NBC News - February 25, 2015, by Berkeley Brean - You know that hard earned money you pay the state and your local school district in taxes? Every year more of it goes to charter schools. $1.5 billion this year alone.

So who's keeping an eye on that money to make sure it's not getting wasted?

That's what we're digging into in our exclusive New York State Exposed Education report.

The report outlining fraud and mismanagement by charter schools in New York is titled "Risking Public Money: New York Charter School Fraud."

Click here to read the report
 

What would the reaction be if the superintendent or principal in your school district signed deals with their friends and contacts? We're going to lay out the facts and circumstances and you decide whether the charter school did something wrong or was being efficient.

Eugenio Maria de Hostos parent Jeremaine Curry says, "We want to give our kids the best foundation."

Jeremaine Curry made a choice. He wanted his son Jayden to be in a school he trusted, so he chose Eugenio Maria de Hostos -- the oldest charter school in the city. He says, "It gives our kids the best competitive advantage."

Eugenio is listed in the report that analyzed audits by the state comptroller's office. At Eugenio, the audit showed the school gave contracts to organizations either run by board members or friends of board members. For example, their first building? Owned by the Ibero Action League, the sponsor of the school and the rent was "set a bit higher."

The school pays $200,000 for Phys Ed at the downtown YMCA run by board member George Romell, $57,000 for music instruction from the Hochstein School of Music where board member Margaret Quackenbush teaches and $100,000 contract for cleaning services where the company's manager is a board member's brother.

Berkeley Brean: "Everybody who got hired or got that job either had a connection to the board or was a friend of yours."

Julio Vasquez, Chair of Eugenio Maria de Hostos Charter School: "Ah, not really. Here's what happened."

Vasquez says the non-profits they contract with were partners of the charter from day one.

Brean: "So you don't think you could have saved public money at all by putting out bids?"

Vasquez: "Not at all. Who in the community would...?”

Brean: "How would you know unless you did it?"

Vasquez: "I would not know."

The report says because of a general lack of oversight of charter schools, the state could lose $54 million in possible charter school fraud and mismanagement in one year. Regular district schools get audited at least once every five years. Charter schools can be audited, but only at the state comptroller's discretion. We tracked down Kyle Serrette -- the author of the report and we pressed him on the criticism of Eugenio.

Brean: "Is what they did all that bad?"

Kyle Serrette: "When they rented a facility without figuring out the fair market value was then that potentially wasted money."

Brean: "I mean, to me, it sounds like they were using the efficiencies that were at their fingertips."

Serrette: "They may have been doing the best they know how to do."

Serrette continues, "If you're going to enter into an agreement, you should see if there's a better deal elsewhere."

"Absolutely, I mean, that we didn't follow the procurement process in certain instances? I admit that and going forward, we will," says Vasquez. "But I have to also say that there are times when you have an emergency that you have to act and get it done. That's what we're all about."

Now, Eugenio Maria de Hostos has the second highest test scores of the 11 charters in Monroe County. Its charter just got re-approved by the state, so the state thinks it's doing a good job for children.

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