August 25, 2016

Auditor General: Charter School Payment Appeal Process Seriously Flawed

Auditor General Eugene DePasquale Thursday said his latest audit shows a faulty Charter School Law and the Department of Education’s protracted, inconsistent, confusing, and conflicting process for handling charter school payment challenges may unfairly favor charter schools over school districts.
Under the Charter School Law, charter schools receive funding from school districts based on a formula for both non-special education and special education students. If the school district fails to make a monthly payment to a charter school, the charter school sends an invoice to PDE and the department directly pays the charter school and deducts the amount from the school district’s state subsidy.  
School districts may object for a variety of reasons, including questioning charges for students not residing in the school district or the number of days that the charter school claims to have educated a student.
“What we found in our audit is that essentially all a charter school has to do is claim to PDE that it is owed money, and PDE cuts the charter school a check and withholds the money from the school district’s state subsidy before providing the district a chance to challenge the payment,” DePasquale said, noting that this was an audit of PDE’s practices, not a criticism of charter school actions.  
“Absent showing PDE a cancelled check as proof of payment, a school district’s only option is to enter the lengthy, confusing, and nonsensical rabbit-hole-world that is PDE’s charter school payment appeals process.”
Auditors noted that even though PDE notifies a school district that it has 30 days to challenge a redirection payment request, in most cases the department does not wait the 30 days before authorizing the payment to the charter school.
Auditors found that there were 857 charter school payment appeals filed by districts during the five-year audit period of January 2011 through December 2015 when PDE made more than $1 billion in direct payments to charter schools.
As of Dec. 31, 2015, 701 of the appeals – or 82 percent – were unresolved, including:
— 374 appeals involving $30.5 million redirected from school districts to charter schools, and
— 327 appeals where funds were not redirected from school districts to the charter schools.
“The majority of the $1 billion PDE redirected to charters is not in dispute,” DePasquale said. “Our audit focused on the 374 appeals that are unresolved where $30.5 million was redirected from school districts to charters.
“This is not to say that the districts are owed $30.5 million,” he said. “Since PDE did not follow-up on these appeals we just do not know. It is possible that the school districts and the charter schools could have resolved the appeals on their own, but again, because PDE didn’t follow up, we just don’t know.”
Click Here for the full announcement and a copy of the audit.
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