Published Online: January 26, 2010
Published in Print: January 27, 2010, as Federal Audit Raps Philadelphia

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Federal Audit Raps Philadelphia

Ed. Dept. says district failed to follow rules on $140 million.

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The Philadelphia school district failed to follow federal rules in 2005 and 2006 in spending nearly $140 million in federal aid, according to an audit by the U.S. Department of Education.

The audit calls for the 161,000-student district to repay about $17.7 million to the department and provide “adequate documentation” to justify an additional $121 million in spending or return that amount as well.

During the audited period, the district received $245 million in federal aid toward its $1.9 billion budget.

The 18-month audit examined accounting methods from July 2005 through June 2006, when Paul G. Vallas was the chief executive officer and the district’s governing body was composed of different members.

The district has 30 days to respond to the report. The Education Department will determine whether it must repay any of the money, said Mary Mitchelson, the federal agency’s acting inspector general.

The findings were “similar to what we have found in some other districts,” she said. Officials would not say why they chose to audit Philadelphia, which was last audited in the late 1980s.

The 130-page report generally criticizes the district for faulty bookkeeping and poor records management. It was released Jan. 15 by the federal department’s office of the inspector general.

The audit said the district had not enforced required staff certifications, improperly used some grant money to pay for ineligible salaries, failed to show what work some employees performed, and inadequately explained how some of the money had been used to pay for food, training materials, computers, and class trips.

The district had rebutted a draft of the audit in a 30-page response, calling many allegations the result of a “fundamental misunderstanding” of how it managed the grants. Refunding the money would have a “devastating impact” on the district’s mission, it said.

Michael J. Masch, the district’s chief business officer, said that nearly all the $140 million had been spent appropriately, but that the auditors had been “resistant” to accepting alternative forms of documentation.

“I want to make sure that the public does not misunderstand and think that the school district of Philadelphia spent $140 million in inappropriate expenses,” he said.

Mr. Masch, who began working for the district in June 2008, said the school system had already improved the way it maintains spending records and would wholeheartedly embrace the auditors recommendations for managing grants.

Vol. 29, Issue 19, Page 4

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