Auditor General Eugene DePasquale said today a recent performance audit of the Greater Johnstown School District, Cambria County, raises questions about the district’s financial challenges and problematic hiring practices that cost the district $136,000.
“I commend district officials for reducing transportation costs since the last audit, but I have serious concerns about the district’s financial challenges and hiring practices,” DePasquale said in a news conference.
Hiring Practices Questioned
In June 2012, the district hired a board member’s daughter for a newly created clerical position of “project manager” without posting the position or considering other candidates. The board offered a five-year employment contract — usually reserved for top administrators — and an annual salary of $54,870.
Two years later, the board voted to approve a new employment contract with this same employee, boosting the salary to $59,348, changing the title to “project director, Alternative School” and extending the contract through June 2019.
Six months later, she was put on paid administrative leave for unspecified reasons and then offered a contract buyout that cost the district more than $136,000:
- $120,990, equivalent of two years of salary;
- $4,109 for unused vacation days; and
- $11,516 in payments for the employee’s medical coverage through July 2016.
Eighteen months after the employee’s buyout, she was rehired in a different position as “transportation coordinator,” again without posting the position or considering other candidates. The new position included a one-year contract and salary of $50,000. Simultaneously, the district continued its $40,000 contract with an outside vendor for transportation services.
“Beyond the appearance of nepotism and lack of competitive hiring, entering into a five-year employment contract for what essentially is a clerical support position is rare and certainly unnecessary,” DePasquale said, noting such contracts are usually only offered for key leadership and management positions, such as a superintendent, principal, and business manager.
“The district’s hiring and entering into unusual employment contracts with a board member’s daughter lacked accountability and fairness, and cost the district more than $136,000 that would have been better spent on classroom education,” DePasquale said, noting that the initial hiring violated a range of best practices, but did not violate any specific district policy. “However, in January of this year the board adopted a hiring policy that it promptly violated when this individual was rehired in August.”
The related board member appropriately abstained from the votes and noted the family relationship as the reason for abstention, as required by law.
DePasquale said his auditors found that the district did not have standard employment documentation on file, such as an application, resume, or interview forms documenting that an interview of the board member’s daughter had occurred, nor was there any evidence that the board considered anyone else for the position.
“What I find even more disturbing is that when we asked for the district’s response to the audit finding on the board member’s daughter, the district chose not to respond directly to the hiring issues,” DePasquale said. “I certainly hope that the district will take my audit as a wake-up call. Simply putting personnel policies in place is meaningless if you are going to ignore them at your convenience.”
Drop in General Fund Balance Creates Challenges
The district’s General Fund balance decreased by $10.7 million, or 63 percent, from $17 million in 2011 to $6.3 million in 2015.
However, after deducting committed or assigned amounts, the district is left with a $1.8 million balance, which is less than 4 percent of expenditures.
“It concerns me that if the current financial trend continues, the fund balance is likely to fall to near zero by the end of the 2016-17 school year,” DePasquale said.
“While I am glad to see district officials are aware of the growing financial challenges and that cost-reduction efforts are being made, I recommend district officials develop a multi-year financial plan to ensure the financial stability of the district.”
Student Transportation Improvements Lauded
DePasquale said he was pleased with improvements the district has made since the prior audit released in 2013 that criticized the district for being unable to justify $8.7 million in transportation reimbursements received over 10 years.
“I commend district officials for improving its recordkeeping and for competitively bidding transportation services that resulted in significant savings,” DePasquale said.
“In May, I called on the General Assembly in Harrisburg to require all school districts to seek competitive bids for student transportation services. Since 2013, our audits identified 19 school districts in 11 counties that paid $54.8 million more than the state transportation formula allowance.
“It is clear to me that to get the best possible price and ensure transparency for taxpayers, student transportation contracts should be re-bid every time they are up for renewal.”
Auditors found that for the 2014-15 school year, the Greater Johnstown School District’s percent of transportation costs over the final state formula allowance was 37 percent, a significant decrease from the 86 percent over allowance identified in the 2009-10 school year.
However, the current audit reports that the district was underpaid $17,710 in Pennsylvania Department of Education (PDE) transportation reimbursements during the 2013-14 and 2014-15 school years because the district based the data reported to PDE on a single month count, rather than the actual number of nonpublic students transported throughout the year.
“Until our audit, district officials were unaware they should report the actual number of nonpublic students transported throughout the year,” DePasquale said. “What’s more, we could not review the 2012-13 transportation data because the district could not produce the records. That means the district likely missed out on some state funding that year if it used the same flawed reporting method.”
Transparency Concerns Increase Costs, Waste Tax Dollars
“While the district has made great improvements in reducing student transportation costs, I am still concerned about its hiring practices, the hemorrhaging of the district’s General Fund, and how information is shared with the public,” DePasquale said.
“My auditors verified the district’s Right-To-Know-Law policies and procedures are appropriately applied, but the report to the school board last month projecting related expenses to hit nearly $100,000 is concerning,” he said.
“For the sake of the students and the taxpayers of the Greater Johnstown School District, I certainly hope that the board and district officials will work together and with residents to focus on providing the best education possible for students.”
The Greater Johnstown School District audit report is available online at: www.PaAuditor.gov.