Audit report showed Coatesville School District mismanaged funds

Posted: March 20, 2014

COATESVILLE While the Coatesville Area School District struggled with a multimillion-dollar deficit, it paid for retirement benefits in 2012 to an administrator who was ineligible for them, according to a multiyear state audit report released earlier this month.

By exceeding its budget and causing a deficit in its general fund, the district is also violating the state Public School Code, the report said.

The audit, which spanned from June 3, 2010, to April 26, 2013, revealed that the district has continuously overestimated the revenue it thought it would generate and had a "dramatic $31.1 million drop" in its general fund balance over a seven-year period, which has put it in an "unstable financial position."

"The district's poor financial condition is due primarily to its inability to control spending within the confines of its budget," according to the report from the office of State Auditor General Eugene A. DePasquale.

The office performs regularly scheduled performance audits of school districts in the state to make sure they comply with state laws.

In a statement Tuesday, Ronald Kabonick, the school district's director of business administration, said the district can't change the past but is working to improve its financial condition in the future.

The report cited the district's rising charter tuition costs - a more than $8 million increase from 2006 to 2012 - as a financial burden to the district, which no longer receives reimbursement from the state. The report recommended that the district try to reduce the number of students who choose charter schools over district schools and develop a plan and timeline to reduce its deficit.

School districts are required by the state to pay charter-school tuitions.

The report also recommended that the district better monitor how it spends its money, citing the district's payment in 2012 of more than $21,000 in retirement benefits to a former director of business administration, Kenneth D. Lupold, who was an employee for only two years. According to district regulations for supervisors, employees must have worked at least 10 years to be eligible for retirement payments.

In the report, the district said that it waived the years-of-service requirement in this case as part of its early retirement incentive program, which it said it started to save money.

The state Auditor General's Office reviewed school board meeting minutes and found that the payments were not discussed at a public meeting. It recommended that the district keep the community better informed of district finances.

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