City says EAI owes it $500,000

January 08, 1994|By Gary Gately | Gary Gately,Staff Writer Staff writers Ian Johnson and Joan Jacobson contributed to this article.

Education Alternatives Inc., the private company running nine Baltimore schools, owes the city about $500,000 that it had received based on overstated enrollment figures, city school officials said yesterday.

Superintendent Walter G. Amprey said school officials had told EAI that based on a state audit it must repay the money, received during the last school year for its "Tesseract" schools.

But John T. Golle, EAI's chairman and chief executive officer, contradicted the superintendent, saying he had not been told that the company was expected to repay the money.

In a telephone interview, Mr. Golle said he was shocked to hear that Dr. Amprey expected repayment. "There's nothing that's been decided -- at least that's been communicated" about a repayment, Mr. Golle said.

Told of Mr. Golle's comments last night, a clearly stunned Dr. Amprey said: "I don't know what to say. . . . I thought we were pretty clear."

EAI received the money after challenging school system enrollment projections. The company said the projections had under-represented enrollment by an estimated average of 250 pupils during the 1992-1993 school year.

The school system made the payments based on "enrollment adjustments." Under its contract, EAI received $2,000 for each student exceeding the projected enrollment of about 4,800.

Dr. Amprey's decision to require EAI to repay the estimated $500,000 came as a result of a recent state audit that confirmed the city's original enrollment projections. And that's a large sum for EAI, whose profits totaled $1.1 million in the 1993 fiscal year.

News of the overpayment brought sharp criticism.

City Council president Mary Pat Clarke, who voted against the EAI contract in her role as a member of the Board of Estimates, said, "We gave away our oversight as part of the contract itself. It never should have happened. Shame on us. This money [the $500,000] belongs in every school."

Dr. Amprey said EAI first made its claim early in the 1992-1993 school year, its first operating the schools, and that he agreed to give EAI "the benefit of the doubt."

But he said the school system made it clear that the money would have to be repaid if a state audit confirmed the city numbers. The audit found a net undercount at the nine schools of only three students, he said. That would entitle EAI to total payments of $6,000, based on its contract.

With completion of the state audit, Dr. Amprey said, "As far as I'm concerned, [the enrollment discrepancy] is resolved, and EAI owes us that money."

But Mr. Golle continued to maintain yesterday that the city's count -- confirmed in the audit sent to the school system last month -- is flawed.

EAI officials plan to meet with city and state officials to review the enrollment data Monday and Tuesday, Mr. Golle said. He has told city school system officials that EAI hopes to pay for an independent study that would corroborate the company's attendance figures.

EAI contends the city relied too heavily on average daily attendance instead of overall enrollment as reflected in roll-book records. But until the company has a chance to review state records, he said, "to go over differences with what the state has and what the city has," discussing possible repayment would amount to "just a matter of speculation."

Some Tesseract critics said the $500,000 in payments, which needed no approval beyond the school system, demonstrates a lack of oversight on the contract.

"This city school system is so underfunded, and EAI was able to get a half-million dollars when other schools are struggling to get toilet paper and ditto fluid," said Linda Prudente, spokeswoman for the Baltimore Teachers Union, which is challenging the EAI contract in court.

City Councilman Anthony J. Ambridge, D-2nd, who earlier this week called for a City Council investigation into possible overpayments to EAI, yesterday said, "I believe we overpaid them more than $500,000 because of discrepancies in the way attendance is being recorded.

"There are students falling through the cracks," he said.

Stock analysts it would be premature to speculate on the impact on company profits.

Mike Moe, an analyst with Dain Bosworth Inc., said, "They are bound to have minor differences over enrollment. It's not such a big deal, from my perspective."

The stock closed yesterday at $35, up 25 cents.

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