Private schools’ public funding raises concerns

Lack of financial accountability for Maine’s private schools that heavily rely on public funds troubles education officials and lawmakers.
Exterior of the alumni building at Washington Academy
Maine does not audit spending of public funds by Maine private schools leaving that spending up to private schools overseen by boards of trustees, who are privately selected and may reside outside of Maine.

The lack of financial accountability for so-called “private” high schools in Maine that actually receive most of their monies through public funding is troubling to some public education leaders and legislators, who point to financial abuses at private schools that have ranged from thousands of taxpayer dollars to a billion dollars wasted by the U.S. government on charter schools. 

Locally, a financial audit for 2020-2021 found that Washington Academy (WA) in East Machias had a finance director who misstated financial balances, which potentially could have resulted in the theft of funds. WA school officials say they have since taken steps to prevent that possibility in the future.

The state does not audit the spending of public funds by the private schools, and unlike public schools, where an elected school board oversees the budget with public meetings that are attended by parents and community members, private schools are overseen by boards of trustees, who are privately selected and may reside outside of Maine.

“Play by the public rules”

Bill Mathis, who lives in Goshen, Vt., is the national president of the Horace Mann League, an honorary association of leaders who promote the public school system, and is the former managing director of the National Education Policy Center at the University of Colorado. As a former Vermont school superintendent, he notes that private schools object to having the public looking at their accounting records, but he says, “If you’re going to slop at the public trough, you’re going to have to play by the public rules. If you’re going to take public monies, you need to be accountable for it. Otherwise, you don’t have a democracy any more.”

He points out that private academies have strong networks of alumni who may say that the schools are private and should be “able to do what they want. But once you take public money, you give up that right.” He also points to concerns about acceptance policies at the academies, particularly for special needs students, and expectations that parents will financially support a private school. “Privatization can’t work across socio-economic classes,” he says. “They segregate.” In addition, private schools take away from the public monies going to public schools. “Their goal is two systems — separate and unequal.”

“This is such a huge equity and inequality concern,” he says of the private schools. “Situations like this cause [huge] amounts of inequity, while they market them as being about fairness and equality.”

Mathis points to several examples of financial abuses by private schools, including when the owner of a for-profit school in Vermont withdrew thousands of taxpayer dollars from the school for his own use, which was featured in a recent article in the Vermont Digger. The Washington Post highlighted in another recent article a new audit by the U.S. Department of Education that found that the U.S. government wasted up to $1 billion on charter schools, which are publicly funded but privately managed, that were promised but never opened.

Washington Academy audit findings

There also have been concerns about the handling of public monies at private schools in Maine. The 2020-2021 financial audit for Washington Academy states that the school had “materially misstated account balances as of June 30, 2021, requiring correction after year-end and internal control policies and procedures were not followed during fiscal year 2021.” The audit found that the misstatement of balances was caused by WA having “an ineffective director of finance during fiscal year 2021, who did not perform the duties of the position.” The ineffective oversight “could have resulted in misappropriation of assets,” the audit states. It does not say that assets were stolen but rather that they could have been misappropriated because of the lack of oversight. The audit ended up being delayed by over six months, causing the late filing of a federal Form 990, resulting in a penalty. Payroll reports also were not filed in a timely manner, which might have resulted in penalties, and accounts receivable were not followed up on, which resulted in uncollectible balances.

WA responded that “regrettably” the school had a director of finance “who had many years of experience at other town academies and had come with positive references but did not perform as expected.” In June 2021 a new finance director was hired. Since then, the school administrators “feel that our processes, internal controls and oversight of the departments led by this position are beginning to see positive change.” To ensure that a similar situation does not occur again, the head of school will meet at least semi-annually with business office staff so they can express any concerns. If they do arise, the head of school will report the findings to the president and treasurer of the board of trustees.

Concerning WA’s budget protocols, Judson McBrine, the head of school, notes that the school’s director of finance is responsible for all financial operations at the school. McBrine says that WA follows all state and federal reporting requirements, including annually submitting an audit report to the Maine Department of Education (MDOE). The WA board of trustees also receives the annual audit report and 990s as well as internally prepared interim financial statements.

Percentages of public funding

In Maine, the percentage of local students at private academies who are publicly funded ranges from 99.3% at Maine Central Institute to 80.4% at Thornton Academy, according to the MDOE website. For schools in this area, at WA the percentage of publicly funded students is 85%, while at Lee Academy the percentage is 84%. In 2021, the top 11 private schools received approximately $56 million in public tax dollars. Yet there is no state oversight of how those funds are spent by the schools.

Dan Walker, an attorney for the Maine Association of Independent Schools, says those percentages do not include the town academy boarding populations. While the MDOE website lists the percentage of publicly funded students at Fryeburg Academy as 98%, when the number of boarding students is factored in the percentage drops to 75%. Other schools have similar adjustments, according to Walker. He also points out that the percentages for public funding do not account for the monies that the town academies provide through their own fundraising and boarding programs.

However, public funding still provides the majority of funding at the state’s private academies. As for the lack of fiscal oversight by the MDOE of public funds used at those schools, Walker comments that they are private entities that are governed by boards of trustees and heads of school. “The town academies are nonprofit institutions governed similarly to other nonprofits. 

Their boards of trustees maintain fiduciary responsibility for the institutions and hire heads of school, who in turn hire faculty and staff.”

The lack of state oversight had not always been the case, though. The state had required that annual audits be performed for the private schools, with the results provided to the state auditor, but that requirement was repealed in 2011. Now the state only requires the private schools report their total educational expenditures, excluding certain costs.

As the Maine private academies are nonprofits, their IRS 990 forms do give some insight into where public tax dollars are being spent, but there is no distinction on the forms between private and public funding. Those 990 forms do indicate the amount that private schools have been spending on expenses such as payments to foreign organizations and governments, with Lincoln Academy spending $764,145 in 2018. These funds appear to be for “finders fees for finding foreign students,” with Maine Central Institute, for example, spending over $230,000 to recruiters in East Asia and $17,000 to Russian entities for finders’ fees in 2017. The 990 forms also indicate expenses for travel, with WA spending nearly $100,000 in 2018. Over an eight-year period, from 2011 through 2018, WA spent $811,000 on travel and $857,000 on promotion and advertising, according to the 990 forms.

The MDOE did not respond to repeated requests for comment about state oversight of public funds given to private town academies. MDOE Commissioner Pender Makin did write in a January 26, 2021, email that was obtained through the Freedom of Information Act (FOIA) that the department “does not have oversight of private schools, including town academies.” She also wrote in a May 25, 2021, email, “There are many private entities that receive public funding in GPA [General Purpose Aid], and none of them disclose their full budgets or even break down the intended specific purpose for the funds they receive.”

Another email memo that was obtained through FOIA concerning a meeting between state officials and the Maine Association of Independent Schools in August 2021 notes that over the past two years the MDOE “has received multiple complaints from taxpayers and town selectpersons who want more state oversight and more accountability from the private schools that receive their funds.” The memo, prepared by Joseph Marro, senior policy advisor to Governor Janet Mills, also states, “We recognize the desire of private schools to retain their individuality and traditions, but we do believe that private schools who are paid public tax dollars for providing a de facto public education should also be held to some standard of public accountability.”

To be on the MDOE’s list of approved schools for tuition, the private academies must meet certain state requirements, including the adoption of specific policies and, following the enactment of a 2021 law sponsored by Rep. Rebecca Millett of South Portland, state health and safety rules, including anti-bullying laws. Public schools, though, must not only meet those requirements but also must provide their financial audits to the state, are required to raise a certain amount as the local share in order to receive state funding and will essentially be penalized by the state, in receiving less subsidy, if they spend money in a way that does not meet the state’s Essential Programs and Services funding model.

Nathan Kempthorne, whose wife Esther taught Spanish at WA until she resigned following a number of racist incidents that culminated with the finding of a noose in her classroom, has been pushing for greater oversight of the budgets at private schools. He comments that the MDOE and the legislature’s Education and Cultural Affairs Committee have “a legal fiduciary responsibility to the taxpayers for every public dollar they allocate to schools,” but he believes that the state government has buckled “to the political influence of the wealthy trustees at these schools,” so that new laws are not passed or are watered down, as happened with Rep. Millett’s original bill.

Local oversight of private schools

Along with state financial oversight, public schools are held accountable in how they spend their monies by local school boards, which approve the school budgets, and by local residents, who also must approve the school budgets. The school board members are elected from their communities and can be voted out of office if local residents do not like how their local tax dollars are being spent. Private academies have boards of trustees who are not publicly elected and are therefore not accountable in the same way to local citizens. Mathis comments, “Private schools with their boards of directors are not very open. That’s pretty much a universal truth.”

In addition, public school budgets are administered by superintendents who must meet certain training requirements and be professionally credentialed by the state, while similar certification is not required for the heads of school at private academies.

One private academy that is exploring ways to work more closely with sending towns on its budget process is George Stevens Academy in Blue Hill. A budget review committee composed of representatives from each of the eight towns that pay tuition for students who attend the private school would provide an avenue for community input and community priorities in developing the school’s budget.

Rep. Will Tuell, who is also on the East Machias select board, comments, “I think all school budgets should go through the school board and to the voters of their respective municipalities if a school is going to accept public funding. That is certainly the case with public high schools. It should be the case across the board. If the town is going to be paying for the education, it should be up to them how much they pay, and that will in turn result in greater transparency and scrutiny over what they are getting for that investment. I also do not believe that a town academy should be allowed to charge more per student than a public school unless the voters of each sending municipality agree to do that.”

Tuell had introduced legislation a number of years ago that would have given local school boards decision-making authority over how taxpayer monies are spent at any school receiving public funding, but the bill did not garner any support. He says, “School boards and voters should have complete say over how” public monies are spent. “The towns should be able to say they are raising a certain amount for public education.” If school boards can’t set budget amounts for private schools, then the next best thing, he says, is to have school choice about where students attend high school.

Kempthorne also is advocating for local oversight of the budgets at private academies, commenting, “The board at WA is not held publicly accountable by the community for what they do with public funds at the school and will never hold public meetings with the community, or show the school’s financials to the people who pay their salaries.” He adds, “Elected boards have public meetings, publicly discuss and approve funds expenditures, and are held accountable by the voters. Washington Academy does none of these things.”

In response to those concerns about the lack of local oversight, attorney Walker comments, “The town academies are governed by boards of trustees that are representative of the community and region where they are located. Many have a number of open sessions to work with the local communities on their budgets. As an independent school, academies do not have to furnish the public with their budgets, but the information is available on their 990s.”

Also responding to the question of local oversight of the budgets of private academies, Rep. Millett comments, “Maine has an interesting interplay of local and state control. I think there’s a role for both in oversight of the private schools that receive publicly tuitioned students. Local school boards of districts that send their students to these schools have a responsibility to ensure that their tax dollars are being used appropriately and should consider, if not already present, reporting and oversight requirements in the contracts they have with the schools. My bill that was recently enacted does extend state requirements for these private schools. The question for us as a legislature and legislative committee is how do we ensure that the department is exercising that oversight.” Rep. Millett planned to follow up with Commissioner Makin to find out how the department was progressing in implementing the new law before considering introducing any legislation to address the lack of financial oversight.

It’s also possible that the state may act to make changes in its oversight of private schools following the U.S. Supreme Court’s ruling this summer that Maine cannot exclude religious schools from its public tuition reimbursement program.


This article was first published by the Quoddy Tides and republished with permission. 


Edward French, Quoddy Tides

Edward French is the editor and publisher of The Quoddy Tides, a twice a month newspaper founded by his mother Winifred French in 1968. The Quoddy Tides, based in Eastport, is the most easterly newspaper published in the United States and covers eastern Washington County, Maine, and western Charlotte County, New Brunswick, including the Fundy Isles.
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