Audits Of 26 Arizona Charter Schools Were 'Woefully Below' Standards
STEVE GOLDSTEIN: An accountant who conducted audits for 26 charter schools is in trouble with the state. The Arizona Board of Accountancy's investigative panel last month found the auditor's work was quote "woefully below" standards. Craig Harris of The Arizona Republic has been looking into charter schools for a long time in the state and joins us now. Craig, good morning.
CRAIG HARRIS: Good morning.
GOLDSTEIN: So let's talk about where we've reached this. So the Arizona Board of Accountancy, what did they discover, and Joel Huber, what do we need to know about him and his reputation?
HARRIS Well he is a pretty prominent accountant with charter schools. I mean most people probably never know who this person is. He's a CPA who's in Mesa and he does the accountancy for 26 charter schools. And he got in trouble under scrutiny for work that he did for a very prominent charter school called American Leadership Academy, and his work, as you said was, they were highly critical calling it "woefully bad." They raised questions whether he even knew how to do taxes. And so he is in a bit of hot water. And so all of his clients now have to go out and find a new auditor because he's under discipline by the state accountancy board.
GOLDSTEIN Well, brief follow up that. So 26 schools under the same umbrella, was someone then benefiting from this? Was the leader of those charter schools benefiting from this? Because why would you have an accountant, who is found to be basically terrible?
HARRIS: Well I think part of it is, some of the charter schools that I talked to, they were shocked because they thought he was a pretty good accountant. They thought he asked tough questions, he was fair, but he was also a little bit on the cheap. He was by industry standards, he was charging way below market value. Now if you add up all of his clients, he was making about $170,000 for these 26 clients. That's pretty good money. But what the accountancy board did, the investigators said is that, for a sole practitioner — a guy who has no staff no one working for him — it would be almost impossible to do that kind of work, and the investigators at the accountancy board said he got away with it because he did take a "cookie cutter" approach and relied so much upon management saying, "well this is what you need to put down." And the role of an auditor is to go in and say, "well, wait a minute. I don't trust anything you are saying here. Show me everything, it's black and white. It's not personal, it's just I need to verify what's going on.”
MARK BRODIE: Now, I wanted to ask, what was woefully bad about what this guy was doing?
HARRIS: Well, what they caught him on or he wasn't reporting things called related party transactions. That's a very nice word of saying insider deals. And he was not reporting a lot of the insider deals that were going on at American Leadership Academy and you're required, by law, to put those in audits with the state, and you're also required by federal law to put those in your tax returns. So, the public knows, it's not against the law, but the public knows that "hey, I'm getting all these deals and there's a relationship here and it's not an arm's length transaction." And so he wasn't disclosing those and so they had to restate their audits for 2017 to disclose all these numerous deals that a guy named Glenn Way was getting by running American Leadership Academy. And when they put their 2018 audit on, they were in much more detail and also reporting on numerous what they call related party transactions, whether it was a management company or in a services company, or even a real estate company that Glenn Way, all partially owned or fully owned, and he was getting these contracts to do this work for American Leadership.
GOLDSTEIN: Craig, we've heard you used that phrase before on the program, you just used it again, "not against the law" and then we saw what happened at the state legislature this session, as far as updating charter school regulations, having more oversight. Is this something that could have been prevented with more oversight or is this an outlier of some sort?
HARRIS: Well if you're a charter school, it's legal. If you're a district school, you're going to prison. You cannot do this if you're a district school. And the reason for that is that it raises eyebrows, you know. You shouldn't be able to use with public funds if you're a district school like Gilbert district or Glendale or Scottsdale. What we saw there, there's folks who got indicted for doing similar things. But if you're a charter school, the state law allows you to do this because they are private businesses, even though they're almost 100 percent publicly funded, they are private businesses. So they're not held to the same standards and the same accountability as district schools.
GOLDSTEIN: Okay, we just have a few seconds left, so what's next potentially for Huber and for Glenn Way?
HARRIS: Huber is in a bit of trouble. The accountancy board will take up the recommendation from this panel. If they uphold it, he won't be able to do charter school audits for another year. For Glenn Way, he's doing fine. He has a very successful chain of charter schools with American Leadership. And he'll probably just keep on doing what he's doing.
GOLDSTEIN: Craig Harris of The Arizona Republic. Craig, Thanks as always.
HARRIS: Thanks a lot.