A whistleblower is suing a cyber charter, alleging it improperly billed school districts

A cyber charter school’s former business administrator is suing the school, alleging that it was improperly billing districts, including for students who weren’t logging on to the charter’s lessons.

Loree Marchese filed a lawsuit Monday in Philadelphia’s Common Pleas Court against the 21st Century Cyber Charter School, where she worked from 2021 until January. In the lawsuit, Marchese alleges the school violated Pennsylvania’s Whistleblower Act, saying she was fired after reporting “waste and wrongdoing” to the school and its CEO.

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Marchese reported “improper billing of school districts” for students whose residency was not properly verified by the charter, the lawsuit alleges, and for students “who were not attending school and not logging in as required.”

School districts pay tuition to charter schools for every student they enroll, at a rate based on the district’s spending per student. Cyber charter schools, which can enroll students from anywhere in Pennsylvania, receive different tuition rates depending on a student’s home district.

While some of the errors reported by Marchese involved “de minimis amounts of money,” others were significant, the lawsuit said — noting that “as a result of the plaintiff’s efforts,” the cyber charter had to refund over $20,000 to the Jersey Shore Area School District “due to improper billing.”

A lawyer for 21st Century Cyber Charter, Grace Deon, said Tuesday that an internal investigation had determined there was no improper billing.

“The school maintains … that plaintiff’s claims are without merit and it intends to vigorously defend against plaintiff Marchese’s lawsuit,” Deon said in an email.

In response to a federal case filed by Marchese in May, the school denied Marchese’s allegations of “waste and wrongdoing,” instead saying there were “unintentional billing errors” that it had addressed.

The charter — which enrolled about 1,100 students last year — billed based on “information known” at the time, the school said in the lawsuit. It issued credits, for instance, if it learned that a student had moved from one district to another.

“There are instances when a student becomes truant or homeless and despite best efforts to engage and/or to locate the student, these efforts are not successful,” the school said in the filing. “Upon the learning of such circumstances, the school would make adjustments to reconcile school district billing as required.”

It also said that when it had trouble locating a student or parent, it sent staff out to the home, contacted the state’s Office of Children, Youth, and Families, “and even involved law enforcement for a ‘well check.’”

Pennsylvania’s cyber charter funding system has been controversial for years. Cyber charters are funded at the same rates as brick-and-mortar charters. And given the variance in how much school districts spend per student, the payment rates can vary widely depending on where a student lives.

But efforts to overhaul the funding system have largely failed. A proposal last year by Gov. Josh Shapiro to establish a flat cyber charter tuition rate of $8,000 per student — compared with rates last year that ranged from $8,600 to $26,000 — wasn’t part of the budget deal.

Marchese, who says she was fired while on leave for a health condition, filed the whistle-blower complaint in Common Pleas Court after a federal judge ruled earlier this month that his court didn’t have jurisdiction over that claim. Other claims remain pending in federal court.

In response to that federal case, the 21st Century charter said it had not fired Marchese but had accepted her resignation effective immediately.