Charter School Study Raises Big Questions about the Effectiveness of Management Outsourcing

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April 6, 2011; Source: ProPublica | When public school systems turn over some of their schools to charter schools, it is a kind of management outsourcing. The public school system is essentially saying to the charter school operators, “Okay, you manage the school and deliver better results than we have.”

About one-third of charter schools have outsourced their management responsibilities to “full service” management companies. This ProPublica investigation of these largely for-profit management firms suggests that only half of charter schools managed by for-profits met their adequate yearly progress (AYP) targets compared to 63 percent of all charter schools and 67 percent of public schools.

The article doesn’t come down on one specific reason for the mixed results of the charters with for-profit managers, but many of the examples mention the unwillingness of the management companies to disclose much of their finances, even when asked by the charter schools and public school systems that hired them.

The lead example in the story involves White Hat Management, established by an Akron businessman who played a central role in getting charter school legislation approved in Ohio. Now Ohio is suing him, complaining that only 2 percent of students in White Hat schools are meeting progress targets.

In response to the state’s demand for an accounting of the funds it has received, White Hat’s refusal is classic. Its attorney said that public funds become private once they are given to the for-profit company, comparing White Hat to Coca-Cola: “If I’m Coca-Cola, and you’re a Coca-Cola distributor or a Coca-Cola purchaser, that doesn’t entitle you to know the Coke formula or find any financial information you’d be interested in learning from the Coca-Cola company . . . And that’s kind of what they’re demanding.”

Add that statement to the annals of accountability obtuseness, especially considering that 96 percent of White Hat’s revenues come from the state. ProPublica describes other disclosure-reluctant charter school management companies in Broward County, Fla. and Rochester, N.Y. that feel, like White Hat, that once they have their paws on the money, no one else has a right to know what they’re doing.

Sometimes even the charter school boards are at a loss about how to deal with their contracted for-profit managers. Nonprofits aren’t better or worse managers than for-profits, but they generally know they have to disclose their finances to the IRS and the public. We have yet to encounter a nonprofit using Coke to defend its hostility to transparency.—Rick Cohen