STATE News:

ALBUQUERQUE — State Auditor Brian Colón Monday announced the conclusion and findings of a special audit conducted to investigative and examine concerns regarding certain payments from the GREAT Academy (“Academy”) to its component unit, The GREAT Academy Foundation (“Foundation”), as well as into the expenditure of public funds by the Foundation.

The special audit was designated, in part, after receipt of allegations from the Public Education Commission (PEC) regarding potential violations of the Government Conduct Act and possible financial mismanagement, misappropriation of public funds and conflicts of interest.

OSA examined the financial transactions that occurred between July 1, 2016 and Jan. 31, 2022. During that period, the Foundation’s total receipts equaled $2.28 million; 99.5 percent of the Foundation’s total sources of revenue during the period came from the Academy – public money transferred away from the school and to a private foundation.

As a result, these public dollars are no longer subject to the oversight, laws, and regulations of the State creating a black hole of accountability. 

The special audit further identified of the $2.28 million, $1 million was for ‘pre-paid’ rent by the Academy to the Foundation. In addition to this prepaid rent amount, the Foundation also received $1.26 million in monthly rent and additional rent/maintenance fee payments from the Academy. The Foundation entered a mortgage to buy the building the charter school is in for $1.1 million in 2017. During the period examined by the OSA, the Academy paid more than $2.2 million in rent to the Foundation for the building. However, the Foundation during that same period, only paid just under $500,000 toward the building mortgage.

Four and a half years from now, the mortgage comes due, and the Foundation will have to pay a $694,000 payment – on a $1.1 million mortgage that they have as of today, the Foundation has collected rent payments exceeding $2.2 million from the Academy.

Auditor Colón issued the following statement:

“The expenditures in question are alarming and represent a sizable amount of taxpayer money that falls outside any legal reviews to ensure the funds are used appropriately.

“These funds are intended to support the operational and educational needs of the Academy and its students, instead due to the highly irregular organizational structure we have no way of knowing if these funds are going toward student success or the pockets of the Foundation’s administration. Arguably, the relationship between the Acad“emy and the Foundation is akin to a shell company moving funds in a questionably legal manner, except the funds in this instance come from the pockets of the taxpayer.

“Currently, there are no laws, regulations, or other enforcement mechanisms in place to prevent the transfer of public funds from a public charter school to a private foundation without the accountability and transparency otherwise required for the expenditure of public funds.

“The only cure for this money malady is for the Legislature to step in and create a law to ensure more oversight on public dollars filtered to private foundations.”

The OSA is particularly concerned about the glaring conflicts noted during the period reviewed during the special audit. The Academy’s Executive Director over saw the Academy’s Dean of Student and Business Office Support employee at the Academy, but the Dean of Students and Business Office Support employee oversaw the Executive Director’s work as a contractor for the Foundations working at the Academy, as the Foundation President and Director of Operations, respectively. Internal controls were effectively rendered useless if any existed at all and as a result $2.27 Million in public funds were spent with little to no accountability.

New Mexicans concerned about potential instances of fraud, waste, and abuse should contact the Office of the State auditor. Reports may be made anonymously through our website at www.saonm.org or by calling 1-866-OSA-FRAUD. You also may speak to an investigator by calling 505.476.3800.