The Pocono Record
October 12, 2013
STROUDSBURG — Pocono Mountain School District received too much money from the state because of bad data-keeping, operated with extreme deficits and transferred several thousand dollars to a former superintendent’s retirement plan without transparency, a new audit finds.
But the audit, released Friday by Pennsylvania’s Auditor General, also shows a school district that has faced some of the most daunting challenges in the state.
The results from the April 5, 2010, to Jan. 30, 2012, audit period illustrate a district “on the brink,” Auditor General Eugene DePasquale said Friday.
“This problem cannot be fixed alone just by the school district,” he said of its financial problems.
DePasquale said Pocono Mountain’s situation demonstrates that urban and rural schools have both been severely affected by state cuts to education and the way funding for charter schools is calculated.
The performance audits, which are typically done every four years but more often for districts that have more issues, determine whether state funds are being used according to guidelines.
The audit found the district to be mostly in compliance.
The first exception in the report was a general fund deficit, at nearly $12 million for the fiscal year ending June 30, 2012, nearly $19 million for 2011 and about $3.5 million in 2010.
The report attributes the problem to declining revenues from property taxes and declining enrollment because of unemployment.
Other challenges are unanticipated increases in expenditures to charter schools, including cyber schools, the defunding of the charter school reimbursement payments and increased health insurance costs.
The audit commended the district for taking several steps, including eliminating 280 professional, support and administrative positions by closing three schools and consolidating or altering other programs.
“Still, I think the problem is so big, those cuts, while warranted and helpful, are not enough,” DePasquale said.
But district spokeswoman Wendy Frable said the trend has been reversed this year.
The district now shows a projected $17.9 million fund balance and, for the first time in several years, did not have to take out a loan to cover costs until tax revenues are collected. The audit did not extend to this year.
In a second finding, the report said the district received about $165,000 more than it should have from the state because of miscalculated enrollment numbers.
The same problem cropped up in the last audit as well.
The report said the problem came from data entry errors and misclassifications of students’ resident status.
Frable said it was not possible for the district to go back and correct all possible coding entries for prior years. She said the state will make a deduction from the subsidy down the road to fix the problem.
A third observation found that previous superintendent Dwight Pfennig received a $12,162 payment to his Tax Sheltered Annuity retirement plan that was not in his contract or approved by the board.
“The district’s taxpayers have a right to well-documented information regarding superintendent compensation levels,” the report said.
Frable said the board approved the superintendent to defer a portion of his salary to a 403(b) account to maximize tax savings for him and for the district. The amount matched an approval the previous year, she said, and the board approved it again.
“Unfortunately, our documentation does not properly reflect the breakdown between the salary amount and the annuity amount, which was an oversight on our part,” she said by email. “This will not happen again.”
DePasquale said the larger concerns of the audit are related to the district’s financial shortfalls, rather than the smaller mistakes where there is no evidence of fraud.
He said the issues with an unfair charter school funding formula must be fixed. If the Legislature does not make a change, he said he will hold hearings, including one locally, and craft his own proposal.
He said the activities at the Pocono Mountain Charter School, which continues to fight for its survival in state court, are some of the “most extreme” in the state.