Though it has no teachers, this company gets millions meant for private, charter schools

PHOENIX – To backers, Prenda microschools represent a “return to the one-room schoolhouse” of the past, empowering parents to educate their children in intimate settings away from the cruel public school bureaucracy.

Looked at another way, the for-profit company is reaching for something more contemporary, to be the Uber of education.

Anyone can start a Prenda microschool of five to 10 students. No certification or degree is required to be a “guide” – Prenda's term for the adult who leads the class – only a passion for helping kids.

Guides use their living rooms as a schoolhouse, much like Uber drivers work in their own vehicles.

Prenda – which is largely based in Arizona but is "rapidly spreading all over the world," according to its website – has seen a surge in interest during the coronavirus pandemic and doesn't shy away from the Uber comparison.

“If you think about Uber and the fact that it allows a normal person to own a taxi, and you think about Airbnb and the way it allows a normal person to own a hotel, Prenda allows a normal person to run a school,” Enrollment Director Rachelle Gibson says in one of the company's numerous online videos.

And like the ride-sharing company, Prenda exploits gaps in regulation and oversight in the hopes of growing so fast and large that it alters the industry it seeks to disrupt.

Prenda is not a private school, a charter school or a public school. But at different times, it operates as all three – drawing taxpayer funding or support for each type of school. It teaches public and private school students in the same classroom, which may not be legal under Arizona law.

As a result, there’s little government oversight of Prenda guides and how they lead their home classrooms.

If you ask Prenda, it's not a school at all.

“We’re not a school. We are a provider of microschools,” said Prenda Chief Executive Officer Kelly Smith. “We have a model, an education model, called a microschool. We provide a curriculum and tools and training and support to enable and facilitate the microschool to happen. But our goal is to work with schools as kind of a provider and partner.”

Smith founded Prenda after his experience forming coding clubs in Mesa with his son and other children. Smith saw how focused students were when they were driving their education rather than teachers. “Kids, when they make a decision that they want to learn something, are unstoppable,” he said.

Prenda divides its model into three sections: “conquer,” which is self-directed learning; “collaborate,” in which students do group activities; and “create,” when students work on a project in pairs or small groups.

The adult guides them through those activities but is not a teacher, Smith said.

“Their job is not to deliver content, it’s not to take responsibility for the learning of kids,” Smith said. “So there’s this Plutarch quote … 'The mind is not a vessel to be filled but a fire to be kindled.' And that’s what we encourage all of our learning guides to do is to work hard to kindle that fire.”

The mother of one student told The Arizona Republic she had no idea what her son learned while attending a Prenda microschool, which she said used inexpensive curriculum available online.

Pamela Lang said she was forced to hire an aide for her son at additional expense. Her son’s guide said she didn’t have the time to help her son, according to Lang.

Partnerships with charter schools

Prenda has been indirectly funded by public school money through contracts with charter schools and a pilot program with Mesa Unified School District.

It is impossible to know exactly how much public school funding has ended up in Prenda coffers because Prenda doesn’t hold a charter with the state.

Prenda's contract with charter school operator EdKey gives an idea.

EdKey receives about $8,000 from the state for each student in its Sequoia Choice online charter school, CEO Mark Plitzuweit said.

In its partnership with Prenda, EdKey takes about $3,000 of the state funding for each Prenda student, and Prenda receives the remaining share of per-student funding, according to contracts and interviews with Smith and Plitzuweit.

The amounts vary by grade level, Plitzuweit said. Prenda receives $4,100 to $5,100 per year for students in first through eighth grades, according to contracts from this school year obtained by the Republic.

Plitzuweit said EdKey's deal with Prenda will add $1.5 million to $1.75 million to EdKey's revenue this year.

That is an obvious benefit to a company that had a $9 million long-term deficit in its last available audit.

Under the Prenda deal, EdKey enrolls the students, who are counted by the state as charter school students in EdKey's Sequoia online school, even though their education is led by Prenda and they are taught Prenda's curriculum.

Prenda's agreement with EdKey allows it to be classified as an education service provider rather than a school, which would require it to obtain a state charter.

EdKey certifies that the students’ hours of instruction meet state requirements and submits to the state their scores from standardized tests. Prenda’s test scores aren’t publicly available because they are combined with all Sequoia Online students.

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"They can use us ... as partners in helping to make sure that these students have more school choice,” Plitzuweit said.

Plitzuweit said every public school in the state uses service providers.

But few give contractors the exclusive right to educate their students.

Dawn Penich-Thacker, a spokeswoman for Save Our Schools Arizona and a Prenda critic, said Prenda defines itself in a way that is most advantageous for it to receive public education dollars while avoiding public education regulation or scrutiny.

“It’s exploiting the gaps in the system in order to grow their project as much as possible before people notice it’s taking advantage of gray areas in the law,” Penich-Thacker said.

Fees split between guides, Prenda

Founded in 2015 and incorporated in Delaware, Prenda has sold more than $7 million in equity, stock options and warrants since 2017, according to Securities and Exchange Commission filings. More than $6 million of that was issued in May, SEC filings show.

“We’re building an organization around software, a curriculum, support of the student experience and then a lot for the learning guides as well,” Smith said. “So we need to find these learning guides, screen them, vet them."

Prenda advertises its microschool guides are paid $23,000 to $26,000 a year.

If a microschool has a maximum of 10 students receiving the highest payout from EdKey, Prenda and its guide would split roughly $51,000 a year in public charter school funding.

Prenda’s website lists 371 microschools in Arizona. The number has exploded from about 80 in 2019, before the COVID-19 pandemic. If Prenda received the maximum amount from EdKey for each school, it would take in nearly $19 million annually in charter school public funds.

Smith said Prenda has received less than $19 million annually from state-funded sources but declined to say how much charter school money Prenda receives.

"Private school" students who attend Prenda microschools tap public money through the state's empowerment scholarship account (ESA) program. According to the Arizona Department of Education, 25 ESA students used Prenda in 2020, paying it $32,000 this year.

Prenda has been trying to accelerate its growth, spending nearly $40,000 on Facebook ads this summer as the pandemic raged and some parents looked for alternatives to the traditional school setting. Since 2018, it has spent more than $100,000 on Facebook ads.

Smith said Prenda hasn't turned a profit.

Asked what the strategy was to become profitable, such as expanding as fast as possible or raising prices, Smith said “he didn’t have good answers.”

What kind of school is it?

State officials can’t regulate Prenda, in part because they can’t decide what type of school it is or whether it's a school at all.

The Arizona State Board for Charter Schools contends Prenda isn’t a school but rather a contractor to EdKey.

Serena Campas, policy and public relations manager for the board, said charters can contract with outside organizations to provide instruction, administration and other services.

"They basically function as a learning center," a place for online students to go during the day, Campas said. “So that’s kind of how Prenda functions for EdKey.”

Campas said that as far as the board is aware, Prenda “guides” are not instructors or traditional teachers.

“A lot of our schools have a learning center where there’s a person there to facilitate learning as far as like watching the student and being there to answer questions,” Campas said.

She said the board asked EdKey for more information about its relationship with Prenda.

“But they are still EdKey students, they are still using, as far as I know, that curriculum,” Campas said. “Their contract, between EdKey and Prenda, we don’t have any access to.”

The Republic obtained the contract under Arizona’s public records law.

Prenda teaches its own curriculum beyond what is provided by EdKey, Smith and Plitzuweit said. Plitzuweit said EdKey's curriculum is available if Prenda needs it, but Prenda uses its own.

Jim Hall, a former principal and founder of the group Arizonans for Charter School Accountability, filed a complaint with the Charter School Board contending that EdKey illegally collected state funds for average daily membership for Prenda students because EdKey wasn’t educating them.

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The complaint alleged EdKey transferred state funds to a private school, Prenda, that doesn’t provide services.

In response to the complaint, EdKey’s lawyer denied giving state funds for schools' average daily membership to Prenda or paying a “per-pupil" fee to Prenda.

The Charter School Board closed the complaint based on the response of EdKey’s lawyer.

The contract between Prenda and EdKey says EdKey pays Prenda $4,100 to $5,100 per student and directly refers to average daily membership, saying that if a student completed the maximum number of hours annually, that would equal the full state average-daily-membership funds for that student.

‘What are we getting for our buck?’

Smith acknowledged some may not understand Prenda because they have an outdated understanding of what schools should look like.

“Our goal is to empower kids as learners,” he said.

Parents certify hours outside the microschool because “learning isn’t an activity that is confined to a particular place and time.”

“We’ve built support to reinforce that, encourage kids to go home and read a book and write and practice math and work on piano and a number of other activities that would allow them to continue their education outside of ‘quote’ school,” Smith said.

Hall questioned whether taxpayers are get a good deal by paying two private entities more money than most public schools in the state receive.

“What are we getting for our buck?” he asked. “We have no idea where the money is going, except that I know that there’s a yahoo that had two weeks of training that we’re paying $23,000 or $26,000 to work with our kids.”

Public schools get less money while providing a comprehensive education for anyone who walks in the door — special education, tutoring, counseling, electives and extracurricular activities, he said.

The software programs listed on Prenda’s site are low-cost and available online to anyone, he said, noting they are often used by home-schooling parents.

Prenda's website says it has proprietary software called PrendaWorld, which “helps students manage their online tools, set goals and hold themselves accountable.”

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Hall said EdKey essentially pays a bounty for Prenda to find children for its Sequoia Online program that the school doesn't have to educate, which adds to its profit margin.

"It's a boon to them," Hall said, noting Sequoia Online's revenue has increased from $6 million before the Prenda agreements in 2018-19 to an estimated $14 million this school year.

Penich-Thacker of Save Our Schools questioned whether Prenda is exclusionary.

By allowing guides to choose whom they want to provide services to and leave out others, Penich-Thacker said, the microschools can legally discriminate.

Smith said Prenda does not tell guides whom they should work with and is interested in helping all students. He cited partnerships for microschools with the Black Mothers Forum in South Phoenix, programs on the San Carlos Apache Indian Reservation and in more rural areas of the state such as Kingman, Lake Havasu City and Yuma.

“Typically, those microschools will form organically around a neighborhood,” Smith said. “We’re definitely not trying to serve a particular group of people. My goal is to provide a microschool option to anyone who wants it.”

This article originally appeared on Arizona Republic: Prenda microschools get funding meant for charter and private schools