State: Charter schools overpaid management company by $1.5M

An Ohio appeals court has upheld a state auditor’s finding that the Richard Allen charter school chain in Montgomery and Butler counties overpaid its management company by roughly $1.5 million.

The 10th Ohio District Court of Appeals ruled Dec. 10 on behalf of Ohio Auditor of State Dave Yost, who was sued in 2012 by the Institute of Management and Resources. IMR sued Yost claiming that in issuing the finding he misinterpreted a contract between the company and the Richard Allen schools it managed.

An attorney for Richard Allen said the whole issue stemmed from a “drafting error.” He said they paid exactly what they intended and don’t want the money back.

“Every dime of that money was used in the operation of those schools and education of the children,” said attorney Edmund Brown.

He said they’d rather have the $250,000 the auditor’s office charged them for an audit they believe led to a flawed conclusion.

“If these schools hadn’t played fast and loose with the money they received, those audit costs would have been a lot lower,” said Auditor’s Office spokeswoman Brittany Halpin.

She said the school’s disinterest in getting the money from the Institute of Management and Resources shows the “cozy” relationship between IMR and school administrators.

“What school wouldn’t want more money to educate kids?” she said.

The finding was among millions in alleged misspending by officials with the school and management company identified in audits from 2010 through 2013.

In addition, audits raised ethics concerns about the relationship between the school, the management company and its former sponsor.

At issue in the lawsuit was the contract between Richard Allen’s four schools — three in Dayton and one in Hamilton — and management company Institute of Management and Resources. The contract said the schools would pay IMR 10 percent of its revenues as a management fee, and then pay “87 percent of the remaining 90 percent” to cover each school’s expenses.

The auditor’s office — and now the courts — read this to mean a total of about 88 percent of the schools’ revenue. Through July, the four schools were paid more than $5.3 million this year to educate 716 students.

But Richard Allen officials and IMR — which until recently employed the school’s treasurer — say they intended for the school to pay a full 97 percent to IMR. Special audits released beginning in 2012 tallied this difference at roughly $1.5 million since 2008.

The contract has since been amended, and ethics concerns addressed. The schools received a clean audit this year.

In terms of performance, the Dayton schools performed better than Dayton Public Schools in recent statewide math and English testing. The Hamilton charter school performed worse than that city’s public schools.

The previous audit findings are still due, and Brown hopes the issue can be fixed contractually and without an appeal to the state Supreme Court. Brown said that even if IMR paid Richard Allen, the school would be required to pay 95 percent of the money back to IMR under the current contract.

“The bigger issue is this appearance of impropriety, which is lasting until — well we’re two weeks until 2016,” Brown said.

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