Pa. Auditor General Tim DeFoor (Commonwealth Media Services).
A three-year audit shows five of Pennsylvania’s cyber charter schools amassed excessive reserves following rapid enrollment growth during the COVID-19 pandemic, demonstrating the need to change the way tuition is paid for online students.
State Auditor General Timothy DeFoor’s office released the findings Thursday. Online charter schools receive taxpayer funding from the school districts where their students live. The audit makes recommendations to the governor’s office, General Assembly and the Department of Education to review and reform the cyber charter school tuition formula.
While it found the cyber charter schools acted within the law, it highlighted “uncommon” spending practices such as purchasing gift cards, paying bonuses to teachers and the acquisition of 21 physical properties by the state’s largest cyber school.
The audit calls for scrutiny of Commonwealth Charter Academy’s acquisition and renovation of buildings throughout the state to determine whether it followed the education department’s guidelines on building usage and the Charter School Law.
“We get concerned whenever revenues and fund balances significantly increase, because it opens the door for questionable and discretionary spending of our tax dollars,” DeFoor said Thursday. “In each case, cyber charter schools were legally accruing millions of dollars in reserve to excessive amounts.”
Charter schools and traditional public schools may accumulate reserves to cover unexpected expenses or interruptions in revenue. DeFoor said the five schools’ aggregate fund balances increased 144% between July 2020 and June 2023.
“Reserves are meant to cover unanticipated bills so there’s no interruption in a child’s education, DeFoor said. “It isn’t money meant to sit in the bank of a cyber charter school growing year after year. These are your tax dollars.”
The audit noted transactions by Commonwealth Charter Academy that, “while permissible and with CCA’s autonomy in financial management, may be considered uncommon or unique for a cyber charter school.” They included $22 million in employee bonuses, $2.4 million in fuel stipends, $1.3 million for a vehicle fleet and $70,280 for a “Family Funfest Event.”
It found other schools paid employee bonuses, but that expenditures in other categories such as outside contractors and field trips were generally reasonable.
Recommendations in the report include calling on Gov. Josh Shapiro’s office to establish a task force of representatives from the state Department of Education, cyber charter schools, school districts, parents, education-related associations and lawmakers within six months. Members should produce an evaluation of the existing funding formula and recommendations for a new approach that considers the actual costs of providing a quality education in a cyber environment.
The task force should have assistance from the education department to review approaches for establishing a tuition rate for regular education and special education cyber charter students.
The audit also found the department has not renewed some cyber schools’ charters and recommends the agency carry out the renewal process in a timely manner to coincide with the end of schools charter agreements.
GET THE MORNING HEADLINES.
The audit’s findings reflect concerns raised by those of public school advocacy groups about cyber charter tuition and spending in recent years. Gov. Josh Shapiro’s proposal for the next budget calls for a statewide base cyber charter annual tuition rate of $8,000 per student, which would save school districts an estimated $378 million a year.
“Gov. Shapiro shares the auditor general’s commitment to ensuring taxpayer dollars are spent effectively and efficiently. The governor agrees that significant reform to cyber charter tuition is needed to better align the cost of providing an online education with the tuition cyber charter schools receive,” a Department of Education spokesperson said in a statement to the Capital-Star.
Cyber charter schools responded by highlighting the audit found no financial mismanagement, waste, fraud, or abuse of taxpayer dollars.
Jeff Piccola is a former Dauphin County Republican state senator who serves as chairperson of the Commonwealth Charter Academy board of trustees. He said in a statement the audit confirms the school manages taxpayer funds properly.
“CCA’s comprehensive internal controls, combined with its student- and family-focused mission, ensure that students and families receive the academic enrichment, social support, and attention they deserve,” Piccola said.
CCA noted its enrollment more than doubled during the audit period and while DeFoor pointed to cyber charter schools’ reserves as evidence supporting tuition reform, it did not acknowledge the state’s traditional school districts maintain fund balances of more than $6.7 billion. More than 88% of the state’s 1.7 million public school students attended traditional schools in 2023, according to the Pennsylvania State Education Association, the state’s largest teachers union.
Eileen Cannistraci, CEO of Insight PA Cyber Charter school, commended the auditor general for a thorough and professional audit but noted DeFoor’s office had denied a request that each school’s audit be presented separately.
“Insight PA encourages readers of the audit report to look at each audit separately and avoid generalizing any findings to the entire cyber charter sector,” Cannistraci said, adding she agrees that changes to the way cyber charter schools are funded should be evaluated in a collaborative fashion.
“Insight PA would be willing to participate in a task force or legislative commission to look at cyber charter funding holistically and objectively. We strongly oppose the current call for an arbitrary flat tuition rate for cyber charter schools that is not based on real data or input from the cyber charter sector,” Cannistraci said.
The nonprofit group Education Voters advocates for the adoption of a pro-public education agenda by elected leaders. Just last month, the organization released a report criticizing CCA for lacking transparency in its spending of hundreds of thousands of dollars.
Advocacy group’s report contained ‘significant errors,’ charter academy says
Susan Spicka, who serves as its executive director, said the audit is a “clarion call” for the legislature to act on Shapiro’s proposal.
“Pennsylvanians cannot afford to wait any longer for state lawmakers to take action to protect their constituents’ tax dollars from being removed from their local schools and packed into cyber charter asset hoards,” Spicka said.
But, Spicka said her group disagreed with the auditor general’s recommendation to create a task force to study cyber charter tuition formulas.
“A task force would simply kick the can down the road and ensure that tens or even hundreds of millions of additional property tax dollars will be hoarded or wasted by cyber charter schools while Harrisburg wrings its hands,” Spicka said, noting that the state House last year passed a bipartisan bill to set a statewide tuition rate and limit cyber charter school reserve balances.
Pennsylvania’s law allowing publicly-funded charter schools was passed in 1997. The law was amended in 2002 to authorize cyber-charter schools.
Since then, the education department has granted permission for 14 cyber charter schools that accept students from throughout Pennsylvania. They serve about one-tenth of the state’s 1.7 million public school students.
Because every school district in Pennsylvania establishes its own budget and per-pupil spending rate, a single charter school can receive a broad range of tuition payments from each district where it draws students.
According to the auditor general’s office report, the tuition rates paid to the five schools in the audit ranged from $6,975 to $25,150 for regular education students and $18,329 to $60,166 for special education students.
YOU MAKE OUR WORK POSSIBLE.