Auditor General Jack Wagner Says Pennsylvania Cyber Charter School's Reserve Funds Highlight Need to Fix Funding Formula

HARRISBURG, Pa., Dec. 6, 2012 /PRNewswire-USNewswire/ -- Pennsylvania Cyber Charter School, the state's largest charter school, held a $13 million budget surplus at the end of the 2009-10 school year, highlighting the commonwealth's flawed funding formula that is permitting charter and cyber charter schools to receive far more in taxpayer money than their true cost of educating children, Auditor General Jack Wagner said today after issuing a performance audit of the Beaver County-based school.

Wagner said that PA Cyber Charter's budget surplus, officially called an unreserved general fund balance, was the largest of any charter or cyber charter school in the commonwealth, even though it spent more than the statewide average for administrative and business costs for charter and cyber charter schools, including almost $2 million a year in public advertising paid for with taxpayer money.

Wagner again called on the Department of Education and General Assembly to reform the state's charter and cyber charter school funding formula to make it fairer to taxpayers. The Department of the Auditor General issued a report in June that showed Pennsylvania could save $365 million a year in taxpayer money by adopting separate charter and cyber charter school funding formulas similar to those used in other states. Those formulas are based on the true cost of educating a child in a charter or cyber charter school.

"While I have long supported alternative forms of education, as the state's independent fiscal watchdog, I cannot look the other way and ignore a broken system in which charter and cyber charter schools are being funded at significantly higher levels than their actual cost of educating students," Wagner said. "It is time for the Pennsylvania Department of Education, along with the General Assembly and the Corbett administration, to fix Pennsylvania's flawed funding formula for charter and cyber charter schools and restore fairness to the system."

Opened in 2000, the Pennsylvania Cyber Charter School is the largest cyber charter school in the state. It provided educational services to 8,539 students drawn from 484 of Pennsylvania's 501 public school districts during the 2009-10 academic year. Because it receives funding from the individual school districts rather than a uniform rate set by the state, Pennsylvania Cyber Charter School collects a different fee from each of the 484 districts, based on the cost of educating a student in each of those districts. Thus, Pennsylvania Cyber Charter School collected reimbursements for non-special education students ranging from a low of $6,414 in the Altoona Area School District in Blair County to $17,755 from the Lower Merion School District in Montgomery County.

The Department of the Auditor General's June report estimated that the national average for educating a student in a cyber charter school was about $6,600.

Wagner's performance audit, which covered the period July 1, 2008 through July 18, 2011, also found that Pennsylvania Cyber Charter School's reported business expenses totaled $12.6 million for the 2008-09 school year -- the third-highest amount reported by the 501 school districts and 127 charter schools that filed annual financial reports with the Pennsylvania Department of Education that year.

Included in the funds classified as business expenses was nearly $4 million in advertising expenses spent over two years. Since more than 90 percent of the school's revenue came from tuition payments received from local school districts, this money spent on advertising is comprised largely of taxpayer dollars.

"These are taxpayer dollars that were allocated specifically for funding public education," Wagner said. "Pennsylvania Cyber Charter School should stop spending taxpayer funds for advertising and should allocate them to additional student education services."

Based on the school's average cost per student, 155 students could have been educated in 2008-09 and 195 students in 2009-10 with the amount spent on advertising, Wagner noted.

The Department of the Auditor General's performance audit, which is available to the public at www.auditorgen.state.pa.us, concluded before a reported federal grand jury investigation of Pennsylvania Cyber Charter School became public in July 2012.

Wagner first called for a fix to the broken funding system for Pennsylvania's charter schools in June 2007, after audits of three charter schools showed that all three were paid hundreds of thousands of dollars more in funding than their actual costs for educating students.

After the state authorized charter schools, only six schools operated in the 1997-98 school year.  During the 2011-12 school year, 162 charter schools operated in the commonwealth and the number is growing each year, making the inequities greater. This is all the more reason to create better equity in the system for the sake of Pennsylvania taxpayers, Wagner said.

Auditor General Jack Wagner is responsible for ensuring that all state money is spent legally and properly.  He is the commonwealth's elected independent fiscal watchdog, conducting financial audits, performance audits and special investigations.  The Department of the Auditor General conducts thousands of audits each year.  To learn more about the Department of the Auditor General, taxpayers are encouraged to visit the department's website at www.auditorgen.state.pa.us.

SOURCE Pennsylvania Department of the Auditor General