Charter school payments draw scrutiny from Pa. auditor

HARRISBURG - Pennsylvania's fiscal watchdog on Wednesday questioned millions of public dollars paid to charter school landlords and called for the state to monitor such lease payments more closely.

At a Capitol news conference, Auditor General Eugene DePasquale highlighted more than $2.5 million in lease reimbursements to nine charter schools, including the Propel Charter School System in Allegheny County, the Chester Community Charter School in Delaware County, and School Lane Charter School in Bucks County.

Without offering details, DePasquale said his office found ties between the schools and their property owners that could contradict state guidelines that deem buildings owned by a charter school ineligible for lease reimbursement.

"What we found in some of our audits is that the same people who own and operate charter schools, they themselves create separate legal entities to own the buildings and lease them to charter schools," DePasquale said.

Charter schools, which are public schools operated by private entities, have exploded across the commonwealth in recent years and become a contentious topic among educators, parents, and community leaders.

More than 150 operate statewide, enrolling well above of 128,000 students, state data show. Nearly half the schools are in Philadelphia.

The Republican-led legislature has been generally supportive of expanding charter schools, arguing that they provide parents with options and press the traditional public schools to improve. Gov. Tom Corbett agreed with them when he was in office.

Critics, including the state teachers' union, have questioned the academic success of charter schools and blamed payments to them for driving up district budgets and hurting traditional schools. Gov. Wolf, a Democrat who counts the teachers as reliable allies, has signaled his administration will look more closely at the impact of charter schools.

DePasquale, a Democrat seeking reelection this fall, faulted the state Department of Education for not checking who owns charter-school buildings.

"The problem is that we find zero evidence that the Pennsylvania Department of Education makes any effort to verify ownership of the buildings or look for conflicts of interest between the school and related parties," he said. "They simply write a check for whatever amount the charter school submits."

He said that the Education Department asked the Auditor General's Office about six years ago to review such connections and that the auditor's staff had done so.

"We keep finding it and supplying the information to the department, and they do nothing with it," he said.

DePasquale made a similar call for scrutiny in March 2013, when he said that audits of six charter schools found they had improperly received more than $550,000 in lease reimbursements from the state for properties related to or owned by the schools. It was unclear if that money was ever repaid.

In a statement late Wednesday, the department said any charter school seeking reimbursement for a portion of its lease expenses completes a request each year that requires the CEO to attest that the school is eligible for reimbursement.

"We have already begun reviewing our annual process to apply greater safeguards ensuring that every taxpayer dollar is spent appropriately," the statement said. "Unfortunately, current law does not grant PDE the authority to seek repayment from the charter schools for inappropriate payments."

In his announcement and at a news conference, DePasquale did not name the landlords or offer details on the alleged connections.

But he singled out the Propel system, which operates in at least seven Allegheny County locations, saying a new audit that examined the years December 2010 through April 2016 questioned $376,921 in lease reimbursements.

The audit alleges that a landlord entity was created for the purpose of buying buildings and leasing them to the charter school, that the school's founder and executive director is actively involved in both the school and the landlord organization, and that the landlord and charter school administration share an address.

"Therefore, we conclude that these landlord/tenant arrangements between these related parties creates circular lease agreements whereby it could be argued that the charter schools have ownership interests in the applicable buildings, which would make them ineligible to receive state lease reimbursements," the audit said.

Alan Shuckrow, legal counsel for the Propel schools, disputed the finding, saying the landlord organization is a charitable organization with a separate board from that of the charter school.

"Propel has properly applied for and received these lease reimbursements under the law," Shuckrow said.

Ira Weiss, solicitor for the Pittsburgh School District, said the district agreed with the auditor general's concerns about lease reimbursements.

"These schools are paid millions in tax dollars with little or no oversight" by the Department of Education, Weiss said. "It is more evidence that the charter school law, one of the most permissive in the nation, needs a complete overhaul."

DePasquale also labeled as "questionable" payments to Chester Community Charter School, the largest charter school in Southeastern Pennsylvania and the biggest recipient of lease reimbursements.

According to DePasquale, the Delaware County school received $1.28 million between 2008-09 and 2010-11.

Chester Community Charter School CEO David Clark and chief financial officer Robert Olivo did not respond to requests for comment Wednesday.

In Bucks County, School Lane Charter School received $60,248 between 2006-07 and 2008-09, the auditor said. Calls and messages to its CEO, Karen Schade, and business manager, Mirosya Bauer, were also unanswered.

Others cited by DePasquale included:

Perseus House Charter School of Excellence, in Erie County, which received $56,368 between 2010-11 and 2013-14.

Fell Charter School in Lackawanna County, which received $94,266 between 2006-07 and 2008-09.

Roberto Clemente Charter School in Lehigh County, which received $99,123 in 2010-11 and 2011-12, and $191,267 between 2006-07 and 2009-10.

Bear Creek Community Charter School in Luzerne County, which received $106,332 in 2008-09 and 2009-10.

Keystone Charter School in Mercer County, which received $155,411 between 2010-11 and 2014-15 and $85,375 in 2008-09 and 2009-10.

Evergreen Community Charter School in Monroe County, which received $20,360 in 2006-07 and 2008-09.

klangley@post-gazette.com 717-787-2141 @karen_langley

Contributing to this article were staff writers Daniel Block and Grace Toohey, as well as Molly Born of the Pittsburgh Post-Gazette.