Butkovitz’ Charter School Investigation Faults School District for Lack of Oversight

Audit Date: April 8, 2010
Audit Categories
  • Investigation
Controller: Alan Butkovitz

Executive Summary

For Immediate Release:
April 8, 2010

Contact: Harvey Rice

Butkovitz’ Charter School Investigation
Faults School District for Lack of Oversight

Controller’s findings include mismanagement, questionable leasing
agreements, undocumented expenses and nepotism

Click here to view investigative report

View the Controller’s Charter School Investigation Page

PHILADELPHIA – City Controller Alan Butkovitz today released the findings of his in-depth investigation into 13 Philadelphia charter schools that found a lack of oversight by the School District, resulting in numerous cases of financial mismanagement, questionable spending practices and fraud and abuse, all at the expense of taxpayers.

The Controller’s investigation concentrated on the School District’s Charter School Office to determine if it was adequately monitoring all 63 charter schools and to ensure that millions of tax dollars were being spent appropriately and were not susceptible to fraud, waste or abuse.

“Each year, taxpayers provide an estimated $300 million to fund charter schools in Philadelphia,” said Butkovitz, today at a press conference. “It is our responsibility, and the responsibility of the School District of Philadelphia to ensure that this taxpayer money is being spent appropriately.”

While reviewing the Charter School Office, the Controller’s investigators uncovered numerous missing documents for the 13 schools that were investigated, including missing charter agreements, articles of incorporation and proof of insurance, — all of which is a violation of School Reform Commission (SRC) requirements. The Charter School Office also failed to compile and submit annual reports and compliance summaries to the SRC, as mandated.

“In spite of the numerous problems uncovered at individual schools, the biggest problem lay clearly with the School District’s Charter School Office,” said Butkovitz. “The Office demanded little in the way of accountability from any charter school we investigated.

“There was a complete and total failure on the part of the Charter School Office to monitor charter schools and hold these schools accountable for how they spend taxpayers’ dollars.”

By reviewing the Charter School Office, the Controller’s investigation looked at 13 charter schools and found financial mismanagement and questionable practices at all 13 schools. Some of these findings include:
-nine schools had leasing agreements with related organizations, six of which listed their only source of income as rental revenue from the charter school.
-eight schools had related party transactions involving construction, maintenance and/or management contracts: one school’s management company’s owner also owned the construction company that did work on some of the schools under its management purview.
-Joseph Caruso, who was paid $80,000 as legal counsel to the Preparatory Charter School, was listed as a full-time teacher at the charter school and received retirement benefits under the Public School Employees Retirement System (PSERS).
-Imani Education Circle Charter School was located on a property owned by the school and leased to the Imani Foundation, which housed six for-profit entities but was receiving a 100 percent property tax exemption by the Board of Revision of Taxes.

“To fix many of these abusive practices, legislation needs to be enacted to allow for a complete audit of all fund transfers or other dealings by charter schools with associated entities or non-profits,” said Butkovitz.

“There must be total transparency, mandating that all charter schools and their related non-profits provide all non-educational records and documents for review upon request.”

Controller Butkovitz also recommended that, “all charter schools be required to submit their annual operating budget as well as year-end financial disclosure reports to the School District. Most importantly, the School District needs to improve its oversight, accountability and management of the charter schools.”

“The charter school experiment is providing parents with educational choice and opportunities for their children outside of the normal public school route,” said Butkovitz. “We must ensure that $300 million a year in taxpayers’ money that goes to charter school education is being spent effectively and efficiently with appropriate controls and oversight to prevent and detect fraud, waste and abuse.”

The charter schools included in the Controller’s investigation were: Community Academy of Philadelphia, Franklin Towne Charter High School, Harambee Institute of Science and Technology, Imani Education Circle, Khepera, Mathematics, Civics, & Sciences, Multi-Cultural Academy, New Foundations, People for People, and Preparatory Charter School of Math, Science, Technology & Careers. At the request of the U.S. Attorney, three schools that were part of the Controller’s investigation have been redacted from the report.