Charter schools must take out loan to sever ties with management company

San Jose charter schools to end contract with Newpoint Education Partners

JACKSONVILLE, Fla. – The board of two local charter schools decided Thursday night it would take out a loan with their management company, Newpoint Education Partners, to cover a portion of the money the company said the schools owe.

The loan would allow San Jose Academy and San Jose Preparatory High School to officially end their contract with Newpoint, which was indicted last month on charges of grand theft, money laundering and aggravated white-collar crime.

Newpoint initially came up with the option, loaning the schools $100,000 and having them pay a 6 percent interest rate for the next three years, and in exchange, the management contract would be terminated. But the schools would also have to announce the agreement publicly per Newpoint's specific language. 

It's money that's highly contested, yet board members said they aren't looking to fight.

"Why does the board want to enter into a $100,000 loan with a company that's accused of stealing money in another county? I would say, as you heard Gary say, not agree to do that. And then spend the next six months, two years in litigation over trying to end the arraignment and not have that. And in the end, the schools aren't going to make it through that," said Bonnie Arnold, board chair of San Jose Charter Schools. 

According to WFLA-TV, two schools formally managed by Newpoint near St. Petersburg have struggled financially to keep their doors open after the company left them in such financial chaos that they could not keep a balanced budget. Thursday, they had to end their fight to keep the schools and will most likely close, WFLA-TV reported.

In Jacksonville, Newpoint claims San Jose owes about $500,000 in payroll, management and other fees. That's why the board said it has decided to take the loan.

"You know, in many issues around the state, there were expenses accruing and fees on that that had not come before boards to be approved. So those were forgiven in that document. And we agreed to $100,000 that will be paid over a 36-month or 3-year period at 6 percent," Arnold said.

As part of the agreement from June 30, the board will have to publicly address the termination per a certain script Newpoint has written up, which includes saying, "Newpoint provided our schools with financial support, including advancing cash to cover payroll when needed and deferring their management fees, all to ensure the school would survive and then thrive as we have done."

Arnold said she doesn't disagree with that statement. 

"They really did a lot for us when we first opened. They were here a lot, and I didn't realize all that goes on behind opening up, doing an application, finding a facility, arraigning for all the renovation that goes on, hiring of this," Arnold said.

In Thursday's meeting, the board also discussed how they've lost students because of the controversy.

The next board meeting was scheduled for 5:30 p.m. on July 7. 

San Jose Academy and San Jose Preparatory High School released the following statement on the termination of their contract with Newpoint:

“San Jose Academy and San Jose Preparatory High School accepted the voluntary termination of their charter school management which was provided by Newpoint Education Partners on June 23, 2016. Newpoint offered to terminate their agreement with our schools as they determined it would be in the best interest of the schools, the students, and the families who attend and love our schools. The management agreements will terminate effective June 30, 2016. During the time that Newpoint managed San Jose Academy and San Jose Preparatory High School, Newpoint met the needs of the schools by providing us with all the support and management services needed to successfully open our schools and develop our schools into an excellent option for the community. Newpoint’s support included educational resources, quality leadership, instructional support and a great group of highly qualified teachers. Newpoint’s has enabled the schools to improve their school grades and allowed the students to achieve learning gains. In addition, Newpoint provided our schools with financial support including advancing cash to cover payroll when needed and deferring their management fees, all to ensure the school would survive and then thrive as we have done. As part of their offer to terminate the management agreement, Newpoint has agreed to forgive obligations related to the financial support they provided our schools as a further gesture of their interest in the success of our great schools. We appreciate all the support Newpoint provided and the positive impact Newpoint has had on our schools. We look forward to continued success at San Jose Academy and San Jose Preparatory High School.”

Charter schools paying interest on loans that don't exist?

Arnold and the schools' attorney, Gene Wheeler, decided earlier this month to get out of their five-year contract. The decision was made after the schools discovered they've possibly been paying interest on $235,000 worth of apparently non-existent loans from the management company.

Charter schools always have their own school board, but because they are receiving funds from the state government, public school districts oversee that the finances are being spent appropriately.

The Duval County School District told News4Jax it did an in-depth audit on both the local schools and their finances after the indictment in Escambia County came down. The district said at the time that everything seemed to check out.

But that doesn't seem to be the case now.

After WFLA requested public records detailing the loans Newpoint Education Partners took out on the two Jacksonville schools, Wheeler said there were none. He also confirmed the schools' board of directors never approved any loans.

READ: San Jose Academy audit | San Jose Preparatory audit
(Note: Loans in question on pages 21-22 of audits)

Despite that fact, the loans are listed in the 2015 independent auditor report done by CPA firm King and Walker. According to San Jose Academy's audit, "the school borrowed funds from its management company, a related party through contractual obligation. All long-term debt represents amounts to be repaid from governmental activities."

As of June 30, 2014, the company said the school had borrowed $10,000 to cover costs of operations with a 5 percent annual interest.

The audit goes on to say that on June 30, 2015, the school borrowed $175,000 with a 6 percent annual interest.

For San Jose Preparatory, Newpoint stated that on June 30, 2014, the school borrowed $10,000 to "cover costs of operations" with a 5 percent annual interest rate.

On June 30, 2015, the company said the school borrowed $40,000 to "cover costs of operations" with a 6 percent annual interest rate.