Media Release

Debt-ridden, now defunct charter school received 20-year charter renewal in June 2017 

Phoenix – Feb. 8, 2018 – Discovery Creemos Academy, a Goodyear-based charter school that abruptly closed down on Jan. 30, had its charter renewed by the Arizona State Board for Charter Schools (ASBCS) in June 2017 in spite of a $3.3 million net deficit.
Members of the charter school regulator, the ASBCS, expressed dissatisfaction with the school’s compliance and academics at that time, but still voted unanimously to renew its charter. Given the ASBCS’ limited regulatory oversight, its members might not have been aware that the charter holder had increased administration charges by $1.4 million in 2016 and purchased $575,000 in goods and services from four for-profit companies he founded to conduct business with his school.
That the school’s charter was renewed for a 20-year period is the latest revelation following the sudden closure of the charter school, leaving more than 100 students without a school and teachers without a job.
Why were parents and teachers not told the truth about the school’s significant level of debt, putting it in a precarious operating position?
Why were taxpayer dollars entrusted to the school for the 2017-18 school year given its level of debt and the charter holder’s known history of self dealing with four for-profit companies established by himself and his wife?
Add in the school’s ‘D’ academic rating and poor AZ Merit results (only 13% of students passed the English test and 7% passed the math component), and one has to ask how the school’s charter could possibly be renewed.
The majority of charter schools in Arizona—including Discovery Creemos Academy—are regulated by the ASBCS. Its board members, who are appointed by the governor for 4-year terms, are responsible for authorizing activities, including decisions to grant, renew or revoke a charter.
However, a 2014 email from the ASBCS to Jim Hall, founder of Arizonans for Charter School Accountability, states that, “The Board, in its oversight responsibilities, holds charter holders accountable for the timely submission of AFRs and tracks the timely submission of budgets through the compliance portion of the annual audit. The Board does not utilize the information contained in those documents in its oversight.”
“The Charter Board has absolutely no mechanisms in place to detect fraud, even in obvious examples like the Bradley Academy,” said Hall. “The Board staff did not inform the Board about all of the funds Daniel Hughes was personally spending to pay for unspecified supplies and administrative fees in the materials prepared for the June 2017 Board meeting—money he was diverting to his own pocket. How can the Charter Board determine if public funds are being misappropriated if they don’t know how, and where, charters are spending tax dollars? It makes critical decisions about the fate of charter contracts with little real information provided by staff.”
For example, during the June 2017 meeting, ASBCS board members did not query several startling financial actions by the school. These include that Discovery Creemos Academy:

• Spent 5 times more on administration in 2016 compared to 2014.
• Spent $1.8 million to run a single school of 441 students.
• Bought $574,000 worth of goods and services from companies owned by the charter holder.
• Created a revolving fund of $100,000 to buy goods and services for the school as he saw fit to the tune of $477,000.

The 11-member ASBCS is comprised of the Superintendent of Public Instruction or designee, six members of the general public one of whom shall reside on an Indian reservation, two members of the business community, one charter school operator, and one charter school teacher. Notably, the majority of current board members have a vested interest in charter schools, which brings into question their ability to provide objective oversight of other charter school operations.
“The Arizona State Board for Charter Schools is unable, or unwilling, to assure that $1.5 billion in tax revenue provided to charter schools isn’t being stolen,” commented Hall.
According to 2014-15 audit information, 45 charter organizations have negative net assets valued at $500,000 or more, 29 of those schools have negative net assets valued at more than $1 million. One charter organization, with only one school location, has more than $25 million in negative net assets. This begs the question, which charter school will collapse next?
“If Arizona wants to maintain its standing as a leader in the charter school sector it must address the issues brought to light by Creemos Academy’s closing,” said Dave Wells, Research Director of the centrist think tank the Grand Canyon Institute (GCI). “Our policy report released in Sept. 2017 regarding charter school accountability in Arizona raised serious issues regarding the questionable financial practices of 77 percent of the state’s charter schools. Without addressing these issues the state’s charter sector will continue to face unexpected and avoidable school closings like we saw last week at Creemos Academy along with millions of dollars in wasted public funds.”
The Legislature needs to work with the ASBCS to establish more stringent financial rules regarding charter practices including:

• Charter schools must conduct public competitive bid processes similar to public district schools.
• ASBCS must require any charter that has a deficit OR does not pass the financial dashboard to develop a plan for rectifying finances.
• ASBCS should monitor the financial status annually.
• Charter schools running a two-year deficit or that do not pass the financial dashboard, should be placed in financial probationary standing.
• Charter schools with financial probationary standing should only have the charter status renewed for 1 year if the school is making progress. If the school is not making progress, the charter should be revoked.
• Charter schools with a less than satisfactory academic performance and where the school has been on financial probation for three years, should have their charter revoked.

If these recommendations were in place, Discovery Creemos Academy would not have been closing in the middle of the school year with the charter holder moving his family out of the state.
It is time that Arizona’s Legislators put the state’s students and taxpayers first by improving charter school oversight and accountability.

Added documentation:

Arizona Republic Story “State Knew Goodyear charter school was failing, let it operate”

Details from the Charter Board Meeting including transcript of question of Dan Hughes of Bradley/Creemos during renewal of charter discussion: http://www.azcsa.org/

Link to Charter Board Meeting from June: https://asbcs.az.gov/board-staff-information/meeting-dates-materials/archive

Minutes from June 12, 2017 Arizona State Charter Board Meeting: https://asbcs.az.gov/sites/default/files/June%2012%2C%202017%20Summary.pdf

Renewal Packet for Bradley (Creemos) Academy of Excellence: https://asbcs.az.gov/sites/default/files/Bradley_Renewal%20Portfolio.pdf

The Grand Canyon Institute, a 501(c) (3) nonprofit organization, is an independent, nonpartisan think tank led by a bipartisan group of former state lawmakers, economists, community leaders and academicians. The Grand Canyon Institute serves as an independent voice reflecting a pragmatic approach to addressing economic, fiscal, budgetary and taxation issues confronting Arizona.

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