Press Releases

Press Releases: Office of the City Controller Releases Report on School District’s Internal Control Over Financial

For immediate release: Tuesday, June 5, 2018

Contact: Jolene Nieves Byzon, 215-300-1071

Philadelphia, PA – The Office of the City Controller released its annual report on internal control and on compliance and other matters for the School District of Philadelphia. The report, which examines the District’s internal control over financial reporting, found no material weaknesses or significant deficiencies, but highlighted several conditions requiring corrective action by the District.

The report found that the District has insufficient processing procedures for termination pay, which has resulted in a backlog of more than 2,300 former employees being owed compensation for accrued leave time.

While working for the District, employees accrue sick leave and personal and vacation time that should be paid to employees who separate from the District. The payout, called termination pay, should be made according to terms outlined in the District’s respective labor agreements. By not making termination payouts in a timely manner, the District may be in violation of its labor agreements, as well as in violation of Pennsylvania state law for not escheating unclaimed monies to the state.

The total termination pay outstanding for more than one year is $6.7 million, owed to more than 2,300 employees, including individuals who left District employment as far back as 2001. This issue occurred as a result of substantial employee turnover and insufficient staffing in the Payroll and Human Resources Departments.  In the report, the Controller’s Office recommended that the District dedicate additional staff to eliminate the backlog of owed termination pay, remit appropriate amounts due to the Commonwealth and develop a more efficient human resources strategy.

In response to the Controller’s FY2017 report and recommendations, the District provided its plan to address the backlog of payments, including increasing staff dedicated to termination payouts (two hires in FY17 and an additional two hires approved for FY18), hiring an outside firm to help identify and correct inefficiencies in the termination pay process, and modifying procedures to improve efficiencies in the termination process overall.  The District disclosed that, as of May 18, 2018, $2.4 million of the $6.7 million owed to former employees was resolved, including all cases prior to 2006. The District also stated that the remaining backlog will be resolved by August 31, 2018.

“While many employees – teachers, principals, bus attendants, security guards and cleaning and maintenance staff – have had to wait an inexcusable length of time to receive their rightfully earned money, I must recognize School District leadership for developing and implementing a comprehensive action plan to right this wrong. Dr. Hite, Uri Monson and the entire team are not only addressing the backlog of payments, but also improving the process so that this doesn’t happen again,” said City Controller Rebecca Rhynhart. “As City Controller, it is my job to shine a light on problems and hold organizations and individuals accountable. But, when there is a problem and that organization is willing to address it, I believe that too should be held up as an example.”

Chief Financial Officer Uri Monson added, “The School District made a commitment to addressing this long-standing condition and to do so in a way that not only clears out the backlog, but puts in place a new process which will prevent the problem from recurring as we move forward. I am grateful that the Controller not only highlighted the concern but acknowledged the School District’s efforts to assess, redesign and implement a fix to this issue.”

Additional key findings from the Report on Internal Control and on Compliance and Other Matters include:

  • Deficiencies in the District’s capital asset reporting process;
  • Unaccounted for or missing equipment and inaccurate property records;
  • Noncompliance with established procedures for Student Activities Funds; and
  • Payroll processing without proper approval.

Read the full report here.

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