Albany

A South End charter school could have saved as much as $2.3 million by buying its Krank Street building rather than leasing it from the nonprofit foundation that has played a significant role in each of the city's 10 remaining charter schools, a state audit said.

The report from state Comptroller Tom DiNapoli's office faults Albany Community Charter School's board of trustees for failing to adequately scrutinize where the school should be located and how it should be paid for. The board failed, for example, to seek out a list of existing buildings from the state and city school district that could have been used.

In sum, the audit suggests school officials relied too heavily on the counsel of the Brighter Choice Foundation, a separate nonprofit that provides support services to the city's charter schools, for key decisions that should have been their own.

"It does raise some red flags for the charter school and the board," said Brian Butry, a spokesman for DiNapoli's office. "Is the board doing its due diligence when it comes to these decisions?"

Depending on the interest rate, the school could have saved between $207,000 and $2.3 million by borrowing to buy the elementary school rather than leasing it from Brighter Choice at least through 2017-18, the audit found.

DiNapoli's office said it "found no evidence that the board had fulfilled its fiduciary responsibility to the school by ensuring that it fully evaluated the choice of its school building. ... Instead the board allowed the foundation to select the site for the elementary school location, secure the financing for the construction, and construct the building."

The audit also questions another key financial relationship between the school and foundation, through which school officials pay Brighter Choice a percentage of their annual per-student income for "legal and financial assistance, technical support, and advocacy" — a total of about $55,000 in 2011-12.

"When asked to describe the specific services being provided to the school," the audit found, "the foundation did not provide any further detail."

The audit notes that every school trustee voted for that pact in 2011 except for the board's president, who recused himself because he was also chairman of the Brighter Choice Foundation.

That fee, which will rise to 2 percent after being renewed earlier this year, "does not appear to be reasonable as the services being provided do not have any bearing on the number of students at the school," DiNapoli's auditors found.

The increase — combined with the rise in enrollment tied to the opening last year of Albany Community Charter School's middle school in a South Dove Street building also owned by Brighter Choice — is expected to triple the fees paid by the school to the foundation.

Broadly, the issues raised by DiNapoli's audit could be seen as offering support to critics of the city's charter school presence generally, and Brighter Choice's role in it specifically.

The critics, many of whom allege the rise of charter schools has financially hobbled the city school district, have for years complained that the schools aren't nearly transparent enough about how they spend the roughly $35 million in taxpayer money the district is required to pay them every year.

It was a significant step in 2011 when another Brighter Choice school, the Brighter Choice Charter School for Boys on North Lake Avenue, became the first charter in the state audited by DiNapoli.

In a lengthy rebuttal to the audit, however, officials from Albany Community Charter School countered that the assumptions about how much it could have saved were fundamentally flawed because they failed to account for certain borrowing-related costs the school would have had to pay above and beyond the expense of the elementary school building.

The state analysis, the school argued, also failed to account for the fact that the lease was signed in September 2008, when national financial markets were in a state of collapse and a young school like ACCS would have faced insurmountable hurdles in securing the low-interest rates the audit used, wrote Bramble Buran, the chairwoman of the school's board of trustees.

The decision to rent the middle school, Buran noted, came after the city's Capital Resource Corporation made clear amid a contentious public debate that it would not allow charter schools to access its tax-free financing, even though they were eligible.

In an interview, Buran also described the school's contractual relationship with Brighter Choice as neither unusual nor exorbitant, adding that it allows the school to "focus on what its job is, which is to be there for the students and to help the students achieve" while Brighter Choice assists with complex legal and financial tasks.

"Albany Community Charter School would say that it's been a great partnership — of course, well aware that there are folks out there that are going to have a different opinion," Buran said.

Chief among those critics is the City School District of Albany, which said Wednesday that DiNapoli's audit validates alarms they have been raising for years about the lack of openness in how the charter schools spend public money.

"Where is this money going, and how is being used?" said William Hogan, the district's assistant superintendent for business affairs. "I think the taxpayers have a right to know that."

jcarleo-evangelist@timesunion.com • 518-454-5445 • @JCEvangelist_TU