The Herald, Sharon, Pa.

March 19, 2013

Lease payments questioned in audit

By Joe Pinchot
Herald Staff Writer

WEST SALEM TOWNSHIP — The state Auditor General’s Office said in a performance audit that Keystone Education Center in West Salem Township may have improperly received $85,375 in lease reimbursements from the state.

Jim Gentile, founder of the charter school, called the accusation “legally incorrect” and “materially misguided.”

“We followed all the guidelines that the Department of Education had,” he said. “That’s why we got the money. We never would have applied for it, if we felt we weren’t eligible to receive it.”

Department of Education Press Secretary Tim Eller said the department will review the audit to determine if any actions are warranted.

“When the auditor general makes recommendations that public school entities refund monies to the commonwealth, the department carefully examines those recommendations to determine the legal basis for the recommendations and proceed accordingly.”

The audit covering July 1, 2008, to June 20, 2010, said the problem arises from the overlap in personnel of the school and the for-profit corporation that owns the building in West Salem Township, Gentile Enterprises Inc.

As an example, Gentile is the founder of the school and was an officer of the school and the landlord corporation at the time of the audit.

Gentile resigned from the school board in 2010.

The school’s director of finance also has a role with the landlord, the audit said. Such an arrangement creates the “reasonable likelihood” that charter school and landlord officials could reap “direct or indirect financial benefits,” the audit said.

“Properties owned by a charter school are not eligible to receive state lease reimbursement,” the audit said.

The audit, dated March 7, said the “circular leasing arrangement” among related parties means the school “was essentially leasing to itself.”

The school on Monday issued a news release saying the audit’s finding “would suggest” the auditor’s office and the education department officials “were both inept and dilatory in their duties.”

“It has always been the Department of Education that has reviewed and approved all documents submitted by Keystone Charter School, including the leases, for approval of the rent reimbursement,” the release said.

When the school was founded in 1997 – the first charter school to open in Pennsylvania – state officials were involved in setting up the school and approving its charter and the arrangement between the owners of the building and the school, the release said.

“It was disclosed and made very apparent that the owners of the building were the same individuals who were instrumental in forming the public school,” the release said.

The release goes on to praise the “Herculean efforts” of Keystone administration and staff, county agencies and the Greenville and Reynolds school districts, and the successes of Keystone students, many of whom have become professionals and tradesmen or served in the armed forces.

In what is called an “observation,” the audit said there were several ethics violations related to the Gentile family members’ positions with the school and the affiliated Keystone Adolescent Center, which shares a building with the school, and the fact that the school buys meals from one of the school districts when a district superintendent is on the charter school board.

Keystone waived the opportunity to respond to the allegation because of an ongoing ethics investigation.

According to the audit, the state Ethics Commission has completed its investigation and a final decision will be publicly released.