1Amend Bill, page 44, by inserting between lines 26 and 27

2Section 13.1. The act is amended by adding a section to
3read:

4Section 1725.1-A. Actual Costs of Education Services.--(a)
5Within one hundred eighty (180) days of the effective date of
6this section, the department shall promulgate audit standards
7under this article which shall be used in determining the year-
8end actual costs of educational services per non-special
9education student and special education student provided by a
10charter school to any child who is a resident of a school
11district, which are subject to payment in accordance with
12section 1725-A. The department shall follow the procedures
13provided in the act of July 31, 1968 (P.L.769, No.240), referred
14to as the "Commonwealth Documents Law," and the act of June 25,
151982 (P.L.633, No.181), known as the "Regulatory Review Act,"
16for promulgation and review of final-omitted regulations.
17Subsequent audit standards promulgated under this section or
18amendments to the initial audit standards may not be in final-
19omitted form. The audit standards shall take effect at the
20beginning of the first school year after which such audit
21standards have been promulgated.

22(b) In order for the year-end actual costs of educational
23services per non-special education student and special education
24student to be thoroughly and properly determined, the audit
25standards promulgated by the department shall:

26(1) Specify reasonable costs associated with the operation
27of the educational program offered by a charter school. The
28following may not be considered reasonable costs associated with
29the operation of the educational program offered by a charter
30school:

31(i) Any paid media advertisement, including television,
32radio, movie theater, billboard, bus poster, newspaper,
33magazine, the Internet or any other commercial method that may
34promote enrollment of a charter school.

35(ii) Any bonuses or additional compensation beyond the
36annual or termed contractual compensation for all faculty,
37administration and staff, including salary, benefits and any
38additional compensation not specifically enumerated in the

1contract.

2(2) Allow a closely related business entity to charge up to
3one hundred and seven per centum of the actual educational
4costs.

5(3) Require information as necessary for a full-scope review
6of a finalized management agreement entered into between a
7charter school and a closely related business entity, including:

8(i) All payments received from school districts of
9residence.

10(ii) Expenditures of the closely related business entity
11related to the delivery of educational and administrative
12services pursuant to the management agreement.

13(4) List and show all receipts and expenditures for an
14educational service provider that provides any service to a
15charter school.

16(5) Provide reasonable penalties for failure to comply.

17(c) The following shall apply:

18(1) The department shall effectuate an annual year-end final
19reconciliation process of tuition payments against actual costs
20of educational services per non-special education student and
21special education student providing any necessary procedures for
22the transfer of funds from the charter school to the school
23district of residence. The final reconciliation process shall
24include one of the following:

25(i) Allowing a school district of residence to withhold its
26last monthly payment from a charter school to account for any
27overpayments as identified by the year-end audit. If the school
28district of residence has sent overpayments, the district may
29adjust its last monthly payment accordingly.

30(ii) Requiring a charter school at the end of each school
31year to return any overpayments to a school district of
32residence owed a refund. A charter school may not return any
33overpayments on a pro rata basis.

34(2) Procedures for the transfer of funds may not permit the
35department to deduct from a school district of residence's basic
36education subsidy any amount in excess of the selected
37expenditure per average daily membership amount calculated in
38accordance with section 1725-A.

39(d) Charter schools, educational service providers and
40closely related business entities shall provide to the
41department, unless already retained by the department, any
42information necessary to carry out the provisions of this
43section.

44(e) Except as provided under subsection (c), nothing
45contained under this section shall permit a school district of
46residence to provide funding for a charter school in a manner
47other than that which is specified in section 1725-A.

48(f) For the purposes of this section, the following terms
49shall have the following meanings:

50"Charter school" shall mean a regional charter school or
51cyber charter school.

1"Closely related business entity" shall mean any organization
2with a management or operational relationship with a charter
3school involving either shared or overlapping aspects of
4corporate identity such as ownership, board of directors or
5trustees membership, capital or profits.

6"Educational and administrative services" shall mean any
7direct expenditures for any instruction and the administration
8of the instructional program. The term shall not include any
9expenditures not pertaining directly to the instruction and the
10administration of the instructional program.

11"Educational service provider" shall mean a for-profit
12education management organization, nonprofit charter management
13organization, school design provider, business manager or any
14other partner entity with which a charter school intends to
15contract or presently contracts to provide educational services,
16operational services or management services to the charter
17school. The term shall not include a charter school foundation.

18"Management agreement" shall mean any contract establishing a
19management or operational relationship between a charter school
20and closely related business entity for the provision of
21professional or nonprofessional services to the charter school.