Posted on Fri, May. 16, 2008

Charter's financial controls faulted
There was no oversight at Phila. Academy, probers say.

By Martha Woodall
Inquirer Staff Writer

Brien N. Gardiner, the founder of Philadelphia Academy Charter School, and the former chief executive officer, Kevin M. O'Shea, were the only people at the school with authority to write checks, and there was no oversight on how the money was spent, according to lawyers hired by the school's board.

Those gaps in financial procedures may have allowed the men to misuse taxpayer funds, the lawyers said. In April, the board of directors at the popular Northeast charter school hired the firm of Ballard, Spahr, Andrews & Ingersoll to investigate allegations of financial mismanagement, nepotism, and conflicts of interest.

Gardiner and O'Shea also abused the board's trust, but that could have been avoided if the board itself had been operating under better fiscal controls, the investigators said.

Lawyers, who during the last month combed the school's fiscal records, found evidence of widespread financial wrongdoing: School credit cards were used for personal purchases, cash disappeared, and both Gardiner and O'Shea constructed lavish personal offices for themselves at Philadelphia Academy's buildings at 11000 Roosevelt Blvd. and 1700 Tomlinson Rd.

"I was appalled when I walked in here," said Yvonne DeAngelo McGinley, a veteran finance official who was brought into the school in March to help straighten out the finances. "I was totally disgusted with what I found."

McGinley made her comments Wednesday night at a meeting during which the charter school's board fired Gardiner and O'Shea, heard about the evidence of serious wrongdoing, and adopted new bylaws and financial procedures. Five of the six board members also agreed to resign and the board voted to expand to seven members, three of whom would be elected by parents.

"The board placed significant trust, obviously, in both Gardiner and O'Shea," said Henry E. Hockeimer, a lawyer at Ballard Spahr.

"Our findings are that trust was abused," Hockeimer told the more than 250 parents, teachers and community members who crowded into the lunchroom for the board meeting. "We also believe, however, that if the board had been operating under better guidelines and controls, some of Gardiner and O'Shea's misconduct could either have been avoided or eliminated."

Although the lawyers' investigation continues, Hockeimer said that during the last month, his team had "reviewed thousands of documents and interviewed over 20 witnesses."

The lawyers' preliminary findings include these:

Last year, Gardiner persuaded the board to hire the firm Charter School Choice Inc. to handle the school's finances and accounting without revealing that the firm had paid him as a consultant. The company provides business services to charter schools.

"Unbeknownst to the board, and directly contrary to statements made by Gardiner, Gardiner had been paid by Charter School Choice as a consultant," lawyer John C. Grugan said.

Gardiner received $47,450 from the company in 2006 and $65,066 in 2007 for helping to create a billing system for a cyber charter school.

Lawyers also found that Philadelphia Academy had provided "significant financial and other support to other charter and cyber schools founded by and or operated by O'Shea and Gardiner."

For example, Grugan said, the Philadelphia Academy maintenance staff was required to work at other charter schools with ties to Gardiner and O'Shea. The lawyer declined to name the schools.

He said the lawyers also had "developed significant evidence" that both O'Shea and Gardiner had improperly benefited personally from charter school funds.

"Expensive executive offices have been constructed and furnished by PACS," Grugan said, "but these offices were neither approved by the board nor, as best as we can tell, constructed for the benefit of PACS."

He said lawyers also had found "significant evidence supporting" allegations of financial improprieties they could not yet detail.

After Gardiner and O'Shea were suspended on April 17, the school's accountants found the school had more cash on hand, he said.

"There was a significant amount of cash taken," Hockeimer told the parents. "How we can ever quantify that would be very difficult."

Parents asked about proceeds from school fund-raisers, lunch money from the high school cafeteria and vending machines, and the $2 fees students pay to attend school out of uniform on Friday "dress-down days."

The school will begin providing cash receipts, officials said.

In hope of obtaining a new five-year charter, the board also approved a new conflict-of-interest policy.

The Philadelphia School Reform Commission last month delayed voting on the charter's renewal to give the commission's inspector general time to complete a separate probe of the allegations of financial mismanagement.

The action came a day after The Inquirer disclosed that the school's administrators were being paid more than most area school superintendents, and detailed allegations of nepotism, mismanagement and conflicts of interest.

Contact staff writer Martha Woodall at 215-854-2789 or martha.woodall@phillynews.com.

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