Five takeaways from Sahan’s investigation of a Brooklyn Park charter school — and a $132 million loophole in Minnesota’s anti-corruption laws

Nearly 70,000 Minnesota kids attend charter schools, and two-thirds of them are students of color. That’s more students than attend any single school district in the state, and more than the combined undergraduate and graduate students at the University of Minnesota’s Twin Cities campus. But despite their large educational footprint, charter schools are rarely subject to in-depth reporting from local newsrooms.

Minnesota charter schools, like charter schools across the country, operate with a great deal of autonomy. In my four years reporting on education for Sahan Journal, I’ve learned that autonomy sometimes means no one steps in when problems arise. Substandard buildings, unfair leases, high-turnover school boards , crooked accounting : Sahan Journal has reported stories about charter schools that have experienced all these difficulties — and in some cases, closed as a result, leaving students and families scrambling to find a new school.

In the course of reporting on those schools, Sahan Journal discovered a far broader issue in the way Minnesota charter schools award millions of dollars in large outside contracts. These are contracts for more than $100,000 — some more than $1 million — that go to independent companies for bus service, educational software and more. Because of a legal loophole, these outside contracts are not subject to the same oversight that governs the contracting practices for public school districts and other local government units. And due to the complicated (and often hands-off) state oversight structure for charter schools, it’s difficult to tell who is responsible.

A few years ago, these contracting questions came to a head at Noble Academy — a Brooklyn Park school that serves mostly Hmong students and has repeatedly been named a “high-quality charter school” by the state — when a former staff member filed a formal complaint with the Minnesota Department of Education. The state agency required the school to tweak its policies, but did not impose any consequences. Ultimately, the department closed the complaint.

That’s where Sahan Journal picked up the story. Here’s what our investigation into charter-school contracting practices found.

When Minnesota charter schools award contracts, they don’t have to follow the same laws as cities, counties, or school districts.

If a public school district wanted to buy 1,000 desks, it would have to follow a competitive bidding process under Minnesota law. That means it would have to advertise in a newspaper, solicit multiple bids, and award a contract to the “lowest responsible bidder.”

But charter schools are exempt from this law, just as they are exempt from many other state laws that apply to local government entities.

Without a mandatory competitive bidding process, a school might end up paying too much for transportation, desks or software. But it might also mean a school awards funds based on personal relationships.

Procurement laws, which govern how local governments award contracts, were put in place to address corruption, said David Schultz, who teaches political science and legal studies at Hamline University, and state constitutional law at the University of Minnesota Law School.

“What we basically have said is that we’re going to take entities that have enormous amounts of money and exempt them from the standards that we would expect to apply to any other governmental entity,” Schultz said. It’s as if the state forgot “the reason why we put all these rules in place,” Schultz added — that is, “to deal with corruption.”

The amount of money involved is significant. A Sahan Journal investigation found that charter schools distribute more than $132 million in state funding through large outside contracts annually.

Sahan Journal collected publicly available tax filings from 172 out of 180 charter schools operating across Minnesota during the 2021-2022 school year. Then Cynthia Tu, Sahan’s data and artificial intelligence reporter, used AI tools to scrape through all 172 of those tax reports to create a database of large contracts over $100,000. (Nonprofits, including charter schools, are required to disclose their five largest contracts above that cutoff line.) To make sure our final number was as precise as possible, we excluded food service contracts, which involve federal funds and must follow federal procurement laws.

Ultimately, our analysis found that charter schools spend more than $132 million in state funding on large contracts every year. Remember, that’s only the contracts that are worth six figures or more.

Individual school boards approve them, and are supposed to monitor them. But these volunteer-run boards often experience high turnover and low participation. Authorizers, who provide oversight to charter schools, say that assessing charter-school contracts is outside their scope of responsibility. If someone files a formal complaint, the Minnesota Department of Education may step in to investigate.

The school that triggered our investigation, Noble Academy, awarded contracts to the deputy superintendent’s daughter and the school’s founder.

In 2019, the Noble Academy school board awarded a $20,000 lawn-care contract to a company newly created by the deputy superintendent’s 18-year-old daughter. Ultimately, the Minnesota Department of Education found that this conflict of interest “appear[ed] to have been mitigated.”

Then, two years later, when the school’s founder and longtime superintendent was eyeing retirement, the school created a contract for a brand new management company, Excellence in Education, that he controlled. The contract awarded the founder’s company with 10% of all school funds — about $1 million per year.

Noble Academy and its authorizer, Osprey Wilds Environmental Learning Center, said those funds go to consultants who provide financial, operational and tax accountant services; operations and facilities expenses; and salaries and benefits for Excellence in Education staff. The company made more than $200,000 in profit last year.

A state investigation required the school to update its policies about nepotism and conflict of interest. But the state imposed no penalty on Noble Academy.

The Minnesota Department of Education ultimately closed the complaint filed against Noble Academy, after the school promised to terminate the management contract and enter into a competitive bidding process. That request for proposals yielded just one bid — from the founder’s same company. So once again, Excellence in Education received a contract with Noble Academy for 10% of all school funds. Over the past three years, the company has received about $3 million in state funding.

The Minnesota Department of Education has proposed a new law to fix the problem.

The proposal in the state Legislature would require charter schools to adopt a procurement policy that includes a competitive bidding process for all contracts over $25,000. It would also allow the state to withhold funding if a school enters into a contract that does not follow the school’s own procurement process or state law.

In other words, if a school entered into a $1 million no-bid contract with its founder, the state could reduce the school’s funding by $1 million.

The procurement proposal is part of a larger education policy bill. The Minnesota House and Senate are expected to vote on it this week.

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