The day before the Philadelphia School Reform Commission is scheduled to vote on several charter school renewals, the city controller on Wednesday released a report criticizing the financial management of two charter operators.
The Controller's Office outlined problems it found when it examined the operations of Aspira of Pennsylvania and Kenny Gamble's Universal Companies.
Among other things, the report found questionable financial transactions among related entities, including loan guarantees; school-lease arrangements with parent organizations; and charter board members serving on boards with ties to the schools.
Universal has seven charter schools. Aspira has four in addition to a statewide cyber charter.
The providers have two schools each that are up for renewal by the SRC: Universal's Vare Promise Neighborhood Partnership Charter and Audenried Promise Neighborhood Partnership Charter, both in South Philadelphia, and Aspira's John B. Stetson Charter School in Kensington and Olney Charter High School in Olney.
Controller Alan Butkovitz has been calling for an overhaul of the state's 1997 charter law since his office released its first charter report in 2010. He said the issues at Aspira and Universal provide more evidence of why change is needed.
Butkovitz said that when the law was enacted nearly 20 years ago, it "contemplated mom-and-pop charter schools, and now they are large bureaucracies."
The 23-page report said legislators should change the law "to empower local school districts with greater oversight and compliance authority over education service providers and their associated entities."
Butkovitz said the law must also make clear "that charter school trustees cannot serve on the boards of organizations that have direct business with the individual school board."
The report said that while state law requires charter schools to be operated by independent boards, that was "not the case with these 'charter school districts.' "
The charter management organizations, the report said, are running the schools, which "have no authority to make independent financial decisions or other significant operational decisions, and appear to be shell corporations of the parent education service provider."
For example, the report said former officials at Olney told the office they had no knowledge of a 10-year lease agreement that Olney had to rent space for another Aspira program at the Aspira Educational Campus at the former Cardinal Dougherty High School. The Controller's Office also said Olney board meeting minutes did not mention the lease arrangement.
The report said state law "does not specifically authorize school districts to monitor or hold accountable education service providers such as Aspira and Universal. . . . Nonetheless, these providers receive huge amounts of taxpayer funds to operate charter schools. There are no obvious restraints over these charter school operator organizations and how they choose to allocate millions of dollars in public money received from the school district as well as state and federal governments."
Universal and Aspira charter schools have agreements to pay the management organizations to provide professional and financial services. Universal's charters paid the related Universal Community Homes a total of $7.4 million for fiscal years 2011 to 2014 and $12 million over the same period to the related Universal Education Companies, the report said.
The Controller's Office also said the district's charter school office of eight staffers and an executive director should be expanded and given more resources so it can provide better oversight of 83 city charters that educate more than 63,000 students.
In contrast, Butkovitz said that the charter office in Washington has 39 employees who oversee 114 schools with 39,000 students.
A Universal spokesman said founder Gamble "has a passion for educating inner-city youth and welcomes constructive oversight as Universal educators pursue this challenging and important mission."
The spokesman said Universal had worked cooperatively and provided all information requested by the Controller's Office.
He said: "While Universal does not agree with all of the controller's conclusions, we agree completely with the need for greater experience and capacity" in the district's charter office.
A spokeswoman for Aspira, which focuses on Latino youth, said the nonprofit would respond to Butkovitz's report once it has "completed a thorough review."
Citing low test scores and questionable management practices, the district's charter office has recommended that the SRC deny renewals for Universal's Vare and Audenried, and Aspira's Stetson and Olney charters.
All were once-troubled district schools that the SRC turned over to Universal and Aspira in 2010 and 2011 to convert to charters under the district's Renaissance program.
The district's charter office said the operators failed to achieve dramatic academic improvements they had promised during their five-year operating agreements.
Last month, SRC member Bill Green succeeded in postponing a vote on those four schools, pending the release of the Butkovitz report.
Butkovitz said copies of the report were sent to SRC members and the district on Tuesday.
The SRC is scheduled to vote on the renewals Thursday.
The controller's report can be found at http://www.philadelphiacontroller.org/audits-reports/review-of-charter-school-oversight-examination-of-charter-schools-operated-by-education-providers.