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Auditor General audit flags large reserves, real‑estate purchases at cyber charter schools
Summary
Committee members pressed Auditor General Timothy DeFoor about audit findings that five cyber charter schools boosted fund balances hundreds of millions of dollars and made large real‑estate purchases under a 2002 funding formula the auditor calls outdated.
Representative Danny Friel and other members highlighted a recent Auditor General audit examining five Pennsylvania cyber charter schools that reported large increases in fund balances. In committee questioning, Representative Friel quoted the audit: "schools improved financial position by accruing fund balances that increased $365,000,000 or 144% from $2.54 up to over $6.20 or $619,000,000 as of June 2023," and described transfers of funds into capital projects for real estate purchases.
Auditor General Timothy DeFoor told the committee that those outcomes are legally permitted under the current funding formula. "The reason why all this happened... it happened legally because we were using an outdated funding formula," DeFoor said, noting the formula dates to 2002 and that predecessors had raised similar concerns.
Members raised the juxtaposition of large reserves and low student proficiency. Representative Friel cited proficiency rates for one cyber operator: "In mathematics and algebra, CCA has a 4.7% proficiency. English language arts 11 percent proficiency. Biology science 13 percent proficiency," and asked whether DeFoor had seen a correlation between growing reserves and academic performance. DeFoor said academic-performance questions were better directed to the Department of Education.
DeFoor recommended convening stakeholders to revise the funding formula, saying states that update pathways for accounting and auditing also need policy updates for school funding. Several committee members urged legislative attention to the formula; DeFoor said he and prior auditors have recommended reform.
The audit spurred questions about transparency and the appropriate policy response; DeFoor and members emphasized the legal limits of the auditor general’s authority to change funding law while urging interbranch and interagency discussions to address the funding and performance gaps.
