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State audit faults Buffalo science charter school rental of YWCA

An audit of the Buffalo Academy of Science Charter School’s building lease released Wednesday by the state Comptroller’s Office criticizes school officials for their property selection process and suggests the school is paying too much for rent.

The audit, covering the period from July 1, 2006, to April 22, 2013, noted that officials listed the current school site, the former YWCA at 190 Franklin St., as one of its prospective locations two months before a New Jersey-based nonprofit educational services corporation that bought it was registered with the state.

“The corporation does not appear to be in the real estate business,” the audit said. “We find it surprising that the corporation – in business for less than a year with no apparent real estate experience and with limited financial resources – would have purchased the YWCA building without prior communication with school officials and without some form of commitment from the school.”

The audit does not identify the nonprofit, but real estate transaction records list it as Apple Educational Services Inc., with offices in Moonachie, N.J. The audit noted that the school later contracted with the nonprofit for a student database management and assessment system and student testing, as well as staff training and development services.

Auditors estimated the corporation’s costs for buying and renovating the building, plus interest, at $1.9 million and noted that rent during the 15-year lease would total more than $4.4 million, “a return on its investment of more than 200 percent.”

In response, Murat Demirbas, president of the school’s board of trustees, noted that the YMCA building was selected because it had the lowest price-per-square-foot ratio and a short lease, as well as provisions for immediate occupancy and renovations at the landlord’s expense.

Demirbas added that the school provided the Comptroller’s Office with documentation showing that there was no relationship between the school and the nonprofit corporation before it purchased the building.

Demirbas also noted, “The board could not analyze the long-term financial gains of the landlord nor does it agree that the return on investment for the seller or landlord in a real estate transaction should be a factor in the cost analysis ... It was the most cost-effective option and to the best interest of the school.”

In its comments on the school’s response, the Comptroller’s Office said, “It is unclear to us what documentation school officials are referring to or how any such information would demonstrate that the two entities acted independently and had no relationship with one another.”

The Comptroller’s Office recommended that the school’s board “ensure that all its proceedings are properly documented in the minutes” and “conduct site selection reviews and cost analyses for real estate transactions and ensure transparency in conducting its proceedings.”

It asked the board to develop a plan to address its recommendations and submit it in 90 days.

The school, which currently enrolls about 375 students in grades 7 through 12, was established in 2004 and moved to its present location in 2006.