By NICHOLAS CONFESSORE and JENNIFER MEDINA
ALBANY — During its first years of operation, the Niagara Charter School in Niagara Falls spent thousands of dollars on plane tickets, restaurant meals and alcohol, and more than $100,000 on no-bid consulting contracts. Yet the school’s teachers resorted to organizing a fund-raiser to buy playground equipment.
When the Roosevelt Children’s Academy, a charter school on Long Island, fired its management company after paying it more than $1 million a year, it hired two of the school’s board members as new managers — and paid them hundreds of thousands of dollars.
And in the Bronx, the Family Life Charter School pays $400,000 annually to rent classroom space from the Latino Pastoral Action Center, a “Christ-centered holistic ministry” led by the Rev. Raymond Rivera. Mr. Rivera also happens to be the school’s founder.
Charter school advocates, including Mayor Michael R. Bloomberg, are vigorously lobbying for a bill that would more than double the number of charters in New York State and send at least $2 billion in taxpayer money a year into the charter system.
Supporters want the Legislature to pass the bill before the June 1 deadline by which states must apply to win a share in Race to the Top federal education grants that place a premium on an expansion of charter schools. New York’s potential share is $700 million.
Charter school advocates argue that the schools’ freedom from traditional rules enables them to make major improvements. But that same freedom can present problems: a review of public documents shows that many charter schools have spent money in questionable ways and have experienced significant conflicts of interest.
The documents, including state Education Department reports, federal tax filings and audits of charter schools prepared by outside firms, were obtained by the state teachers union, and provided to The New York Times, which corroborated the data. Teachers unions have traditionally been sharply critical of charter schools, whose teachers usually are not unionized.
The problems underscore what many critics say is a weak system in New York for policing spending by charter schools, which are publicly financed but privately run.
Charter schools, for example, are not specifically prohibited by state law from hiring their own board members or employees as consultants. While the state comptroller’s office — the state government’s fiscal watchdog — can audit public schools, it is prohibited by a court ruling from examining charter schools.
Before that court ruling was issued last year, the comptroller’s office completed audits of 18 charter schools around the state. Fourteen had significant financial irregularities, including one school that spent $67,951 on staff trips to the Caribbean, according to officials.
“We don’t have enough oversight, and that is clear,” said State Senator Bill Perkins, a Harlem Democrat and charter critic. “I’m not suggesting that this is rampant, but it undermines the integrity of the public’s faith in charters.”
Several New York agencies can issue charters: the State Board of Regents, the State University of New York and, in New York City, the city’s Education Department. In other cities, local school boards also have the ability to allow charter schools to open.
The issue of accountability has emerged as a major sticking point in negotiations over the bill, which would raise the cap on charters to 460 from 200. The bill has been passed by the Senate but remains stalled in the Assembly.
Even as the Obama administration promotes charter schools as integral to its education agenda, the inspector general in the federal Education Department has raised concern about growing accusations of financial fraud at schools around the country.
In New York, the Merrick Academy in Queens, which was founded by State Senator Malcolm A. Smith, has been subpoenaed by federal prosecutors over the possible misuse of school money to benefit Mr. Smith. Mr. Smith, who is no longer affiliated with the school, has denied wrongdoing.
State officials acknowledge the need for better oversight, and the State Education Department has reorganized the office that reviews charter schools. The goal, said Sally Bachofer, who now heads the office that oversees charters, is to hold “schools to high academic and operational standards.”
Jonas Chartock, the executive director of the SUNY Charter Schools Institute, said that the institute’s focus was academic performance but that officials routinely checked for financial malfeasance.
In the past decade, the institute has refused to renew the charters of eight schools for poor academic performance, poor financial controls or both. The Regents have once refused to renew a charter.
In New York City, the schools chancellor, Joel I. Klein, has ordered the closing of East New York Preparatory Charter School in Brooklyn at the end of this academic year following revelations that the school’s founder and principal had named herself superintendent and granted herself a $60,000 raise.
But charter schools have at times resisted tougher monitoring. In 2007, a group of charter schools and advocates sued the comptroller’s office, challenging its right to audit the finances and academic performance of such schools. Critics said the comptroller’s office had no expertise to assess academics.
Last year, the Court of Appeals, the state’s highest court, ruled that charter schools were in effect independent contractors and beyond the comptroller’s reach.
Michael Duffy, who heads the charter school office for the city, said every school was monitored by the State Education Department and must select an auditor to scrutinize its record annually, then submit the findings to education officials.
“I’d leave the questions of whether it’s enough up to others,” Mr. Duffy said, “but we have a fairly robust set of measures that allow the public a window on how these schools are operating.”
In some cases, however, officials in charge of overseeing charters have reauthorized schools even after finding significant evidence of financial mismanagement. The problems at the Niagara Charter School, for example, were uncovered by investigators from the State Education Department and detailed in a 2008 report to senior department officials.
Among other findings, the school could not explain to investigators’ satisfaction how the board had determined the salary of its chief executive at the time, Gary Stillman, who also appeared to be simultaneously employed by another charter school in the area, Enterprise Charter School, which shares some board members with Niagara.
The report concluded that Niagara suffered from “the pervasive appearance of financial mismanagement and less than ethical behavior on the part of the Board of Trustees and school administration.”
Yet last year, John B. King Jr., the state’s senior deputy education commissioner, recommended to the State Board of Regents that Niagara’s charter be renewed.
In a statement, Dr. King defended his decision and said that before the renewal was granted, the department took steps to ensure that Niagara’s problems would be fixed.
“It’s important to note that student achievement is also improving at Niagara Charter, a school with a large percentage of high-need students,” Dr. King said.
The president of Niagara’s board, James Muffoletto, said that Mr. Stillman was no longer working at the school and that the school had disputed some of the findings of state education officials.
Teachers unions say they want charter schools to face the same financial scrutiny as traditional public schools.
“There’s clearly a double standard in the way the law is written,” said Richard C. Iannuzzi, president of the state teachers union, New York State United Teachers. “It clearly points to a lack of transparency.”
In some cases, union officials have found, charters entered into complex and eyebrow-raising transactions to secure space, which most charters, unlike traditional schools, must obtain on their own.
The Oracle Charter School in Buffalo, for example, will make more than $5 million in payments to a real estate partnership called KBSD to eventually own a building that sold for $875,000. The annual interest rate, according to loan documents, is 20 percent. Two years after the transaction was arranged, a KBSD partner joined Oracle’s board.
A lawyer for the school, Peter Morrow, said Oracle had turned to KBSD because no local bank would extend to the school a line of credit. The deal had been structured to give KBSD a reasonable rate of return, he said, while saving the school more than $1 million in property taxes it would otherwise owe.
KBSD, Mr. Morrow said, is “taking a greater risk than the bank would take.”
In the case of the Family Life Charter School in the Bronx, Mr. Rivera said the SUNY Charter Schools Institute had approved the plan for the school to rent the space from his ministry because the rent was below market value.
“They assured us there was nothing illegal about it,” he said. “They’re using most of the space in the building now. There’s nothing wrong with that.”
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