Capitolwire - October 1, by Christen Smith - A report released Wednesday insists meager state oversight has allowed charter school officials to defraud taxpayers out of $30 million over the last 17 years.

And “that's just scratching the surface of the problem,” says Ted Kirsch, president of the American Federation of Teachers' Pennsylvania chapter.

“It's only talking about what's being reported and there are other things that haven't gotten to the surface yet and they are still being investigated,” he said during an interview Wednesday. “The (fraud) problem is a lot more widespread.”

The Center for Popular Democracy, Integrity in Education and Action United authored the 15-page report last month in which it calls for a moratorium on new charters while the state Attorney General's office investigates all 174 charter schools for potential fraud. The report also pushes the General Assembly to mandate annual fraud risk assessments capable of detecting and preventing waste and abuse.

“While the state has complex, multi-layered systems of oversight in the charter system, this history of financial fraud makes it clear that these systems are not effectively detecting or preventing fraud,” the report reads. “Indeed, the vast majority of fraud was uncovered by whistle-blowers and media exposes, not by the state's oversight agencies.”

The report's index details allegations of fraud against 11 separate charter schools across the state. At least nine of the charter school officials mentioned in the report have pleaded guilty and received prison sentences.

“It’s time for lawmakers to stop providing charter industry players a blank check with little oversight and no accountability,” said Lily Eskelsen García, president of the National Education Association, the parent organization of the Pennsylvania State Education Association. “...For students in all types of schools—traditional, charter or magnet—the key is having a sound structure for oversight and accountability, while providing educators with autonomy to create great learning environments for their students. Let’s work with families, educators and community members to make sure all students can attend great schools that meet their needs.”

“What's lacking here is a process to hold the charter operators accountable,” Kirsch said. “We need some laws that govern the accounting procedures and how money is handled by charter operators. These people are making a lot of money. It's a cash cow.”

Tim Eller, spokesman for the Department of Education, criticized the report Wednesday for “failing to mention” the state uses the same accounting practices for both public schools and charter schools.

“All public schools, including charter schools, are subject to audits by the state Auditor General,” he said. “The Auditor General is charged with ensuring that public entities are using taxpayer dollars for their intended purpose.”

Auditor General Eugene DePasquale said he couldn't confirm the report's $30 million figure, but said “we have found waste in the system,” particularly related to the issues of lease reimbursement and special education funding.

The auditor general uncovered “$1.2 million in improper lease reimbursements” in an August 2013 audit of Chester Community Charter School — Pennsylvania's largest. He said Wednesday lease reimbursement fraud represents about half of the charter cases his office has uncovered.

The audit found that Chester Community Charter School's founders sold the original building to a non-profit organization for $50.7 million, then created a for-profit management company to run the charter school, all the while collecting illegal reimbursement payments from the state for the buildings.

When asked about the report’s proposals regarding more oversight, DePasquale said: “If we had more resources, certainly we could audit more schools. That's absolutely true. But we need partners at the Department of Education to respond when we do find issues.”

DePasquale also suggested the General Assembly pass charter school reform that would address fraud involving lease reimbursements.

Two separate pieces of legislation — House Bill 6188 and Senate Bill 1085 — included measures to improve transparency and accountability in charter schools, but both bills have been stalled in the opposing chambers since budget negotiations wrapped up in July.

“House Bill 618 which passed the House in September of 2013 was basically loaded with accountability measures related to governing audits and academic performance,” said Steve Miskin, spokesperson for House Majority Leader Mike Turzai, R-Allegheny. “We are hoping the Senate passes it.”

Senate leadership did not respond to requests for comment Wednesday.

“If the widespread allegations mentioned in the report prove to be true, then those guilty should be prosecuted to the full extent of the law,” said Bob Fayfich, executive director of the Pennsylvania Coalition of Public Charter Schools, in a statement released Wednesday. “However, the report draws sweeping conclusions about the entire charter sector based on only 11 cited incidents in the course of almost 20 years, while ignoring numerous alleged and actual fraud and fiscal mismanagement in the districts over that same time period, which dwarf the charter school allegations in terms of alleged misuse of taxpayer dollars.”

Fayfich says the coalition supports mandating more stringent audits in the name of accountability, but doesn't think the public sector should be exempt.

“If the authors’ recommendations are to conduct a fraud audit of every charter school based on the actual and alleged misdeeds of a few, and initiate a moratorium on all charter schools until those audits are complete, then, in the name of intellectual integrity, the same recommendations should apply to traditional public school districts,” he said. “Fraud and fiscal mismanagement are wrong and cannot be tolerated, but to highlight them in one sector and ignore them in another indicates a motivation to target one type of public school for a political agenda.”

Renee Martin, acting communications director for the Attorney General Kathleen Kane, said Wednesday a copy of the report “has been shared with our attorneys.”