve got to have gatekeepers who are aware of this possibility. In 2016, the US Office of the Inspector General released a reportand noted that a primary flaw of the US Department of Education was that it treated charter schools and traditional public schools the same. The OIG said that this is a major problem, that you cannot treat them the same because of the EMO relationships with charter schools. We need to understand how this type of fraud works in order to better design gatekeeping mechanisms because it ties into everything. It ties into auditing, it ties into examination of the contracts at the charter school authorizer level.

Berkshire: You end your paper with a call to strengthen the oversight role of *gatekeepers* so as to prevent the kind of fraud and conflicts of interest by charter management organization like Academica or Imagine or Celerity. But I don’t have to tell you that *gates,* much like *shackles* are so yesteryear. Meanwhile, you’re seeing the entities whose job it is to keep an eye out for fraud wither away due to budget cuts, resulting in part from charter school expansion.

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