Steelton-Highspire School District facing $2.7 million budget deficit

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Auditor General Eugene DePasquale said today that a recent audit of Steelton-Highspire School District, Dauphin County, shows serious financial distress and continued professional employee certification problems that jeopardize learning.

As part of the financial review, auditors found a deteriorating general fund balance, which included a $2.68 million deficit in the 2011-12 school year. The budget deficit has continued to grow in each of four fiscal years since 2009 when the deficit was more than $500,000.

Last March, the district was placed on the Department of Education’s financial watch list, which is part of an early warning system to identify school districts that are struggling to maintain fiscal stability. As part of the effort, the Department of Education is to offer technical assistance aimed at improving its fiscal condition.  Other school districts on the list include Aliquippa in Beaver County, Wilkinsburg Borough in Allegheny County, and Reading in Berks County.

“Steelton-Highspire School District is on life-support,” DePasquale said. “Without significant improvement, it is possible that the district will face future state intervention.  No one wants that to happen, but our first priority must be the education of the students of this district.

“While I am encouraged that district officials recognize that they have problems, I urge district leaders to work closely with the Department of Education to take advantage of any assistance they offer to prevent the potential loss of educational options and services for the students of Steelton and Highspire.”

The audit indicated that the district’s financial problems are due in part to its failure to control expenses in accordance with its budgets, a high real estate tax delinquency rate, and payments to charter schools now totaling more than $916,00 per year, for which they are no longer being reimbursed by the commonwealth.

DePasquale noted that recent audits of other districts in the commonwealth showed similar situations.

“As I have said many times, the focus of our education system should be all about the kids. If we don’t take action now to help financially troubled districts we will see a decline in our education system and that does not bode well for our future,” DePasquale said.

In his first year as auditor general, DePasquale said his department released more than 300 audits of school districts, charter and cyber charter schools, intermediate units and vocational-technical schools.  Auditors have found that districts with financial challenges have struggled with the impact of the elimination of charter school reimbursement funding in 2011.

Prior to the 2011-12 school year, the state provided indirect financial support to charter school education by reimbursing school districts a portion of their charter school tuition payments according to established rates (30 percent to 41.96 percent in some instances). The reimbursement was eliminated in the state’s 2011-12 annual budget without any changes to the way charter schools are funded.

In the 2009-10 school year, the Steelton-Highspire School District paid more than $414,000 in tuition to charter schools and was reimbursed by the state approximately $112,000. In the 2011-12 school year the district paid more than $916,000 in charter school tuition without any reimbursement from the state.

In addition to financial issues, since the 2002-03 school year, auditors have found 64 instances of professional staff not being properly certified and as a result, the district has faced possible state subsidy forfeitures of nearly $85,000.

“In the most current audit, professional certification deficiencies for 20 staff members, and that represents 15 percent of the district’s current professional employees,” DePasquale said. “It is quite disappointing that the Steelton-Highspire School District continues to disregard our recommendations and fails to strengthen its review and monitoring of certification information.  They must correct these problems now.”

Auditors also found that the Steelton-Highspire School District:

  • Failed to maintain federal criminal history records for 20 bus drivers, relying instead on the records of a neighboring school district that uses the same contractor to review and maintain the federal background checks; and
  • Failed to properly report data for children placed in foster care, which resulted in underpayment by the Department of Education of more than $30,000.

To deal with the district’s difficulties, auditors made 21 recommendations, including that the district:

  • adopt budgets estimating beginning fund balances based upon historical indicators and realistic expectations of the amount that will actually be available for the budgetary period;
  • institute budget projections beyond the next fiscal year, preferably a minimum of three years;
  • provide the school board with standard monthly updates on key financial benchmarks so that policy changes can be made before the district’s financial condition worsens;
  • use monthly budget status reports to scrutinize proposed expenditures for current operations and limit them to revenues received and the amount appropriated;
  • accept financial technical assistance offered by the Department of Education;
  • maintain and monitor budget controls so that expenditures do not exceed revenues;
  • survey parents to determine why the district is losing more students to charter schools;
  • implement a process to regularly review and verify professional certifications; and
  • review all bus drivers’ files and obtain any clearances that were not obtained prior to the audit;

In the 2011-12 school year, the Steelton-Highspire School District provided educational services to more than 1,399 students and serves a population of 8,400 people. The district employed 102 teachers, 23 full- and part-time support personnel and seven administrators. The district received $10.3 million in state funding in 2011-12.

The Steelton-Highspire School District audit is available online at:

(Source: Pa. Auditor General’s Office)