(a) Restriction on serving. A person may not serve
as a member of the governing body of a charter holder as a member
of the governing body of a charter school, or as an officer or employee
of a charter school, if the person has a substantial interest in a
management company that has a contract for management services with
the charter holder or a charter school. A person has a substantial
interest in a management company if the person:
(1) has a controlling interest in the company;
(2) owns more than 10% of the voting interest in the
company;
(3) owns more than $25,000 of the fair market value
of the company;
(4) has a direct or indirect participating interest
by shares, stock, or otherwise, regardless of whether voting rights
are included, in more than 10% of the profits, proceeds, or capital
gains of the company;
(5) is a member of the board of directors or other
governing body of the company;
(6) serves as an elected officer of the company; or
(7) is an employee of the company.
(b) Management company as officer. Notwithstanding
subsection (a) of this section, a person who has a substantial interest
in a management company may provide management services that include
the functions of a central administration officer, campus administration
officer, or business manager, if:
(1) the person provides all management services under
a contract for management services;
(2) the person provides all management services as
an agent of the management company;
(3) the person does not serve as an employee or volunteer
of the charter holder or charter school, and does not otherwise serve
as a contractor of the charter holder or charter school;
(4) the person does not serve as a member of the governing
body of the charter school or charter holder; and
(5) the management services provided by the person
do not include powers or duties that are non-delegable under §100.1101
of this title (relating to Delegation of Powers and Duties).
(c) Audit disclosure. A charter holder shall separately
disclose, in its annual audit report required by §100.1047(c)
of this title (relating to Accounting for State and Federal Funds),
all persons listed in subsection (a) of this section with a substantial
interest in a management company as defined by subsection (a).
(d) Removal by charter holder. If a person is prohibited
by this section from serving as a member of the governing body of
a charter holder, as a member of the governing body of a charter school,
or as an officer or employee of a charter school, the charter holder
shall remove the individual from such position immediately.
(1) The removal must be made in accordance with the
removal provisions in the articles of incorporation and bylaws of
the corporation, if applicable, the terms of the open-enrollment charter,
any applicable local policies, and state and federal law.
(2) The governing body of the charter holder may not
approve an account or draw or authorize the drawing of a warrant or
order to pay the compensation of a person if the person is prohibited
by this section from serving in the capacity for which compensation
is due.
(e) Implementation schedule and transition. Notwithstanding
this section:
(1) beginning with the fiscal year in which September
1, 2001, falls, a charter holder shall separately disclose, in its
annual audit report required by §100.1047(c) of this title, all
persons listed in subsection (a) of this section with a substantial
interest in a management company as defined by subsection (a); and
(2) if a person is prohibited by this section from
serving as a member of the governing body of a charter holder, as
a member of the governing body of a charter school, or as an officer
or employee of a charter school, and if removing such person would
violate an employment or other written contract that was executed
prior to September 1, 2001, then the employment or other contract
may continue in effect past September 1, 2001, if each of the following
conditions is met:
(A) no state funds are used to pay any amounts due
the person under the employment or other contract, and all such amounts
are paid from a clearly identified source of non-state funds;
(B) the terms of the employment or other contract have
not been renewed, modified, or otherwise altered since September 1,
2001; and
(C) the person does not perform, and is not charged
with performing, any charter school functions.
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