Report On Internal Control and On Compliance and Other Matters School District of Philadelphia Fiscal Year 15


Audit Date: August 3, 2016

Audit Categories

  • Financial
Controller: Alan Butkovitz

Audit Tags

  • Children and Families,
  • Education,
  • Grants,
  • Internal Controls,
  • School District

Description


Audit of the School District of Philadelphia’s Finances


Executive Summary


Why The Controller’s Office Conducted the Examination

We conducted an examination of the School District of Philadelphia’s (District) basic financial statements as of and for the fiscal year ended June 30, 2015 for the purpose of opining on their fair presentation. As part of this audit, we reviewed the District’s internal control over financial reporting to help us plan and perform the examination. We also examined compliance with certain provisions of laws, regulations, contracts, and grant agreements to identify any noncompliance which could have a direct and material effect on financial statement amounts.

What The Controller’s Office Found

The Controller’s Office found that the District’s financial statements were presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America and issued a separate report that accompanies the District’s Comprehensive Annual Financial Report for the fiscal year ended June 30, 2015. The audit procedures used to arrive at our conclusion regarding these financial statements led us to identify a number of matters involving the District’s internal control over financial reporting that need management’s attention. Some of the more important matters include:

  • The District continued to hold $6.5 million due to former employees that have separated from service — some as far back as 2001. In doing so, the District appears to be in violation of applicable labor agreements, and, for at least $1.2 million of the amount, in violation of Pennsylvania’s escheat law.
  • Management has not dedicated the resources necessary to process termination pay and escheatable amounts in a timely manner.
  • Nearly $5.0 million of Student Activity Funds continued to be at risk for theft and misuse, as schools holding the funds failed to follow established policies and procedures. District management did not adequately enforce those policies and procedures.
  • TransPass activity we examined at five District schools continued to suggest that passes were missing and unaccounted for. The missing TransPasses totaled nearly $3,700 and were part of the District’s $32.9 million Student TransPass Program. Poorly designed procedures coupled with a failure to properly implement others that were in place appear to be the cause for the lack of accountability over the passes.

What The Controller’s Office Recommends

The Controller’s Office has developed a number of recommendations to address the above findings. These recommendations can be found in the body of the report.