Indianapolis innovation schools must follow a new policy after one lost its nonprofit status

As principals in Indianapolis Public Schools take on more responsibility, they are tasked with new administrative duties — and sometimes things may fall through the cracks.

The issue was crystallized last month at a school board meeting, when it was revealed that Global Preparatory Academy at School 44 lost its tax exempt status because leaders had failed to file paperwork to maintain it.

As one of eight Indianapolis Public Schools campuses that have converted to innovation status over the past three years, Global Prep is a new kind of school. It is under the umbrella of the district, but the school also has a charter, and its leader has administrative responsibilities that would not typically fall to a district principal.

Maintaining the school’s 501(c)(3) status is one of those new responsibilities, said founder and principal Mariama Carson, who previously led a neighborhood school in Pike Township for seven years. Under Indiana law, only nonprofit organizations may receive charters.

“The fact that we missed the filing, yes, that’s a big deal,” Carson said. But, she added, “it was totally unrelated to the operational runnings of the school, and I think that’s what parents care most about.”

The consequences of the mistake are relatively negligible, Carson said. The school’s nonprofit status was revoked last May, and Carson learned about it during the school’s annual audit. The school reapplied for tax-exempt status in February, she said, and if the request is approved by the Internal Revenue Service, the decision will be retroactive. The school did have to pay several thousand dollars for an accountant to prepare the new application, she said.

The revelation that Global Prep had failed to maintain tax-exempt status was especially notable because it often wins praise from advocates for innovation schools. It is led by an experienced principal, saw a jump in test scores during its first year, and has growing enrollment.

The issue came to light when MaryAnn Schlegel Ruegger, a community advocate and critic of innovations schools, shared the audit with the Indianapolis Public Schools board in February.

“I want to know why no due diligence is being done,” she said to the board. She added that the school is expected to be overseen by the district and the Office of Mayor Joe Hogsett, which granted its charter. The founder also got funding and support from The Mind Trust, a nonprofit that has played a central role in the creation of innovation schools.

“How can no one find this?” she asked.

Indianapolis Public Schools leaders did not learn about the problem until February because the school had not notified them previously. That violates the school’s contract with the district, which requires the school to give notice if it loses tax exempt status, and the district sent the school a written reprimand.

Aleesia Johnson, who oversees innovation schools for Indianapolis Public Schools, said that the district also changed its process in response to the issue. Now, schools are required to submit proof of nonprofit status every year. Previously the district would only get that information when it received the annual audit.

“It certainly has made us look back at our reporting requirements from our partner schools, making sure that we have dotted all I’s and crossed all T’s, and that we have all the information that we need to have,” Johnson said.

The flexibility afforded to innovation schools comes along with new responsibility for operational issues such as human resources, contracts with vendors, and school technology. This year, Global Prep hired a director of operations to take on some of those duties.

Johnson said that all district principals need to think about similar administrative and operational issues, “but certainly the scope and the spectrum at which an innovation principal needs to be thinking about them is broader.”

Carson sees the issue as a one-off problem. The school became a nonprofit as part of the charter application process before it opened its doors, and she did not realize regular forms were necessary to maintain nonprofit status, said Carson. Now, she has a team of people she relies on to deal with financial and administrative issues, but it was not on their radar because she handled the initial application, she added.

“As a neighborhood principal, I didn’t have those challenges,” Carson said. “But now there are systems that have to be in place for anybody that’s running an innovation school, different than just running a school for the district.”

Update:  March 31, 2018: This story has been updated to clarify MaryAnn Schlegel Ruegger’s quote.