STATE OF N E W Y O R K SURPEME COURT

COUNTY OF A L B A N Y

In the Matter of SUCCESS A C A D E M Y CHARTER SCHOOLS - N Y C , Petitioner-Plaintiff, For a Judgment Pursuant to N Y C P L R Articie 78 and NYCPLR3001 against THOMAS P. DINAPOLI, as Comptroller ofthe State OfNew York, OFFICE OF THE STATE COMPTROLLER, and THE STATE OF N E W Y O R K Respondents-Defendants. NOTICE OF MOTION FOR L E A V E TO FILE AN AMICUS CURIAE BRIEF IndexNo. 3708-13

P L E A S E T A K E N O T I C E that upon the annexed affirmation of Matthew Bergeron, Esq., swom to on the 20* day of December 2013, the swom affidavit of Peter Applebee, swom to on the 19'*' day of December 2013, with attachments, and upon all the pleadings and proceedings herein, die undersigned will move this Court, pursuant to the Rules of Procedure of the Supreme Court of the State ofNew York, at the Supreme Court ofthe State ofNew York, 16 Eagle Street, Albany, New York, at 9:30 a.m. on the 3'^ day of January 2014, or as soon thereafter as coimsel may be heard, for an order granting the New York State United Teachers ("NYSUT") and the United Federation ofTeachers, Local 2, AFT, AFL-CIO ("UFT') leave to file an amicus curiae brief in support of respondents-defendants Thomas P. DiNapoli, Office of the State Comptroller, and the State ofNew York in the above-captioned matter on the following grounds: (1) the case raises issues of paramount importance to NYSUT, UFT, and their members;

(2) the movants would invite the Court's attention to law and arguments which might not otherwise be brought to the attention of the Court; and (3) the movants' brief would be of special assistance to the Court. Dated: Latham, New York December 20, 2013 Respectfully submitted. RICHARD E. C A S A G R A N D E Attomey for Proposed y^w/cw^ Curiae New York State United Teachers 800 Troy-Schenectady Road Latham, N Y 12110 Tel. No. 518-213-6000

Fax N o ^ ^ : m { ^ 4 8 F \
e-majir^^^^@iwsimnail.org By:

TO:

K I R K L A N D & ELLIS LLP Attn: Jay P. Lefkowitz, P.C. Joshua B . Simon Ryan D. McEnroe Terence Y . Leong Attomeys for Petitioner-Plaintiff 601 Lexington Avenue New York, New York 10022 Eric T. Schneiderman, Esq. Attomey General of the State ofNew York Attn: James Seaman, Esq. Attomey for Respondents-Defendants The Capitol Albany, New York 12224-0341 (518) 474-3429

STATE OF N E W Y O R K SUPREME COURT In the Matter of

COUNTY OF A L B A N Y

SUCCESS A C A D E M Y CHARTER SCHOOLS - N Y C , Petitioner-Plaintiff, A F F I R M A T I O N DM SUPPORT OF MOTION FOR L E A V E TO FILE A N AMICUS CURIAE BRIEF IndexNo. 3708-13 against T H O M A S P. DINAPOLI, as Comptroller ofthe State o f N e w York, OFFICE OF THE STATE COMPTROLLER, and THE STATE OF N E W Y O R K Respondents-Defendants.

For a Judgment Pursuant to N Y C P L R Article 78 and N Y C P L R 3001

M A T T H E W E. BERGERON, an attomey admitted to practice before the Courts ofthe State o f N e w York, affirms under the penalty of perjury, the following: 1. I am of counsel to Richard E. Casagrande, attomey of record in this matter for the

New York State United Teachers ("NYSUP'). As such, I am familiar with the facts and circumstances of the above-captioned matter. 2. This affirmation is submitted in support o f N Y S U T and United Federation of

Teachers' ("UFT") motion for leave to file an amicus curiae brief on behalf of respondentdefendants Thomas P. DiNapoli, as Comptroller of the State o f N e w York, the Office of the State Comptroller, and the State ofNew York.

Basis of NYSUT'S and UFT's Request For Leave 3. NYSUT is affiliated with the American Federation of Teachers, the National

Education Association and the AFL-CIO. N Y S U T is a statewide labor organization, with over 1,263 local affiliated unions. These unions represent over 600,000 public and private sector employees and retirees in New York State. The majority o f N Y S U T members are in-service or retired public school teachers and school-related professionals, including secretaries, nurses, custodians, and bus drivers. NYSUT also represents employees of charter schools. The largest local union affiliated with NYSUT is the United Federation ofTeachers ("UFP'), which is the exclusive collective bargaining representative of all non-supervisory pedagogical personnel and instructional paraprofessionals employed by the Board ofEducation of the City School District of the City o f N e w York ("Board of Education"). The UFT's membership includes approximately 84,410 teachers, guidance counselors, secretaries, psychologists, and social workers, who are currently or potentially subject to the provisions ofEducation Law 3020-a, the means by which tenured educators can be terminated or otherwise subjected to discipline.

4.

On numerous issues of education and labor policy, NYSUT is regarded as the

representative of the teaching profession in this State. As such, N Y S U T has previously appeared as amicus curiae in a number of cases which could impact upon its members and public employees. Cases in which NYSUT has appeared as amicus curiae include the proceeding before the Supreme Court, New York County, in the instant matter, as well as the following: Rosenblum v. New York City Conflicts of Interest Board, 18N.Y.3d422 (2012); Kahn v. New York City Dep't of Educ, 18 N.Y.3d 457 (2012); Rosenblum v. New York City Conflicts of Interest Board, 75 A.D.3d 426 (1st Dep't 2010); Kahn v. New York City Dep't of Educ, 79
2

A.D.3d 521 (1st Dep't 2010); New York City Transit Auth. v. Transport Workers Union of Am., 14 N.Y.Sd 119 (2010); New YorkState Office of Children and Family Services v. Lanterman, 14 N.Y.Sd 275 (2010); New York Charter Sch. Ass 'n v. Smith, 15 N.Y.Sd 403 (2010); Godfrey v. Spano, 13 N.Y.Sd 358 (2009); N.Y Charter Sch. Ass'n v. DiNapoli, 13 N.Y.Sd 120 (2009); Amorosi v. South Colonie Indep. Cent. Sch. Dist., 9 N.Y.Sd 367 (2007); CSEA, Local 1000 v. New YorkState Pub. Employment Relations Bd, 35 A.D.Sd 1005 (3d Dep't 2006); NYSCOPBA V. New YorkStatePub. Employment Relations Bd, 309 A.D.2d 1118 (3d Dep't 2003); New York

City Transit Auth. v. Transport Workers' Union of Am., 306 A.D.2d 486 (2d Dep't 2003); Bd of Educ. V. Mills, 250 A.D.2d 122 (3d Dep't 1998).

Interests of NYSUT and UFT 5. As they both represent charter school employees, both NYSUT and UFT have a

significant and substantial interest in the outcome ofthis case. Charter schools are funded almost exclusively through public monies. The question before the Court is whether the Comptroller has the authority to conduct a financial audit of Success Academy to ensure that those public monies are being spent properly. Thus, the interests o f N Y S U T and UFT are not only important to the members they represent, but are common to those of all taxpayers. Grounds for Granting NYSUT and VFT Amicus Curiae Status 6. Submission of an amicus curiae brief by N Y S U T and UFT would be of special

assistance to this Court, in that it directs the Court's attention to law and arguments that might not otherwise be presented, and would assist this Court in reaching an informed disposition of the matter.

W H E R E F O R E , it is respectfully requested that this Court enter an order granting N Y S U T and UFT leave to appear as amicus curiae and to file a brief at a time and place designated by the Court, and for such other and further relief as the Court may deem appropriate. Dated: Latham, New York December 20,2013

STATE OF NEW YORK SUPREME COURT

COUNTY OF ALBANY

SUCCESS ACADEMY CHARTER SCHOOLSNYC, Petitioner-Plaintiff,

-againstAFFIDAVrr Index No.: 3708-13 THOMAS DINAPOLI, as Comptroller ofthe State OfNew York, OFFICE OF THE STATE COMPTROLLER, and THE STATE OF NEW YORK, Respondents-Defendants.

STATE OF NEW YORK COUNTY OF ALBANY

) )ss.: )

PETER APPLEBEE, being duly swom, deposes and says: 1. I currently serve as Manager of Higher Education, Education Finance, and Federal

Programs within plaintiff New York State United Teachers' ("NYSUT") Research Department. Prior to joming NYSUT in 2010,1 served as Assistant Chief Budget Examiner for the New York State Division of the Budget, Deputy Director and Assistant Director ofthe New York State Senate Finance Committee, Director and Assistant Director of the New York State Senate Education Committee, Program Associate in the New York State Senate's Ofifice of Counsel and Program, and Education Finance Associate for the New York State Senate Education Committee. In all, I have nearly 20 years of experience in the govemment sector with budget analysis. 2. I submit this affidavit in support ofthe motion to appear as amicus curiae in this 1

matter filed by New York State United Teachers ("NYSUT") and the United Federation ofTeachers. More specifically in support of that motion, attached hereto as Exhibit A and B are copies of financial analyses performed by the Research Department regarding the South Buffalo and Roosevelt Children's Academy Charter Schools. 3. By way of brief background, charter schools areftindedoverwhelmingly by public

tax dollars. Under the law, the only regular, required stream of revenue they receive is from the school district in which the child is located ("resident district"). Those payments are made as a form of "tuition" on behalf of each studentfromthe resident district attending the charter. 4. NYSUT is affiliated with labor organizations that represent charter employees for

collective bargaining piuposes. As such,fromtime to time we conduct analyses to determine those charters' fiscal health. The South Buffalo and Roosevelt Children's Academy analyses are such examples. 5. As shown by the attached analyses, both charters maintained significant fiind

balances. By the close ofthe 2011fiscalyear, the Buffalo charter held afondbalance of 177.9% of its total annual expenditures. Buffalso receives 94.1% of its fiinding from pubhc monies. For Roosevelt, its fimd balance at the end of fiscal year 2012 was 242.6% of its annual expenditures. Roosevelt receives 94% of its fundingfrompubhc monies. 6. To place these numbers into perspective, state law restricts non-charter public

schools to retaining a maximum of4% of its annual expenditures as a fimd balance. This is but only one statistic that shows the need and importance for oversight by the New York State Comptroller of charters. 7. For all the reasons set forth above, I respectfiilly submit that NYSUT and UFT's 2

motion to appear as amicus curiae be granted.

PETER APPLEBEE Swom to before me this

Mm

/rSay of December^2jjT3

MATTHEW E. BERGERON Notary Public, State of f > J e w York

NO.02BE6092817

Qualified jn Onondaga C q ^ ^ ^ Commission Expires May 27,

South Buffalo Charter School Financial Analysis 2008-2011

Prepared by Tim Miller New York State United Teachers Assistant in Research and Educational Services

March 30,2012

South Buffalo Charter School

Background The following represents an analysis of the financial condition ofthe South Buffalo Charter School (South Buffalo), based upon South Buffalo's Financial Statements produced for fiscal years ending June 30,2008,2009, 2010 and 2011. The financial statements were audited by Lumsden & McCormick, LLP. These audits found that the financial statements of South Buffalo represented fairly in all material respects the financial condition of South Buffalo at the conclusion of the respective year.

South Buffalo Charter School - Fiscal Years Ending 2010 and 2Q11
Expenditures Salaries Employee Benefits and Taxes Contracted Services Other Expenses Occupancy Professional Fees Staff Development Supplies and Materials Textbooks and Programs Transportation Depreciation Total Revenues Public School Districts Resident Student Enrollment Students with Disabilities Federal Grants Investment Income Other Income Total Operatine Surplus/(Deficit) F Y E 2010 $4,095,647 $1,106,838 $190,287 $243,236 $149,028 $62,303 $64,155 $106,304 $218,368 $38,080 $210,556 $6,484,802 F Y E 2010 $6,901,572 $457,267 $534,347 $30,987 $25,233 $7,949,406 $1,464,604 F Y E 2011 $4,024,043 $1,237,857 $170,121 $229,524 $178,390 $48,947 $59,605 $136,813 $175,597 $63,413 $232,039 $6,556349 F Y E 2011 $7,978,312 $567,275 $502,133 $16,107 $18,976 $9,082,803 $2,526,454
Dollar Change % Change

-$71,604 $131,019 -$20,166 -$13,712 $29,362 -$13,356 -$4,550 $30,509 -$42,771 $25,333 $21,483 $71,547
Dollar Chanpe

-1.7% 11.8% -10.6% -5.6% 19.7% -21.4% -7.1% 28.7% -19.6% 66.5% 10.2% 1.1%
% Change

$1,076,740 $110,008 -$32,214 -$14,880 -$6,257 $1,133397

15.6% 24.1% -6.0% -48.0% -24.8% 143%

In 2011, total expenditures increased by 1.1%fix)m2010. Salaries comprise the largest percent of South Buffalo's total expenditures, as typical ofservice organizations. Salaries comprised 61.4% of South Buffalo's total expenditures m 2011. Salaries decreased by $71,604, or 1.7% fi:om 2010. Employee Benefits and Taxes comprised 18.9% oftotal expenditures m 2011 and increased by 11.8% from 2010 levels. Overall revenue increased by 14.3% from 2010 levels. Revenue from PubHc School Districts (Resident Student Enrollment and Students with Disabihties) made up 94.1% of South Buffalo's revenues in 2011. Resident Stadent Enrollment comprised 87.8% and Stadents witii Disabihties comprised 6.2% of total revenues. In 2011, Revenue from
1 I South Buffalo Charter School

Public School Districts increased by 16.1% from 2010. The next largest revenue source was Federal Grants. Federal Grants comprised 5.5% of revenues in 2011 and decreased by 6.0% from 2010. South Buffalo ended the 2011 year with an operating surplus of $2,526,454, which represented 38.5% of total expenditures. South Buffalo Charter School - Fiscal Years Ending 2009 and 2010
Expenditures Salaries Employee Benefits and Taxes Contracted Services Other Expenses Occupancy Professional Fees Staff Development Supplies and Materials Textbooks and Programs Transportation Depreciation Total Revenues Public School Districts Resident Student Enrollment Students with Disabilities Federal Grants Investment Income Other Income Total Operating Surplus/fDeficit) F Y E 2009 $3,766,207 $926,437 $148,244 $277,273 $181,161 $49,838 $82,432 $123,008 $157,396 $21,849 $194,670 $5,928,515 F Y E 2009 $6,678,219 $351,157 $505,050 $63,875 $7,147 $7,605,448 $1,676,933 F Y E 2010 $4,095,647 $1,106,838 $190,287 $243,236 $149,028 $62,303 $64,155 $106,304 $218,368 $38,080 $210,556 $6,484,802 F Y E 2010 $6,901,572 $457,267 $534,347 $30,987 $25,233 $7,949,406 $1,464,604
Dollar Change % Change

$329,440 $180,401 $42,043 -$34,037 -$32,133 $12,465 -$18,277 -$16,704 $60,972 $16,231 $15,886 $556,287
Dollar Change

8.7% 19.5% 28.4% -12.3% -17.7% 25.0% -22.2% -13.6% 38.7% 74.3% 8.2% 9.4%
% Chanee

$223,353 $106,110 $29,297 -$32,888 $18,086 $343,958

3.3% 30.2% 5.8% -51.5% 253.1% 4.5%

In 2010, total expenditures increased by 9.4% firom 2009. Salaries comprised 63.2% of South Buffalo's total expenditares in 2010. Salaries increased by $329,440, or 8.7%. Employee Benefits and Taxes comprised 17.1% of total expenditures in 2010 and increased by 19.5%. Employee Benefits and Taxes comprised 32.4% ofthe total increase m expendihires of $556,287. Total revenue mcreased by 4.5% from 2009 levels. Revenue from Public School Disfricts made up 92.6% of South Buffalo's revenues in 2010. Federal Grants comprised 6.7% of revenues in 2010 and increased by 5.8% from 2009. South Buffalo ended the 2010 year with an operating surplus of $1,464,604, which represented 22.6% of total expenditures.

2 I South Buffalo Charter School

South Buffalo Charter Scbool - Fiscal Years Ending 2008 and 2009
Expenditures Salaries Employee Benefits and Taxes Contracted Services Other Expenses Occupancy Professional Fees Staff Development Supplies and Materials Textbooks and Programs Transportation Depreciation Total Revenues Public School Districts Resident Student Enrollment Students with Disabilities Federal Grants Investment Income Other Income Total Operating Surplus/fDeflcii) F Y E 2008 $3,524,705 $1,157,682 $158,502 $194,161 $141,585 $38,447 $70,690 $201,971 $148,774 $31,680 $175:226 $5,843,423 F Y E 2008 $5,981,043 $372,661 $706,726 $104,420 $51,723 $7,216373 $1,373,150 F Y E 2009 $3,766,207 $926,437 $148,244 $277,273 $181,161 $49,838 $82,432 $123,008 $157,396 $21,849 $194,670 $5,928,515 F Y E 2009 $6,678,219 $351,157 $505,050 $63,875 $7,147 $7,605,448 $1,676,933
Dollar Change % Change

$241,502 -$231,245 -$10,258 $83,112 $39,576 $11,391 $11,742 -$78,963 $8,622 -$9,831 $19,444 $85,092
Dollar Chanpe

6.9% -20.0% -6.5% 42.8% 28.0% 29.6% 16.6% -39.1% 5.8% -31.0% 11.1% 1.5%
% Chanee

$697,176 -$21,504 -$201,676 -$40,545 -$44,576 $388,875

11.7% -5.8% -28.5% -38.8% -86.2% 5.4%

In 2009, total expenditures increased by 1.5% from 2008. Salaries comprised 63.5% of South Buffalo's total expenditures m 2009. Salaries increased by $241,502, or 6.9%. Employee Benefits and Taxes comprised 15.6% oftotal expenditures in 2009 and decreased by 20.0%. Total revenue increased by 5.4% from 2008 levels. Public School Districts Revenue naade up 92.4% of South Buffalo's revenues in 2009. In 2009, Resident Student Enrolhnent increased by 11.7%, while Students with Disabilities decreased by 5.8% from 2008. Federal Grants comprised 6.6%. of revenues in 2009 and decreased by 28.5% from 2008. South Buffalo ended the 2009 year with an operating surplus of $1,676,933, which represented 28.3% of total expenditures. At the end of 2008, South Buffalo had an operating surplus of $1,373,150, or 23.5% oftotal expendihires.

3 I South Buf&lo Charter School

South Buffalo Charter School - Fiscal Years Ending 2008-2011

Expenditures Salaries Employee Benefits and Taxes Contracted Services Other Expenses Occupancy Professional Fees Staff Development Supplies and Materials Textbooks and Programs Transportation Depreciation Total Revenues Public School Disfricts Resident Student Enrollment Students with Disabilities Federal Grants Investment Income Other Income Total Operating SurpIus/(DeficU) F Y E 2008 $3,524,705 $1,157,682 $158,502 $194,161 $141,585 $38,447 $70,690 $201,971 $148,774 $31,680 $175,226 $5,843,423 F Y E 2008 $5,981,043 $372,661 $706,726 $104,420 $51,723 $7,216,573 $1,373,150 F Y E 2009 $3,766,207 $926,437 $148,244 $277,273 $181,161 $49,838 $82,432 $123,008 $157,396 $21,849 $194,670 $5,928,515 F Y E 2009 $6,678,219 $351,157 $505,050 $63,875 $7,147 $7,605,448 $1,676,933 F Y E 2010 $4,095,647 $1,106,838 $19037 $243,236 $149,028 $62,303 $64,155 $106,304 $218,368 $38,080 $210,556 $6,484,802 F Y E 2010 $6,901,572 $457,267 $534,347 $30,987 $25,233 $7,949,406 $7,672,498 F Y E 2011 $4,024,043 $1,237,857 $170,121 $229,524 $178,390 $48,947 $59,605 $136,813 $175,597 $63,413 $232,039 $6,556,349 F Y E 2011 $7,978,312 $567,275 $502,133 $16,107 $18,976 $9,082,803 $9,137,102 Dollar Change $499,338 $80,175 $11,619 $35,363 $36,805 $10,500 -$11,085 -$65,158 $26,823 $31,733 $56,813 $712,926
Dollar Change % Change

14.2% 6.9% 7.3% 18.2% 26.0% 27.3% -15.7% -32.3% 18.0% 100.2% 32.4% 12.2%
% Chanse

$1,997,269 $194,614 -$204,593 -$88,313 -$32,747 $1,866,230

33.4% 52.2% -28.9% -84.6% -63.3% 25.9%

Total expenditures mcreased from $5.84 million in 2008 to $6.56 million in 2011. This represents a $712,926 increase (12.2%) in spending over the foxir-year period ofthis analysis. This increase m expenditures translates to an average amiual increase in expendihires of 4.1% between 2008 and 2011. This increase in expenditures over the four-year period was mostly due to Salaries mcreasing by $499,338, or 14.2%. Salaries attributed 70.0% of the total increase in expenditures. Total revenues increased from $7.22 million m 2008 to $9.08 million in 2011. This $1,866,230 increase in revenue reflects a 25.9% increase in revenues over the four-year period. This 25.9% increase reflects an average annual increase in revenues of 8.62%. Total Public School Dishict Revenue increased by 34.5%. Resident Student Enrollment increased by 33.4% and Students with Disabilities increased by 52.2%. A l l other sources of revenue declmed over the four-year period. Federal Grants declined by $204,593, or 28.9%

4 I South Buffalo Charter School

Fund Balance Changes - Fiscal Years Ending 2009 through 2011

F Y E 2008 Beginning Year Fund Balance Operating Surplus/(Deficit) Ending Year Fund Balance Total Expenditures Ending Year Fund Balance as Percent of Total Expenditures $4,622,415 $1,373,150 $5,995,565 $5,843,423 F Y E 2009 $5,995,565 $1,676,933 $7,672,498 $5,928,515 F Y E 2010 $7,672,498 $1,464,604 $9,137,102 $6,484,802 F Y E 2011 $9,137,102 $2,526,454 $11,663,556 $6,556,349 $5,667,991 94.5%
Dollar Change % Change

102.6%

129.4%

140.9%

177.9%

South Buffalo continues to be in an unusually strong financial condition. The fund balance shows significant growth each year. When the fund balance is combined with the ongoing operating surpluses, the school has significant resources available for negotiations. South Buffalo began the 2008 fiscal year with a fund balance of $4,622,415. By the end ofthe 2011 fiscal year, the fimd balance totaled $11,663,556 an mcrease of $7,041,141 from the beginning level of 2008. At the end of2008, the fimd balance as a percentage of South Buffalo's total expendihires was 102.6%. By the end of 2011, the fund balance represented 177.9% of total expenditures. The fund balance has continued to grow even though per pupil tuition level in the 200910 year was frozen to 2008-09 levels. Based on current state statute, per pupil tuition payments forthe 2011-12 and 2012-13 fiscal years are frozen to 2010-11 levels. This per pupil tuition freeze will present no fiscal difficulties for the school since revenues exceeded expenditares by 38.5% in the 2010-11 fiscal year. To illusfrated this large revenue cushion, assummg that total expenditures increase between 2010-11 and 2012-13 at the same rate as they did over the last two years, then total expenditures would sfill be ahnost $2 million below the 2010-11 total revenue levels. Public school districts are restricted by state law to only retain a maximum of 4% in an tmrestricted fund balance. While this provision of state law does not apply to charter schools, if South Buffalo limited its fimd balance in a similar manner, the school would retain about $260,000 in a fimd balance. The existing fimd balance is so large that the school could operate for over a year and a half at the current expendihxre levels without collecting any additional revenue.

5 I South Buffalo Charter School

Roosevelt Children's Academy Charter School, Inc. Financial Analysis 2010-2012

Prepared by Tim Miller New York State United Teachers Assistant in Research and Educational Services

March 28,2013

Roosevelt Children's Academy Charter School, Inc.

The following represents an analysis of the financial condition ofthe Roosevelt Children's Academy Charter School, Inc. (Roosevelt). The analysis is based upon Roosevelt's certified fmancial statements for fiscal years ending June 30,2010,2011, and 2012. The 2012 financial statements were audited by Galleros-Koh LLP and the 2010 and 2011 financial statements were audited by Israeloff, Trattner & Co. P.C. These audits found that the financial statements of Roosevelt represented fairly in all material respects the fmancial condition of Roosevelt atthe conclusion of the respective year.

Fiscal Year Ending June 30,2012

Revenues Resident Student Enrollment Food Service Federal-NCLB and IDEA E-rate Fimding Fundraising Income Interest Income Other Income Total F.Ttnenditures* Salaries and V/ages Payroll Tax Expenses and Fringe Benefits Food Purchases SuppHes and Materials Textbooks Occupancy Professional Fees Other Expenditures Total 20J1 $12,149,540 $307,458 .$227,746 $45,568 $147,437 $46,640 $394 $12,924,783 2011 $3,875,645 $1,109,283 $320,734 $224,837 $175,027 $357,561 $290,015 $860,341 $7,213,443 2012 $13,031,629 $295,592 $274,024 $36,186 $136,734 $52,902 $141 $13,827,208 2012 $4,568,659 $1,055,467 $361,430 $241,602 $60^361 $173,864 $189,537 $1,014,091 $7,665,011 Variance $882,089 ($11,866) $46,278 ($9,382) ($10,703) $6,262 ($253) $902,425 %Change 7.3% -3.9% 20.3% -20.6% -7.3% 13.4% -64.2% 7-0%

Variance $693,014 ($53,816) $40,696 $16,765 ($114,666) ($183,697) ($100,478) $153,750 $451,568

%Change 17.9% -4.9% 12.7% 7.5% -65.5% -51.4% -34.6% 17.9% 6.3%

SuTplus/(Dericit)

$5,711,340

$6,162,197

* Depreciation has been removed fcom all expenditure tables to reflect actual cash operating expenditures.

In 2012, total revenue increased by 7.0% from 2011 levels, primarily due to an $882,089 increase in Resident Student Emollment. Resident Student Enrollment comprises the majority of Roosevelt's revenues. In 2012, this revenue source comprised 94.2% of all revenues. The next largest revenue sources were Food Service and Federal which comprised 2.1% and 2.0% respectively. Total expenditures increased by 6.3% from 2011. Salaries and Wages comprise the largest percent of Roosevelt's total expenditures, as typical ofservice organizations. Salaries and Wages comprised 59.6% oftotal expendihires in 2012 and increased by $693,014, or 17.9%. Payroll Tax Expenses and Fringe Benefits comprised 13.8% oftotal expendihires in 2012 and decreased by 4.9%.

Roosevelt ended the 2012 year with an operating surplus of $6,162,197, which represented 80.4% of expenditures.

Fiscal Year Ending June 30,2011

Revenues Resident Student Enrollment Food Service Federal-NCLB and IDEA E-rate Funding Fundraising Income Interest Income Other Income Total Expenditures* Salaries and Wages Payroll Tax Expenses and Fringe Benefits Food Purchases Supplies and Materials Textbooks Occupancy Professional Fees Other Expenditures Total Surplus/(Deficit) 2010 $8,785,887 $181,974 $442,029 $22,500 $56,535 $69,618 $1,237 $9,559,780 2010 $3,353,210 $954,243 $241,894 $134,141 $80,149 $340,633 $277,237 $806,287 $6,187,794 $3,371,986 2011 $12,149,540 $307,458 $227,746 $45,568 $147,437 $46,640 $394 $12,924,783 2011 $3,875,645 $1,109,283 $320,734 $224,837 $175,027 $357,561 $290,015 $860,341 $7,213,443 $5,711,340 Variance $3,363,653 $125,484 ($214,283) $23,068 $90,902 ($22,978) ($843) $3,365,003 Variance $522,435 $155,040 $78,840 $90,696 $94,878 $16,928 $12,778 $54,054 $1,025,649 %Change 38.3% 69.0% -48.5% 102.5% 160.8% -33.0% -68.1% 35.2% %Change 15.6% 16.2% 32.6% 67.6% 118.4% 5.0% 4.6% 6.7% 16.6%

Total revenues increased in 2011 by 35.2% from 2010 levels. Resident Student Enrollment comprised 94.0% of Roosevelt's revenues and increased by $3.3 million, or 38.3%. Food Service increased by 69.0% and comprised 2.4% of revenues in 2011 while Federal decreased by 48.5% and comprised 1.8%. Total expenditures increasedby 16.6% in 2011. Salaries and Wages comprised 53.7%i of expenditvu-es and increased by 522,435, or 15.6%. in 2011. Payroll Tax Expenses and Fringe Benefits comprised 15.4%. of expenditures and increased by 16.2%firom2010. Rooseveh ended the 2011 year with an operating surplus of $5,711,340, or 79.2% oftotal expendihires. h 2010, Rooseveh had an operatmg surplus of $3,371,986, or 54.5%. of the total expenditures.

Fiscal Years Ending 2010-2012

Revenues Resident Student Enrollment Food Service Federal-NCLB and IDEA E-rate Funding Fundraising Income Interest Income Other Income Total Expenditures* Salaries and Wages Payroll Tax Expenses & Fringe Benefits Food Purchases Supplies and Materials Textbooks Occupancy Professional Fees Other Expenditures Total Change in Net Assets 2010 $8,785,887 $181,974 $442,029 $22,500 $69,618 $56,535 $1,237 $9,559,780 2010 $3,353,210 $954,243 $241,894 $134,141 $80,149 $340,633 $277,237 $806,287 $6,187,794 $3,371,986 2011 $12,149,540 $307,458 $227,746 $45,568 $147,437 $46,640 $394 $12,924,783 2011 $3,875,645 $1,109,283 $320,734 $224,837 $175,027 $357,561 $290,015 $860,341 $7,213,443 $5,711,340 2012 $13,031,629 $295,592 $274,024 $36,186 $136,734 $52,902 $141 $13,827,208 2012 $4,568,659 $1,055,467 $361,430 $241,602 $60,361 $173,864 $189,537 $1,014,091 $7,665,011 $6,162,197 Variance $4,245,742 $113,618 ($168,005) $13,686 $67,116 ($3,633) ($1,096) $4,267,428 Variance $1,215,449 $101,224 $119,536 $107,461 ($19,788) ($166,769) ($87,700) $207,804 $1,477,217 %Change 48.3% 62.4% -38.0% 60.8% 96.4% -6.4% -88.6% 44.6% %Change 36.2% 10.6% 49.4% 80.1% -24.7% -49.0% -31.6% 25.8% 23.9%

Total revenues increased from $9.5 million in 2010 to $13.8 million in 2012. This $4,267,428 increase in revenue reflects a 44.6% increase in revenues over the three-year period. This 44.6% increase in revenues reflects an average annual increase in revenues of 22.3%. The increase can be attributed to a $4.2 million growth in Resident Student Emollment. Total expenditures increased from $6.1 million in 2010 to $7.6 million in 2012. This represents a $1,477,217 increase (+23.9%) in spending over the three-year period of this analysis. This expenditure growth translates to an average annual increase in expenditures of 11.9% between 2010 and 2012. This increase m expenditures was primarily due to the $1.2 million increase in Salaries and Wages.

Ailocation of Expenditures between Program and Support Services - 2012

Proaram Services Expenditures* Salaries and Wages Payroll Tax Expenses & Fringe Benefits Food Purchases Supplies and Materials Textbooks Occupancy Professional Fees Other Expenditures TotaJ Expenses Regular Education $3,267,066 $754,768 $346,974 $232,391 $57,947 $123,445 $0 $644,669 $5,427,260 Special Education $182,746 $42,219 $14,456 $9,211 $2,414 $6,953 $0 $14,877 $272,876 Support Services Management and General $1,118,847 $258,480 $0 $0 $0 $43,466 $189,537 $220,526 $1,830,856 Fundraising $0 $0 $0 $0 $0 $0 $0 $134,019 $134,019 Combined 2012 $4,568,659 $1,055,467 $361,430 $241,602 $60,361 $173,864 $189,537 $1,014,091 $7,665,011

The table above breaks out Roosevelt's allocation of expenditures between Regular Education, Special Education, Management, and Fundraising for the 2012 year.

Cash and Cash Equivalents - Fiscal Years Ending 2010 - 2012

F Y E 2010 F Y E 2011 F Y E 2012
Dollar Change % Change

Beginning Year Balance End Year Balance Total Expenditures Ending Year Balance as Percent of Total Expenditures

$7,741,819 $7,876,455 $6,187,794 127.3%

$7,876,455 $12,645,616 $7,213,443 175.3%

$12,645,616 $18,594,129 $7,665,011 242.6% $10,717,674 136.1%

Rooseveh continues to be in an imusually strong fmancial condition. The school's cash and cash equivalents balance (cash and ofher liquid assets) have shown significant growth each year. When the cash balance is combined with the ongoing operating surpluses, the school has significant resources available for negotiations. They began the 2010 year with a $7,741,819 cash balance. By fhe end of 2012, the cash balance totaled $18,594,129, a $10,852,310 mcreasefiromthe beginnmg of 2010. Atthe end of 2010, the cash balance as a percentage of Roosevelt's total expenditures was 127.3%. By the end of 2012, the cash balance represented 242.6% of total expenditures. The fund balance has continued to grow even though per pupil tuition level in the 200910 year was frozen to 2008-09 levels and payments for the 2011-12 through 2013-14 fiscal years are frozen to 2010-11 levels. This per pupil tuition freeze will present no fiscal difficulties forthe school since revenues exceeded expenditures by 80.4% in tihe 2011-12 year. To illusfrate this large revenue cushion, assummg that total expenditures increase between 2012-13 and 2013-14 at the same rate as they did over the last two years, then total expenditures would still be over $4 million below the 2011-12 total revenue levels.

Public school dishicts are restricted by state iaw to only retain a maximum of 4% in an unrestricted fund balance. While this provision of state law does not apply to charter schools, if Roosevelt limited its cash balance in a similar manner, the school would retain about $310,000. The existing cash balance is so large that the school could operate for over two years at the current expenditure levels without collecting any additional revenue.

STATE OF N E W YORK SUPREME COURT

COUNTY OF A L B A N Y

In the Matter of SUCCESS A C A D E M Y CHARTER SCHOOLS - N Y C , Index No. 3708-13 Petitioner-Plaintiff, For a Judgment Pursuant to N Y C P L R Article 78 and N Y C P L R 30001 against THOMAS P. DINAPOLI, as Comptroller ofthe State ofNew York, OFFICE OF THE STATE COMPTROLLER, and THE STATE OF N E W YORK Respondents-Defendants.

PROPOSED AMICUS CURIAE BRIEF ON BEHALF OF NEW YORK STATE UNITED TEACHERS AND THE UNITED FEDERATION OF TEACHERS IN SUPPORT OF RESPONDENTS-DEFENDANTS RICHARD E. CASAGRANDE Attomey for Proposed Amicus New York State United Teachers 52 Broadway, 9th Floor New York, N Y 10004 Telephone: (212) 533-6300 Facsimile: (212) 228-9253 MATTHEW BERGERON BRIE K L U Y T E N A A R Of Counsel A D A M S. ROSS Attomey for Proposed Amicus United Federation ofTeachers 52 Broadway, 14"" Floor New York, N Y 10004 Telephone: (212) 533-6300 Facsimile: (212) 228-9253

T A B L E OF CONTENTS PRELIMINARY STATEMENT ARGUMENT POINT! THE COMPTROLLER IS CONSTITUTIONALLY AUTHORIZED TO CONDUCT FISCAL AUDITS OF CHARTER SCHOOLS A. B. C. Legislative Enactments Are Presumed Constitutional The Proposed Audit is Limited in Scope and is Discretionary The Proposed Audit is Incidental to the Comptroller's Supervision of the Accounts of School Districts Public Policy Strongly Favors Fiscal Oversight by the Comptroller Plaintiff-Petitioner's Claims of Burden and Duplication are Irrelevant POINT II PLAINTIFF-PETITIONER FAILS TO M A K E THE REQUISITE SHOWING TO WARRANT A N INJUNCTION CONCLUSION APPENDIX 19 22 16 I

5 6 7

D.

11

E.

PRELIMINARY STATEMENT New York State United Teachers ("NYSUT") and the United Federation of Teachers ("UFT") submit this amicus brief accompanying its motion for amicus curiae rehef As amici, N Y S U T and UFT respectfully submit that the Comptroller has constitutional authority, with or without direction from the Legislature, to conduct the proposed audit of plaintiff-petitioner. Therefore, this Court should deny the relief sought by plaintiff-petitioner and grant respondentsdefendants' motion to dismiss. Article V , 1 of the New York State Constitution provides, in relevant part, that "the legislature shall defme the powers and duties [of the Comptroller] and may also assign to him or her ... supervision ofthe accounts of any political subdivision of the state ... The legislahire shall assign to him or her no adminishative duties, excepting such as may be incidental to the performance of these fimctions, any other provision of this constitution to the contrary notwithstanding." After a rash of scandals involving the misappropriation of millions of public dollars in several school dishicts in New York State, the Legislahire amended the law to expressly direct the Compholler to audit all charter schools. New York Charter Schools Association, et al. v. DiNapoli, 13 N.Y.3d 120, 136 (2009); Ch. 267 of the Laws of 2005. Perhaps the most

prominent incident in this rash was out of the Roslyn Union Free School District. According to a 2005 report issued by the Comptroller's office, more than $ 11 million ofthe district's fimds were used for personal expenses. That report cited poor and/or non-existent oversight by the District's board of education and inadequate monitoring by the District's independent auditor. The scandal resulted in the imprisonment of at least two District officials. Roslyn Union Free School

District: Anatomy ofa Scandal. Report of Examination, covering January 1, 1996 to June 14, 2004, #2005M-21. The law was later stricken by the Court of Appeals in New York Charter Schools Association, et al. v. DiNapoli, supra. In that case, the Comptroller sought, pursuant to the Legislature's direction, to conduct a performance audit of a charter school. However, the majority found that the limitations contained in Article V , 1 prohibited the Legislature from directing the Comptroller to do so. Concurring with the result m that case. Chief Judge Lippman wrote, "[w]e do not hold that charter schools may never be audited by the State Comptroller" and that it may be that the Comptroller can audit charter schools "at his or her discretion." 13 N.Y.3d at 134. Similarly, Judge Graffeo agreed that the Legislature could not direct the Comptroller to conduct performance audits, but opined that "Article V , 1 grants the Legislamre some flexibility in authorizing the ComphoUer to conduct more limited, purely fmancial audits of the public funding provided to charter schools." Id. at 135. After the DiNapoli decision, the Legislature amended the law to eliminate the directive and authorize the ComphoUer to conduct audits "at his or her discretion." Education Law

2854(l)(c); Chapter 101 of the Laws of 2010. Relying on the amended statute, the Comptroller sought to conduct a strictly fmancial audit of plaintiff-petitioner. This action ensued. As the state's largest labor organization, representing more than 600,000 in-service and retired public and private sector employees, including charter school employees, NYSUT has an interest in the outcome of this matter. The largest local union affiliated with NYSUT is the United Federation of Teachers ("UFT"), which is the exclusive collective bargaining representative of all non-supervisory pedagogical personnel and instructional paraprofessionals

employed by the Board of Education of the City School District of the City of New York. As amici, NYSUT and the UFT wili respectfully point the Court's attention to law and arguments that may not be fully presented by the parties to the case and thus may escape the Court's consideration. On numerous issues of education and labor policy, NYSUT is regarded as the representative of the teaching profession in this State. As such, N Y S U T has previously appeared as amicus curiae in a number of cases which could impact its members and public employees. Cases in which N Y S U T has appeared as amicus curiae include: Cunningham v. New York State Dep't of Labor, 2013 N Y Slip. Op. 04838 (2013); Condon v. Sabater, 2013 N Y Slip. Op. 69173(U) (1st Dep't 2013); Rosenblum v. New York City Conflicts of Interest Board, 18 N.Y.3d 422 (2012); Kahn v. New York City Dep't ofEducU N.Y.3d 457 (2012); Condon v. Sabater,

Index No. 401175/12 (Sup. Ct., N Y Co. 2012); Rosenblum v. New York City Conflicts of Interest Board, 75 A.D.3d 426 (1st Dep't 2010); Kahn v. New York City Dep't of Educ, 79 A.D.3d 521 (1st Dep't 2010); New York City Transit Auth. v. Transport Workers Union of Am., 14 N.Y.3d 119 (2010); New York State Office of Children and Family Services v. Lanterman, 14 N.Y.3d 275 (2010); New York Charter Sch. Ass'n v. Smith, 15 N.Y.3d 403 (2010); Godfrey v. Spano, 13 N.Y.3d 358 (2009); N.Y Charter Sch. Ass'n v. DiNapoli, 13 N.Y.3d 120 (2009); Amorosi v. South Colonie Indep. Cent. Sch. Dist., 9 N.Y.3d 367 (2007); CSEA, Local 1000 v. New York State Pub. Employment Relations Bd, 35 A.D.3d 1005 (3d Dep't 2006); NYSCOPBA v. New York State Pub. Employment Relations Bd, 309 A.D.2d 1118 (3d Dep't 2003); New York Cily Transit Auth. v. Transport Workers' Union of Am., 306 A.D.2d 486 (2d Dep't 2003). In N Y S U T and UFT's view, the instant matter impacts fundamentally and crucially on the ability of the State Comptroller, who is "the independent auditing official for the affairs of

the State" and who is responsible for "superintend[ing] [its] fiscal concerns" to ensure that taxpayer fiinds intended to carry out the public fimction of education are not misused by charter schools. Matter ofDinallo v. DiNapoli, 9 N.Y.3d 94,101 (2007); State Finance Law 8. Accordingly, N Y S U T and UFT respectfiilly request that their motion for amicus curiae relief be granted, that the amicus brief proposed by NYSUT and UFT be accepted, that plaintiffpetitioner's requests for preliminary and permanent relief be denied, and that defendantsrespondents' motion to dismiss be granted, thus affirming the State Comptioller's authority to audit charter schools' use of public fimds.

ARGUMENT POINT I THE COMPTROLLER IS CONSTITUTIONALLY AUTHORIZED TO CONDUCT FISCAL AUDITS OF CHARTER SCHOOLS This proceeding concems the authority of the State Comptroller to conduct, at his discretion, a fiscal audit of Success Academy Charter School - Harlem 1 ("Harlem 1"), a charter school in New York City. Article V , Section 1 of the New York State Constitution ("Constitution") provides that: The comptroller shall be required: (1) To audit all vouchers before payment and all official accounts; (2) to audit the accrual and collection of all revenues and receipts; and (3) to prescribe such methods of accounting as are necessary for the performance ofthe foregoing duties. The payment of any money of the state, or of any money under its conhol, or the refiind of any money paid to the state, except upon audit by the comptiroUer, shall be void ... In such respect the legislature shall define the powers and duties and may also assign to him or her: (1) supervision of the accounts of any political subdivision of the state . . . The legislahire shall assign to him or her no administrative duties, excepting such as may be incidental to the performance of these functions, any other provision of this constitution to the contrary notwithstanding.

This provision "does not specify financial audits, performance audits or indeed audits at all, but broadly empowers the Legislahire to delegate to the Comptroller both supervision ofthe accounts of any political subdivision of the State and administrative duties incidental thereto." Matter of McCall v. Barrios-Paoli, 93 N.Y.2d 99, 105 (1999); New York Charter Schools Association, Inc., v. DiNapoli, 13 N.Y.3d 120 (2009). Education Law 2854(1 )(c) provides that a charter school "shall be subject to the financial audits, the audit procedures, and the audit requirements set forth in the charter and shall be subject to audits of the comptroller of the state of New York at his or her discretion. Such

procedures and standards shall be consistent with generally accepted accounting and audit standards." Pursuant to these provisions, in April 2013, the Comptroller sought to conduct a fiscal audit of Harlem 1. Amicus respectfully contends that, for all the reasons discussed below, the Comptroller's proposed audit of Harlem 1 is constitutionally permissible and therefore respondents-defendants' motion to dismiss should be granted. A. Legislative Enactments Are Presumed Constitutional

As a preliminary matter, it is well-settled that legislative enactments enjoy a strong presumption of constitutionality. A party contesting the constitutionality of a statute must overcome a very heavy burden by proving that the invalidity of the law is beyond a reasonable doubt. See, e.g., Concemed Home Care Providers v. State of New York, 969 N.Y.S.2d 210 (N.Y.A.D. 3 Dept., 2013); Overstockcom v. New York State Department of Taxation and

Finance, 20 N.Y.3d 586, 987 N.E.2d 621 (N.Y., 2013). hideed, in seeking facial nullification, petitioners bear the burden to demonstrate that "in any degree and in every conceivable application," the law suffers wholesale constitutional impairment. Cohen v. State, 94 N.Y.2d 1 (1999), citing McGowan v. Burstein, 71 N.Y.2d 729, 733 (1988). "Statutes are quintessentially the product of the democratic lawmaking process. These threshold hurdles are . . . set in place doctrinally and precedentially because of a fundamental premise that '[bjalancing the myriad requirements imposed by both the State and the Federal Constitution is a function entrusted to the Legislature, the elective representatives of the people.'" Cohen v. State, 94 N.Y.2d 1 at 8, citing Matter of Wolpoff v. Cuomo, 80 N.Y.2d 70, 79 (1992). Moreover, it is a familiar rule of statutory constiuction that when the Legislature amends a statute it will be assumed to have knowledge of judicial decisions interpreting the statute as then existing . . . an amendment substituting a different term forcefully indicates that the judicial

decision did not correspond with legislative intent, and that a different interpretation should be had." People ex rel Makin v. Wilkins, 22 AD2d 497, 499 (4* Dept. 1965). That is particularly so where, as here, the Legislature expressly revised the language of the statute in question to cure a constitutional defect and render it applicable. B. The Proposed Audit is Limited in Scope and is Discretionarv

Plaintiff-petitioner wrongly attempts to frame this matter as a simple rehashing of a previous case. New York Charter Schools Association, Inc., v. DiNapoli, 13 N.Y.3d 120 (2009), ("New York Charter Schools Association") in which the Court of Appeals held that the

Legislature exceeded its power by directing the Comptroller to conduct plenary audits of charter schools. In that case, the Court found that the provisions of General Municipal Law 33(2) and Education Law 2854(1)(c) were unconstitutional only "to the extent that [those] provisions direct the Comptroller to conduct audits of charter schools." In his concurrence. Chief Judge Lippman clarified, "[w]e do not hold that charter schools may never be audited by die State Compttoller . . . We have not, by enforcing the constiUitional limitation upon the Legislature's prerogative to make use of the Compfroller's office, thereby placed charter schools beyond the Comptroller's power." Id. at 134. In a concurring opinion. Judge Graffeo stated that "the Legislature could constitutionally direct die Comptroller to perform fiscal audits of the public fiinding that charter schools receive as 'incidental' to his comprehensive oversight of school districts themselves." M at 137-138. Plaintiff-petitioner fails to acknowledge the crucial facts that distinguish this case from New York Charter Schools Association and render the audit at issue here constitutionally permissible. First, the audit in this proceeding was not directed by the Legislature. Rather, it was initiated by the Comptroller at his discretion pursuant to Education Law 2854(1)(c). In a

concurrence explaining the contours of the Court's holding in New York Charter Association, Judge Lippman wrote: The issue before us has less to do with the power of the Comptroller than it does with the power of the Legislature. A l l we hold is that the Legislature could not, consistent with the express limitation upon its authority to defme the Comptroller's agenda contained in article V, 1, direct the ComphoUer to perform both fiscal and programmatic audits.

Schools

Following that decision, the Legislature amended Education Law 2854(1 )(c) to repeal the language requiring the Comptroller to audit charter schools. Instead, it subjected charter schools to Comptroller audits at his discretion. This distinction is crucial because in the instant matter, it cannot be said that the Legislature exceeded its power by directing the Comptroller to audit Petitioner; rather, the Compholler has initiated the audit at his discretion pursuant to his statutory and constitutional authority. Second, the scope of the audit presently at issue is limited to fiscal matters, a fact that petitioner acknowledges in" its petition.' In New York Charter Schools Association, Comptroller sought to "conduct academic performance audits." the

13 N.Y.3d at 128. Here,

however, the scope ofthe audit encompasses only the fiscal data possessed by the school. In this regard, the audit is limited to an arena in which the ComphoUer has undeniable expertise: he is the state's chief fiscal officer, charged with "the unique fundamental duty to superintend the fiscal concems of the State." Matter ofMcCall v. Barrios-Paoli, 93 N.Y.2d 99, 104 (1999). In Dinallo v. DiNapoli, 9 N.Y.3d 94 (2007), the Court of Appeals held that the Legislature could not direct the Comptroller to audit the New York State Insurance Department Liquidation

' Plaintiff-petitioner writes, "[b]y letter dated April 30,2013, the Comptroller sought to conduct a comprehensive financial audit of Harlem 1 . . . requiring Harlem I to collect substantial amounts of information and provide the Comptroller with access to detailed financial records." (Emphasis supplied.)

Bureau because the sole purpose of the Bureau had "no impact on the state fisc." Additionally, the Court noted that the Bureau did not perform a govemmental or proprietary function for the state, and it operated without the benefit of state funds. Here, all of those criteria are present. Plaintiff-petitioner performs a govemmental function and relies on state funds. In addition, its very existence has an impact on the state fisc, as state money is diverted, pursuant to statute, from traditional public schools within a school disfrict to charter schools within that district. C. The Proposed Audit is Incidental to the Comptroller's Supervision ofthe Accounts of School Districts

Furthermore, insofar as the Compfroller's audit of Harlem 1 could be deemed the result of the Legislature's direction, the fiscal information the Comptroller seeks is incidental to his supervision of the accounts of the school district. N.Y. Const. Art. V , 1. It is well-established that school disfricts are considered political subdivisions of the state. See Koch v. Webster Central School Dist Bd. of Ed., 445 N.Y.S.2d 874, N.Y.Sup. (1981), and cases cited therein. As such, they are subject to audit by the Comptroller. While charter schools are not overseen by school districts in the same marmer as traditional public schools, they are undeniably public schools as evidenced by thefr very definition in the Education Law. Moreover, the use or misuse of public fiinds by public schools, including charter schools, has a direct and significant impact on the school districts within which they operate, as well as on the state as a whole. The Education Law repeatedly characterizes charter schools as public schools. For example, Education Law 2850(2)(e) lists one of the objectives of charter schools as providing parents and students "with expanded choices in the types of educational opportunities that are available within the public school system" (emphasis added). Education Law 2853(1 )(c) states that "[a] charter school shall be deemed an independent and autonomous public school," and Education Law 2853(1 )(d) provides that "[t]he powers granted to a charter school under this

article constitute the perfomiance of essential public purposes and govemmental purposes ofthis state." In addition, plaintiff-petitioner considers itself a public school and has held itself out as such as recently as October 9,2013, at a very public rally m New York City.^ Although charter schools are not accountable to their local school districts in the same manner as traditional public schools, they are public schools whose finances are inextricably linked to those ofthe school districts. Charter schools receive funds from the local school dishrict based upon the number of students they enroll. The Education Law requires that "school districts shall pay directly to the charter school for each student enrolled in the charter school who resides in the school district the charter school basic tuition," as well as "any federal or state aid attributable to a student with a disability attending a charter school "^

Furthermore, pursuant to Education Law 2856(2), i f a school dishict fails to make the mandatory payments outlined in Education Law 2856, the ComphroUer must deduct from any state flmds that become due to such school district an amount equal to the unpaid obligation to the charter school. This requirement alone is sufficient to render a fiscal audit of a charter school by the Comptroller incidental to his supervision of the school district's accounts. For example, i f a charter school claims it did not receive the payments required under Education Law 2856, the Comptroller would be unable to verify such a claim without auditmg the financial records of both the school disfrict and the charter school. Yet in the face of all the above, the Petitioner

^ A n article published in the New York Daily News describing a pro-charter school rally orchestrated by Success Academy in New York City on October 8,2013 features photographs of charter school supporters wearing t-shirts provided to participants by Success Academy which read "Charter Schools Are Public Schools." See "Charter school rally sends message to Bill de Blasio, Joe Lhota" available at http://www.nydailynews.com/new-york/education/charter-schoolrally-sends-message-de-balsio-Ihota-article-1.1479884 (accessed October 10, 2013). ^ See Education Law 2856(l)(a), (b).

10

blithely states that "there is no connection between charter school accounts and public school district accounts." [Pet. Memorandum of Law at 15]. Plaintiff-petitioner also cites the Court of Appeals' holdmg in Blue Cross & Blue Shield of Cent. N.Y. v. McCall, 89 N.Y.2d 160 (1996) as support for the proposition that the Comptroller cannot audit charter schools. In Blue Cross, the Court determined that the Legislature did not have constitutional authority to assign to the Comptroller the power to conduct audits of private health insurance companies. However, plaintiff-petitioner's reliance on that decision is misplaced. As Judge Graffeo pointed out in her concurrence in New York Charter Schools Association: "the Charter Schools Act does not create a purely private status for charter schools; rather, the Act makes clear that they are part of the 'public school system.'" 13 N.Y.3d at 137. While charter schools may receive some funding from private entities, they are

overwhelmingly funded by public tax dollars and they are subject to the disclosure requirements applicable to govemment agencies under the New York state Freedom of Information Law ("FOIL") (Education Law 2854(1 )(e)); the Education Law explicitly designates them as public employers for purposes ofthe Taylor Law (Education Law 2854(3)); and they perform a public, govemmental fimction. In addition, the petitioner here has identified itself and held itself out to the public as a public school.'* D. Public Policv Strongly Favors Fiscal Oversight bv the Comptroller

The ComptioUer is the state's chief fiscal officer, charged with "the unique fimdamental duty to superintend the fiscal concems of the State." Matter of McCall v. Barrios-Paoli. 93

N.Y.2d 99, 104 (1999). As such, the ComptioUer is empowered to conduct audits where the

See footnote 3, supra.

II

disbursement of state funds is involved. Martin H. Handler, M.D., P.C. v. DiNapoli, 88 A.D.3d 1187,1189(2011). Charter schools receive funds from the local school district based upon the number of students they enroll. Education Law 2856(1 )(a). Accordingly, the funds available to the local school district are directly impacted by the funding needs of charter schools and by the use or misuse of those funds. If, for example, a charter school inflates the number of emoUed students, that misrepresentation directly reduces the funds available to the host school district and constitutes a misuse of public fimds. In September 2013, the New York Post reported allegations that the South Bronx Classical Charter School had billed the New York City Board ofEducation, which calls itself tire Department of Education, for special education students who did not attend the school. http://nypost.com/2013/09/04/charter-school-probed-over-special-ed-kids-who-might-not-exist/. If hue, the school would be guilty of diverting public funds away from otiier Department of Education schools and into its own coffers. This is precisely die type of alleged fiscal mismanagement of public money the Comptroller is empowered to identify. Placing charter schools out of the Compfroller's reach would severely unpair his ability to "superintend the fiscal concems of the state." Perversely, it would preclude the Comptroller from ensuring fiscal accountability by schools the Education Law has characterized as "public schools," which rely on public fimds to perform "an essential govemmental purpose of the state." Amici contend that this result would contravene the fimdamental purpose of the Office of the Comptroller, as well as the clear legislative intent of the law. Plaintiff-petitioner claims that its accountability to other entities, including its charter entity and the Board of Regents, obviates the need for Comptroller oversight. Specifically,

12

Plaintiff-petitioner contends that it is required to submit documentation, including a "report card" of the school's progress and a "broad range" of academic and financial data, to the Board of Regents. Yet the submission of internally prepared, self-reported data is far different than submission to an audit by an outside source, as the foraier can easily be manipulated. In fact, the original legislation directing the ComphoUer to audit each school dishict, board of cooperative educational services, and charter school was prompted by the failure of independent auditors to disclose "blatant and ongoing firaud" which resulted in the misappropriation of millions of dollars in school dishicts in New York State. New York Charter Schools Assn., 13 N.Y.3d at 136. Moreover, the existence of other mechanisms of oversight does not diminish or extinguish the Comptroller's audit authority. Courts have previously held that audit authority can be held concunrently by other entities and by the ComphroUer, eitiier where explicitiy provided for by statute or where no restriction on such concurrent authority exists. See, e.g., Town of North Hempstead v. County of Nassau, (2d Dept. 2013) 103 A.D.3d 734; Barrios-Paoli, supra. In addition, tiie expertise possessed by the Comptroller is fiscal in nature; while the expertise possessed by the Board of Regents and the charter entity is educational in nature. As Judge Graffeo pointed out in her concurring opinion in New York Charter School Association, "it is . . . a statutory responsibility of the Board of Regents and charter entities to evaluate tiie instiructional objectives and academic achievements of charter schools." Id. at 136. The fmancial expertise of the Comptroller is essential here, as there have been many instances of mismanagement and abuse of public funds by charter schools botii in New York State and across the United States. One example of the Comptroller's fiscal expertise was recently reported by the Albany Times Union on October 30, 2013. Specifically, an audit conducted by the Comptiroller's office revealed that Albany Community Charter School could have saved up to two million dollars by

13

purchasing, rather than renting, the building in which the school is located. The audit disclosed that the school relied on advice from the Brighter Choice Foundation, a nonprofit corporation that provides services to charter schools, in deciding to rent the location. The Compfroller's office found no evidence that the school's board of frustees had fulfilled its fiduciary duty or conducted the appropriate due diligence with respect to the rental ofthe building. In addition, the audit raised questions about the fiscal relationship between the school and the Brighter Choice Foundation, in part because the school pays a percentage of its annual per-shident income to the Foundation for no apparent reason.^ Further nationwide examples are attached as Appendix A . Furthermore, recent financial analyses of at least two charter schools in New York State show significant operating surpluses. Specifically, an analysis of the South Buffalo Charter

School for 2008-2011 shows tiiat it ended the 2011 fiscal year with a $11,663,556 fund balance an increase of 94.5% from fiscal year ending 2008. See Affidavit of Peter Applebee, sworn to December 19, 2013 and Exhibit A thereto. A fiscal analysis of the Roosevelt Children's

Academy Charter School, Inc. for 2010-2012 reveals similar data. At the end of fiscal year 2012, that charter had a $10,717,674 fimd balance - an increase of 136% from 2010. Id. at Exhibit B. While not facially mdicative of any wrongdoing, such healthy surpluses are peculiar in that charter schools are fiinded overwhelmingly by tax dollars. An audit by the Comptroller in instances such as these would ensure that the revenue received was based on an accurate student count and that the revenue was being properly spent or held, as the case may be. An additional public policy consideration that weighs in favor of Comptroller oversight of charters is the Freedom of Information Law. When the Legislature enacted the Charter

^ Jordan Carleo-Evangelist, "Audit raises red flags about charter school," Times Union, October 30, 2013, available at http://www.timesunion.com/Iocal/article/Audit-raises-red-flags-aboutcharter-school-4941086.php (accessed November 19,2013).

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Schools Act in 1998, it specifically subjected charter schools to FOIL.^ Thus, for FOIL purposes, a charter school is equivalent to any public agency or public school. The fundamental policy underlying FOIL is diat "the public is vested with an inherent right to know and that official secrecy is anathematic to our form of govemment." Matter of Fink v. Lefkowitz, 47 NY2d 567, 571 (1978). This principle can and should be applied to the expenditure of public fimds by charter schools. In essence, plaintiff-petitioners want public fimding without any real fiscal accountability to the public. Yet, that arrangement conhavenes both the legislative intent oftiie Charter Schools Act and the most fundamental principles of govemment accountability to the public as embodied in the Constitution and in the statutes discussed above. For all intents and purposes, charter schools are public schools which have been afforded the freedom to experiment with new and innovative pedagogical methods for tiie benefit of their students and in furtherance of the advancement of public education. It is that freedom - not freedom from fiscal oversight, supervision, or accountability - tiiat renders charter schools unique among public schools. Finally, plaintiff-petitioner itself acknowledges that charter schools are "highly

accountable" to the State of New York and its citizens. [Pet. Memorandum of Law at 4.] This accountability is not hypotiietical; the Comptroller is the embodiment of fiscal accountability to the State o f N e w York, and charter schools - as public schools performing a public purpose with public money - should be subject to audits on the same basis as traditional public schools. Denying the Comptroller fiscal oversight and audit power will directiy harm the state by removing its most powerflil weapon agamst cormption and fiscal misuse of fiinds in charter schools. ^ Education Law 2854(l)(e): "Charter school[s] shall be subject to the provisions of article six [FOIL] and seven [Open Meetings Law] of the public officers law."
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E.

Plaintiff-Petitioner's Claims of Burden and Duplication are Irrelevant

Lastly, plaintiff-petitioner asserts that the ComphroUer lacks authority to conduct a fmancial audit of Harlem 1 because it "would be unnecessarily burdensome and duplicative." (Pet. Memorandum of Law at 17.) While burden may be a valid consideration as to whether an injunction should issue {see infra), it plays no legitimate role in evaluating the merits of the dispute before the Court, to wit, whether a fiscal audit of Harlem 1 by the Comptroller is constitutional. As discussed above, amici believe he has such authority. Furthermore and

notwithstanding, a Comptroller audit would not be burdensome on plaintiff-petitioner in light of its compliance with other third-party audits. See infra. Plaintiff-petitioner's argument in this respect, in essence, urges the Court to substitute plaintiff-petitioner's judgment for that of the Legislahire and Constitution regarding the appropriate level of Comptroller oversight. That plaintiff-petitioner believes that an audit by the ComptioUer here would be duplicative and burdensome as a matter of public policy is irrelevant. In other words, a party's subjective belief regarding a govemment function caimot invalidate the constitutional and/or statutory basis for that function. Even more simply put, one carmot refuse to follow a law just because one disagrees with it. Plaintiff-petitioner's improperly relies upon Barrios-Paoli and Blue Cross. The holdings in those cases were not based on any finding that the ComptioUer either had {Barrios-Paoli) or did not have {Blue Cross) the authority to conduct audits based on whether the audit would be duplicative. Rather, in the former the Court looked to the plain language of the Constitution and General Municipal Law and concluded that "accounts" subject to audit were not limited to financial ones, and in the latter the Court found that audits of private insurance companies

16

organized under the hisurance Law are administrative duties to which the Legislature cannot constitutionally delegate to the Comptroller. Indeed, in Barrios-Paoli the Court of Appeals expressly rejected the notion that the Comptroller's authority to audit is negated somehow because it duplicates auditing powers possessed by another entity: As a fmal argument, the City notes the explicit audiority of the City Comptroller, under the City Charter, to conduct such audits, urging that die Legislature did not intend to duplicate those powers. That argument is flawed. Fhst, the provision upon which the City relies was enacted by the people of the City, and as such obviously did not displace the State Comptroller's authority under General Municipal Law 33 and 34. Second, there is nothing to suggest that the State Legislature intended that performance audits of the City would be conducted exclusively by the City Comptroller. Indeed, in 1985, die Legislahire established the Office of die Deputy Comptroller for the City of New York as a permanent division within the Office of the State Comptroller, unambiguously evidencing its intention that the State Comptroller has the power to inquire into the operations of the City and its agencies irrespective of the City Compfroller's coextensive powers. 93 N. Y.2d at 109, internal citation omitted. Here, by amendmg Education Law 2584(l)(c), the Legislahire evidenced "its intention that the State ComptioUer have the power to inquire into the operations of charter schools "irrespective ofthe [charter entity and the board of regents'] coextensive powers" as set forth in Education Law 2853(2). Thus, the question before the Court is whether the CompfroUer has the constitutional authority to audit plaintiff-petitioner, not whether it having coextensive power to do so is good public policy. Tuming to the burden plaintiff-petitioner claims the audit will impose, same is irrelevant to whether the Comptroller has the authority to conduct a financial audit. In all due candor, many laws, by their very nature, are "burdensome". Same surely is not sufficient enough to justify non-compliance. Moreover, and as discussed below, plaintiff-petitioner admits that it

17

already compiles the information sought by the Comptroller for other third-party oversight. Thus, its claim of burden is disingenuous at best.

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POINT II PLAINTIFF-PETITIONER FAILS TO M A K E THE REOUISITE SHOWING TO W A R R A N T A N INJUNCTION

As the Court knows, to be entitled to injunctive relief, the plaintiff-petitioner must establish: a) a likelihood of success on the merits; b) irreparable injury; and c) that the balance of the equities tips in its favor. Amici respectfully submit that plaintiff-petitioner fails on all three accounts. A . Likelihood of Success on the Merits As set forth above, the Comptroller is fully within his constitutional and statutory authority to conduct a fmancial audit of plamtiff-petitioner. Thus, as plaintiff-petitioner cannot establish that it is hkely to succeed on the merits of its claims, injunctive rehef cannot issue. B . Irreparable Harm "One of the conditions which petitioner must meet in order to establish its entitlement to a preliminary injunction is a showing of hreparable harm without the preliminary injunction, and the irreparable harm sustained by petitioner must be more burdensome than die harm caused to respondents." PEF v. Cuomo, 96 A.D.2d 1118, 1119 (3d Dep't 1983), citing Metro. Package Store Assn. v. Koch, 80 A.D.2d 940, 941 (3d Dep't 1981). In this case, the harm caused by the Comptroller, and consequently the people of New York, by denying it the right to account for public fiinds significantly outweighs any burden imposed on plaintiff-petitioner by forcing it to compile routine information. Plaintiff-petitioner asserts that i f an audit is performed, "the bell cannot be unrung" and that it will be "time-and-staff intensive and burdensome." (Pet. Memorandum of Law at 21-22.) However, plaintiff-petitioner contradicts tiiis very position. As addressed above, plaintiff-

19

petitioner claims that a Comptroller audit would be duplicative because "charter schools are well-regulated by an already existing framework of oversight, which includes charter schools' authorizers, the Board of Regents, independent audits, federal govemment audits with respect to federal funding and Intemal Revenue Service audits." Id. at 18. citing Verified Petition and Complaint at '^24-34; see supra. Thus, it defies logic that plaintiff-petitioner would claim

immunity from a Compttoller audit on the one hand because the charter school already provides the same information to other entities, yet on the other claim providing the information to the Compttoller would be an undue burden and cause it harm. The revelation here appears not to be that plaintiff-petitioner cannot easily and readily compile the necessary information, but that it is more concemed about who sees it. Conversely, the harm caused to the Compttoller, and the taxpayers ofthe State o f N e w York if die people's fiscal watchdog is denied die right to conduct an audit of plaintiff-petitioner, is significantly greater and undoubtedly kreparable. First and foremost, and as discussed above insofar as the Compttoller's authority, the public deserves full transparency with regard to how its tax dollars are spent. To deny that transparency in a democracy is die epitome of irreparable harm. Second, and in this same vein, die passage of time potentially diminishes the availability of accurate information. As pointed out by die State Education Departtnent m its memorandum to the govemor's counsel recommending approval of the amendment to Education Law 2854(I)(c): "The State Education Department believes that die OSC should have the flexibility to conduct unannounced audits if so desired. If another Roslyn^ situation is uncovered, there is a

^ See supra. A 2005 report issued by the Comptroller's office detailed more dian $11 million of the Roslyn Union Free School District's funds were used for personal expenses. That report cited poor and/or non-existent oversight by the Disttict's board of education and inadequate monitoring by the District's independent auditor. The scandal resulted in the imprisorunent of at least two District officials. Roslyn Union Free School District: Anatomy ofa Scandal, Report of Examination, covering January I, 1996 to June 14, 2004, #2005M-21.
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risk that provision of prior notice will afford an opportunity for deshuction or falsification of records that can be obviated by conductmg an unannounced audit." Ch. 267 ofthe Laws of 2005 B i l l Jacket at p. 13. If the Court grants a stay of the Compfroller's audit of Success Academy, that stay undoubtedly will send a message to the odier approximately 200 publicly funded charter schools in the state that their books are immune from the Compfroller's scrutiny. The specter of CompfroUer oversight serves to safeguard potential misuse ofthe public's money and to ensure that complete and accurate information is maintained by charter schools. Thus, it cannot be said that there is any irreparable harm to plaintiff-petitioner by allowing the audit to proceed. Much to the confrary, the true immediate ureparable harm will be caused to the Comptroller and the state's taxpayers.

21

CONCLUSION Based on die reasons and authorities discussed above, N Y S U T and UFT respectfully request that their motion to appear as amicus curiae be granted. Insofar as the merits ofthe suit, N Y S U T and UFT respectfully submit that plaintiff-petitioner's application for relief should be denied and defendants-respondents' motion to dismiss should be granted.

Dated: December 20,2013 Latham, New York

lUCHARD E. C A S A G R A N D E , ESQ. Attomeys for Proposed Amicus 800 Troy-Schenecjajy^oad Latiiam,^ew Y c ^ l 2

Telepl^e^^mai3-6j)OS
By:

A D A M S. ROSS, ESQ. Attomey for Proposed Amicus United Federation ofTeachers 52 Broadway, U*^ Floor New York, N Y 10004 Telephone: (212) 533-6300

1 1 1 3 8 4

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APPENDIX

1. Philadelphia, PA: In Philadelphia, Dorotiiy June Brown, founder of tiiree charter schools in Philadelphia was accused by tiie Department of Justice of defrauding tiiree charter schools that she had helped found of more than $6.5 million. FBI: http://www.ft>i.gov/philadelphia/press-releases/2012/charter-school-founderdorothv-iune-brown-charged-m-6-million-fraud-scheme Philadelphia Inqufrer: htti)://articles.phillv.com/2013-12-07/news/44869020 1 dorothviune-brown-cvnwvd-group-l-l-c-ad-prima Philadelphia Inquirer; htti3://articles.phillv.com/2013-12-06/news/44813756 1 dorotiiviune-brown-charter-fraud-case-laboratory-charter-school Philly.com: http://articles.phillv.com/2Q12-08-13/news/33I68193 1 dorothv-iunebrown-planet-abacus-charter-schools

2. Columbus, OH: In 2012, Carl W. Shye Jr., a charter school heasurer, was mdicted on federal charges of embezzling over $470,000 over six years and was sentenced to serve two years in prison. Dispatch.com: http://www.dispatch.com/content^stories/local/2012/04/02/treasurersmishandle-fmances-at-charter-schools.html Dispatch.com: htiD://www.dispatch.com/content/stories/local/2012/10/31/former-schooltreasurer-sentenced.html MariosStar.com: http://www.marionstar.com/article/20120602/NE WSO1/206020309/Ohio-savs-indictedschool-official-owes-more-monev 3. Las Vegas, NV The State Public Charter School Autiiority found falsified documents from Roy Harden, who was running an online charter school called Renaissance Academy. ABC13: http://www.im.com/ktnv/news/202221161 .html A B C 13 :http://www.im.com/ktiiv/news/162137715.html

2 4. Pittsburgh, PA: The FBI is investigating The Urban Pathways Charter School m Pittsburgh, P A for misuse of taxpayer money. CBS News: http://www.cbsnews.com/news/fbi-called-in-to-probe-charter-schoolspending-pa-report-savs/ TribLive.com: http://triblive.com/news/adminpage/504931 Q-74/fbi-pathwavsurban#axzz2nH9x3VvT TribLive.com: http://triblive.com/news/adminpage/4848384-74/neill-trombettaadmitted?utai source=feedbumer&utm medixmi=feed&utm campaign=Feed%3A+allhi bstories+%28TribLrV^E+News%29#ay^2nlTQy^VvT 5. Washington, DC Monique S. Murdock, Former executive director of Nia Commimity Public Charter School in Washington, DC pled guilty to embezzling $29,000 of public dollars. Washington Post: http://www.washingtonpost.com/local/education/nia-communitvpublic-charter-schools-ex-dhector-pleads-guiltv-to-embezzlement/2013/11/13/4979da0a4cae-11 e3 -9890-al e0997fb0c0 storv.hhnl WTOP: http://www.wtop.com/41/3210189/DC-charter-school-head-accused-ofembezzling-fundsFBI.gov: http://www.fbi.eov/washingtondc/press-releases/2013/former-executivedirector-of-public-charter-school-pleads-guiltv-to-stealing-29-OOO-in-funds 6. Los Angeles, CA: Edward Peter Fiszer, former principal of N E W Academy Canoga Park pleaded guilty to embezzlement of over $1.4 million from the Los Angeles charter school. LAtimes Blog: http://latimesblogs.latimes.com/lanow/201Q/12/former-charter-schoolprincipal-pleads-guiltv-to-embezzling-school-fiinds.html 7. Philadelphia, PA: Brien N . Gardiner, founder of Philadelphia Academy Charter School had multiple consulting businesses within the school disfrict. Camelot Schools of Pennsylvania, L L C pays Gardiner's company. Charter School Development Associates, more than

3 $9,000/month and has a confract widi the district to operate three schools, receiving $10.4 million in one year without having to report on financial management. FBI.gov: htfri://www.fl3i.gov/philadelphia/Dress-releases/2009/ph072009.hhn Philly.com: http://articles.phillv.com/20Q8-05-14/news/24990235 1 charter-schoolboard-consulfing-agreement-school-refi)rm-commission Philly.com: http://articles.phillv.com/20Q8-09-17/news/24991488 1 invesfigatorsallegations-of-financial-mismanagement-land-deals

8. San Antonio, Texas: A Texas charter school, part of an Arizona-based charter school network, redacted all mention of financials in their charter school application. New York Times: httiJ://www.nvtimes.com/2013/I2/15/us/when-private-firms-runschools-financial-secrecv-is-allowed.html? r=l & 9. Clackamas, Oregon: The Oregon Department of Justice accused two individuals operating at least 10 charters schools of racketeermg and money laundering as well as other financial fiaud between 2007 and 2010. OregonLive.com:htti3://www.oregonlive.com/education/index.ssf/2013/01/oregon ch arter school founders.html 10. St. Louis, M O : A charter school in St. Louis, Missouri was taken over by the public school district after the charter school had acquired an insurmountable amount of debt. The school owed nearly $5 million to over 100 creditors, one of which is a for-profit charter school chain. Imagine Schools. Democratic Underground/Stltoday.com: http://www.democraticunderground.com/discuss/duboard.php?az=view all&address= 219x24659

4 11. Tucson/Phoenix, Arizona: Charter schools in Tucson and Phoenix owe $4.7 million to the state due to false enrollment claims. Arizona Daily Star: http://azstamet.com/news/local/education/charter-school-must-repavmillion-over-bogus-enroUment-claims/article 3bae315b-cfb6-57b3-a9af87995ea29b32.html 12. Chicago, IL: The Federal Securities and Exchange Commission is investigatmg violations by the United Neighborhood Organization (UNO), Illinois' second largest charter school operator. This comes after a series of Chicago-Sim Times investigative reportbig on widespread cronyism and mismanagement ofthe $98 million in state school constmction grand fimding. Office of tiie Attomey General: http://foia.ilattomevgeneral.net/pdfi^opinions/2013/13-012.pdf Chicago Sun-Times: http://www.suntimes.com/23185796-452/sec-probes-unofinancing.html 13. Philadelphia, PA: The United States Department ofEducation - Office of Inspector General and the Federal Bureau of Investigation charged Hugh C. Clark (former board president) and Ina M . Walker (former chief executive officer) with conspiracy, wirefiraudand theft fiom New Media Technology Charter School in Philadelphia, P A . FBI.gov: http://vmw.fl3i.gov/philadelphia/press-releases/2012/former-ceo-of-charterschool-pleads-guiltv-to-fraud FBI: http://www.fbi.gov/news/news blog/charterschool 041411 FBI.gov: http://www.flji.gov/philadelphia/press-releases/2Ql l/ph041411 .htm 14. Los Angeles, C A : The founders of a San Fernando Valley charter school (Ivy Academia) were ordered to pay $300,000 in restitution for embezzling public fimds.

Southern Cahfomia PubUc Radio: htto://www.scDr.org/blogs/education/2013/12/16/15414/charter-schooI-operatorsordered-to-pav-300k-in-re/ L A times: htft>://articles.latimes.com/2Q13/oct/04/locaI/la-me-ln-charter-foundersentenced-2Q131004 15. Cleveland, OH: Joel B. Friedman, Jeffrey Pope, Marianne Stefanik and Virgil B . HoUey were indicted on charges of vnre fraud, mail fraud and conspiracy to launder money from Greater Heights Academy, a Cleveland Heights charter school. FBI.gov: http://vmw.fbi.gov/cleveland/press-releases/2013/four-people-indicted-fordefrauding-cleveland-heights-charter-school-of-400-000 Cleveland.com: http://www.cleveland.eom/meh:o/index.ssf/2013/ll/cleveland heights charter scho.h tml 16. Philadelphia, PA: The Pennsylvania Office of Open Records made a fmal determination in die matter of Regina Media and die Philadelphia Daily News (Complainant) v. Olney Charter High School (Respondent) in the matter of an open records request made by Medina seeking expenses, invoices and records of payments from the Philadelphia charter school. Philly.com: http://articles.phillv.com/2013-ll-19/news/44205841 1 sunshine-actphiladelphia-school-district-resolutions