Release Date: Jul 22, 2011 7:30 AM  

The State Board of Education today voted to put Pencader Business and Finance and Reach Academy For Girls charter schools on probation. Both schools had faced closure because of governance and financial issues.

Based on additional evidence provided by the schools after the Final Report meeting of the Charter School Accountability Committee and at each school's respective public hearing, Former Secretary of Education Lillian Lowery recommended the schools remain open and placed on probation subject to strict conditions.

For Pencader, those conditions are:

• No later than Sept. 30, each Pencader board member must complete the state’s financial training program.
• The school must convene its required Citizen Budget Oversight Committee within 30 days and meet at least monthly. All committee members must complete training.
• By Sept. 1, the school board must submit to the state evidence of specific building-level financial oversight procedures that explain how Pencader’s day-to-day financial operations are implemented and who—at the building level—is responsible for monitoring those procedures.
• By Sept. 1, the school board must submit a revised 2011-2012 budget and budget narrative to include correct interest payments and a 2012-2013 budget and budget narrative to include interest, loan payments, other changes to the budget to accomplish the interest and loan payments and provide impact to school operations. All of that shall be subject to the final approval of the department, in its sole discretion, and shall comply with the representations made by the school as part of the record in this matter.
• Beginning Sept. 1 and on the same day of each succeeding month, the school board must submit to the state, on a form to be provided by the department, a financial analysis reflecting Pencader’s current financial status. Pencader also must meet monthly, for as long as the state deems necessary, with representatives of the department to discuss Pencader finances and administrative issues. Everyone involved with financial matters at Pencader must be available to attend these meetings and the state will have the right to require the attendance of specified individuals at the meetings. The state also must have unlimited access to all of Pencader’s financial records, with such redactions as may be necessary to protect any person’s right to privacy, but not including the identity of any creditor of, or donor to, Pencader. The purpose of such meetings, in part, shall be to satisfy the state that Pencader continues to be financially viable, that it is paying all of its obligations in a timely manner and that it is amassing the necessary surpluses to timely pay all of its debts in full.
• By Aug. 1, Pencader must provide the state with satisfactory evidence that it has paid in full the Aqua loan for $160,000 and with signed copies of any new loan documents relating to the refinancing of said loan. Any new loan obtained to repay the Aqua loan will not exceed $160,000 and will provide for interest-only payments in Fiscal Year 2010, with the rate of interest not to exceed 5 percent per annum. Further, Pencader shall repay in full the principal balance of the new loan no later than Sept. 1, 2012.
• For so long as Pencader shall remain on probation, it shall not incur any additional debt without the prior written consent of the Department of Education. By June 30, 2013, Pencader also must have repaid in full the $300,000 loan from Greggo & Ferrara and shall be debt free.

For Reach, those conditions are:

• No later than Sept. 30, each Reach board member must complete the state’s financial training program
• The school must convene its required Citizen Budget Oversight Committee within 30 days and meet at least monthly. All committee members must complete training.
• By Sept. 1, the school board must submit to the state evidence of specific building-level financial oversight procedures that explain how Reach’s day-to-day financial operations are implemented and who—at the building level—is responsible for monitoring those procedures.
• By Sept. 1, the school board must submit a revised 2011-2012 budget and budget narrative justifying its allocations for teacher and leader professional development, instructional supplies and new utility expenses, including costs for meter installation.
• By Sept. 1, the school board must submit to the state a plan explaining the source of funding for instructional supplies for four years with revised budgets reflecting such revenues and expenditures. This condition is imposed because instructional supplies are currently funded in the Reach budget by federal start-up funds that will not be available in future years.
• Reach’s director must schedule quarterly visits from the representatives of the state’s curriculum and instruction workgroup to assist Reach with fidelity of curriculum delivery given the reductions to that budget area at Reach.
• Beginning Sept. 1 and on the same day of each succeeding month, the school board must submit to the state, on a form to be provided by the department, a financial analysis reflecting Reach’s current financial status.

Should either school fail to meet the conditions of its probation, its charter could be revoked.

“The students, parents and teachers who have stood by these schools are counting on their new leaders to make good on their promises. With this decision, we are giving the schools the chance – with close state oversight – to do so,” Lowery said.

Lowery credited the formal review process for forcing positive changes at each school such as: changes in board leadership, particularly the addition of members with financial expertise and school leadership experience; new leadership at the building level as well as new financial advisors, particularly the addition of Brandywine School District’s David Blowman and Mark Holodick at Reach; renegotiated contracts, including both schools negotiating rent forgiveness; and Pencader developing a new financial plan that shows the ability to pay off its hefty loans within two years.

While Lowery is pleased the schools’ boards have committed to these changes, she was clear that the work isn’t over. Each school still faces great challenges, particularly to recover from past financial mismanagement. And each still is in the danger of losing its charter if improvements aren’t made.

“These schools must meet their financial, governance and academic expectations. With state supervision and support, I hope to see them exceed them,” Lowery said. “But if they fail, we owe it to our students and taxpayers to close their doors.”

The Delaware Department of Education's Charter School Accountability Committee had recommended revocation of both schools’ charters at the end of the 2010-11 academic year because of serious financial and governance concerns. Pencader, which opened near New Castle in 2006, was put on formal review at the April 21, 2011, State Board of Education meeting. It was the third time in the school’s history that it had been placed on formal review.

After going through the most recent formal review process, the CSA committee voted to recommend Lowery ask the State Board to revoke the school’s charter, citing concerns about the lack of specificity and cohesion in the school’s response to the financial problems as well as administrative operations, such as a lack of expertise in the building to run day-to-day financial operations.

Reach, which opened in August 2010, was put on formal review at the Nov. 18, 2010, State Board of Education meeting. Upon completion of the formal review process, the committee also recommended revocation of Reach’s charter. Among the concerns cited were lack of leadership experienced in school finances and turnarounds, missing contracts and curriculum outlines as well as budgets that lacked detail or appropriations for needed items, such as instructional materials and professional development.

Since the committee issued its final reports, each school provided the state with additional information and evidence that previously had been requested. Lowery took that into consideration when issuing her recommendation.

Formal Review Process Applied to Pencader Timeline

• Place on formal review: April 21, 2011
• Initial and preliminary CSAC meetings: May 6, 2011
• Preliminary CSAC report: May 23, 2011
• School response: June 6, 2011
• Final CSAC meeting: June 10, 2011
• Public hearing: July 13, 2011
• State Board of Education decision: July 21, 2011

Reach Academy for Girls Formal Review Timeline

• Place on formal review: Nov. 18, 2010
• Initial and preliminary meetings: Dec. 7, 2010
• Preliminary report: Feb. 25, 2011
• Temporary halt to process approved by state to allow school to explore new governance: Feb. 25, 2011
• State decision to return to process: April 18, 2011
• School response: May 26, 2011
• Final meeting: June 7, 2011
• Public hearing: July 11, 2011
• State Board of Education decision: July 21, 2011

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Delaware's Department of Education is committed to promoting the highest quality education for every Delaware student by providing visionary leadership and superior service.	Contact Info. Alison Kepner Delaware Department of Education 401 Federal Street, Suite #2 Dover, Delaware 19901 Phone: (302) 735-4035 Fax: (302) 739-4654 Email: akepner@doe.k12.de.us
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