Risk Seen in Deals Offered By Fitness Group
State officials in Minnesota are telling districts to proceed with caution when making deals with a group that offers schools across the country a way to get new fitness programs for students at no cost.
The warnings issued in recent weeks by both the state auditor and the attorney general of Minnesota relate to the National School Fitness Foundation, a 4- year old organization based in American Fork, Utah.
At issue is the unusual financial arrangement by which the foundation helps schools acquire its trademark program for improving physical fitness, called L.I.F.T. America, which stands for Leadership in Fitness Training. Districts pay for the product upfront, and then receive funds back from money raised by the foundation.
Minnesota State Auditor Patricia Anderson calls it a risky proposition.
"There is no guarantee that they are going to get their money back, or that the company is going to remain stable," she said in an interview last week.
National School Fitness Foundation officials agree they can't assure districts that the group will be able to raise ample funds to offset the full cost. But that uncertainly is spelled out, in bold type, in the agreements that the foundation makes with school systems, as noted in a recent report by Ms. Anderson's office.
What's more, the foundation claims to have met its financial commitments so far to all of the 500 schools nationwide that have adopted the L.I.F.T. America fitness program.
Minnesota's auditor concedes that of the 13 districts in her state that have struck deals with the foundation, none has reported a problem in receiving money back from the Utah group.
"There is a risk to districts, and that is something we are upfront about with schools," said Christopher M. Rees, the executive vice president for public relations and marketing for the National School Fitness Foundation. He added: "We have never once defaulted on a payment to a school."
Districts that sign contracts with the group agree to buy the L.I.F.T. America program, which the foundation developed, from a for-profit company, School Fitness Systems, also based in American Fork.
Costing between $112,000 and $220,000 per school, depending on the grade level, the program includes fitness equipment, curricular materials, training for school staff members, and a "kiosk"—an instrument that gauges body fat and other fitness data for use by the school, and by the foundation's researchers.
Districts often borrow the money to make the upfront payment. In such a case, the foundation pledges to work to raise money to contribute back to the school system in amounts equal to the district's monthly bill for the loan. But its contracts stress that "business risk" is a factor, and that the district could be liable to cover remaining costs if the foundation is unable to make its contributions.
Mr. Rees said his group makes those contributions out of funds from private donations and licensing fees included in the program's purchase price. The foundation also has helped districts win physical education grants from the U.S. Department of Education to pay for the program.
Ms. Anderson urges districts to consider how they'd meet their financial obligations if those sources of funding dried up.
Thomas Dickhudt, the superintendent of the 3,600-student Chisago Lakes, Minn., school district, said he's confident the foundation will work to live up to its end of the bargain, though he worries that the recent publicity could affect the group's ability to raise money. His district installed the L.I.F.T. America program at one of its schools last year.
"We've been extremely happy with them," he said of the foundation. "They've met all their payments. They've been a really good organization to work with, and we're going to continue to work with them."
Vol. 23, Issue 27, Page 20Published in Print: March 17, 2004, as Risk Seen in Deals Offered By Fitness Group