A report from the state auditor general's office found "internal control lapses" within the Montour School District resulted in the loss of more than $400,000 in taxpayer funds.
The audit, released in December 2012 by Pennsylvania Auditor General Jack Wagner's office, found "significant non-compliance with state laws and administrative procedures" within the district.
The routine performance audit was conducted from February 23, 2006 to November 6, 2011. State subsidies and reimbursements were audited from the 2004-2005 to 2009-2010 school years.
Montour Superintendent Donald Boyer said at the school board's January meeting that the district plans to appeal several of the audit's findings.
"In a month, we'll get a letter of the (Pennsylvania) Department of Education confirming these things (in the audit,) and a committee of the board will prepare a response," Boyer said at the meeting.
Violations cited in the 48-page document range from personnel issues to discrepancies in student activity fund money.
According to the audit's findings, a "lack in continuity" in the district's administration enabled former Montour director of fiscal management Samuel Reichl III to "make decisions without checks on his authority."
The audit noted that from Nov. 2003 to Sept. 2009, the district had five different superintendents and numerous school board members. Boyer has served as the district's superintendent since 2009.
"As a result of (the director of fiscal management's) ability to act with impunity, he made inappropriate decisions that caused the district to waste taxpayer funds," according to the audit.
Reichl left the district in May 2010, according to the audit.
In Jan. 2011, the school district hired a firm to conduct an independent forensic audit of activities that took place within the district's business office from 2003 to 2010. That investigation found that more than $750,000 in taxpayer funds were lost as a result of discrepancies in the business office.
The auditor general's findings report that $400,483 in expenses from 2006 to 2011 were a result of a "breakdown of internal controls," in the business office. That total includes the $185,000-cost of the 2011 forensic audit.
The following inappropriate activities were included in the auditor general's report:
- The district entered into a lease agreement for school buses it already owned. The administrator did not obtain approval from the school board before completing the lease transactions.
- The district lost $25,000 in state grant money because the necessary paperwork had not been filed with the state.
- Former administrators were hired as "consultants."
- The audit found that the district paid a total of $6,788 in health insurance premiums to the spouse of a retired administrator, who is not named in the audit. The retired administrator was taken off of the district's health care plan in April 2010, after turning 65. His wife, who had not reached 65, was listed by the district as an "inactive employee," though she has never worked for the district.
- Former school board members were unaware of many of the inappropriate transactions as they were taking place.
Click the media in this article to view the full PDF of the audit.
The audit also found that from 2003 to 2011, four teachers and two administrators were hired in roles outside of their certification area, and the district did not keep bus drivers' qualifications on file. Boyer said both violations have since been corrected.
Some Montour student organizations have operated at a deficit, which violates the district's requirement that clubs be financially self-sustaining. The high school's yearbook organization had a deficit balance $17,324 as of June 30, 2011, according to the audit.
"(The Montour School District) should require clubs with cash balances to take immediate action to create a positive balance and prohibit the fund custodian from disbursing funds for a club if such expenditures will cause a deficit balance," according to the audit.
Boyer said at the board's meeting that the district has taken steps to correct violations noted in the audit and recoup money lost.
The auditor general's office will follow up with the district in the coming months, according to its communications office.