NEW CASTLE SCHOOLS Audit: District violated state law

The superintendent blamed a prior board and administration for the findings.
By LAURE CIOFFI
VINDICATOR NEW CASTLE BUREAU
NEW CASTLE, Pa. -- A state audit revealed that the New Castle School District has inappropriately subsidized its general fund budget with money that should have been spent on debt reduction or building improvements.
Auditor General Robert P. Casey released the findings Wednesday.
The audit showed the district violated state laws and Pennsylvania Department of Education regulations in December 1994 when the school board established a capital reserve fund for building improvements and supplied it with $658,000 in excess proceeds from the district's construction bond.
State law requires that any unexpended money from construction bonds must be used to pay off the bond debt.
State officials said school districts are allowed to create capital reserve funds, but can only put excess general fund money in them.
Auditors also found the district violated state law by transferring a net $2.4 million from the capital reserve fund to the general fund to balance the budgets for the 1999-2000 and 2001-02 school years. The 2002-03 school year was not part of the audit.
Capital reserve funds are limited to expenditure on public works and improvements. A news release from the auditor general states that documents on file at the district show that as far back as 1994 district administrators were interested in using funds from the capital reserve fund for general fund purposes.
Auditors concluded that when district officials became aware of the restrictions, they tried to create a fund that would enable them to move money from the capital reserve fund to the general fund.
In September 2001, the district created the tax rate stabilization fund, and by June 2002, had supplied it with $11.2 million from the capital reserve fund.
The district subsequently transferred a net $1.5 million from the tax rate stabilization fund to the general fund to balance the budgets for the 2002-03 and 2003-04 school years.
The district violated regulations that govern school district accounting procedures by establishing the fund without prior approval from the department of education and by transferring funds from the capital reserve fund to the tax rate stabilization fund.
Sandy Williams, auditor general spokeswoman, said there are no sanctions for these violations. She was unaware if the education department had any sanctioning powers.
A spokesman from the education department could not be reached to comment Wednesday afternoon.
Casey's findings show district officials waived their opportunity to respond to the audit.
Not intentional
Superintendent George Gabriel in a written news statement released this morning stated that the district "vehemently denies it knowingly, willingly or intentionally violated any state laws."
The findings are a result of events that occurred under a prior school board and administration, and it is believed they were based on what was sound advice with the best interest of the taxpayers and students in mind, the release said.
Gabriel's statement goes on to say that any violation of law was unintentional, and all funds were used for school purposes.
The statement said that since the reserve account and stabilization fund were created there have been several audits by the state and no other report addressed those issues.
Gabriel said the district is working with the auditor general and the Pennsylvania Office of Budget Comptroller Operations to satisfy all concerns.
The comptroller's office recommended that the district transfer all money to the district general fund and then establish a capital reserve fund in accordance with state law, Gabriel said.
Auditors also found that the district did not keep complete records of vehicle mileage or bus route descriptions. The Public School Code requires the district to maintain those records for at least six years.
Inaccuracies
A news release said auditors found inaccuracies in reports filed for 2000-01 and 2001-02 school years, including data on the number of pupils transported, the number of days pupils were transported, miles traveled with and without pupils and the amount paid to the district contractor.
The inaccuracies were caused by clerical errors and failure to review information provided by the contractor before submission to the education department, auditors said. These inaccuracies should not have a significant financial impact on the district, the auditor general said.
The news release said district officials agreed to take more steps to ensure increased review and retention of adequate documentation.