Controller's audit: Can Philly's schools survive?

THE CITY controller's Valentine's Day gift to the school district came in the form of an audit report questioning its ability to survive.

Gerald Micciulla, a deputy city controller, pointed to the district's budget shortfalls and said there's uncertainty "about its ability to achieve cost savings and obtain additional funding to overcome" them.

"These conditions raise substantial doubt about its ability to continue as a going concern," he wrote.

That one line in the district's internal audit of its books for the 2010-11 fiscal year could make it more expensive to borrow money.

The district said in a statement that it shares concerns about its financial direction, but will continue to meet its financial obligations while dealing with the budget deficits.

It still has to cut more than $38.8 million from this year's budget and is faced with a more than $260 million deficit for next year.

"The key here is that the [School Reform] Commission and [Chief Recovery Officer] Thomas Knudsen are keenly focused on those financial challenges and are working with me and my administration on a daily basis to address those challenges," Mayor Nutter said.

"We will ensure financial stability, fiscal discipline and continued operations."

City Controller Alan Butkovitz called Knudsen "extremely credible," but said the district's plans for savings would likely be met by strong opposition.

"If there's finally some accountability and facing of reality, hopefully things will come to a head so that there will be real solutions to these issues rather than a constant process of sweeping things under the rug," Butkovitz said.