Pursuant to Section 6-400(d) of the Home Rule Charter, the Office of the Controller conducted a performance audit of the City of Philadelphia’s Pre-K Initiative. Our objectives were to determine whether revenues from the Philadelphia Beverage Tax were accurately accounted for and properly used to increase access to early preschool education for underserved children. A synopsis of the results of our work, which was performed in accordance with Government Auditing Standards, is provided in the executive summary to the report.
Why the Controller’s Office Conducted the Audit
Concerned about whether the city was properly accounting for revenues received from the Philadelphia Beverage Tax (PBT), and if those funds were going toward the expressed purpose of the tax, pursuant to Section 6 -400(d) of the Home Rule Charter, the Office of the Controller (Controller’s Office) conducted a performance audit of the Philadelphia (PHL) Pre-K Program. The objective of this audit was to determine whether revenues from the PBT were accurately accounted for and properly used to increase access to early preschool education for underserved children.
What the Controller’s Office Found
While we observed many positive features in the administration and performance of the PHL Pre-K Program, there were several items that are problematic and diminish the commitment to transparency promised for the program and the use of PBT revenues that fund it. Specifically, we noted that (1) pre-k providers overbilled the PHL Pre-K Program $102,350 for children who never attended per actual attendance records, (2) twenty percent (or 18 of the 88 providers) still have not achieved quality standards as recommended by the Universal Pre-K Commission, (3) the Mayor’s Office of Education would not provide us with inspection reports used for vetting lower-rated providers. One site in question, had obvious visual health and safety deficiencies that appear not to have been considered when the site was originally selected, (4) the city has not yet prepared a written implementation plan that would address future expansion of the PHL Pre-K Program, (5) collection of PBT revenues are currently included in the city’s General Fund and not a Special Revenue Fund, which could result in the revenues being used for purposes other than intended, and (6) many providers participating in the PHL Pre-K Program are not current regarding payment of the business and wage taxes.
What the Controller’s Office Recommends
The Controller’s Office has developed recommendations to address the above findings. Some of the more significant include: (1) verifying the accuracy of provider invoices, (2) establishing a written policy for removing pre-k providers who have not reached a quality 3 or 4 STARS rating after their initial 18 months in the program, (3) thoroughly researching the qualifications of providers who wish to participate in the PHL Pre-K Program, (4) establishing a written implementation plan that would serve to provide an open blueprint for expanding pre-k services in in the future, (5) placing PBT proceeds into a Special Revenue Fund that would provide the transparency necessary to ensure that collections are being used to only fund the designated and publicized intentions of the tax, and (6) collecting outstanding business and wage taxes from providers not complying with their tax obligations.