
𝐀𝐒𝐔 𝐡𝐚𝐬 𝐝𝐢𝐯𝐞𝐫𝐭𝐞𝐝 $𝟑𝟏 𝐦𝐢𝐥𝐥𝐢𝐨𝐧 𝐟𝐫𝐨𝐦 𝐭𝐡𝐞 𝐀𝐒𝐔 𝐏𝐫𝐞𝐩 𝐜𝐡𝐚𝐫𝐭𝐞𝐫 𝐬𝐜𝐡𝐨𝐨𝐥𝐬 𝐭𝐨 𝐚 𝐬𝐡𝐞𝐥𝐥 𝐜𝐨𝐫𝐩𝐨𝐫𝐚𝐭𝐢𝐨𝐧
(The complete complaint is at azcsa.org)
ASU runs and operates ASU Prep charter schools, rather than sponsoring and regulating them as required by statute. Since 2020, ASU has failed to report over $31 million in tuition and partnership payments made to ASU Prep Digital that was diverted to a shell company established by ASU executives.
ASU Prep Academy’s online school, ASU Prep Digital, flourished during the pandemic, increasing revenue from $7 million in 2019 to over $64 million in 2022. For example, ASU Prep Digital received a three-year $9 million contract with ADE to run the Math Momentum Program and was paid over $4 million to provide all online education for Pasadena Unified in 2021. Overall, ASU Prep Digital claims to have 42,000 students and 410,000 course enrollments in 23 states and 24 countries and 850 partnerships with school districts worldwide.
The revenue from ASU Prep Digital’s out of state tuition and partnerships was not reported to the state. ASU Prep annual audits disclosed that ASU Prep Digital and the 10 brick and mortar Prep schools brought in a total of $101 million in 2022, but required state financial reports only posted revenue of $83 million. Since 2020, ASU Prep has reported $31 million less in revenue in their annual financial reports than is disclosed in their annual audits.
Where did the $31 million go?
ASU Prep submits consolidated audits that include 11 charter schools and a shell corporation, ASU Prep Global, that was created by ASU executives in 2017 to divert out-of-state tuition and revenue from partnerships with districts. The $31 million not disclosed in annual financial reports apparently is being diverted to ASU Prep Global.
There are three problems here. First, all charter schools are required to report out of state tuition and revenue from services provided to other districts on their required Annual Financial Reports. Digital reported less than $2 million revenue for these services in 2022 despite an ADE payment of $3 million for the Math Momentum program and tens of millions from other “partnerships” and worldwide tuition payments.
Secondly, ASU Prep Global doesn’t physically exist. All tuition billing and contracts with other agencies make payment to ASU Prep Digital, not Global. ASU Prep Global has no educational program, no employees, no address, no website and, most importantly, no transparency for the millions of dollars being diverted to it.
Lastly, ASU Prep is not a privately owned charter school run amuck. ASU Prep Academies are the only charter schools in Arizona not sponsored by the Charter Board. According to statute and Board of Regents policies, ASU is supposed to be the sponsor and regulator for independently operated charter schools, but there is no office or committee at ASU that regulates the activities of ASU Prep. Instead, the person Michael Crow has designated to act as sponsor, Senior ASU VP James Rund, is also on the ASU Prep corporate board, as are three of Rund’s employees at ASU. The ASU Prep CEO is ASU VP Julie Young and the COO is ASU VP Amy McGrath. Together with ASU’s General Counsel, Senior VP Jose Cardenas, they form the majority on ASU Prep’s five-member corporate board. The four ASU VPs salaries, paid by ASU, topped $1.5 million in 2021.
ASU Prep combined their school board and corporate board in 2013. The ASU Vice Presidents running the ASU Prep Board do not make any operational decisions in public meetings. The Board has not hired, evaluated, or set the salary of any employee, including the CEO and COO since 2013. The ASU Prep Board approves some policies, ok’s the school calendar, and sets the date for the next meeting. Personnel, curriculum, and purchasing decisions are all made in secret by school administrators, in this case ASU vice presidents.
The University has comingled millions of dollars with ASU Prep in the creation of ASU Prep Digital’s program and platform and now is diverting millions in charter school revenue into a shell corporation completely under ASU’s control.
Arizonans for Charter School Accountability has filed a Public Monies Violation with the Attorney General regarding the co-opting of ASU Prep charter schools by the University and the laundering of millions of dollars in charter school revenue via a shell corporation created by ASU.
The Auditor General needs to complete an independent audit of ASU Prep finances 2018-2023 to determine if the revenue from ASU Prep is benefiting the charter schools or ASU.
The Legislature needs to pass legislation requiring all charter schools to be regulated by the Charter Board. The fox isn’t doing a very good job of guarding the henhouse…
Two other complaints of this kind have been submitted to the Attorney General since January 2021 with no response. Hopefully the new AG will finally investigate this misuse of public funds.