Fraud and Mismanagement in PA Charters

In September, a report entitled "Fraud and Financial Mismanagement in Pennsylvania's Charter Schools" was released by The Center for Popular Democracy, Integrity in Education, and Action United. The full report runs twenty pages, but the short conclusion about fraud and financial mismanagement in PA charters is this:

There's a lot of it, and nobody is in any real position to catch it.

The charter bill in PA is expensive enough anyway-- over a billion dollars of taxpayer money is directed away from public schools and into charter treasuries, where they will never see the light of day again. (Remember, one of the rules of operating a modern charter is that you are a public school when it comes to grabbing public tax dollars, but not when it comes to accounting for those dollars.)

The report finds two major flaws with the current oversight system. First, general auditing techniques do not uncover fraud (but they are all we're using). Second, the offices responsible for ferreting out fraud have barely enough staff to ferret out a ferret. The Philadelphia School District, which has run out the red carpet for 86 charters, employed a whopping two auditors to keep an eye on them.

They suggest some repairs for these issues, including audits by people who know fraud stuff, more staff, more transparency and accountability for charters, and better safeguards moving forward. The report would like to see better whistleblower protection and a moratorium on new charters until a decent oversight system is in place. They also include a handy fraud chart, a kind of family tree of the different ways in which charter operators can bilk the taxpayer.

In the meantime, the report figures that the Keystone State has been bilked of at least $30 million by charter operators, including some of these outstanding examples;

* The founder of the Pocono Mountain Charter School used $2.5 million in school money to fix up a church property he ran

* The CEO and founder of New Media Technology Charter School in Philly stole over half a million to help out some other side businesses.

* The founder of Pennsylvania Cyber Charter School has been indicted for stealing a whopping $8 million to provide a lavish lifestyle for himself.

It's worth noting that virtually none of the frauds were discovered by the kinds of auditing checks that the report calls for. Instead, it has been whistleblower tips and journalism that has alerted authorities to move-- and several times, those authorities were federal and not state.

I'm also struck by how amateur hour these shenanigans are. I mean-- why steal the money? Eva Moskowitz just pays herself a huge salary; since there's no penalty for a criminal lack of shame, she can openly and easily enjoy the kind of lifestyle that these guys tried to steal.

At any rate, the report recommends that the state beef up the auditors' force and require charters to institute some real internal checks and balances. Since the state legislature could not be counted on to spend the money on water if the capital building were on fire, I'm not going to hold my breath. On the other hand, if Tom Wolf wanted to add a little juice to his claims that Governor Tom Corbett has cut a billion dollars from state education money, Wolf might also like to observe that another billion is shifted from public to charter schools (oh, don't give me that tired line about charter schools being public-- they aren't) and that some unknown portion of that billion is buying charter operators swimming pools and high end party supplies.

The appendix of the report includes some more fun fraud stories and an explanation (with charts) of how fraud auditing is supposed to work. And footnotes. Grab a cup of hot chocolate and curl up on a cool autumn day.