Three top officials from New York State’s Niagara Falls City School District have formed their own company to market an information management program the district helped develop. The venture, if successful, could yield the Niagara Falls school system more than $800,000 in profit.
Superintendent Carmen A. Granto, business services administrator Roy W. Rogers, and information services chief Guy Rizzuto have launched an enterprise called “Integrated Educational Services” as part of an agreement they reached with Vision Associates of White Plains, N.Y., to become an authorized reseller of the data-warehousing program eScholar.
The school system opted out of its ownership interest in eScholar, for which it served as prototype, thereby protecting itself from any liability if something goes wrong with the software. However, the district can still collect up to $1.1 million in royalties on future sales of the programa potential profit of some $825,000 after figuring in its $275,000 original investment.
The Niagara Falls school board approved the agreement Aug. 26.
The district had paid Vision Associates $230 an hour and provided numerous staff hours to help the company develop eScholar, a data-warehousing solution designed for the K-12 market.
eScholar pulls information from existing electronic systems and puts it in a form that is easy to analyze. The program helps administrators track student and staff attributes such as grades, attendance, discipline, test scores, demographic information, and teacher certification.
Using the software, officials can look for patterns that will help them make better decisions, such as the relationship between grades and attendance or between standardized test scores and teacher preparation.
Under its original arrangement, Niagara Falls would have been entitled to collect half the royalties on all sales of the software with no cap. Considering that Vision Associates predicts worldwide sales of as much $200 million, it might sound as if the district is giving up a potential windfall.
But being a co-developer of the program also would have left the district open to any lawsuits filed as a result of a software glitch or malfunction.
With the reworked deal in place, “If a future version of eScholar ‘crashed,’ no one could sue Niagara Falls, with its supposedly deep pockets,” Vision Associates President Shawn Bay told the Buffalo News.
Under the new agreement, the district will continue to reap a 50-percent royalty on sales of eScholarincluding sales conducted by Integrated Educational Servicesbut only up to the $1.1 million cap.
Beyond protecting itself from potential lawsuits, the district also has been released from any obligation to continually update eScholar.
That responsibilityand a certain amount of liabilitywill now fall to Integrated Educational Services, the private firm launched by Granto and two other district officials.
Not everyone in the community is behind the move, however. In an editorial published in the Buffalo News, resident Lynn A. Garcia speculated on the potential conflict of interest posed by the arrangement.
“In the real world of business, a group of employees establishing a new business for themselves based upon technology or the business relationship of their employer would be in serious conflict of interest . . .” Garcia wrote.
But school board attorney Angelo Massaro believes the parties have sufficiently addressed the conflict-of-interest questions.
Integrated Educational Services will not have a direct relationship with the district. Instead, it will pay a royalty on its sales to Vision Associates, which will then forward the district’s cut to the school board. Furthermore, the new company will use private resources to upgrade eScholar and the district will enjoy future versions at no cost.
“Now, if [Integrated Educational Services] were to sell to the district, that would be a conflict of interest on the part of those employees,” Massaro told the Buffalo News.
Granto told the school board he would be happy to forgo the venture if the board sees a conflict.
On the other hand, Granto reminded the board, “If we do this, the more we sell, the more the board gets. And if the district receives $1 million, that’s a million less from the tax rolls.”
Integrated Educational Services
Niagara Falls City School District
Vision Associates Inc.