Auditor General DePasquale Says ‘Best Practices’ Assistance from Department of Education May Help Financially, Academically Troubled School Districts Recent Audits Identify Continued, Severe Problems at Two Allegheny County School Districts
Auditor General DePasquale Says ‘Best Practices’ Assistance from Department of Education May Help Financially, Academically Troubled School Districts Recent Audits Identify Continued, Severe Problems at Two Allegheny County School Districts
PITTSBURGH (Sept. 13, 2013) – Auditor General Eugene DePasquale said today that recent audits of Duquesne City and Sto-Rox school districts in Allegheny County clearly demonstrate that immediate management assistance from the Department of Education and other educational entities is needed to help stem the decline of these and other troubled school districts.
“Our most recent audits show that Duquesne City School District is over the cliff financially; and Sto-Rox School District is teetering on the edge,” DePasquale said. “For the sake of the students in these districts, I urge the Department of Education to use its knowledge and resources to provide these and other ailing schools with tools to help them better deal with their financial realities.”
DePasquale noted that recent audits of other districts in the commonwealth showed similar findings or observations.
“I encourage other districts or education organizations that may have dealt with similar financial issues to step up to help,” DePasquale said. “It should be all about the kids, after all. If we don’t take action now to help financially troubled districts we will see a greater shift in our education system.
“In my first 9 months as Auditor General we released more than 150 school district audits,” DePasquale said. “One thing we see over and over again, especially in districts with limited tax base, is that the elimination of the charter school reimbursement funding in 2011 was devastating. Students in these schools can’t afford to continue waiting for long-promised action in Harrisburg to remedy the charter school funding formula.”
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 currently funded.
In the 2010-11 school year, the Sto-Rox School District paid more than $2.5 million in tuition to charter schools and was reimbursed by the state nearly $400,000; the Duquesne School District paid more than $1.9 million in tuition to charters and was reimbursed approximately $600,000.
“Taking away this much funding from financially troubled school districts, without correcting the flawed charter school funding formula and providing some ‘best practice’ solutions for moving forward is not in the best interest of our students or our commonwealth’s future,” DePasquale said.
The audit indicated the Duquesne City School District continues to be in a financially declining position, despite closing the high and intermediate schools, taking other cost-cutting measures and being in state financial recovery status. In particular, auditors found that the district:
- continues to maintain a negative fund balance and have expenditures exceeding revenues;
- is unable to pay its current debts as they become due;
- may not be able to pay certain debts without the disposal of current assets including real estate and equipment;
- continues to have an increase in the number of its students enrolling in charter schools , which is reducing the amount of district funds available for in-district educational services; and
- had a drop of $15 million in total assessed property value between 2007 and 2011, which has severely cut district revenues.
Duquesne City School District continues to have problems providing documentation for state reimbursement for orphans and foster students placed in district homes and is failing to properly manage other student information.
Auditors recommended that the district:
- continue to monitor the financial condition of the community and act as best it can to respond to changes;
- improve student information retention by retaining a permanent record folder and registration and withdrawal for each student;
- review enrollment data and submit any changes to the Department of Education; and
- provide in-service training to administrative and clerical personnel responsible for recording student data.
In the case of Sto-Rox School District, auditors discovered that the district:
- failed to submit a timely annual financial report with the Department of Education, which can be a warning sign of financial issues or operational deficiencies that could impact the district’s overall financial position;
- frequently operated in deficit spending mode;
- had more debt than assets, which could increase the time it must hold invoices prior to payment and impede the district’s ability to obtain a loan or other financing;
- saw an increase of 10 percent from 2006 to 2011 in the number of district students attending charter schools, reducing the amount of funds available for educational services for in-district students;
- had decreasing or level property values and local tax revenues that could cause the district to be unable to generate more resources for the education of its students;
- failed to document some school bus driver qualifications; and
- did not update on a timely basis a memorandum of understanding between the district and two law enforcement agencies.
The audit recommended that the Sto-Rox School District:
- provide the school board with monthly financial updates so that policy changes can be made before the district’s financial condition worsens;
- maintain and monitor budget controls so that expenditures do not exceed revenues;
- keep the communities of Stowe Township and McKees Rocks Borough informed about the financial status and overall health of the school district;
- survey parents to determine why the district is losing more students to charter schools;
- amend the job description of the district’s business manager to tie the accurate and timely reporting of financial information and reports to job performance;
- correct deficiencies with school bus driver records and implement procedures to improve qualification reviews; and
- review and update agreements with local law enforcement.
Duquesne City School District has approximately 350 elementary school students in kindergarten through sixth grade. The district serves a population of 5,500. In 2012, the Department of Education declared the district to be in Financial Recovery Status. This designation occurs when a school district’s financial condition deteriorates to the point where it must request an advance on its annual state basic education subsidy.
Sto-Rox School District provides educational services to more than 1,300 students in kindergarten through twelfth grade and serves a population of 12,000 people.
The department’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.
Full copies of the Duquesne and Sto-Rox school district audits are online at: www.PaAuditor.gov/audit-reports.
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