Report cites questionable charter-school practices
One Philadelphia charter-school operator runs a private parking lot on the side. Another rents out apartments and collects the rent at his school. Yet another rents property to herself, signing her lease as both tenant and landlord.
These are some of the findings in a draft of a city controller's report on 13 Philadelphia charter schools obtained by The Inquirer that cites excessive salaries, compliant boards whose members are handpicked by school chiefs, inflated rents, and rampant conflicts of interest.
It "is abundantly clear that taxpayer money is at risk," according to the draft report, which is expected to be released within two weeks.
City Controller Alan Butkovitz declined on Friday to comment on specifics because the completed report has not been made public, but he confirmed that the document The Inquirer obtained was his final draft.
"Charter schools are an experiment in using private business models in the educational field, but this is not private money," Butkovitz said. "Charter schools are spending tax dollars as if it's nobody's business - as if they were private fiefdoms."
The Controller's Office opened its special fraud investigation of city charter schools several months after The Inquirer reported allegations of financial mismanagement and conflicts of interest at Philadelphia Academy Charter School in April 2008. Butkovitz's office has since been sharing information with the U.S. Attorney's Office, which is conducting its own criminal investigation of at least nine area charter schools, according to sources with knowledge of the investigation.
Although charter-school operators and others have claimed previous allegations of financial abuse disclosed by The Inquirer were not the norm, the Butkovitz report says "ethical concerns may, in fact, be more widespread than many acknowledge."
Barbara Farley, a school district spokeswoman, said she could not comment on Butkovitz's report because the district had not received a copy.
Lawrence F. Jones Jr., president of the Pennsylvania Coalition of Charter Schools, stressed that his organization favors charter-school accountability.
"If there are allegations someone has done something wrong, it needs to be investigated in a fair and transparent manner," said Jones, chief executive of the Richard Allen Preparatory School in Southwest Philadelphia. "And if they are found to have done something wrong, it needs to be vigorously punished."
In Philadelphia, there are 67 charter schools with 34,000 students. The school district is spending $356.7 million of its $2.3 billion budget this year on charter schools.
Among the findings in Butkovitz's draft report:
Questionable financial management, incomplete or missing records, and ethical lapses were seen at all 13 charter schools examined.
Average salaries for chief executives of charter schools were higher than those of public high school principals, and average salaries among the 10 highest-paid charter-school chief executives easily topped salaries paid to public school assistant superintendents.
Ten of the charter schools examined lease space from related nonprofit groups, and several are involved in complicated arrangements in which taxpayer funds are used to buy buildings that are controlled by nonprofits that have no accountability to the school district or to taxpayers.
Butkovitz said he remained a supporter of the charter concept and the notion that the schools encourage educational creativity.
"I think the idea of charter schools is fine," he said last week. "They give parents more options, and they're often educationally superior to the public school system."
The problem, he said, is their lack of accountability. "There is tremendous opportunity for abuse."
Charter schools are independent, taxpayer-funded schools that are free from many of the requirements facing traditional public schools. New Jersey's law authorizing charter schools was approved in 1996; Pennsylvania's was adopted a year later.
Butkovitz released a portion of his final report last week after 6ABC reported that the Harambee Institute of Science and Technology Charter School in West Philadelphia was doubling as a nightclub on weekends.
In the part of the report he released, Butkovitz disclosed that Rhonda Sharif, the school's chief financial officer, also served as business manager for two other charter schools and was paid $700,561 over four years by those three schools. She claimed to have worked more than 365 days in each year and collected $101,587 in reimbursement for "unspecified" credit-card expenses in 2008.
Charles J. Grant, Sharif's attorney, said Wednesday that he was confident she would be exonerated once authorities had reviewed the charter-school records being turned over in response to a federal subpoena.
In addition to the Harambee Institute, Butkovitz's report examined operations at Khepera in West Mount Airy; Math, Civics, and Sciences in Spring Garden; Franklin Towne Charter High School in Bridesburg; and the Imani Education Circle in Germantown.
Also, the Multi-Cultural Academy in North Philadelphia; New Foundations in the Northeast; People for People in North Philadelphia; Preparatory in South Philadelphia; and Community Academy of Philadelphia in Kensington. Three schools were removed from the report at the request of federal authorities.
The Butkovitz draft found that during 2007-08, the average salary for charter-school chief executives in the city was $115,171 - about $10,000 more than district high school principals earned that year.
Among the 10 highest-paid chief executives, the average was $175,246, considerably more than the $133,889 earned by the district's nine assistant superintendents, who are responsible for overseeing dozens of schools within a region.
And the Controller's Office could find no correlation between a chief executive's salary and the charter school's size or the median salary paid to its teachers.
The draft also detailed the real estate practices of the 13 charter schools, including the 10 that leased space from related nonprofits.
In the past, charter-school operators have explained that using nonprofit groups is common due to schools' trouble obtaining mortgages because their operating charters are only for five years.
The state's 1997 charter law provides no capital funds for charters schools, but the legislature gave charter schools another reason to use nonprofits when it created a program in 2001 that reimburses charter schools for part of their rental costs.
Math, Civics, and Sciences rents its facilities at 447 N. Broad St. and 1326 Buttonwood St. from Parents United for Better Schools, a nonprofit, according to the draft.
Veronica Joyner, the school's founder and chief executive, is also the founder and president of PUBS. Joyner signed the documents for the lease in 2003 as both the landlord and the tenant, the report says.
The school is paying $636,000 a year in rent under the terms of a 20-year lease. The Controller's Office notes that over the life of the lease, the school is scheduled to pay about $12 million to the nonprofit by 2023, though the 10-year mortgage is scheduled to be paid off in 2014. Lisa Mathewson, a lawyer for Joyner and the nonprofit, said she could not comment on reports she had not seen. She did say Joyner's role with the school and the nonprofit "was fully disclosed." A source with knowledge of the nonprofit Joyner founded in 1984 said Joyner had received no compensation from it for the last 12 years.
The Multi-Cultural Academy was founded by Vuong Thuy, who remains its chief executive, the draft states. The school rents its property at 3821 N. Broad from the Indochinese-American Council. Thuy founded that group and serves as its executive director, and his wife is employed as its program director.
Three of the nonprofit's board members are also on the charter school's board. Since 1996, the nonprofit has received $2.8 million from the city for literacy and programs for immigrants.
Thuy said he believed the lease was appropriate because it was approved by the charter school board and neither he nor his wife had voting rights.
"The charter board decided to sublet," he said. "We had nothing to do with it."
The building housing Multi-Cultural is one of four that Thuy and his wife own, including one at 4929 N. Broad that is leased to the Indochinese-American Council. Thuy rents out the two apartments on the top floors, and tenants in at least one of the apartments were directed to send rent payments to him at Multi-Cultural Academy.
"It appears that Dr. Thuy was using the school facilities to receive and collect rent on his personally owned properties," according to the draft.
Thuy disputed that, saying he personally collected the rent from the apartments' tenants.
The City Controller's Office also found several questionable practices when it reviewed the operations of Imani Circle Charter School.
Among other things, Imani bought its site at 100-126 W. Chelten Ave. in August 2007 for $8 million, the draft states. The sale included adjacent buildings with for-profit business tenants and a parking lot.
Investigators in Butkovitz's office found that after the school purchased the property, it leased it to the related Imani Foundation Inc. for $595,000 annual rent. Charter-school founder Francine Fulton signed the rental agreement as landlord; her husband, Howard J. Fulton, signed as foundation president and tenant.
On the same day, the foundation leased 39,247 square feet of the building back to the charter school for $470,000.
Mary Moragne Shule L.L.C., which operates a preschool, was one of six businesses in the adjacent building that was part of the land deal. The company had been paying about $1.37 per square foot each month in rent before Imani purchased the building. After it changed hands, the preschool rented more space, but its monthly rate dropped to 56 cents per square foot, the controller said.
State records show Fulton, the school's chief executive, is the president of the business that runs the preschool.
During a visit to Imani, the Controller's Office also discovered that the school was running a private, unlicensed parking lot that charges $5 per day. No income was reported on the tax forms by either the school or the nonprofit. Jack L. Gruenstein, Imani's lawyer, would not comment.
Butkovitz's final report is expected to include recommendations for closing loopholes in state law that have enabled what some lawmakers consider questionable financial practices by charter schools. It will also review the Philadelphia School District's oversight of city charter schools.
Allegations of financial mismanagement and conflicts of interest at Philadelphia Academy Charter School in Northeast Philadelphia, disclosed by The Inquirer in April 2008, prompted both Butkovitz's charter-school review and the federal criminal probe.
A subsequent internal review by the Ballard Spahr law firm found "substantial evidence of wrongdoing" at the Northeast school.
Philadelphia Academy's founder committed suicide last May. The former chief executive and board president pleaded guilty to fraud charges and are in federal prison.
Three city charter schools founded by Dorothy June Brown were removed from the Butkovitz report at federal authorities' request.
Brown, who also founded the Agora Cyber Charter School, now based in Wayne, was forced to sever all ties with that online school to settle several civil suits. As The Inquirer has reported, federal investigators subpoenaed Agora's financial records in May 2008.
The Controller's Office also sidestepped several other charter schools known to be involved in federal investigations, according to the draft. The office's review of Community Academy was cut short when teams of federal agents raided that school in August.
Contact staff writer Martha Woodall at 215-854-2789 or firstname.lastname@example.org.