An audit of the Philipsburg-Osceola region school district by the state auditor general revealed areas of non-compliance and “significant internal control deficiencies” in the areas of transport operations, project reimbursements construction and health service reimbursements. In addition, it showed that the district had not followed best practices in financial stability.
The 44-page performance audit covers a period from July 1, 2015 to June 30, 2019 and found that the district had not requested state reimbursement in the total amount of $ 572,583 for associated costs. to major construction projects.
“School districts that lack internal controls – a problem our listeners see all too often – can end up receiving too much or too little state funding,” Auditor General Timothy L. DeFoor wrote in a statement last week. Press. “Without this audit, the school district may never have realized that it had made a massive mistake that could have imposed unnecessary costs on local taxpayers.”
The audit also noted concerns about the district’s financial situation, which declined significantly during the review period, according to a statement. The district’s expenses exceeded his income, and he transferred more than $ 5 million from his general fund to pay for the construction of a stadium that was not budgeted for. These transfers have “considerably depleted” the balance of its general fund.
Significant drop in the general fund balance
One of the four audit findings showed that the district general fund balance “declined significantly” over the five-year period. The district had a surplus in the 2015-16 fiscal year, but experienced operating deficits for the next four.
“These deficits have resulted in a drop of more than $ 5 million in the general fund balance, from a peak of $ 8.9 million as at June 30, 2016 to only $ 3.6 million as at June 30, 2020”, indicates the audit.
For the period under review, the district had a cumulative deficit of over $ 4 million, according to the audit. Total district operating expenses increased by over $ 6 million between fiscal year 2015-16 and fiscal year 2019-20, while total revenues increased by less than $ 2 million. The increase in spending can mainly be attributed to an increase in education spending.
The audit included a response from district management, who said they agreed with the recommendation to prepare multi-year budgets and highlighted other actions they have taken.
“The District has increased its local property tax rates to increase its local share of revenue for fiscal year 2021-22. Preliminary results for fiscal year 2020-2021 appear to show a surplus. The district will continue to maximize its revenue through timely submissions to the state to receive and recognize its share of state revenue. The district is also using funds from the federal ESSER grant to supplant applicable current expenses, ”the district response said.
Thousands of dollars in district overpayment
A second result showed that because the district did not implement adequate internal controls over the entry, calculation and reporting of regular transport data, there was a net overpayment of $ 28,583 to the district. .
Pennsylvania Department of Education guidelines state that districts are required to report the number of miles per day each vehicle travels with and without students. Districts also report the number of students assigned to each vehicle and the number of days each vehicle has transported students, as directed.
The audit found that the PO school district did not report 13 vehicles used to transport students in three different school years (2015-16, 2016-17 and 2017-18).
“Failure to report vehicles has led the district to underreport the number of kilometers driven, days on duty and the number of students transported during these school years. Failure to report vehicles along with key data elements resulted in the district not receiving full reimbursement for transportation it was eligible for during those school years, ”the audit said.
Then, during the 2018-19 school year, it made a “systemic reporting error” for 43 of its 50 vehicles carrying students. Due to an error in entering mileage data, the district over-reported the number of kilometers traveled to transport students.
Other minor reporting errors were also noted.
“The multiple errors in reporting transport data that we identified in this conclusion that resulted in overpayments / underpayments, along with the district’s explanations of the cause of the errors, highlight the need for strong internal controls over the process of reporting transport data, ”says the audit. .
The district has agreed to follow the audit recommendations, which include the development and implementation of an internal control system over its regular transport data reporting process, including training of employees involved in data communication.
Delayed construction project reimbursement costs
The audit found that because the district did not implement “adequate internal controls”, it did not seek reimbursements from PDE for $ 572,583 for approved construction projects. In addition, he did not file further claims in a timely manner, so there was a delay in receiving income of $ 460,052.
The audit indicates that the district issued a bond and that the proceeds of the sale were used for a construction project in the district; the principal and interest payments made by the district related to the bond were partially repayable by the government. The money was used for another project and this payment was partially refundable. Both projects were in 2015. As of March 2021, the district had not requested reimbursement totaling $ 572,583, according to the audit.
“Due to a lack of oversight, district officials were unaware that reimbursement requests had never been completed and submitted to the POE. After we brought this issue to the attention of a district official, the district filed the necessary claims and subsequently received reimbursements in June 2021. Without our audit, the district may never have received over half a million dollars that it was entitled to receive, ”audit reports.
For two other obligations, the district did not submit reimbursement requests on time. The audit indicates that due to the “turnover in the district” officials could not determine when PDE confirmed that the bonds were eligible for redemption. It is not known how long the revenues were delayed.
To resolve reimbursement issues, the district accepted the audit recommendations, which include putting in place written procedures for filing PDE reimbursements and ensuring that not all tasks are the responsibility of a single employee. The district will submit final cost data for both projects to the PDE so that it can receive ongoing reimbursement. Employees who request such reimbursements will also be trained on the guidelines and requirements.
Student health data was underreported
The audit found that the district did not implement “adequate internal controls”, which led to underreporting of student data to the Ministry of Health. This resulted in the district receiving $ 11,834 less than it was entitled to receive for reimbursement of its health services for the 2015-2016 school year.
Districts that provide student health services are required to report annual health services costs and district “average daily membership” to the DOH.
The audit found that during the 2015-2016 school year, the district reported an incorrect average daily enrollment, so its reimbursement amount was negatively affected by over $ 11,000.
The former business manager was responsible for compiling and entering the data and the superintendent was responsible for reporting the data to the DOH. The audit indicates that the superintendent did not review the data before it was submitted.
In addition, the district was not timely to submit its 2014-15 report on the annual school health reimbursement claim system to the Ministry of Health, the audit found. This causes repayment delays which can impact financial operations.
The district agreed to implement the audit recommendations.