AUDIT OBJECTIVES AND METHODOLOGY

November 20, 2002The Honorable Mark S. SchweikerGovernorCommonwealth of Pennsylvania225 Main Capitol BuildingHarrisburg, Pennsylvania 17120Dear Governor Schweiker:This report contains the results of our performance audit of Contract No. SP1611200001(“Contract”) between the Pennsylvania Department of Education (“PDE”) and Edison SchoolsInc. (“Edison”). Pursuant to the Contract, PDE paid Edison $2.7 million to analyze the financialand academic problems of the Philadelphia School District (“District”) and submit a report toPDE presenting options for solving those problems. The Contract and the resulting report are ofgreat interest to families in the District and all state taxpayers, particularly in light of subsequentevents such as the Commonwealth’s takeover of the District, the Commonwealth’s investment ofa significant amount of additional dollars in the District, and Edison’s selection to managetwenty public schools in the District.This performance audit covered the term of the Contract from July 27, 2001, throughDecember 31, 2001. The five audit findings detailed in this report raise serious concerns aboutthe procurement and oversight of the Contract. As a result, we have offered elevenrecommendations to improve PDE’s procurement of future contracts and its oversight of thevendors selected to perform those contracts. We have also included an observation aboutEdison’s record-keeping system and a recommendation for improving that system for ...