Legislature Should Review Charter School Lease Practices, Auditor’s Report Recommends



Columbus – Shortcomings in Ohio law governing charter school facility leases create the opportunity for practices that could enrich private companies while shortchanging Ohio’s students and taxpayers, a report by Auditor of State Dave Yost has found.

The report recommends that the Ohio General Assembly consider legislation to ensure that charter schools – also called community schools – seek market-competitive leases for school facilities and eliminate conflicts of interest between the charter school boards and the private management companies that they contract with to provide school facilities and services. The report also was sent to the Ohio Ethics Commission.

“Our study found that some charter schools are entering into lease agreements that are costing them far more than the market would dictate,” said Auditor Yost. “Sometimes these lease agreements are with management companies whose officers also have served on the boards of the charter schools with whom they contract. We also found that Ohio law creates difficulties for charter schools that seek to build or buy facilities, thus forcing many to lease facilities instead.”

The study was prompted by a complaint lodged with the Auditor of State that some complex lease agreements between charters schools and management companies were diverting into private hands the public funds intended to educate charter school students.

Unlike conventional public school districts, charter schools cannot levy taxes and can’t issue tax-secured bonds to raise money to build or buy facilities. Other sources of facilities revenue for charter schools are limited, so schools often have little choice but to lease facilities.

The study focused on three charter school management companies – Concept Schools, Inc., Imagine Schools, Inc., and National Heritage Academies – and six unrelated and randomly selected charter schools to use as a base comparison. The study found that schools managed by the three management companies were spending at least twice as much of their resources on leases as the six control-group charter schools.

Based on these findings, the study recommends that the Legislature create a committee to analyze charter school laws in other states to determine how they handle these issues.

The study also recommends that lawmakers require charter schools to use methods that ensure that leases are obtained at competitive rates, citing federal rules that govern leases entered into by federal agencies.

Since ethics regulations that govern entities using public monies don’t directly apply to charter school management companies, the study recommends legislation that would impose stricter standards and greater transparency in the dealings of these companies.

Members of the boards of community schools also should be personally liable for reviewing and selecting properties to lease or buy, instead of leaving these decisions to management companies, the study recommends.

A full copy of this report is available online.

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