The IRS provides its employees a list of questions to be asked if a charter school applies for nonprofit, tax-exempt status. Some answers may “indicate possible problems.”
The IRS says the answers to the 74 guidance questions as they pertain to individual applications are not public record.
Below are some of the questions, and how White Hat schools compare.
1. “Did the management company apply for the charter, form the corporation, draft the by-laws, mail in Form 1023, or send the check for the user fee?”
Ohio incorporation records show that many White Hat-operated charter schools and for-profit management companies that oversee charters were created by John F. Martin, whose address is that of the law firm of Brennan, Manna & Diamond in Akron.
2. “If the school has legal representation, is it the same as the management company?”
In the case of West Academy, Life Skills of Cleveland and some other White Hat schools, legal counsel serving the boards also serves White Hat through Brennan, Manna & Diamond.
3. “Were other management companies considered? Did they submit bids?”
Board members serving multiple schools said they have not considered a company other than White Hat.
4. “Does the management company provide comprehensive services?”
Board members who were interviewed said White Hat is responsible for all operations. Contracts entered as evidence in a lawsuit involving some schools indicated that more than 95 percent of school revenues went to White Hat’s affiliates.
5. “Were multiple [nonprofit] applications filed at the same time, involving schools managed by the same management company?”
Amy Goodson, attorney for several school boards that employ White Hat, will simultaneously file multiple applications for several schools. “I find it most efficient that when I have multiple new schools to sit down and file them all at once,” she said.
6. “If there are other similar schools who are applying at the same time, are the provisions in the agreements identical (boilerplate)?”
Documents creating these schools, and on file with the Secretary of State’s Office, are nearly identical and were often submitted, usually on the same date, by attorney’s from Brennan, Manna & Diamond.
7. “Does the school provide free advertisement of the management company’s name on the website or facility?”
The parent website for all White Hat-managed schools features a silhouette of a white hat. The website is copyrighted by White Hat Management. On related websites, copyrights are listed for “The Academies,” the K-8 schools, and “Life Skills,” the dropout recovery programs.
8. “Is the school allowed to keep any improvements it makes to the curriculum?
In an ongoing lawsuit in which several school boards have taken issue with White Hat Management, the company has taken the position that curriculum reflects the work of the company and therefore is proprietary.
9. “Are the termination provisions biased in favor of the management company?”
If the boards do not renew contracts, White Hat’s position in court is that it owns most of the assets, including the building. The board, then, is forced to find a new location.
10. “Does the school have any rights to the curriculum if the management agreement is terminated?”
In the court case, White Hat officials claim the curriculum to be propriety.
11. “If management company requires the use of a name by the school, does the school have any rights to the name if the management agreement is terminated?”
The names of several White Hat-managed schools are trademarked by WHLS of Ohio, LLC, a Nevada company with the same mailing address as White Hat’s downtown Akron office.
12. “Do any of the school board members have, or have they had, a family or business relationship with the management company or any of the owners of the management company?”
David DuBois is a friend of Nancy Brennan. Their daughters attended the Elms together. David DuBois and his wife accepted an invitation from Nancy Brennan, daughter of White Hat founder David Brennan, to serve the schools.
13. “Are the board members selected or appointed by the management company?”
Several board members indicated that they were approached by White Hat. Some schools that have undergone name changes, and have had paperwork handled by White Hat, kept the same boards.
14. “Are they members of the local community, including parents, teachers and community leaders?”
No interviews with board members indicated that any had enrolled their children at a White Hat school. Some board members serve schools in other metropolitan areas or other parts of the state.
15. “Is the board involved in the active oversight of the management company, the operations of the school, and major decisions concerning the school?”
Interviews with board members and contracts with White Hat suggest that the company makes most decisions.
16. “Does the board have the authority to set and approve the following major school policies: budget, curriculum, admissions procedures, student conduct, school calendars, and dispute resolution procedures?”
In court documents, a contract between White Hat and the Brown Street Academy in Akron says that the school treasurer is permitted to amend the budget, submit it to the board for approval, “which approval shall not be unreasonably withheld or denied.” The contract also gives the company control over enrollment and recruitment.
17. “Does the board have any responsibility for the day-to-day operations of the school?”
Records show White Hat handles day-to-day operations.
18. “Are the school’s administrators, teachers and similar key personnel employed by the school?”
The Brown Street contract says that the management company, or “operator,” employs all personnel, with the approval of the board.
19. “Does the school have the authority to hire and terminate school administrators, teachers and similar key personnel?”
Although the contract says that the hires and dismissals cannot be done without securing board approval, recently dismissed and newly hired employees at two schools were announced at a February board meeting after White Hat had completed the personnel changes.
20. “Is the management company a liaison between the school and the chartering authority?”
The sponsor, or charter authority, said they often work directly with White Hat to ensure compliance.
21. “Does the management company have the right to attend or vote at board meetings?”
A representative of and employees of White Hat attend each meeting. They do not vote.
22. “Is the compensation based on total income, including all fees, grants, contributions and unusual receipts?”
Management fee is a flat percentage (95.5 percent) of total state and federal revenues.
23. “Does the management company keep most or all of any funds raised for the school?”
In its court case, White Hat maintains that the board pays the company with public funds to equip and operate the school. Those funds become private money as a result, and White Hat then owns most of the assets.
24. “Does the management company or an affiliate provide any ancillary services to the school, such as ... facility or equipment leasing, technology contracting, furnishings, fixtures, textbooks, food, transportation, etc.?”
White Hat, through domestic and out-of-state affiliates, owns several properties that house its schools.
25. “If leased from the management company or an affiliate of the management company, is there a reason the facility is not leased directly by the school?”
The contracts give the management company the authority to secure and pay for the location.
26. “Are any of the agreements for services contingent upon the simultaneous execution of the management agreement, or do any agreements automatically terminate if any other agreement is terminated?”
The contract with Brown Street suggests that all functions of the school are subject to the agreement.