The District school board last night took the first step toward closing the Village Learning Center Public Charter School, citing a pattern of fiscal mismanagement and other problems.

By a vote of 6 to 1 with two abstentions, the board began a process that will allow the school to make its case for remaining open at a public hearing. Another board vote would then be needed to shut the school, which enrolls about 460 students in kindergarten through 12th grade at two campuses in Northeast Washington.

The board vote came the same day that a city audit found that the school spent hundreds of thousands of dollars on leased space it did not occupy, credit card charges for apparel and gifts, and loan repayments that lacked documentation.

The audit, completed by D.C. Auditor Deborah K. Nichols, said Village Learning Center's financial operation "did not support a successful public charter school business . . . model from its inception."

School representatives who attended the board meeting said they were disappointed but hoped to avert closure. They said they would do a better job with finances. "Give us a chance to prove to you that we can meet this challenge," said Talib Abdul-Samad, a counselor at the school.

Village Learning Center, which opened in 1998, was placed on probation in November by the school board because of financial irregularities. That occurred soon after the principal who oversaw high school students was arrested on charges of molesting a youth in Fairfax County, though board members said the charges did not factor into their decision because they were a personnel matter.

The former principal, Desmond Kirk Pierre-Louis, has been indicted on charges of indecent liberties with a minor, sexual battery and forcible sodomy. A trial is scheduled for Aug. 9.

Village is one of 37 charter schools on 41 campuses in the District. Charter schools are publicly funded but operate independently of the school system. Village is receiving about $4.6 million this fiscal year from the District, the audit said. Because the school board issued the school's charter, it is responsible for monitoring whether the school is achieving its objectives and following the law.

Donald M. Temple, a lawyer recently hired by the school to help improve its management and financial operations, said Village officials were "highly concerned . . . and disturbed" by the audit's findings. He said the school's board of trustees would review the audit.

A resolution approved by the District's school board cited other problems as well, including the failure to obtain accreditation, failure to adopt a plan to improve students' performance and failure to establish standardized test score targets.

School board member Mirian Saez, a mayoral appointee, said she voted to begin the closure process to trigger the public hearing. "I truly want to hear from the school," Saez said.

The audit, which examined the school's finances from October 1998 through November 2003, said the school accumulated a deficit of $895,567. It said the Internal Revenue Service had imposed fines and penalties totaling $265,729 against the school for its late filing and payment of withholding taxes in 2001.

The audit also found that the school spent $245,318 for leased properties that it did not occupy. Temple took issue with that finding, saying the amount was not that high.

The audit also found that payments of $156,424 had been made to the school's executive director and family members, as well to as a hired financial consultant. The executive director, the audit said, indicated that the payments were to repay loans made to the school.

But the school's management and board of trustees "could not provide any loan agreements or cash receipts" to document the legitimacy of the loans or loan repayments, the audit said.

The audit also noted $256,849 in credit card payments for which no documentation could be provided. It said the school had no policies governing use of credit cards. The audit reported that $13,085 was spent on apparel, $25,149 on gifts and $6,211 on flowers.

The audit said the school "was not provided the kind of sustained support, guidance, and oversight by the District that was needed to assure that it operated on a sound financial footing."

When told of the audit's findings yesterday, D.C. school board member Carrie L. Thornhill, a mayoral appointee, said, "I'm appalled."

She said the school board needs to examine the way it oversees charter schools. "This is just off the charts," she said. "We've got to do a much better job than that."

Staff writer Tom Jackman contributed to this report.