Concerns cited

The Penn Hills School District Board voted against accepting a 2015-16 independent audit Monday night.

Among the audit's findings:

• Financial statements show the district was significantly over budget in several areas and needs to more closely scrutinize excesses in spending. Officials failed to reconcile general-fund balance sheets on a timely basis, in some cases waiting more than a year to make adjustments that, Turnley said, should be done monthly.

• The district may have “over-claimed” the amount it should have received in government-subsidized food services funding. Officials could not provide checklists documenting mandatory on-site reviews of school cafeteria systems, which puts the district “potentially not in compliance” with the National School Lunch Program.

• The district could not locate the quarterly cash-on-hand and final expenditure reports required to receive federal Title I funding, which supports districts with a high percentage of low-income students. Penn Hills budgeted about $1.6 million in Title I funding this year. Turnley recommended that officials find or complete the reports “as soon as possible so as not to jeopardize funding for this program.”

Source: 2015-16 financial audit by CPA Mark C. Turnley

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Updated 4 hours ago

The Penn Hills School Board voted Monday night against accepting the results of an independent audit that flagged several deficiencies in internal record-keeping and compliance, including shortcomings the auditor warned could jeopardize state and federal funding.

In a 4-3 vote, the board voted not to acknowledge receipt of the final report of CPA Mark C. Turnley's audit covering the 2015-16 academic year.

Board President Erin Vecchio — among the four who would not accept the audit — said she did so because she refuses to vote on any financial assessments amid an ongoing probe into the embattled, cash-strapped district by the Allegheny County District Attorney's and state Attorney General's offices.

“The figures that I'm looking at, I don't know if they're real,” Vecchio said after the board meeting at Linton Middle School. “I want to see the forensic audit from the DA — that's the only audit I'm going to vote on.”

Investigators have been pulling files and interviewing current and former school officials and associates in connection with the probe since last summer.

They are examining the district's contracts and finances to see what, if any, crimes occurred.

The board agreed Monday to waive its attorney-client and product privileges in connection with the county and state investigations — a move signaling district officials want to make it easier for investigators to obtain information, Vecchio said. The board gave similar approvals in June.

“They asked us to do it, and yes, we're cooperating fully with the DA,” Vecchio said. “I have nothing to hide. I want everything to come out on who did what.”

Board members Pauline Calabrese, Jennifer Burgess-Johnson and Denise Graham-Shealey joined Vecchio in voting against accepting Turnley's audit, which was completed as part of an annual state requirement.

“I didn't have complete financial information,” Calabrese said. “I need to see more documents.”

School Directors Catherine Mowry, Marlon Ferguson and Robert Hudak voted to approve receiving the audit and filing related state forms.

Decision's impact unclear

Business Manager David Roussos and substitute Solicitor Chelsea Dice said they were unsure how not accepting the audit would impact the district. They said they would have to discuss the next steps with the board.

“We're going to review that and probably bring it back up in a month,” Superintendent Nancy Hines said, declining to comment further.

The audit examined the district's financial situation and spot-checked a few compliance areas.

It described the district as confronting an “avoidable” financial burden that amounts to “far and above what most districts are facing.”

But it added there was “hope that the district can survive if immediate and long-range reform efforts are supported and implemented.”

The 57-page audit warned that the district was at risk of losing funding if it could not produce missing records on how it spent money on school lunches and low-income students.

Further, the audit said the district will have to enact several years of tax increases and resolve gaps in internal controls to overcome its money problems, which include cash-flow shortages exacerbated by debt approaching more than double the district's $87 million annual budget.

The financial dilemma beleaguering Penn Hills can be attributed to a combination of increases in pension and health care costs, losing students to charter schools, failure to evaluate the impact of programs and — the costliest misstep — racking up $172 million in construction debt while avoiding recommended tax hikes, according to Turnley and an analysis by the Tribune-Review .

The oversight and record-keeping issues flagged in Turnley's audit add to a litany of challenges for the district of about 3,800 students.

Roussos said the district has received about $5 million in advances toward debt service payments and ongoing expenses from the state Department of Education. A $2 million advance was made March 30, and a $3 million advance arrived March 31.

Roussos said the district projects to pay off its more than $170 million in debt by 2043.

Director's resignation accepted

Also Monday, the board formally accepted the resignation of School Director Don Kuhn Jr., who announced his intention to leave the seat in a letter Friday after having been charged with drug possession . He was not present Monday.

District officials declined to comment on the matter.

“That's a personal issue,” Vecchio said.

The board has 30 days to appoint Kuhn's replacement before district taxpayers can petition Allegheny County courts to fill the vacancy.

The district will accept letters of interest for the board vacancy through May 5.

Natasha Lindstrom is a Tribune-Review staff writer. Reach her at 412-380-8514 or nlindstrom@tribweb.com. Trib writer Mike DiVittorio contributed to this report.

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