The state auditor says an NM charter school funneled public funds through their foundation and paid their founders more - Albuquerque Journal

The state auditor says an NM charter school funneled public funds through their foundation and paid their founders more

The GREAT Academy — state charter school on San Mateo — on Wednesday. The school, according to State Auditor Brian Colón, funneled public funds through its foundation, with some of those dollars later being used for large contracts and bonuses to the school’s top administrators. (Roberto E. Rosales/Albuquerque Journal)

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The GREAT Academy apparently used public funds to pay for additional contracts and bonuses that went to the school’s husband-and-wife founders by channeling the dollars through its foundation, according to a special audit released earlier this month.

The founders of the state charter school on San Mateo – Jasper and Keisha Matthews – were already on the school’s payroll as top administrators.

The foundation’s use of funds, State Auditor Brian Colón says, exposes a loophole “akin to a shell company moving funds in a questionably legal manner” that can only be closed by state lawmakers.

“When the public invests its money, it expects a certain amount of deliverables,” Colón said in an interview. “In the case where funds are transferred to a foundation, the public can’t count on those deliverables being met, because there’s no oversight.”

The audit was launched after the chair of the Public Education Commission – the body that’s responsible for overseeing state charter schools – sent a letter to the state auditor’s office outlining concerns over potential misappropriation of public funds and conflicts of interest at the school and foundation.

In an email, Jasper Matthews told the Journal he and Keisha “will not be able (to do) an interview,” and referred the Journal to management responses included in the audit.

In those responses, school management pointed out that the audit doesn’t detail specific violations of the Governmental Conduct and Charter Schools acts, and they didn’t acknowledge any existing conflict of interest issues.

Still, they said the school and the foundation have addressed any possible issues, saying that “no Academy employees are or shall be employed or contracted by the Foundation.”

The audit hasn’t been referred to the state Attorney General’s Office, Colón said, because his office did not, in fact, find any criminal activity.

“That’s an important takeaway here,” he said. “What we identified is a systemic gap in accountability and oversight. And the only place that can be fixed is at the legislative level and the executive level.”

He pointed to at least one 2013 bill – which never got the final sign-off – that would have added more oversight when it comes to things like conflict of interest disclosures and implemented a more standardized lease system.

“My call is for the Legislature to bring up that legislation to tighten oversight as it relates to foundations and leases from charter schools with foundations,” he said.

Between July 1, 2016 and the end of January of this year, the audit found that the school’s foundation, which owns the school building, received almost $2.3 million. Almost 100% of that came from the school itself, which has an enrollment of about 127 students.

In that same time, the foundation spent almost $1.9 million, the audit found.

Broken down, about $1.26 million in monthly rent and additional rent and maintenance payments came from the school, along with another $1 million in “prepaid” rent. One payment of $250,000 of that $1 million was not a written requirement under a lease agreement, the audit found.

But during that same period of time, the foundation paid just under $500,000 toward the building mortgage. By the end of the mortgage agreement, in 2027, the foundation will have paid close to $1.6 million.

In the roughly 5½ years the audit spanned, the foundation also spent over $453,600 on professional services, over $223,000 of which went to individual contracts. Three of those contracts went to school administrators who were already on the school’s payroll. Another nearly $31,000 went to retention bonuses.

The largest contracts and the largest bonuses – which together made up slightly over half of the $453,600 spent on professional services – went to Jasper and Keisha Matthews, who serve as the school’s executive director and its director of academics.

“They’re receiving double compensation in a situation where job duties, responsibilities and objectives are not clearly defined by the Foundation,” Colón said. “That’s a problem.”

The audit pointed out a likely conflict of interest related to the approval of Jasper Matthews’ contract in that he, as the school’s executive director, has authority over the school’s business office support employee and the dean of students.

They, in turn, are part of the foundation’s review and approval process for expenses, which auditors said means they may have felt pressure to approve the contracts of both the Matthewses in order to protect themselves from potential retaliation.

In their written response to the audit, school management also said that the dean of students – whose specific role in the expenses process was as foundation board president – only did that job for a little over two years, and had all of their actions ratified by the full board. The business office support employee, they said, “did not have any authority to nor did she act to approve such reimbursements.”

The GREAT Academy – and specifically Jasper and Keisha Matthews – were criticized in 2017 by the state auditor’s office for unusually high salaries, which at the time were the highest for charter school leaders in the state and put together amounted to about 30% of the school’s budget.

Special Investigations Director Shawn Beck said the current report is being referred to the Legislative Finance Committee and the state Public Education Commission and the Public Education Department, which imposed several financial conditions in its charter contract beginning this year.

Those include separating the funds the foundation gets from the school from those they raise in the private sector, as well as holding the foundation to using funds from the school on things like building expenses, maintenance and mortgage payments – obligations that had been laid out in a new memorandum of understanding between the school and foundation.

School employees also cannot be a member of the foundation board, and the foundation isn’t allowed to pay bonuses to school staff with state funds. School personnel can be paid for any additional services through an hourly contract – but it largely has to come from the school itself.

That’s all well and good, Colón said, before adding that it doesn’t solve the larger issue.

“As a result of our audit, changes have been made,” he said. “But that doesn’t change the concerns I have about the systemic issues that exist based on the charter-foundation relationships in New Mexico.”

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