Olney Charter High and John B. Stetson Charter School are supposed to operate independently.
But the schools, both managed by Aspira Inc. of Pennsylvania, share board members with Aspira's three other charters, and a majority of them are appointed by Aspira.
In addition, the schools are entangled in a web of financial transactions, including payments and loans to Aspira, to each other, and to Aspira-related businesses, the Philadelphia School District's charter office says.
For example, Aspira owed Olney $2.52 million in the 2015 fiscal year, and the charter office said it could find no evidence that Olney's board approved the loans or any documents that showed how the money was used.
Concerns about such practices - and Aspira's requests for time to resolve them - prompted the School Reform Commission to repeatedly delay votes on new charters for Olney and Stetson, a middle school in Kensington.
But the SRC may vote Thursday on whether to end the operating agreements because of concerns about the academics and management practices of the schools.
A district spokesman said Tuesday that the charter office stands by its original recommendation that the SRC deny renewals for both schools.
Critics allege that the SRC bowed to pressure and allowed Aspira - a nonprofit that focuses on Latino youth and education - to negotiate in secret to try to hold onto the two schools.
"It appears that the SRC is conducting a private appeals process for the benefit of the management of Aspira Inc.," the advocacy group Alliance for Philadelphia Public Schools said in a letter to Mayor Kenney in July asking for an investigation.
Aspira said it sought time to resolve the issues the district raised.
Commissioner Bill Green, who pushed for the delays, said he remained in favor of allowing Aspira to work out its issues, because he said he believed the charters were essentially doing better than neighborhood schools.
"Frankly, I don't think that the district has a plan to run those schools," said Green. "I'm not convinced that we would do a better job for those kids and families in the short term."
Aspira referred all calls to lawyer Ken Trujillo, a former city solicitor, who has been acting as "oversight counsel" for Aspira. He said he had not been negotiating with the SRC.
Trujillo said Tuesday that he had been relaying information from Aspira to the SRC to respond to questions raised by the charter office. "That has been an ongoing process," he said.
Among other things, Trujillo said, Aspira has changed bylaws and adopted resolutions about board membership, and had begun recruiting people with expertise in finance, accounting, and education for the boards of the charter schools and Aspira itself.
He said the bylaws were changed in 2015 to remove Aspira's authority to appoint members to the schools' boards.
Both Olney and Stetson are once-troubled district schools that the SRC turned over to Aspira in 2010 and 2011 to convert to charters and overhaul them.
Stetson had 846 students in grades five through eight in the last school year; Olney had 1,752.
Under the agreements, Aspira was expected to achieve dramatic improvements in five years. The district charter office said that had not happened.
At Olney, math and language arts scores initially increased after Aspira took over in 2011, but dropped after the state's Keystone exams were introduced the next year.
In addition, high school graduation rates dropped at Olney from 78 percent in 2011-12 to 53 percent in 2013-14.
Stetson's academic performance improved for the first few years, but the charter office said the growth was not sustained. Scores on state tests fell in both language arts and math in 2013-14.
But the charter office said it was even more troubled when it reviewed the schools' operations and found questionable financial practices.
"There were countless transactions amongst the affiliated Aspira charter schools as well as Aspira as the charter [management] organization that were not documented," DawnLynne Kacer, executive director of the district's charter office said during a SRC meeting in May. Among the issues:
An audit for the 2014 fiscal year showed Aspira owed Olney $984,678 and the charter in turn owed $324,450 to related Aspira entities.
That same fiscal year, Olney paid Aspira a total of $2.9 million for maintenance, security, technology support and other administrative services.
At times, Olney had a signed lease agreement to rent space from ACE/Dougherty LLC, the Aspira company that owns the former Cardinal Dougherty building on North Second Street that houses another Aspira charter school.
The charter office made similar findings in its review of Stetson. It also discovered that Olney and Stetson had multiple security agreements in which they pledged portions of their assets to secure debt for other Aspira entities.
In one case, both Olney and Stetson were involved in pledging school assets to secure a $9.1 million debt for ACE/Dougherty.
As of June 30, 2014, Aspira had a $1.5 million deficit and owed related parties $3.5 million.
City Controller Alan Butkovitz also issued a report in May citing questionable financial practices at Aspira's charter schools.
On Tuesday, Trujillo said that Aspira had begun the process of unwinding the financial entanglements with the charter schools. He said the organization was considering a variety of refinancing options to provide the money Aspira needs to settle its debts and ensure that the charter schools are financially independent.
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