Charter-school report puts blame on School District

City Controller Alan Butkovitz said Thursday that the Philadelphia School District had failed to monitor 67 charter schools, leaving both it and the taxpayers "extremely vulnerable to fraud, waste, and abuse."

Releasing a long-awaited report that looks in depth at 13 charter schools and at the district's charter oversight office, Butkovitz also proposed amending state law to reduce opportunities for fraud.

"In spite of the numerous problems uncovered at individual charter schools, the biggest problem lay clearly with the school district's Charter Office," he said at a news conference. "There was a complete and total failure on the part of the Charter Office to monitor charter schools and hold them accountable for how they spend taxpayers' dollars. . . ."

Butkovitz said the report, based on a 14-month fraud investigation, disclosed "questionable practices, suspect relationships, and potential vulnerabilities." He called on the district to exercise the oversight called for by the 1997 state law that created charter schools.

As The Inquirer reported this week, investigators in Butkovitz's office found financial and ethical problems at all 13 schools they examined, including excessive salaries for chief executives, compliant boards whose members were handpicked by school chiefs, inflated rents, and rampant conflicts of interest.

Butkovitz said that except for when schools' operating charters were up for renewal every five years, the district provided only "minimal oversight" of ongoing school operations, which cost city taxpayers $300 million a year.

Benjamin W. Rayer, chief of the district's Charter Office, responded that Butkovitz's review began prior to his arrival in early 2009 and did not reflect current practices in his office, where staff has been increased from three to seven over the last year.

"What we have been doing since I've been here and Dr. Ackerman has been here is trying to improve our oversight function," Rayer said, adding that he believed the district was fulfilling its monitoring responsibilities.

"We certainly think that where we can improve, we want to improve," he said. "We are committed to doing that. . . . That doesn't mean we don't welcome what the city controller has provided us here and look forward to working with him, his office, and anyone else who has ideas for how we can improve."

Rayer said he could not comment on the specific problems Butkovitz's office found at the 13 charters it reviewed, because he had just received a copy of the report Thursday afternoon.

"When we find allegations of fraud and mismanagement, if they are criminal, they are immediately referred to our inspector general, who investigates these matters," Rayer said.

When controller investigators began reviewing district oversight, Butkovitz said, they found incomplete files for 51 of the 63 charter schools then operating. The district's office, he said, had no records of communication with the trustees of charter schools' boards, though those boards were legally responsible for the schools and taxpayer funds.

Butkovitz also said the district was not evaluating annual reports submitted by charter schools, even though the office was supposed to provide a summary of those reports for the School Reform Commission.

Rayer's predecessor has said publicly that it was difficult to maintain files and monitor so many charters with only a three-member staff.

Butkovitz began his investigation of charters several months after The Inquirer reported allegations in April 2008 of financial mismanagement and conflicts of interest at Philadelphia Academy Charter School in the Northeast.

Tim Reddick, a controller's office investigator, said the 13 schools were selected because a preliminary review of public documents suggested they shared issues of possible financial mismanagement and conflicts of interest that Ballard Spahr lawyers found in an internal probe of Philadelphia Academy.

Reddick said the office used the Ballard Spahr report "as a road map."

Butkovitz's office has been sharing information it uncovered with the U.S. Attorney's Office, which is conducting a criminal investigation of at least nine area charter schools, according to sources with knowledge of the probe.

The controller said three of the charters were removed from his report at the request of federal authorities.