DougCo charter founder profits from taxpayer money

Suzie Glassman

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Leman Academy of Excellence building designLeman Academy of Excellence website

By: Suzie Glassman/NewsBreak Denver

(Castle Rock, CO) Leman Academy of Excellence (LEA) founder Kevin Leman and a group of directors run a for-profit organization called Faustus Management Comapany, LLC, which LEA pays to manage a long list of services for the school.

Management companies like Faustus are called Education Management Organizations (EMOs) and are legal in Colorado. However, they’re used to evade state laws that ban for-profit charters and federal laws that prohibit private entities from receiving federal money.

“The problem,” according to Carol Burris, director of the Network for Public Education, “is EMOs take public funds and funnel them into the private sector, using the school’s tax-exempt status as an intermediary.”

“The original charter is secured by the nonprofit, which gets federal, local, and state funds — and then the nonprofit turns around and gives those funds to the for-profit company to manage the school,” said Burris.

This summer, the U.S. Department of Education amended its Charter Schools Program grant, so incoming charters who contract with EMOs aren’t eligible for the award. The grant will help fund charter schools during their first three years.

Leman Academy’s contract with Faustus

In September 2019, LEA agreed to pay Faustus Management Company, LLC an annual service fee of $450,000 for the 2019-2020 school year and each subsequent year to negotiate a percentage of “Leman Classical’s Funded Enrollment Revenue” not to exceed 15%.

According to LEA board president Victoria Hostin, “The annual service fee is negotiated annually between the management company and the school's Governing Board. The fee has averaged 6.3% of revenue for the previous four years of services.”

Some argue that paying a for-profit company to manage the school is the same as paying a company like Houghton-Mifflin for staff development and educational materials. But DougCo board director David Ray, speaking on behalf of himself and not the board, said the list of responsibilities of an EMO far exceeds this type of instructional support.

The school’s application for replication in the DougCo school district says the EMO will oversee the following functions of the school's management:

  • Developing and monitoring programs and otherwise assisting Leman Academy in complying with state and federal requirements necessary to keep Leman Academy’s Charter in place as well as to maintain its status as an Internal Revenue Code Section 501(c)(3) tax-exempt organization.
  • Monitoring state budget and reporting requirements in order to assist Leman Academy’s compliance with such requirements.
  • Providing marketing, public relations, and advertising plans for Board consideration.
  • Assisting in the development of personnel policies and procedures for Board consideration.
  • Application Notes for Leman Academy Of Excellence
  • Assisting Leman Academy in obtaining equipment and supplies and/or the use of equipment and supplies within a Board-approved budget.
  • Assisting Leman Academy in the acquisition of fixed assets. Assisting Leman Academy in understanding state and federal special education laws, and suggesting policies and procedures that will assist Leman Academy in complying with state and federal special education laws.
  • Assisting Leman Academy in preparing for audits conducted by Colorado or federal education agencies.
  • Assisting Leman Academy in aligning its curricula standards with applicable Colorado state academic standards.
  • Assisting in creating annual financial budgets.
  • Monitoring Leman Academy’s operations with such Board approved budgets and reporting the results of such monitoring to the Board.
  • Preparing financial statements on an annual and as-needed basis.
  • Auditing Leman Academy’s internal records and assisting with audit preparation.
  • Preparing reporting requirements required to adhere to lease obligations and requirements.
  • Assisting Leman Academy in procuring one or more leases or subleases. Providing other administrative services, as requested and approved by the Board of Leman Academy.

Ray said the board only recently became aware of the contract with Faustus. “Their first EMO contract was with "Leman Educational Services," in which the agreement specified a fee of $100/student.

“The contract with Faustus is significantly more where 10% of enrollment revenue (currently $10,343/student) is $1034/student that is being sent to Dr. Leman's EMO. And if the MLO passes add $94/student (10% of the $943/student that the MLO would generate).”

About Faustus Management Company, LLC

Faustus is incorporated in Delaware and is listed as a foreign limited liability company. The LLC has branches in Arizona and Colorado.

“The Faustus Management Company has been instrumental in helping Leman Academy achieve these meaningful, measurable results. It is a successful partnership,” said Hostin.

“By any reasonable measure, Leman Academy has established itself as an asset to the Parker Community and a desirable school choice for DCSD. This is evidenced not only by the school’s strong financials but also by the growing demand from parents.

“It is also notable that the school has met all fiscal health calculations set forth by Douglas County School District since the school’s opening year and the Leman Governing Board increased salaries by 10% two years in a row. Additionally, the current campus has a waitlist of 600 and over 900 families have expressed interest in a second campus,” she said.

Hostin didn’t comment on Kevin Leman’s relationship to Faustus Management Company.

Kevin Leman is listed as a director or member of Classical Education Systems, LLC, KAL Enterprises Inc., Doodle House Productions, Inc, and Scholae Development Company, LLC. A Google search provides little information on these corporations' products or services.

Officer’s of Faustus Management, LLC are connected to many of the same companies.

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Faustus Management Company, LLCCreated in Canva by Suzie Glassman

Leman’s recent proposal to the DougCo district

Leman’s directors and DougCo staff presented a proposal to the board that amounts to a cost-neutral service for hosting two special education center-based programs in its replicated school.

DougCo would provide the employees, instructional materials, and equipment, and LEA would not divert additional per-student revenue for those students to its EMO. This proposal allows LEA to not incur any additional costs for housing these students or to add the cost of purchasing or leasing land since the district would provide that for free.

Chartered for profit

​​A report by The Network for Public Education (NPE) called Chartered For Profit detailing how charter schools are operated for financial gain inspired the government to exclude federal grant money from incoming charters who contract with EMOs.

Burris says non-profits that use EMOs often save money by doing things like hiring unqualified teachers and refusing to teach students with special needs to increase their profit.

Burris also says that it’s common for the owners of for-profit management companies to contract with other companies they own.

“In order to run the school,” says Burris, “the nonprofit has to buy services from the for-profit, which does everything from soup to nuts. The for-profit provides the curriculum, the teachers, the books, and the computers.

“They charge a high price for these things, and when the nonprofits inevitably can’t afford to pay for it all with the public money they receive, the for-profit lends them the money.”

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