There are many ways in which nonprofit charters make a profit. Most involve complex real estate transactions and such things as “triple net leases” which are hard for the public to understand. Such deals often involve a charter operator owning or leasing the real estate and renting it to the charter school at exorbitant rates, with the public footing the bill.

Michael Kohlhaas has discovered another ingenious way that allegedly nonprofit charter operators extract money from their operations. 

He describes the case of a charter operator in Los Angeles who sold his “receivables” soon after getting his charter.

Kohlhaas writes:

The idea is very simple. A charter school has guaranteed future income in the form of payments from the state. They sell those payments to a finance company at a discount.

The finance company also charges a transaction fee. So for instance, if a charter has enrollment worth $1,000,000 they…