Charter School Claims State Can’t Audit it

ALBANY, N.Y. (CN) - A New York City charter school operator claims the state has no right to audit it, and asked a judge to stop the state comptroller from doing so.

Success Academy Charter Schools-NYC sued state Comptroller Thomas DiNapoli and his office and New York State, in Albany County Supreme Court.

Success Academy claims that a 2009 ruling by New York's highest court found the Legislature overstepped its bounds by passing legislation in 2005 that authorized the comptroller to audit charter schools.

Despite fine-tuning in 2010 that resurrected the audits, they're still unconstitutional, Success Academy claims.

Charter schools - public schools financed by taxpayer money but independent of local school districts - have been permitted in New York since 1998. They're designed to offer parents an alternative to local public schools.

New York's charter schools operate as nonprofit education corporations under the purview of the state Board of Regents, the board of trustees of the State University of New York, the state Education Department and, in the case of New York City charter schools, the chancellor of city schools.

Success Academy runs 14 charter schools in New York City, serving some 5,000 students in grades K-7, according to its website. It wants to add six schools this fall and to expand to eighth grade.

Success Academy's Harlem 1, opened in 2006, has an elementary school with 550 students in grades K-4 and a nearby middle school with 175 students in grades 5-7. Both are near Central Park.

The schools' student population is 99 percent minority and principally low-income, and every student in grades 3-6 who took the state's standardized tests in English and mathematics in the 2011-12 school year passed, according to Success Academy's complaint.

(By contrast, 23 percent of Rochester third-grade public school students passed the standardized English exam that year, according to a summer 2012 report from the Rochester Area Community Foundation. The statewide average was 56 percent.)

Success Academy claims it learned in April that DiNapoli planned to conduct "an extensive audit" of Harlem 1 the week of July 15.

Success Academy filed an Article 78 action to challenge the comptroller's authority to do so, and to stop the Harlem 1 review, which it says "is not only duplicative, but ... would require Harlem 1 to expend substantial resources to comply with its numerous and broad requests."

A list of some of the items requested for the audit runs more than a page in the lawsuit.

The complaint states that the state already requires charter schools to submit annual reports to the state Board of Regents and to conduct annual independent audits, with results sent to the Education Department. Harlem 1 also is subject to on-site visits from state and city education entities.

Success Academy says it traded letters with DiNapoli in May and June about the audit.

In one, it maintained that the comptroller lacked the authority to conduct such audits under the state constitution, which authorizes reviews "of any political subdivision of the state" - which charter schools are not.

It also pointed to the 2009 decision by the Court of Appeals that found Article 5, Section 1 of the New York Constitution, which enumerates the powers and duties of the comptroller, did not make auditing charter schools "an administrative duty that is incidental to the comptroller's constitutionally prescribed functions."

The 2009 ruling came in a case that a group of charter schools brought against DiNapoli, after the Legislature in 2005 directed that the comptroller audit all school districts, boards of cooperative educational services and charter schools by March 31, 2010, to ensure that taxpayer money wasn't being misused.

In his response to the Success Academy letter, DiNapoli cited a 2010 amendment to education law that said charter schools, in addition to submitting to audits by authorizing entities, "shall be subject to audits of the comptroller of the state of New York at his or her discretion."

Success Academy claims that provision still violates the state constitution.

"The comptroller's fundamental duty is to superintend the fiscal concerns of the state," it says in the complaint. "Any audit of charter schools by the comptroller and or the OSC [Office of the State Comptroller] is not an administrative duty incidental to the comptroller's supervision of the fiscal affairs of the state, and therefore is unconstitutional."

Success Academy seeks declaratory judgment that the comptroller has no authority to audit charter schools, and a permanent injunction to bar such audits.

In the alternative, it wants the Harlem 1 audit declared unconstitutional and stopped.

It also seeks costs and attorneys' fees.

It is represented by Jay Lefkowitz with Kirkland & Ellis in Manhattan.

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