Audit sought to account for deficit at Penn Hills schools
A legislator has called for a state audit of the Penn Hills School District in the wake of its revelation that it must borrow $18 million to pay its bills, but regular annual audits of the district show it has been spending more money than it has taken in for the past three years.
State Rep. Tony DeLuca, D-Penn Hills, issued a news release Thursday calling on state Auditor General Eugene DePasquale to conduct a special audit. Mr. DePasquale said it likely will be July before he can send an audit team to the district.
But a review of annual independent audits performed by the CPA firm Herbein of the Penn Hills district shows the gap between revenues and expenses in the district has widened sharply since 2011-12, when it had to draw $958,692 from a $4.65 million fund balance it had.
In 2012-13, the district withdrew $3.56 million from the fund balance, leaving $126,555. Despite nearly depleting its fund balance, the school board did not raise taxes, the audit report noted.
But the biggest gap between revenue and expenses came during the 2013-14 school year, when the district overspent its $74 million budget by $9.03 million. The deficit was reduced to $8.9 million by the $126,555 in the reserve fund.
That news was included in a
Jan. 12 letter to the school board that is included in the Herbein audit report. By the end of January, superintendent Thomas Washington was relieved of his duties via a separation agreement that provided him his salary through April. In March, director of business affairs Richard Liberto was placed on paid leave after the district’s bond rating was lowered because of its precarious finances. Neither administrator could be reached for comment.
In addition to the $8.9 million shortfall, acting superintendent Nancy Hines announced at Monday’s meeting that the board is anticipating a $10 million shortfall for the coming year. The board voted to petition Allegheny County Common Pleas Court to execute an $18 million bond issue so that it can pay its day-to-day bills. If approved, the bond issue would prompt a 1-mill real estate tax increase, in addition to the 0.65-mill increase already anticipated.
Ms. Hines had not been available for comment since Monday’s meeting and through a district spokeswoman declined to comment on Mr. DeLuca’s call for the state audit.
The shortfall in the 2013-14 budget was caused by factors such as a $1.5 million decrease in local tax collections and increases in regular and special education costs — largely because of charter school tuition payments — rising transportation costs and the lack of state reimbursements on $130 million in construction projects to build a new high school and elementary school, the report said.
Those reimbursements have not come from Harrisburg to Penn Hills and many other districts in Pennsylvania because of a state backlog in making the payments. Based on a complex formula, the Penn Hills district expects to eventually receive about $1 million annually in state reimbursements.
Charter school tuition costs were estimated to be about $11 million in the 201314 school year and $11.4 million this year, according to the audit reports.
The reports also show the increase in contributions to pension funds, which have affected all school districts in the state. For Penn Hills, the contributions increased from $2.4 million in in 201112 to $5.77 million in 2013-14.
The audit report also states the district has not received any of the construction reimbursements it anticipated from the state on its $130 million in building projects — a new high school and elementary school — and that it budgeted to use some of that funding in 201314 to make debt service payments.
The report said the district made a $2.7 million principal payment on its debt service from the general fund. The backlog of construction reimbursements affects many districts across the state that have built facilities in recent years.
Mr. DePasquale said his auditors would go into their review with an open mind. But, he said, it appears most of the financial strains were items that should have been anticipated. “These issues were not secrets,” he said.