EDITOR'S NOTE: Corrections to the headline and text of this story have been made since its original posting.
ALLENTOWN, Pa. — An audit of the Allentown School District found breakdowns in operational procedures in the spending of millions in federal funding.
The school board approved the audit for the fiscal 2021-2022 year without comment at Thursday’s meeting.
- Allentown School District's 2021-22 fiscal audit found breakdowns in operational procedures
- The report says procedures for spending millions in federal food services funding were not followed
- District officials say corrective action is being taken
It found that some funding disbursements for the school breakfast, school lunch and summer food program were not properly approved.
An earlier report by LehighValleyNews.com incorrectly reported the audit found suspected fraud.
The public accounting firm Zelenkofske Axelrod LLC looked at 25 expenditures and found 11 were not approved by a director. That violated district policy and was a minimum of what was required, according to the audit report.
It described its findings as a material weakness, which means there was an internal control issue where a mistake might not be prevented, or quickly detected and corrected.
"The audit DOES NOT report suspected fraud occurring at the District,” Jeffrey S. Weiss, managing partner of Zelenkofske Axelrod LLC, said in a statement. “The findings reported are the result of testing in accordance with Uniform Guidance on the District’s internal control and compliance over its state and federal grant funding. The findings represent matters covering the District’s internal controls in ensuring that they operate the federal and state grant programs within applicable regulations.”
A school district statement said 11 out of 25 expenditures tested in the Food Services Department did not have a proper supervisory signature on them.
"This reflects a breakdown in proper operational procedures, but does not rise to the level of fraud, which is wrongful or criminal deception," said the statement issued on behalf of Superintendent Carol Birks. "The expenditures in question were appropriate expenditures for the Food Services Department and complied with all federal and state regulations and grant agreements."
The audit covered the last fiscal year — a period before Birks joined the district last fall.
The audit included a repeated finding from the previous year that an employee didn’t have proper clearances.
School board member Patrick Palmer said there was no fraud involved.
“There were some items that were approved that didn’t go through the proper approval process with us, but it would have been approved anyway,” he said. “So it wasn’t fraud.”
“So, it could be, say, you’re going to buy a thousand cases of milk or something like that,” he added. “It didn’t go through the proper approval process to get all that, but it’s something we would have gotten anyway. So we’re going to not get cases of milk.”
“There were some items that were approved that didn’t go through the proper approval process with us, but it would have been approved anyway. So it wasn’t fraud.”Patrick Palmer, Allentown School Board
An audit memo detailed challenges with getting members of the school district administration to comply with document requests for the 2021-22 audit.
“Although we ultimately received full cooperation of management and all necessary documentation, and believe that we were given direct and unrestricted access to the district’s officials and senior management,” the audit memo said, “we experienced significant delays in performance of the audit owing to the delays in receiving requested audit schedules as initially agreed.”
District turnover
Palmer said that was due to high turnover the district was experiencing at the time.
At the start of the fiscal year in July 2021, Marilyn Martinez was acting superintendent after former Superintendent Thomas Parker left that April and the Allentown School District was conducting a national search for a replacement. Deputy Superintendent Jennifer Ramos was appointed to take her place in late July. Former Superintendent John Stanford started in November after being hired in the search. He left in October 2022 after a settlement.
The school district said it agreed with the findings and would implement better internal controls, with the anticipated completion date of July 1.
As of June 30, 2022, the district had a fund balance — a surplus — of $31.6 million, or about 8.5% percent of the district’s budget for 2021-2022. That was up more than 4% percent from the previous year. The fund balance for fiscal year 2023-24 is pegged at about $37.1 million.
The audit showed the school district’s total revenues during the last fiscal year were $414.2 million and expenses totaled $347.3 million, leaving a net balance of $74 million.
More money came in because of a tax hike and additional state pandemic funding, according to the audit. But costs rose due to salary and retirement increases, charter schools and COVID-19 learning loss.
Some of the district’s biggest expenses include instruction, academic student support, maintenance, transportation and interest on long-term debt.
The district’s capital reserve fund had $29.7 million; capital projects had $743,107 debt service totaled $10.6 million; and other governmental funds added up to $841,740.
The school district participates in the Public School Employees’ Retirement System.
ASD’s contractually required contribution rate for the fiscal year that ended June 30, 2022, was 33.99% of covered payroll. The Allentown Public Library is also part of the school district as it receives support and services from ASD. The audit found the district and the library’s net pension liability was about $342.1 million.
The board also approved its fiscal 2023-24 budget Thursday without a property tax increase.
