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February 05, 2010

Charter School Management Fees

As the debate over the for-profit management company Victory Schools heats up, we reviewed the fees that some charter schools pay for management services, either to a for-profit Educational Management Organization (EMO) or to a non-profit Charter Management Organization (CMO). Using data available from the 2008-2009 fiscal audits, we found that 46 schools, or 60% percent of all charter schools, had some sort of CMO or EMO. Out of the 35 schools that actually paid for these services, the cost was, on average, $1,291, or 10 percent, per pupil.

Charters with a CMO paid an average of $986, or 7 percent of per pupil funds. EMO schools paid an average of $2,146, or 17 percent of per pupil funds— a $1,160 difference. To be clear, since different services are provided by different management groups and CMOs might subsidize their services with philanthropy, the amounts paid don’t necessarily indicate over-charging for services. A full spreadsheet, with a breakdown of the schools, philanthropy numbers, and explanatory notes, is available here.

While about 40 percent of all NYC charter schools are independent schools, the rest choose to enter into a contract with either an EMO or CMO for management services. Typically, these contracts stipulate the services that the management organization will provide in exchange for a fee, which is calculated as a percentage of the per-pupil funding that a school receives.

A typical arrangement is that of Uncommon Schools Inc, which charges a new charter school 10% of their per-pupil funds. In exchange, they provide charter application and start-up help, as well as accountability, budgeting, back office, legal, fund development, marketing, and educational services once the school is up and running.

Most schools that choose to have a management organization have a CMO. The rest, about 10 percent, use a for-profit company, generally Victory Schools, which dominates the market in New York City—operating 7 of the 9 EMO charters open in 2008-2009. This small number of EMO charters in New York City makes it difficult to make generalizations about the relative difference between EMO and CMO schools.

In 2008-2009, Harbor Sciences and Arts Charter School, a CMO school, and Peninsula Preparatory Academy, an EMO school, paid the most—23% of per pupil funding—for management services. Some schools, such as those run by the Harlem Children’s Zone and Harlem Village Academies, were not charged at all for CMO services.

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Comments

What exactly is the definition of a CMO? Icahn, Green Dot and UFT charter schools all have partner organizations making major contributions of services or funds to those schools, but you don't count them as CMOs.

Hi Gideon -

If you look in the spreadsheet, you'll notice that I do count Green Dot and the Icahn schools as CMO schools - I just note that the relationship between the schools and the management organization is not made clear in the audits. For the UFT Charter School, I'm not convinced that the UFT counts as a CMO in this instance, because it simply gives the school money, but doesn't necessarily provide services (at least they're not specified in the audit).

I work for a nonprofit that operates charter schools (in addition to other programs). Who defines what a CMO is and what an EMO is? The way it's described above, it looks like a CMO is always a nonprofit, and an EMO is always a for-profit. Do you just call yourself an EMO or CMO, or do you have to apply somewhere (city level? State? federal?) to be one of those things? Thanks for any advice you can provide!

The most recent UFT report on the authorizer's website is from 2007-08, but it says the school partners with the UFT Educational Foundation and "Tthe partner organization serves the school as a consultant, service provider and financial supporter. Ongoing support services are provided on an in-kind basis and include: financial planning and management, procurement, human resources, grants administration, service bureau (through UFT Welfare Fund), website and e-mail technology, fund and relationship development, meeting space, and financial support." The report also says the UFT Teacher Center provides mentoring and professional development and the UFT provides coaches to the charter school's leaders. This sounds like a lot of services, not just money. Here's the link to the report: http://newyorkcharters.org/documents/UFT-FINALreport-9.23.08.pdf

e: From what I understand, the CMO/EMO distinction, at it's most basic level, is a difference between non-profit and for-profit management organizations. So yes - a CMO is always non-profit and an EMO is always for-profit. As for how one goes about registering as a CMO/EMO, I'm not quite sure what the process is or how one goes about setting up a management entity - but I'd love to know more!
Gideon: I can see how the UFT Educational Foundation could be a CMO under my rubric, I just have a hard time counting it since they don't seem to necessarily manage the schools directly in the way that more traditional CMOs/EMOs do. I wish I could get a better, more firm definition of a CMO!

Gideon - reading through that report you link to, I noticed that the review committee pointed out that the role of the UFT in the school was not completely understood by the Board of Trustees. So it's not just us!

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So yes - a CMO is always non-profit and an EMO is always for-profit.

Luke Hamilton

Kim,

Thanks for posting such a thoughtful and comprehensive analysis! I had two somewhat detailed questions: 1. what was your source for the uniform $12,432 per pupil funding assumed for each school on the CMO_EMO list tab (column I)? I was under the impression that every school receives different funds based on location/school characteristics? And 2. where did you collect all the payment formulas on the List of All Charters tab (column H)? Is there a public database on management agreements?

Thanks again!
John

Hi John -
1. Charter schools in NYC get a certain amount of per pupil funding which is based on a state formula. They can apply for federal funds (such as Title 1 money) above and beyond this, and of course many schools collect philanthropic dollars to augment the funds they receive from the state. There are several sources for this information: the NYSED's website, the IBO report, etc. (Here's a link looking at the IBO report: http://www.ibo.nyc.ny.us/iboreports/charterschoolsfeb2010.pdf). (And a link to the NYSED's charter funding page: https://stateaid.nysed.gov/charter/html_docs/charter_0910_final_033109.htm)
2. Payment formulas came from what the schools self-reported in the notes of their 2008-2009 fiscal audits. If you search this blog for my earlier posts on charter school philanthropy, you'll find a link to a folder that contains all of those audits.
Hope that helps!
kim

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Thank you for this article re: Charter Management fees. A few questions.
Do HedgeFunds support both CMOs as well as EMOs?

How many CMOs vs EMOs nationally?

Do CMO Board members get paid? Do EMO Board members get paid?

What happens to money made by CMOs?

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