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This Man Will Pay You $125,000

14lives_650 This guy, Zeke Vanderhoek, will pay teachers $125K at a new school being set up in a Dominican part of Manhattan.

Yes, a charter.  Yes, New York City.  Yes, a tough gig to get (hundreds of applications so far).   Yes, the guy made his money creating a successful test prep and tutoring company -- and never even went to public school (me neither, BTW). 

Yes, a media darling in the making.

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I've asked for the business plan to review the organization's assertion below:

"TEP (The Equity Project) has created a sustainable and conservative financial model that allows the school to compensate its teachers appropriately without relying on outside private funding.[ii] It accomplishes this primarily through cost savings that result directly from the tremendous quality and productivity of its teachers." http://www.tepcharter.org/philosophy.php

I have yet to hear back.

I was responsible for due diligence on many investments in k-12 nonprofits,and written on individual and CMO finances.

For Examples:

• Quantity Counts: The Growth of Charter School Management Organizations (Center on Reinventing Public Education) http://www.ncsrp.org/cs/csr/view/csr_pubs/15

• Are Charter Schools Getting More Money into the Classroom? A Micro-Financial Analysis of First Year Charter Schools in Massachusetts (Center on Reinventing Public Education) http://www.crpe.org/pubs/introCharterMoreMoney.shtml

• What Has Become of the Charter Idea? (I-VII) (School Improvement Industry Week Online) Starting here: http://www.siiwonline.libsyn.com/index.php?post_id=174316

• CMOs Won't Work As EMOs (School Improvement Industry Week Online) http://www.siiwonline.libsyn.com/index.php?post_id=11015

Consequently, I'm skeptical about the accuracy and/or sustainability. I would love to be proved wrong, because TEP would have made a real break hrough. Doubt could be resolved simply by making the business plan and supporting financial detail public.

One of the more significant problems with social entrepreneurs and venture philanthropists is that most treat the business affairs of their social enterprises with more secrecy than those of publicly-held firms. Maybe hiding true valuation from the outside world is one of the downsides of this social trend's capital roots.

Secrecy is entirely justified in the case of a privately held for-profit. There are no outside financial stakeholders who might be disadvantaged, and potential investors would be going into a negotiation part for the purpose of disclosure. Publicly held firms are required to disclose a great deal of financial information because millions of small investors are not in the best position to keep track, and if they cant trust the numbers, there wont be a lot of investment.

It seems to me that nonprofits are closer to publicly held firms than private companies. First, always remember that philanthropic investment is merely a privilege permitted by the taxpayers. Since government can't do everything, or well, we allow very wealthy people substantial tax breaks if they give the money away instead of paying into the Treasury. Second, remember that we taxpayers have agreed that nonprofits with 501(c) (3) status don't pay taxes because they are furthering the broader social good. This gives we taxpayers some rights to understand how our money is being used. Nonprofits are supposed to be doing social good, nonprofit financial sustainability is of vital importance. Here, withholding information that a business might consider a disclosure of competitive advantage over market rivals, actually is contrary to the broader social purpose.

I'd be very interested in hearing the case for nonprofit and philanthropic secrecy.

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