Auditor general: City charter schools need more oversight

Philadelphia schools Superintendent William R. Hite Jr. (center) is flanked by Marjorie Neff (left), chairman of the School Reform Commission, Auditor General Eugene DePasquale (second from right) and state Sen. Vincent Hughes to announce the findings of the report.

The Philadelphia School District's charter school office is too small to oversee the 83 charter schools in the city, state Auditor General Eugene A. DePasquale said in a report released Tuesday morning.

"By failing to have sufficient staffing and resources to adequately perform and document routine oversight measures, the district is unable to verify the validity of hundreds of millions of dollars it is paying to charter schools in tuition payments," DePasquale wrote in the performance audit.

During a briefing at the district's headquarters Tuesday, DePasquale said most of the problems the district faces in managing charter schools stem from weaknesses in the state's 1997 charter law, which he said provides insufficient oversight requirements and allows poorly performing schools to operate for years.

"If there's one thing that needs to come out of this audit report," he said, "it is that Pennsylvania must reform its charter school law." He called it "simply the worst charter school law in the United States."

State Sen. Vincent Hughes (D., Phila.), who joined DePasquale and district officials at the briefing, went further. "This law must be fixed before there is any further expansion of charter schools in Philadelphia and in Pennsylvania," he said.

Several charter bills have been introduced over the years, but none has passed.

Hughes said legislative proposals were being developed during the budget process to tighten the charter law.

DePasquale also said the workload of the district's six-member charter office increased considerably after 2014, when the legislature approved a cigarette tax to support city schools. The law requires the School Reform Commission to consider new charter applications every year.

Before the law took effect, the SRC had not been required to accept charter applications annually and had not entertained any since 2008.

The charter office handled 39 applications for 2015, and the SRC approved six.

The cigarette tax brought $50 million to the district in 2014-15 and is expected to produce $60 million this fiscal year. But the auditor general said it was possible that the cost of new charters approved under the cigarette law would outstrip the revenue produced by it.

The 83 charter schools in the city enroll nearly 70,000 students, and the district's $2.8 billion proposed budget for the fiscal year that begins July 1 includes nearly $875 million for charter schools, including transportation.

The performance audit, which reviewed the operations of the charter office from July 1, 2011, through June 30, 2015, found that while the district was complying with state charter law, there was room for improvement.

The report said that while the district spends about 30 percent of its budget on charter schools, it spends less than 1 percent for the charter office and its auditing office to keep tabs on charter schools.

The auditor general lauded the district's decision last August to hire an executive director for the charter office. The post had been vacant for two years.

Superintendent William R. Hite Jr. thanked DePasquale for the review and said the recommendations would be helpful to the district.

He said that in addition to hiring an executive director, the district had added two positions to bring the charter office staff to nine.

The report also said court challenges by charter schools, including fights over the SRC's efforts to manage enrollment, had caused the district's legal bills to rise. The district spent $1.4 million over three years on outside lawyers to handle legal cases involving charter schools.

The auditor general said that work on his report had concluded before the state Supreme Court ruled in February that the SRC could not suspend portions of the state school code to cap charter enrollment. Last week, the court denied the district's request to reconsider that ruling.

DePasquale recommended that the district conduct annual financial and enrollment audits of charter schools. He said the district's policy of scrutinizing charters only every five years, when they are up for renewal, hampered oversight.

The report said: "The district is also missing an opportunity to identify potential fiscal mismanagement or fraud and abuse at charter schools that could be detected during a financial review."

DePasquale said his office was reviewing the practices of the state Department of Education, which withheld $15 million from the district over disputed charter school bills from 2012-13 through 2014-15 without giving the district a chance to be heard. Sixty-five disputes are unresolved.

An audit of district operations is expected to be released in about a month.

martha.woodall@phillynews.com 215-854-2789 @marwooda