GARY | The board of directors of the 21st Century Charter School in Gary has entered into an agreement to buy the building it occupies near downtown Gary.
The board will buy the building at 556 Washington St. for $3.5 million. The information about the sale and lease payments were disclosed in an independent audit conducted by Indianapolis-based auditors Katz Sapper & Miller on behalf of the Indiana State Board of Accounts. The audit was released earlier this month. The report covers the period from July 1, 2010, to June 30, 2012.
Kevin Teasley, founder and president of Indianapolis-based GEO Foundation, which is the management company for 21st Century Charter School, said the school has been leasing the space since it opened eight years ago. For the first four years, the board leased the building for $300,000 a year and then paid $360,000 per year for most of the remaining years after an addition was made to the building.
Teasley said the foundation borrowed $7 million more than eight years ago to construct two new schools — the 21st Century Charter School in Gary and one in Indianapolis. He said the school buildings are identical, and they cost more than $3.5 million each to construct.
"It actually cost us about $4 million to construct and we discounted it to the school," Teasley said. "We spent another $250,000 when we added a music room above the cafeteria four years ago. It was the decision of the board at 21st Century to buy the building because it will save them money as opposed to continuing to pay rent on the building."
Teasley and School Treasurer Dana Johnson said the school is paying roughly $12 per square foot, which is "pretty reasonable."
Teasley also said the management company is not making any money off the sale. He said it has acted as a "pass through" agent.
"We (the foundation) took the risk by borrowing the money and simply passed the cost on to the school," he said.
Added Johnson, "We have not really made anything. We have essentially been paying a loan we received from the bank. The rent was set based on the amount owed to the bank."
In a supplemental audit report released by the independent auditors nearly a week later on Dec. 12, auditors criticized the charter school for not following several accounting guidelines.
Ryan Preston, an Indiana State Board of Accounts supervisor, said the school didn't have controls or procedures in place to ensure that fund balances from one accounting period agreed with the next period.
Johnson said it was a "paperwork" problem. She said the accounting procedures have been put in place.
"The money is accounted for properly. They wanted us to tighten down on the controls, and in many cases we have already done that," she said.