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Audit exposes construction-bidding flaw in charter school law

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The Lehigh Valley Charter High School for the Arts in Bethlehem. (Contributed photo)
The Lehigh Valley Charter High School for the Arts in Bethlehem. (Contributed photo)

A 29-page audit report released Tuesday reveals that a legal glitch could allow state charter schools to avoid public bidding requirements on construction projects.

In a news release, State Auditor Eugene DePasquale shared the results of an audit for the Lehigh Valley Charter High School for the Arts in Bethlehem. The audit showed that the construction contracting and bidding process for the $25 million project was not legally subject to the public bidding requirements under the state’s charter school law. That’s because the school completed the construction project under the name of the charter school’s foundation and not the charter school itself.

However, a top official at the charter school said it did follow a competitive bidding process for building the school, which opened in 2015.

“We requested four bids, we received three bids,” said Diane LaBelle, executive director and CEO of Lehigh Valley Charter High School for the Arts.

Bucks Development and Contracting of Bethlehem was the firm that built the school. The company has since dissolved, LaBelle said.

“The foundation conducted a competitive bidding process in a thorough, transparent manner that complied with Pennsylvania’s Redevelopment Assistance Capital Program grant program,” LaBelle said.

And like a traditional school district, the foundation also complied with the Prevailing Wage Act, the Steel Products Procurement Act, and the Public Works Contractor’s Bond Law during construction of the new school, LaBelle said.

LaBelle said the Lehigh Valley Charter High School for the Arts and the Charter Arts Foundation cooperated fully throughout the audit process, and the auditor general’s office concluded that the school and foundation operated in accordance with the law.

In fact, LaBelle said, the school was following advice from the state Department of Education when it began the process of developing a new building. The agency suggested creating a foundation to raise money.

“A charter school cannot float a bond or go to the taxpayers to raise taxes to build a facility like the traditional public school does when its district wants to construct a new building,” LaBelle said.

The school eventually formed The Charter Arts Foundation to raise the funds for construction. Nearly $10 million of the $25 million funding came from private sources, she said.

That funding included a $6 million capital campaign, which came from private sources.

Other funding for the school came from a $3 million Redevelopment Assistance Capital Program grant and a $1 million Economic Growth Initiative grant, both from the state. In addition, the foundation received an $800,000 Growing Greener grant from the state Department of Community & Economic Development, a $2 million Alternative Clean Energy loan, $4 million in New Market Tax Credits, and a long-term mortgage, she said.

LaBelle agreed with the auditor general that Pennsylvania should update its charter school law.

The audit report covers 2013 to 2017; and includes two findings and six recommendations for improvement at the Lehigh Valley Charter School for the Arts. Auditors found that the charter school did not have the right number of certified staff required by the charter school law.

In addition, the report showed the charter school had weaknesses in its school board meeting minutes, did not comply with the Sunshine Act when it failed to announce the purpose of its executive sessions and may have violated the ethics act. The act requires the board to document when a board member abstains from voting and the reason for an abstention because of a conflict.

According to the report, the charter school implemented new procedures for announcing executive sessions at its April board meeting and plans to take prompt steps to adhere to the ethics act.

DePasquale said his department would share the results of the report with the Senate and House Education committees to request considering legislation that would require foundations and management companies associated with charter schools to be subject to the same public bidding requirements as those of public school entities.

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Brian Pedersen

Brian Pedersen

Reporter Brian Pedersen covers construction, development, warehousing and real estate and keeps you up to date on the changing landscape of our community. He can be reached at brianp@lvb.com or 610-807-9619, ext. 4108. Follow him on Twitter @BrianLehigh and read his blog, “Can You Dig It,” at http://www.lvb.com/section/can-you-dig-it.

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