Auditor General DePasquale Says Aliquippa School District Faces Serious Financial Challenges Including a Nearly $1 million Deficit

District Placed on Department of Education’s Financial Watch List

December 18 2013

Auditor General DePasquale Says Aliquippa School District Faces Serious Financial Challenges Including a 
Nearly $1 million Deficit

District Placed on Department of Education’s Financial Watch List

HARRISBURG (Dec. 18, 2013) – Auditor General Eugene DePasquale said today that a recent audit of Aliquippa School District, Beaver County, shows that financial problems – some out of the district’s control – caused the district to spend much more than it budgeted for three of five school years from 2008-09 to 2012-13.

Auditors found a deteriorating general fund balance, which included a $928,556 deficit in the 2011-12 school year. The budget deficit was highest when it exceeded $1.6 million in the 2008-09 school year.

In March, the district was placed on the Department of Education’s financial watch list, which is part of an early warning system to identify school districts that are struggling to maintain fiscal stability. As part of the effort, the Department of Education is to offer technical assistance aimed at improving its fiscal condition.

“Aliquippa School District is hurting and unless there is a dramatic financial turnaround, students will be the ones who pay the price when they lose important educational opportunities,” DePasquale said. “I commend district officials for already taking some innovative approaches to reduce costs and address the financial situation. I urge the district to work closely with the Department of Education to take advantage of any assistance they offer to prevent the potential loss of educational options and services for the children of Aliquippa.”

The audit indicated that the district’s financial problems are due in part to its failure to control expenditures in accordance with its budgets, a high real estate tax delinquency rate, and payments to charter school now totaling more than $1 million per year, for which they are not longer being reimbursed by the commonwealth.

DePasquale noted that recent audits of other districts in the commonwealth showed similar situations.

“As I have said many times, the focus of our education system should be all about the kids. If we don’t take action now to help financially troubled districts we will see a decline in our education system,” DePasquale said.

In his first 11 months as auditor general, DePasquale said his department released 300 audits of school districts, charter and cyber charter schools, intermediate units and vocational-technical schools. Auditors have found that districts with financial challenges have struggled with the impact of the elimination of charter school reimbursement funding in 2011.

Prior to the 2011-12 school year, the state provided indirect financial support to charter school education by reimbursing school districts a portion of their charter school tuition payments according to established rates (30 percent to 41.96 percent in some instances). The reimbursement was eliminated in the state’s 2011-12 annual budget without any changes to the way charter schools are funded.

In the 2009-10 school year, the Aliquippa School District paid more than $709,000 in tuition to charter schools and was reimbursed by the state approximately $172,000. In the 2011-12 school year the district paid more than $1 million in charter school tuition without any reimbursement from the state.

To deal with the district’s difficulties, auditors made nine recommendations, including that the district:

• adopt budgets estimating beginning fund balances based upon historical indicators and realistic expectations of the amount that will actually be available for the budgetary period;
• provide the school board with monthly financial updates so that policy changes can be made before the district’s financial condition worsens;
• accept financial technical assistance offered by the Department of Education;
• maintain and monitor budget controls so that expenditures do not exceed revenues; and
• survey parents to determine why the district is losing more students to charter schools.

In the 2009-10 school year, the Aliquippa School District provided educational services to more than 1,100 students and serves a population of 9,400 people. The district employed 115 teachers, 87 full- and part-time support personnel and nine administrators. The district received $12.1 million in state funding in 2009-10.

The Department of the Auditor General’s Bureau of School Audits examines the records of school districts, charter schools, intermediate units, and area vocational-technical schools. The audits — among other things — assess whether or not school entities received the state subsidies and reimbursements to which they were entitled, accurately managed taxpayer funds, and complied with ethics codes. The audits also determine whether teachers and administrators were properly certified for the positions they held during the audit period.

The Aliquippa School District audit is available online at: www.PaAuditor.gov/audit-reports.

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