Auditor General: DOE Must Check Charter-School Rent Payments

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CartoonState Auditor General Eugene DePasquale said his latest audit of one charter-school system in Allegheny County shows the Pennsylvania Dept. of Education continues to divert millions of dollars from classrooms to the bank accounts of some charter-school operators, without proper checks.

The audit of the Propel Charter School System questioned lease reimbursement provided by PDE because of potential conflicts of interest and related-party transactions between the landlord and the charter school.

“PDE’s own guidelines for the lease reimbursement are clear: Buildings owned by the charter school are not eligible,” DePasquale said. “The problem is PDE makes no effort to verify ownership of the buildings or look for conflicts of interest between the school and related parties. They simply write a check for whatever amount the charter school submits. That is a disservice to Pennsylvania students and taxpayers.”

DePasquale pointed out nearly one-third of charter-school audits completed since 2013 included a finding about PDE providing questionable lease reimbursements.

“The $2.5 million we identified since 2013 may be just a fraction of the amount PDE has paid in lease reimbursements since the General Assembly permitted it in 2001,” he said. “The total amount PDE paid for questionable charter-school lease reimbursements could easily be $10 to $15 million if you go back to 2002 when the reimbursements were permitted and no one was checking lease documents.

“Given that PDE has the authority to approve the lease reimbursements, it also has the authority to claw back the funds if there is any indication the charter school actually owns the buildings through related parties,” he said.

“If PDE takes the time to review the audits we send them, they would realize my team has done the hard work for them,” he said, noting the US Dept. of Education, as recently as September 2015, advised states to carefully review “charter-school governing boards for conflicts of interest, related party transactions and appropriate segregation of duties. Since March 2013, I have questioned PDE’s payment of millions of dollars of education funding being diverted to reimburse some charter schools for lease payments.”

DePasqualeOfficialPhotoDePasquale estimates since 2013, his team’s audits have identified nine charter schools that received from PDE a total of $2,521,671 in questionable lease reimbursements.

 “The fact that we let even 1 cent of that money go to waste is a travesty – and it is indicative of a much larger problem. We have the worst charter-school law in the country, and we need to do a complete overhaul, not piecemeal adjustments.

 “Unlike PDE, my team refuses to blindly accept what the charter school tells them,” he said. “We research and comb through the legal documents related to a lease to identify conflicts of interest and related parties.

In most of the charter school audits with a questionable lease-reimbursement finding, said DePasquale, the schools defend the reimbursements by saying PDE approved the request.

However, said DePasquale, “Despite routinely making recommendations to PDE in our audit lease reimbursement findings, PDE has not taken any actions in response to our findings to claw back the funds.”

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