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Report details power over charter schools

By John Published: May 19, 2010

By John Higgins
Beacon Journal staff writer

Akron-based White Hat Management — sued on Monday by the governing boards of 10 of the Ohio charter schools it operates — isn't the only for-profit management company to come under fire.

Last week, Ohio Policy Matters, a Cleveland think tank, published a critical report about Imagine Schools that foreshadowed many of the complaints about financial accountability and poor academic performance leveled at White Hat in the lawsuit.

Virginia-based Imagine Schools is the largest for-profit charter school management company in America, with 71 schools in 11 states and Washington, D.C., according to the report. Eleven of those schools are in Ohio and one of them is in Akron, the Romig Road Community School, in a former Apple's Grocery Store across from Rolling Acres Mall.

The striking similarity between the Imagine report and the White Hat lawsuit is the power that both for-profit corporations hold over the nonprofit school boards that are their employers — at least on paper.

''One huge issue is how hard it is for these school boards, these governing boards, to break away from Imagine or White Hat,'' said the report's author, Piet van Lier.

The White Hat lawsuit contends that changes to Ohio's charter school law in 2006 enabled management companies, under certain circumstances, to replace the governing boards that hired them.

White Hat Management noted in a response sent late Monday that it is regulated and audited by the state of Ohio and has properly accounted for all state and federal funds.

''This is not the place to argue about the politics of charter schools,'' according to White Hat's statement. ''That is properly left to the legislature.''

But it's the legislature that has caused the confusion, said van Lier.

The same law that lets management companies oust their governing boards holds those boards responsible for the school's finances and academic performance.

''The state law appears to be doing
two things at the same time, sort of undercutting itself,'' van Lier said. ''You're creating these boards that are supposed to be responsible, and yet ultimately it's the management company that can wield control.''

In other words, instead of the operators working for the boards, the boards serve at the pleasure of the operators.

Longtime issue

The question of independence has been an issue in Ohio for more than a decade.

In 2000, the Akron Beacon Journal obtained a letter from the IRS to a Hope Academy at a time the Hope schools were attempting to achieve federal nonprofit status. The IRS raised concerns about the close ties between White Hat Management and the Hope school board.

Also in 2000, State Auditor James Petro, after a special review of charter schools, reiterated the IRS' concerns about management companies' relationships with school boards, which were supposed to be independent.

The Thomas B. Fordham Institute/Foundation — a staunch defender of the charter school movement nationally and the sponsor of six charter schools in Ohio — agrees that the ambiguity has made Ohio ripe for lawsuits.

''That creates a situation where you're going to have lawsuits and you're going to have muddied accountability because it's not at all clear who's on the hook for performance,'' said Terry Ryan, Fordham's vice president for Ohio Programs and Policy.

Ryan said Fordham refuses to sponsor management companies that set up the school first, then find a compliant board and sponsor to meet the Ohio regulations.

''We would not sponsor a school that worked that way,'' Ryan said. ''We've actually had conversations like that. And what we always say is, for us, we want to know who the governing board is and we want to communicate with the governing board and we want to have a relationship with the governing authority. Because at the end of the day, that's our partner. They're the ones we hold accountable for results.''

Van Lier said Imagine is one of the companies that sets up the school first and then finds a school board to oversee it.

''It's not some independent board of people saying, 'Well hmm, let's look and see who we want to get here.' It's a group that's been recruited by Imagine to run the school, so there's no question as to who they're going to contract with,'' van Lier said.

The Ohio Policy Matters report also calls for more scrutiny of Imagine's complex real estate and sponsorship arrangements.

Recommendations

The report includes several recommendations for the state, including the prohibition of for-profit management companies from operating in Ohio with public tax dollars.

Imagine Schools says on its Web site, http://www.imagineschools.com, that it functions like a nonprofit and that its application for federal tax-exempt status is under review by the IRS.

The company posted a sharp response to the report on its Web site: ''The attack on Imagine Schools by Policy Matters Ohio is not surprising given its union associations and history of bias against charter schools.''

Imagine's response does not specifically address the report's criticism of the subservient role that school boards play in the company's management.

The report cited an internal memo sent by Imagine Schools President Dennis Bakke in 2008 concerning the governing boards: ''I do not mind them being grateful to us for starting the school (our school, not theirs), but the gratitude and the humility that goes with it, needs to extend to the operation of the school.''

Bakke advises executives to get undated letters of resignation from board members that can be acted on by the company at any time.

''Probably the most important concept that needs to be grasped by potential and sitting board members for our new schools going forward is that Imagine Owns the school, not just the building,'' he said in the memo, which was published in the Fort Wayne Journal Gazette.


John Higgins can be reached at 330-996-3782 or jhiggins@thebeaconjournal.com. Read the education blog at http://education.ohio.com/.
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