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The organization legally responsible for overseeing Harvest Prep Academy is raising concerns about deficiencies in the highly rated Minneapolis charter school's financial management that create "a lack of certainty that public funds are being appropriately used."

The school's authorizer, Audubon Center of the North Woods, issued a "letter of deficiency" dated Thursday that gives the North Side school only a six-month extension through March 31 of its contract with Audubon pending further answers from the school.

Among Audubon's concerns is an unclear web of relationships and finances among the various schools run by Eric Mahmoud, who founded Harvest Prep. The letter said there are frequent payments among Mahmoud's organizations and Mahmoud himself, but it's unclear what they are for and whether state money that supports Harvest and related entities is being used appropriately.

The letter from Audubon's charter school coordinator, David Greenberg, sets a deadline of Sept. 30 for the school to explain how it and parent company, SEED Daycare, are organized and to demonstrate that all payment shifts among Mahmoud's various enterprises are appropriate.

Mahmoud responded Friday that the school's board first learned of the concerns the night before. "As with all requests for information from authorizers and others with oversight responsibilities, we are fully invested in responding to their request for information in a timely manner and clarifying the questions that have been raised," he said via e-mail.

The letter also questions whether Harvest's board has carried out its fiduciary responsibilities, especially for financial oversight and employment law. It asserts that teachers whom Harvest paid as contractors clearly fall under the IRS definition of employees, for example. The letter specifically demands an explanation of Mahmoud's role, including the split of his time among his various enterprises. Greenberg met Thursday with Harvest's board. "They're very prepared to address those concerns and I'm quite confident about their ability to do so," he said in an interview.

Harvest, Mahmoud's first school, was joined later by Best Academy on the same campus at 1300 Olson Hwy. SEED is their landlord and provides administrative services to the schools. Mahmoud is currently opening Mastery School, a third school in which Minneapolis public schools serves as the authorizer in an era of new cooperation between the district and charter schools. Greenberg's letter specifically references Mastery in some of its concerns.

Minneapolis School District spokesman Stan Alleyne said the district is still reading and analyzing the letter.

Praise for academics, but ...

Harvest and Best enroll close to 900 students, almost all of whom are black and poor. The schools have won plaudits for achieving among the highest scores on state proficiency tests for those groups. In June, Mahmoud was inducted into a national charter school advocacy group's hall of fame.

But the Star Tribune this month reported on a number of issues involving Mahmoud, SEED and their finances. The school has been operating under a forbearance agreement with investors in its bonds after missing several payments to them. Both SEED and Mahmoud, with his wife, Ella, have accumulated and eventually repaid numerous tax liens.

The Star Tribune reported that Mahmoud is paid about $273,000 for his various roles with SEED and Best, far more than the best-paid district superintendents in Minnesota. Greenberg's letter asks how much of Mahmoud's time is devoted to "any other schools, businesses or professional activities."

The newspaper also reported that Mahmoud pleaded guilty to a felony charge of residential mortgage fraud in Georgia that arose from a 2005 transaction.

Audubon, based in Sandstone, Minn., is the state's largest authorizer of charter schools, responsible for overseeing 33 of them. Greenberg said that grew from the organization's environmental education mission, which it requires of schools it authorizes. The oversight duty of charter school authorizers was ratcheted up by a 2009 law that requires them to keep closer tabs on charter schools and gives them more power to cut ties with schools.

Charter schools are public schools that are free of many state and school district regulations but are required by law to have oversight from authorizers, mostly nonprofits or colleges.

Steve Brandt • 612-673-4438