Audit alleges lease-reimbursement problems at Chester charter

Pennsylvania Auditor General Eugene DePasquale said Wednesday that an audit of the Chester Community Charter School found that it had received more than $1.2 million in improper lease-reimbursement payments.

Noting that his office had found similar problems at six other charter schools in March, DePasquale called on the state Department of Education to enforce its own policies regarding lease payments to charter schools.

"We're going to continue to bang away at this," he said in a telephone news conference about the Chester Community audit.

"In addition to improperly collecting a huge chunk of taxpayer funding for lease reimbursements, this well-funded charter school seems to disregard even basic school operational requirements," DePasquale said.

The 76-page report on the operations of Chester Community listed 11 areas in which the auditor general said the state's largest charter school was not complying with state laws and regulations. Among other things, the report said that the charter had failed to provide retirement benefits to all staffers, and had employed some special-education teachers who did not meet the criteria for "highly qualified" teachers required under the federal No Child Left Behind act.

DePasquale said that although the Department of Education obtained waivers to provisions of the federal law this week, the requirements were in effect during the period covered by the audit.

Chester Community, which opened in 1998, enrolled 3,033 students in kindergarten through eighth grade in the last academic year, according to state education records. It received $47.7 million in taxpayer funds in the 2011-12 academic year.

The school disputed the auditor general's findings and blasted the report.

In a statement posted on the school's website and e-mailed to reporters, David Clark, the charter's chief executive, said: "The audit report concerning Chester Community Charter School (CCCS) released today . . . demonstrates a clear agenda to attack successful charters through patently false statements. This is another attempt to discredit the largest K-8 charter school in Pennsylvania, the one that is doing exactly what the state could not do: turn kids' lives around and lead them onto a path to success."

Francis J. Catania, an attorney who represents the school, followed up with a letter to DePasquale expressing "profound disappointment at the partisan shot taken by your office against CCCS under the guise of an 'official' audit."

The attorney said DePasquale's report "is so grossly wrong, misleading, or worse - both factually and legally - that CCS can only conclude that the report is intended as a political cudgel to debilitate Pennsylvania's most successful brick-and-mortar charter school in service to an anti-charter agenda."

DePasquale denied that he is anti-charter.

"As auditor general, my job is to call balls and strikes," he told reporters. "We're calling them like we see them."

He said his office concluded that Chester Community was not entitled to receive the more than $1.2 million it had obtained through the state's charter lease-reimbursement program between June 30, 2008, and June 30, 2011, because it had participated in a "circular lease arrangement among related parties."

The audit said the buildings were previously owned by one of the charter school's founders, who sold them for $50.7 million financed through municipal bonds to a related nonprofit organization "established for the sole purpose of supporting" the charter school.

The audit report also noted that the same individual who was once the charter's landlord created a for-profit management company, Charter School Management Inc., that runs the school. Although not named in the report, that individual is Vahan H. Gureghian, a lawyer and a Republican fund-raiser who served on Gov. Corbett's transition team.

In its response to the audit, Chester Community said the rent reimbursements it received from the state were proper and noted that the charter school and the management company that runs it are "separate legal entities" under state law.

DePasquale stood by the audit's findings and called on the Education Department to seek repayment of the more than $1.2 million from Chester Community or withhold that amount from future payments to the school.

Education Department spokesman Tim Eller said: "The department will thoroughly review the auditor general's report, and should it be determined that corrective actions are necessary, they will be taken."

DePasquale has previously said that the Auditor General's Office added lease reimbursements to the auditing protocols for charter schools after Philadelphia City Controller Alan Butkovitz found many questionable lease reimbursements during a review of Philadelphia charter schools in 2010.

The sharp language in Chester Community's response to the auditor general's report is in keeping with the school's history. In 2011, the charter, which draws the majority of its students from the Chester Upland School District, sued that district and the state Department of Education over money owed to the school.

The school wrangled with state officials during the Rendell administration over special-education funding and sued previous owners of The Inquirer.