The state Department of Education has stopped making payments to the Agora Cyber Charter School, which is based in Devon, Chester County, but serves students throughout the state.
In a news release Thursday, the department cited "ongoing concerns over misuse of taxpayer funds" and said a suit was filed in Commonwealth Court asking for the appointment of an independent trustee to oversee operations instead of the school's board of trustees.
Education Secretary Gerald Zahorchak said the school will continue to operate, noting it is managed by a separate educational entity, K-12 Pennsylvania, LLC.
Until the concerns are resolved, the payments that would have gone to Agora will instead go into an escrow account.
The department contends Agora made an "unlawful management agreement" with the Cynwyd Group, LLC, which was "disproportionately rewarded for little or no performance."
The department stated that "millions of dollars" are involved.
Agora officials could not be reached immediately for comment.