Auditor General report finds rapid revenue and fund‑balance growth at Pennsylvania cyber charter schools; Derry board urges reform

A board member reviewing a state audit told the Derry Area School District board that five Pennsylvania cyber charter schools showed “astonishing” growth in revenue and fund balances and that the Auditor General recommended statewide action to change funding and oversight.

The presentation by board member Mr. Chapel summarized the Auditor General’s performance audit of Commonwealth Charter Academy (CCA), PA Cyber, PA Leadership, Insight PA and Reach Cyber for fiscal years roughly 2019–2023 and emphasized three audit objectives: identify and analyze revenue sources, analyze expenditures and report on financial position including general fund balances.

Why it matters: the audit, the presenter said, found large increases in revenues and fund balances while student assessment participation and proficiency remained low at some cyber schools. The audit recommended creation of a task force, legislative study and additional Department of Education (PDE) actions to improve transparency, funding formulas and charter renewal oversight.

Chapel said the five audited schools’ combined revenues rose from about $472 million to $898 million in the review period and that fund balances for those five schools collectively rose from about $254 million to $619 million. “Commonwealth Charter Academy’s fund balance was $95,000,000 before the pandemic and $213,000,000 at the end” of the period covered, Chapel said, and added that the audit shows CCA transferred $183 million into a capital projects fund during that time.

Chapel highlighted specific audit findings that the board and public found notable: sharp fund‑balance growth at several schools (Insight PA’s fund balance increased from about $6.4 million to $50 million in the audit window); substantial capital spending and building acquisitions; large advertising and bonus expenses; and uncommon personnel stipends. “They spent almost $22,000,000 on advertising,” Chapel said, and he reported CCA disbursed roughly $22 million in employee bonuses across three years. The audit also flagged more than $2.3 million in fuel stipends paid to administrative staff who returned to office work and noted the expansion of fleet vehicles and building acquisitions.

Chapel and others contrasted the financial trends with student assessment data. Using the Pennsylvania Future Ready PA Index and other PDE data, Chapel said some audited cyber schools had low participation and proficiency on state assessments. He noted CCA’s 4‑year cohort graduation rate and assessment proficiency: “they’re graduating 64 percent. PA state assessment proficiency or advanced in English, 11 percent. Math, 4.7 percent. Science, 13 percent.” Doctor Ferencic, the district superintendent, added that cyber schools do not meet the same 95% participation threshold required of districts and that in at least one subgroup “the highest population … that took the test” at a cyber school was 40 percent, which he said limits comparability.

Chapel described recent legislative change, Act 55, which added transparency and ethics requirements for cyber charters and revised funding mechanics. He said one change lets districts substitute their actual special‑education percentage for the old 16% assumption when calculating cyber tuition; the district’s recalculation reduced its special‑education tuition rate from about $32,000 to $28,195 for the second half of the year, Chapel said, a per‑student reduction of about $3,600 in that example.

The Auditor General’s recommendations cited in the presentation include creation of a governor‑appointed task force to study funding and accountability, a legislative study and statutory changes to clarify PDE’s role in charter facility guidance and charter renewal timing. Chapel said the state provided one‑time reimbursement to districts in 2024 but that longer‑term reform is still pending; he noted the governor’s 2025–26 budget proposal removed the one‑time reimbursement line pending reform.

Board members discussed local alternatives and next steps. Doctor Ferencic and other members pointed to county online programs and regional offerings as lower‑cost in‑county options; Mr. Chapel urged continued advocacy for statewide reform. Multiple board members praised the presentation as “very educational” for the public.

The board did not take formal action on the audit at the meeting but said the material would be posted and urged the public and legislators to review the Auditor General’s full report.

Ending: Chapel said he will post the presentation and encouraged board members and residents to read the full Auditor General report and contact legislators about reform.