Auditor General Timothy L. DeFoor released a performance audit of five cyber charter schools which shows from 2020 to 2023, they legally increased revenues by $425 million and reserves by 144%, due in part to an outdated funding formula that does not use actual instruction costs to determine tuition, set guidelines for spending or set limits for cyber charter school reserve funds.

“I am now the third auditor general to look at this issue and the third to come to the same conclusion: the cyber charter funding formula needs to change to reflect what is actually being spent to educate students and set reasonable limits to the amount of money these schools can keep in reserve,” said DeFoor.

“Our recommendation is that in the next six months the Governor should appoint a task force to review the funding formula and direct it to issue a report within nine months determining a new formula that is equitable, reasonable and sustainable, and the General Assembly should act within six months of the taskforce’s report to facilitate the enactment of legislation. The most important thing we can do is to provide our children with a quality education and as leaders we need to set our personal agendas aside and fix how we fund education in this state.”

The five cyber charter schools selected for the audit were:

• Commonwealth Charter Academy;
• Pennsylvania Leadership Charter School;
• Insight PA Cyber Charter School;
• Pennsylvania Cyber Charter School; and
• Reach Cyber Charter School.

“In this audit, we found these cyber charter schools legally increased their revenue from $473 million in the 2019-2020 fiscal year to $898 million in the 2022-2023 fiscal year,” DeFoor said. “We found instances of the cyber charter schools legally using taxpayer dollars on things like staff bonuses, gift cards, vehicle payments and fuel stipends. Additionally, Commonwealth Charter Academy spent $196 million to purchase and/or renovate 21 buildings, which to us seems a bit out of the ordinary for a public school that is based in online instruction.”

The audit reviewed revenues and expenses, and reported on the financial position of the cyber charter schools, including an analysis of general fund balances from July 1, 2020, through June 30, 2023. The audit found each cyber charter school has significant and legal revenue increases during the audit period, due in part to an increase in enrollment during the COVID-19 pandemic and increases in tuition rates. The tuition rate is determined by a funding formula developed in 2002 that bases cyber charter tuition on what a school district budgets for each students’ education, not on the actual amount spent on education.

“Let me put this into perspective for you, in 2002, we were still using dial up to access the Internet, floppy discs were the best way to store and share data, and the iPhone and iPad weren’t invented,” DeFoor said. “Think about how much technology, teaching strategy and resources have changed since the COVID-19 pandemic, let alone over the past two decades. It is clearly time for a change.”

“Cyber charter schools exist in a delicate financial balance. Unlike traditional district schools, cyber charters cannot rely on consistent funding sources like local and state taxes, said Commonwealth Foundation Senior Education Policy Analyst Rachel Langan. “The only way for these schools to provide a stable, predictable environment for students, teachers, and staff is by maintaining a reliable reserve.

“To ensure the equitable and accountable use of taxpayer dollars, we must re-evaluate how the commonwealth funds all education options. Despite Pennsylvania being the seventh-highest spender per pupil nationally, student achievement is still stalling.”

“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 and bank accounts or wasted on parties, advertising, gift cards, and other things that are unrelated to educating students,” said Susan Spicka, executive director of Education Voters of PA.

“We acknowledge the quality of AG DeFoor’s audit and report but disagree with his recommendation for the formation of a task force to address the issue. 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. It is past time for Republicans and Democrats in the PA House and Senate to come together and, once and for all, align the tuition paid to cyber charter schools with the cost of an online education to end this waste and abuse of property tax dollars by cyber charter schools.”