PHILADELPHIA (WTXF) - A new audit finds a lack of governance by charter school boards allowed Philadelphia-based operator Aspira Inc. of Pa. to manage public funds without sufficient accountability.
That's one of eight findings in a financial review released Wednesday by Pennsylvania Auditor General Eugene DePasquale’s office.
Reduced revenues, persistent operating deficits, poor cash flow and overspent budgets caused the charter schools’ combined general fund balance to plummet from $7.7 million in 2014 to $419,000 in 2016, the document says.
Auditors also found a poor organization structure, weak management agreements, a lack of board oversight, and little documentation to support charges to the schools.
"Over the three-year review period, Aspira Inc. managed $150 million in public school revenues with little to no oversight," DePasquale summarized.
Aspira operates five Philly schools. But in December the School Reform Commission voted to rescind charters for John B. Stetson Middle School and Olney High School, saying they missed academic goals and had financial and management problems.
Aspira is reportedly appealing that decision.
The audit commenced in early 2017, a few months after FOX 29 Investigate's Jeff Cole reported that Aspira paid its former top academic officer $350,000 to settle a sexual harassment suit she brought against the charter and its CEO, Alfredo Calderon.
A legal document showed an insurance carrier paid out those funds.
At the time FOX 29's story aired in 2016, Calderon refused comment, and a charter spokesperson said it couldn't talk about the case.
Calderon remains on the job.
The audit released Wednesday shows another large payment was made to the same former administrator shortly after the settlement: "A lump sum of $210,000 paid by Pantoja Charter School to a former administrator was not properly authorized, not part of an employment contract, and may have been part of a lawsuit settlement involving Aspira Inc.'s CEO."
A revised organizational structure that made all senior administrators employees of Aspira Inc., rather than the charter schools, is "less transparent," the audit says. This, plus "poor record-keeping practices," will make it "impossible to determine whether public funds are being used to pay senior administrators or other employees of the management company to settle lawsuits."
Also cited in the audit are: risky collateralization of Aspira's delinquent debts; poor procurement and monitoring of educational program contracts; executive sessions not in compliance with the state's Sunshine Act; and financial reporting errors.
Aspira wrote in a management response that it has been "open and responsive over the past year," and it's grateful for the opportunity to discuss concerns with "inaccurate characterizations and unsupported speculation."
"Given the circumstances that precipitate this audit, the report is perhaps more meaningful in what it did not find," Aspira’s response says. "…There is no finding of waste, fraud or abuse. There are no findings of excessive salaries or the like. There is no finding that public funds were used inappropriately. In short, while the report has many useful suggestions, it concludes what all previous audits of the Schools have concluded. The Aspira Schools have operated in accordance with the law."
Aspira issued another statement via Twitter on Wednesday afternoon.
DePasquale said that Aspira, while disagreeing with the majority of findings, did agree to implement 22 of the 24 recommendations for improvement.
The auditor general also said in a news release, "the total control of finances and lack of accountability can best be described as the fox guarding the hen house."
He called this another example of why Pennsylvania needs to reform its charter school laws, which he calls "the worst in the nation."
"All for-profit and non-profit charter school management companies should be subject to the state's Right-to-Know Law to provide another level of transparency and accountability that my team found sorely lacking at Aspira Inc.," DePasquale said.
Today I am discussing my audit of Aspira Inc. charter schools and why PA needs charter school reform. https://t.co/SHM8IPS9A7— Auditor General Eugene DePasquale (@PAAuditorGen) May 23, 2018
The Philadelphia School District released the following statement:
“We take the Auditor General's report seriously and are looking into its findings. At the same time, our goal remains the same -- to ensure students throughout Philadelphia receive a quality education."