oversight

Commonwealth of Pennsylvania Recovery Act Audit of Internal Controls over Selected Funds.

Published by the Department of Education, Office of Inspector General on 2010-03-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

        U.S. Department of Education 

         Office of Inspector General 


American Recovery and
Reinvestment Act of 2009
 Commonwealth of Pennsylvania Recovery Act Audit
     of Internal Controls over Selected Funds

                   Audit Report




               Pennsylvania State Capitol




ED-OIG/A03J0010                             March 2010
               Abbreviations\Acronyms Used in This Report

ARRA                    American Recovery and Reinvestment Act of 2009
BSA                     PA State Auditor General’s Bureau of School Audits
BSE                     Bureau of Special Education
C.F.R.                  Code of Federal Regulations
CFO                     Chief Financial Officer
Commonwealth            Commonwealth of Pennsylvania
Commission              Stimulus Oversight Commission
Comptroller’s Office    Office of the Comptroller
Department              U.S. Department of Education
DGS                     Department of General Services
DOC                     Department of Corrections
ESF                     Education Stabilization Fund
FY                      Fiscal Year
GAO                     Government Accountability Office
Governor’s Office       Office of the Governor
GSF                     Government Services Fund
IDEA                    Individuals with Disability Education Act Part B
IU                      Intermediate Unit
IPA                     Independent Public Accountant
LEA                     Local Educational Agency
Manual                  Manual of Accounting and Financial Reporting for
                        Pennsylvania Public Schools
OESE                    Office of Elementary and Secondary Education
OMB                     Office of Management and Budget
OSERS                   Office of Special Education and Rehabilitative Services
PDE                     Pennsylvania Department of Education
RMS                     Risk Management Service
School Code             Pennsylvania Public School Code of 1949, as amended
SEA                     State Educational Agency
SFSF                    State Fiscal Stabilization Fund
Title I                 Title I Part A of the Elementary and Secondary
                        Education Act
Voc Rehab               Bureau of Labor and Industry’s Office of Vocational
                        Rehabilitation
VRSG                    Vocational Rehabilitation State Grants
                                UNITED STATES DEPARTMENT OF EDUCATION
                                     OFFICE OF INSPECTOR GENERAL

                                                                                                  AUDIT SERVICES
                                                                                            Philadelphia Audit Region


                                                    March 15, 2010


Dr. Gerald L. Zahorchak, Secretary
Commonwealth of Pennsylvania
Department of Education
333 Market Street
Harrisburg, PA 17126-0333

William L. Gannon, Executive Director
Commonwealth of Pennsylvania
Department of Labor & Industry
Office of Vocational Rehabilitation
1521 North Sixth Street
Harrisburg, PA 17102

Dr. Jeffrey A. Beard, Secretary
Commonwealth of Pennsylvania
Department of Corrections
P.O. Box 598
Camp Hill, PA 17001-0598


Dear Sirs:

The attached file contains a final copy of our audit report entitled, Commonwealth of
Pennsylvania Recovery Act Audit of Internal Controls over Selected Funds, Control
Number ED-OIG/A03J0010. The report presents the results of our work to determine
whether agencies charged with responsibility for overseeing ARRA funds have designed
systems of internal control that are sufficient to provide reasonable assurance of
compliance with applicable laws, regulations, and guidance. A signed hardcopy of the
report will be provided upon request.

This report incorporates the comments you provided us in response to our preliminary
final audit report. If you have any additional comments or information that you believe
may have a bearing on the resolution of this audit, you should send them directly to the
following Education Department officials, who will consider them before taking final
Departmental action on this audit.



 The Department of Education's mission is to promote student achievement and preparation for global competitiveness by fostering
                                       educational excellence and ensuring equal access.
                         Thelma Meléndez de Santa Ana, Ph.D. 

                                   Assistant Secretary

                             U.S. Department of Education 

                     Office of Elementary and Secondary Education 

                                400 Maryland Ave., S.W.

                                 Washington, DC 20202 


                                     Alexa E. Posny

                                   Assistant Secretary

                             U.S. Department of Education 

                 Office of Special Education and Rehabilitative Services

                                400 Maryland Ave., S.W.

                                 Washington, DC 20202 


                                      Phil Maestri

                                        Director

                              U.S. Department of Education 

                               Risk Management Service 

                              400 Maryland Avenue, S.W.

                                 Washington, DC 20202 


                                      Thomas Skelly

                             Acting Chief Financial Officer 

                             U.S. Department of Education 

                           Office of the Chief Financial Officer 

                              400 Maryland Avenue, S.W.

                                 Washington, DC 20202 


Statements that managerial practices need improvements, as well as other conclusions
and recommendations in this report, represent the opinions of the Office of Inspector
General. Determinations of corrective action to be taken will be made by the appropriate
Department of Education officials in accordance with the General Education Provisions
Act.

It is the policy of the U.S. Department of Education to expedite the resolution of audits
by initiating timely action on the findings and recommendations contained therein.
Therefore, receipt of your comments within 30 days would be appreciated.

In accordance with the Freedom of Information Act (5 U.S.C. § 552), reports issued by
the Office of Inspector General are available to members of the press and general public
to the extent information contained therein is not subject to exemptions in the Act.


                                              Sincerely,

                                              /s/

                                              Bernard E. Tadley
                                              Regional Inspector General for Audit

Enclosure
Audit Report
ED-OIG / A03J0010                                                                        Page 1 of 23

                                             PURPOSE

The American Recovery and Reinvestment Act of 2009 (ARRA) places a heavy
emphasis on accountability and transparency, and in doing so, increases the
responsibilities of the agencies that are impacted by ARRA. Overall, the U.S.
Department of Education (Department) is responsible for ensuring that education-related
ARRA funds reach intended recipients and achieve intended results. This includes
efficiently controlling funds at the Federal level, effectively ensuring that recipients
understand requirements and have proper controls in place over the administration and
reporting of ARRA funds, and promptly identifying and mitigating instances of fraud,
waste, and abuse of the funds.

The purpose of our review was to determine whether agencies charged with responsibility
for overseeing ARRA funds have designed systems of internal control that are sufficient
to provide reasonable assurance of compliance with applicable laws, regulations, and
guidance. Proper internal controls are essential for ensuring ARRA funds are adequately
administered and used in ways that coincide with the intent of ARRA. This report
provides the results of the review we conducted at the Pennsylvania Department of
Education (PDE), the Commonwealth of Pennsylvania’s (Commonwealth) Office of the
Governor (Governor’s Office), the Commonwealth’s Office of Comptroller Operations
(Comptroller’s Office), the Bureau of Labor and Industry’s Office of Vocational
Rehabilitation (Voc Rehab), and the Commonwealth’s Department of Corrections
(DOC). We focused our review on the design of State-level controls over data quality,
cash management, subrecipient monitoring, and use of funds. These controls are a key
aspect in the proper administration of ARRA funds for Title I Part A of the Elementary
and Secondary Education Act (Title I), Individuals with Disability Education Act Part B
(IDEA),1 Vocational Rehabilitation State Grants (VRSG), and the State Fiscal
Stabilization Fund (SFSF).2

                                             RESULTS

Our review consisted of an assessment of the designed systems of State-level controls
planned for ARRA funds. At PDE, this system consisted of controls that have been
modified for ARRA but established prior to the passage of ARRA. Since ARRA was in
its early stages, PDE was still in the process of planning for implementation. Therefore,
we reviewed the designed systems of State-level controls planned for ARRA funds at the
time of our fieldwork.

PDE and the Governor’s Office were making a proactive effort to ensure the proper
administration of ARRA funds. For instance, PDE provided updated guidance as it
became available to local educational agencies (LEA) about permissible uses, proper
administration, and reporting requirements under ARRA. PDE also offered several

1
 IDEA includes only Grants to States. 

2
 Although our work also included reviews at selected LEAs located in the Commonwealth, the results of 

our work at those selected LEAs will be provided in a separate report. 

Audit Report
ED-OIG / A03J0010                                                             Page 2 of 23

training opportunities to the LEAs. Additionally, the Governor’s Office appointed a
Chief Accountability Officer and created a Stimulus Oversight Commission
(Commission) whose purpose is to ensure that every dollar of the ARRA funds is spent
transparently and in a manner that ensures accountability. The role of the Commission is
to review and monitor the Commonwealth’s stimulus activity and to provide advice and
counsel. The Commission released guidance which relayed the grant and award
processes that will be used to review, approve, and monitor ARRA grant activities. The
Commission reports directly to the Governor’s Office.

However, we determined that the designed systems of internal control at the State-level
could be strengthened for ARRA funds to provide reasonable assurance of compliance
with applicable laws, regulations, and guidance. We identified several areas in which the
Commonwealth’s agencies’ controls could be strengthened or established. Based on our
assessment of the controls, we concluded that PDE could improve its monitoring of
subrecipients and its fiscal internal controls over cash management at LEAs.
Additionally, for data quality, we noted that PDE had not developed a policy to disclose
ARRA data deficiencies. Finally, the Governor’s Office needs to clarify the roles and
responsibilities of the Commonwealth agencies administering SFSF funds. Specifically,
we found that:

     PDE needs to develop and implement additional subrecipient monitoring
      procedures that address ARRA requirements;
    PDE could improve its monitoring of subrecipients and its fiscal internal controls
      over cash management at LEAs;
   	 The Comptroller’s Office and PDE need to verify whether the Federal funds
      advanced to LEAs are actually being expended as they claim and that claimed
      expenditures are reasonable, allowable, and supported;
   	 The Governor’s Office and PDE need to develop and disseminate a process to
      notify the Department of inaccurate or incomplete ARRA data submitted by them;
      and
   	 The Governor’s Office needs to document and delineate the roles and 

      responsibilities of the Commonwealth agencies administering SFSF funds. 


Since most of the ARRA funding had not been requested by the Commonwealth or sent
to the LEAs at the time of our review, we could not validate nor test the accuracy of the
statements made by officials regarding their accounting and tracking systems.

We did not identify any reportable issues with respect to the education-related ARRA
programs administered by Voc Rehab.

We provided a preliminary version of this final audit report to PDE, Voc Rehab, and
DOC for review and comment on January 14, 2010. PDE provided comments on
February 4, 2010. PDE did not agree with our findings and recommendations because it
believed our comments were based on a preliminary understanding of PDE’s processes,
and are suggestive of pending or not yet released official instruction.
Audit Report
ED-OIG / A03J0010                                                                           Page 3 of 23

Based on the comments, we modified Finding Nos. 1 and 4. PDE’s comments are
summarized at the end of each finding. The entire narrative of PDE’s comments is
included as an Enclosure to this report.



FINDING NO. 1: 	            PDE Could Improve Its Monitoring of Subrecipients to Ensure
                            Adequate Oversight of ARRA and Other Federal Funds

PDE could strengthen its Title I and IDEA program monitoring procedures to ensure that
LEAs comply with Federal fiscal requirements. PDE indicated that it planned to monitor
subrecipients of ARRA funds using the same methodology and instruments it used to
monitor subrecipients of non-ARRA funds. A PDE official asserted that ARRA did not
add any new program requirements, just more funding. Although PDE revised its
monitoring instrument to include ARRA funds, it revised only the monitoring instrument
for the Title I grant program.3 We reviewed PDE’s Title I and IDEA monitoring
instruments (including the updated protocol for Title I). We noted that although the
Title I instrument incorporated procedures for the review of payroll and equipment,
PDE’s monitoring instruments for the Title I and IDEA programs were focused mainly
on programmatic issues.

PDE did distribute information and guidance about ARRA to LEAs as it became
available. PDE also offered several training opportunities and provided technical
guidance to LEAs that provided information about the appropriate uses and the proper
administration of ARRA funds, as well as information about ARRA reporting
requirements. However, PDE’s monitoring instruments did not include monitoring of the
subrecipient’s use of Federal funds, except as indicated above.

PDE’s Monitoring Instruments Need to be Strengthened to Address ARRA
Requirements and to Ensure LEAs Have Adequate Fiscal Systems and Use Title I,
IDEA, and ARRA Funds Appropriately

The monitoring instruments used by PDE were not adequate. Although PDE revised its
Title I program monitoring instrument to include procedures to review ARRA funds,
these procedures only included ensuring that Title I supplemental (ARRA) funds and
expenditures are tracked separately from Title I basic funds and determining that LEAs
have source data to reflect the information reported to PDE. PDE’s monitoring of
subrecipients primarily focused on programmatic areas, and except as indicated above,
neither the Title I nor the IDEA monitoring instruments address other fiscal areas.




3
    PDE did not revise its IDEA subrecipient monitoring instrument to include ARRA funds.
Audit Report
ED-OIG / A03J0010                                                                            Page 4 of 23

Specifically, the monitoring instruments used by PDE's program offices for both the
Title I and IDEA grant programs did not include steps to ensure that each subrecipient
has:

    	 An accounting system containing sufficient information and reflecting proper
       accounting treatment of financial transactions (e.g., bank account and cash
       balances and comparison of outlays to budgets);
    	 A financial recordkeeping system4 to account for the monitoring of subgrant­
       related procurement activities, as well as grant and contract funds which ensures
       that financial records are properly documented, maintained, reviewed, and
        up-to-date;
     Clear and comprehensive written policies and procedures for: its accounting
       system, the procurement of goods and services, human resources, and payroll; and
    	 Clear and comprehensive written policies and procedures to properly administer
       and monitor contracts, including the contract award process, documentation of
       why and how a price was determined to be reasonable for sole-source contracts,
       the bidding process, and segregation of the functions for the solicitation and
       evaluation of bids from the contract award process.

According to documentation provided by PDE officials at the exit conference,

                  … each of Pennsylvania’s LEAs is required to adhere to the
                  principles and accounting structures contained in the Manual of
                  Accounting and Financial Reporting for Pennsylvania Public
                  Schools (Manual). This Manual provides for a uniform and
                  standardized system of financial management and reporting for
                  all Pennsylvania public schools and ensures comparability in
                  subsidy distribution and annual financial reporting among all
                  public schools. The key features of the Pennsylvania School
                  Accounting System provide for . . . financial reporting in
                  conformance with Generally Accepted Accounting and Financial
                  Reporting Principles for all state and local governments,
                  including public school systems.

Although the Manual requires that LEAs maintain a system of financial management and
reporting and use a standardized Chart of Accounts, through our fieldwork we found that
there are various financial systems being used by the LEAs to administer grant funds.
LEAs also have their own recordkeeping systems and policies and procedures for
procurement, contracting, human resources, payroll, and other related fiscal areas.
Mandating that an LEA has a financial accounting and recordkeeping system does not
preclude the State educational agency (SEA) from monitoring those systems to ensure
that they are adequate.


4
 A recordkeeping system is the records management system used to organize supporting financial
documentation (e.g., bank statements, cancelled checks, paid invoices, timesheets, budget documents,
personnel records) in a manner that allows this documentation to be easily retrieved, understood, reported,
and safeguarded against theft or destruction.
Audit Report
ED-OIG / A03J0010                                                                       Page 5 of 23

PDE officials also stated that the Pennsylvania Public School Code of 1949, as amended
(School Code), governs procurement and contractual bidding and awarding processes and
procedures. Although the School Code governs these processes, this does not ensure that
LEAs are adhering to the processes or preclude the SEA from monitoring these
processes. As stated, PDE’s monitoring instruments did not include steps to ensure that
these processes are adhered to.

In addition, PDE’s monitoring instruments did not include monitoring of the
subrecipient’s use of Federal funds.5 PDE’s monitoring instruments did not include
procedures to verify that the LEAs were spending Federal funds (ARRA and non-ARRA)
in accordance with applicable laws and Federal regulations and the subrecipient’s plan.

PDE officials also asserted that the Pennsylvania State Auditor General’s Bureau of
School Audits (BSA) reviews the school’s compliance with these pertinent School Code
requirements. Any audit findings discovered are forwarded to PDE for review and
resolution. This process, combined with the monitoring of expenditures and other fiscal
areas, which are included in their Office of Management and Budget (OMB) Circular
A-133 Single Audit, is the basis for PDE’s belief that its monitoring process is adequate.
PDE primarily relied on the OMB Circular A-133 Single Audits to identify fiscal control
or expenditure issues at LEAs. Under the Commonwealth’s implementation of the Single
Audit Act, each agency in the Commonwealth’s resolution system must make a
management decision on each finding within 6 months of receipt by the Commonwealth
to ensure that the subrecipient takes corrective action. Additionally,
34 C.F.R. § 80.26(b)(3), also requires appropriate corrective action of LEA single audit
findings within a 6-month timeframe.

However, a review of current and prior years’ OMB Circular A-133 Single Audit reports
revealed that PDE has consistently had findings relating to the lack of timeliness in
resolving audit findings which may relate to fiscal or use of fund issues. For instance, in
the fiscal year (FY) 2008 OMB Circular A-133 Single Audit report, the independent
public accountant (IPA) noted that for 19 out of 70 subrecipient audit reports with
findings, the timeframe for making management decisions on findings ranged from
approximately 7 months to more than 19 months from the date that PDE received the
audit reports. Additionally, in the FY 2007 OMB Circular A-133 Single Audit report, the
IPA noted that for 6 out of 25 subrecipient audit reports with findings, the time period for
making management decisions on findings ranged from approximately 7 months to more
than 14 months from the date that PDE received the audit reports.

5
  The Department issued non-regulatory guidance on the American Recovery and Reinvestment Act of
2009 Funds for State and Local Programs. This guidance contains information developed by the
Partnership for Intergovernmental Management and Accountability. The Partnership has published a
number of documents and assessment tools to help agencies monitor funds spent under the economic
stimulus package. This guidance includes the Risk Assessment Monitoring Tool and the Financial and
Administrative Monitoring Tool. The purpose of these tools is to provide uniform guidance for
subrecipient monitoring. These tools are available in the Department’s guidance and also on the
Association of Government Accountant’s Web site at http://agacgfm.org/intergovernmental/resources.aspx.
Audit Report
ED-OIG / A03J0010                                                                         Page 6 of 23

Although PDE asserted that fiscal monitoring is covered during the Single Audit review
process, we are concerned that the consistent prior history in untimely audit resolution by
PDE could result in corrective action not being taken timely and Federal funding (both
ARRA and non-ARRA) being misused. Furthermore, PDE’s reliance on OMB Circular
A-133 Single Audits will not identify or resolve issues with LEA’s administration of
Federal funds (both ARRA and non-ARRA) in a timely manner. LEA Single Audits are
not due to PDE until 9 months after their fiscal year ends, and resolution of findings
would not take place until at least a year later. Additionally, PDE officials asserted to us
that the monitoring process is included in its program plans submitted to the Department
and has been continuously approved by the Department.

The Code of Federal Regulations (C.F.R.) Parts 76 and 80 address the SEA’s role in
monitoring subrecipients. According to 34 C.F.R. § 76.702, “A State and a subgrantee
shall use fiscal control and fund accounting procedures that insure proper disbursement of
and accounting for Federal funds.”

According to 34 C.F.R. § 80.40(a),

                 Grantees are responsible for managing the day-to-day operations
                 of grant and subgrant supported activities. Grantees must
                 monitor grant and subgrant supported activities to assure
                 compliance with applicable Federal requirements and that
                 performance goals are being achieved. Grantee monitoring must
                 cover each program, function or activity.

PDE Needs to Develop a Plan to Monitor SFSF Funds

Finally, PDE had not developed a plan to monitor SFSF grant funds. To ensure that these
funds are used appropriately, PDE needs to develop and incorporate the review of the
SFSF funding in its monitoring instruments. In its “Application for Initial Funding under
the State Fiscal Stabilization Program,” each State assured the Department that it would
comply with all of the accountability, transparency, and reporting requirements that apply
to the SFSF program. To comply with these requirements, each State had to have a
comprehensive monitoring plan and protocol to review grant and subgrant supported
activities. The monitoring plans should have addressed the following areas:

           A monitoring schedule; 

           Monitoring policies and procedures; 

           Data collection instruments (e.g., interview guides, review checklists); 

           Monitoring reports and feedback to subrecipients; and

           Processes for verification of implementation of required corrective actions.6


6
 The Department issued an email to remind States of their responsibility to thoroughly and effectively
monitor subrecipients under the SFSF program (The American Recovery and Reinvestment Act of 2009:
State Grants Under the State Fiscal Stabilization Fund - Monitoring: States’ Responsibility [listserv
message, August 27, 2009; http://www.ed.gov/programs/statestabilization/legislation.html]).
Audit Report
ED-OIG / A03J0010                                                                          Page 7 of 23

Also, the Department’s Grant Award Notification included the statement that funds
awarded under the SFSF program are subject to all applicable statutes and regulations.7
This included the General Education Provisions Act and the Education Department
General Administrative Regulations, which includes 34 C.F.R. § 80.40(a), as indicated
above.

If PDE does not have adequate monitoring procedures for funds received under the
ARRA IDEA, Title I, and SFSF programs, it cannot ensure that LEAs are properly
reporting complete and accurate information or spending funds in accordance with
ARRA requirements. Given the current economic climate, LEAs may be experiencing
tight budget constraints, increasing the risk of unallowable or inadequately documented
expenditures or misuse of funds related to ARRA programs.

Recommendations:

We recommend that the Assistant Secretary for the Office of Elementary and Secondary
Education (OESE), in coordination with the Assistant Secretary for the Office of Special
Education and Rehabilitative Services (OSERS), require PDE to:

1.1	    Develop and implement procedures to monitor subrecipients’ fiscal internal
        controls and use of funds for ARRA and non-ARRA grant programs.

1.2	    Develop and implement monitoring procedures that address all applicable
        ARRA requirements, including those requirements specific to the SFSF
        program.


PDE Response

PDE did not concur with the Finding. PDE believes that its monitoring and oversight of
ARRA and other Federal funds is in compliance with all existing published guidance.
PDE stated that its processes and procedures have been consistently approved by the
Department’s OESE and Office of Special Education Programs, and as such, believe that
our recommendations are inconsistent with previous Departmental guidance.
With regard to the Title I program, PDE maintained that LEA fiscal information is
continuously reviewed as a part of the initial application, in addition to the annual plan
and the budget process. PDE asserted that the allowable costs presented by the LEAs are
consistent with Federal regulations, as well as PDE guidance, policies, and priorities.
PDE also noted that LEAs are required to submit requests for budget revisions when
expenditures exceed approved budgets by more than 20 percent.

7
  The Department issued the document Guidance for Grantees and Auditors: State Fiscal Stabilization
Fund Program on December 24, 2009 (http://www2.ed.gov/programs/statestabilization/auditor­
guidance.pdf). This guidance states that, “while the specific requirements in the OMB Circulars that apply
cost principles, such as OMB Circulars A-21 and A-87, do not apply to SFSF funds, expenditures attributed
to the SFSF program must still be “reasonable and necessary,” and consistent with applicable State and
local requirements.”
Audit Report
ED-OIG / A03J0010                                                                      Page 8 of 23

With regard to the IDEA program, PDE noted that fiscal oversight responsibility is also
delegated to its Intermediate Units (IU). The IUs act on behalf of PDE (as the direct
recipient of IDEA funds) for the proper administration, oversight, and management of the
local regional IDEA funding allocations of LEAs. PDE stated that written agreements
exist between the IUs and their member LEAs that enable the IUs to determine that the
eligible LEAs use and report the usage of IDEA funds in accordance with pertinent
regulatory and procedural requirements.

PDE reiterated that it does not have separate procedures to ensure that LEAs have an
accounting system because LEAs are required to adhere to the principles and accounting
structures contained in the Manual of Accounting and the School Code.

PDE also expressed its commitment to exceeding minimum requirements and stated that
it recently awarded a contract to a vendor to assist with ARRA data reporting
requirements. Each LEA will submit detailed data to validate the proper use and
reporting of all ARRA funds received. The contractor will be responsible for reviewing
the ARRA data submitted, reviewing the data submissions, and providing
recommendations on the data submissions. The contractor will also select a sample of
LEAs for on-site visits and follow-up.8


OIG Comments

We revised the Finding to recognize the additional documentation provided by PDE
relating to the procurement and contracting requirements in the School Code (see below).

Although PDE asserted that its monitoring and oversight of ARRA and other Federal
funds are in compliance with all published guidance and that LEA fiscal information is
continuously reviewed, the lack of fiscal and ARRA-related components in PDE’s
monitoring processes and procedures makes it difficult to ensure that LEAs are
expending Federal funds in accordance with Federal regulations. ARRA funding is
subject to the most stringent standards of accountability and transparency; therefore,
heightened monitoring and oversight are required. OMB issued a memorandum on the
Initial Implementing Guidance for the American Recovery and Reinvestment Act of 2009
(Memoranda M-09-10) on February 18, 2009, which states that, “Agencies must take
steps, beyond standard practice, to initiate additional oversight mechanisms in order to
mitigate the unique implementation risks of the Recovery Act. At a minimum, agencies
should be prepared to evaluate and demonstrate the effectiveness of standard monitoring and
oversight practices.”

Regarding the IU’s fiscal oversight responsibility, PDE should not be relying upon the
written agreements between the IU’s and the LEAs. Although the agreements are a good
tool, just because the agreements state that LEAs should use and report the use of IDEA
funds in accordance with pertinent regulatory and procedural requirements does not mean

8
  The Negotiations Amendment for the contract (dated November 12, 2009) stated that PDE would be
responsible for selecting the LEAs that the contractor will visit for onsite monitoring.
Audit Report
ED-OIG / A03J0010                                                             Page 9 of 23

that they are complying. Therefore, monitoring in these areas needs to be performed to
ensure that the policies, procedures, and systems are in place and are functioning as
intended, and that LEA expenditures are reviewed to ensure that they are reasonable,
allowable, and adequately supported. IUs should also be monitoring the LEAs’ fiscal
controls and expenditures because of their fiscal oversight responsibility.

We commend PDE for being proactive and awarding the ARRA contract. Based upon
the information provided on the contract by PDE, it appears that the contract could assist
PDE in ensuring that the ARRA data collected and reported are accurate. However, we
could not substantiate the sufficiency of the review and verification process because the
process was not in place during our review nor were we provided with enough
information on the contractor’s procedures to discern the sufficiency.

In addition, the contractor will be responsible only for reviewing and verifying ARRA
related data. PDE should also ensure that monitoring is also performed for non-ARRA
(i.e., regular Title I and IDEA funds) Federal funds.

As stated above, PDE provided us with documentation to show that the School Code
governs procurement and contractual bidding and awarding processes and procedures.
Based upon this documentation, we revised the Finding accordingly. However,
mandating LEAs to abide by the School Code does not ensure that they are complying.
Monitoring should be performed to ensure that LEAs are in compliance.

Finally, PDE did not address how SFSF funds will be monitored. As stated in the
Finding, PDE needs to develop and implement a process to monitor SFSF grant funds.



FINDING NO. 2:        The Comptroller’s Office Could Strengthen Its Controls Over
                      Cash Management at LEAs to Ensure Adequate Oversight of
                      ARRA and Other Federal Funds

The Comptroller’s Office planned to use its current systems and processes to draw down
and disburse ARRA funds to LEAs. However, the Comptroller’s Office did not have
adequate controls in place to prevent and detect whether LEAs were: 1) expending all the
Federal cash advanced to them on a monthly basis (prior to receiving their next month’s
advance); 2) maintaining excess Federal cash balances; 3) earning quarterly interest in
excess of $100 on Federal funds; and 4) returning interest earned on these funds to the
Department in accordance with the regulations.

The Comptroller’s Office Did Not Verify LEA Expenditures Prior to Payment

The Comptroller’s Office did not have fiscal control and fund accounting procedures that
ensured proper disbursement of and accounting for Federal funds. Specifically, the
Comptroller’s Office did not sufficiently monitor Federal expenditures made by LEAs
and could not determine whether the funds advanced to the LEAs were actually expended
Audit Report
ED-OIG / A03J0010                                                                       Page 10 of 23

and were reasonable, allowable, and supported prior to initiating reimbursement from the
Federal Government.

The Comptroller’s Office issues monthly payments to the LEAs based on the length of
the grant or the yearly allocation amount. For example, if a grant is for 15 months, the
LEA would get a monthly payment each month for 15 months, and for yearly allocations,
1/12 of the total allocation amount is advanced every month. The Comptroller’s Office
then initiates a drawdown of Federal funds later in the month to reimburse the
Commonwealth for the funds it advanced to the LEAs for the month. On average, the
Comptroller’s Office initiates seven drawdowns of Federal funds each month.
On a quarterly basis, LEAs are required to report to the Comptroller’s Office total project
expenditures through a Reconciliation of Cash on Hand report.9 According to a
Comptroller’s Office official, these reports must be certified by a responsible LEA
official to attest that the information provided is true and accurate. However, the
Comptroller’s Office cannot test any of the LEA’s quarterly expenditures for
reasonability and allowability or determine whether there is adequate supporting
documentation because the Reconciliation of Cash on Hand report only requires the LEA
to report project expenditures in aggregate amounts. Testing of the expenditures also
cannot be performed because LEAs are not required to submit any detailed expenditure
information with the reconciliations. Based upon the reasons stated above and because
the reconciliations do not occur on a more regular basis, such as monthly, the
Reconciliation of Cash on Hand report alone is not an adequate tool to monitor LEA
expenditures prior to advancing additional funds.

According to a Comptroller’s Office official, testing of an LEA’s expenditures takes
place during the LEA’s annual OMB Circular A-133 Single Audit by the LEA’s IPA.
The LEA’s financial activities may also be audited by the Pennsylvania State Auditor
General. Comptroller’s Office officials also stated that expenditures should be reviewed
when PDE, the Commonwealth agency responsible for the fiscal and programmatic
monitoring of each LEA, conducts a close-out review within 60 days after a grant ends.
Reliance on audits or reviews that occur well after funds are expended by the LEAs is too
late to ensure early detection of or to mitigate the inappropriate use of funds.

We discussed the finding with Commonwealth officials during our exit conference.
Comptroller’s Office officials responded to our finding in writing. They stated that the
Comptroller’s Office had several procedures in place to ensure compliance with
applicable statutes and regulations to ensure subgrantors charge allowable costs to grants.
They also stated that these procedures include fiscal controls and monitoring of subgrant
activities by various Commonwealth entities.




9
 If the Comptroller’s Office determined that an LEA expended funds in excess of its expected quarterly
expenditure amount, the Comptroller’s Office could accelerate an LEA’s future monthly payments. If the
LEA did not spend enough of its funds the LEA’s future monthly payments could be reduced or stopped.
Audit Report
ED-OIG / A03J0010                                                           Page 11 of 23

Comptroller Office officials explained the process as follows.

       The process begins when an LEA submits an application for a project to
       be funded. PDE reviews these applications to make a determination as to
       whether the project will be funded or not. The application states the
       amount of funding needed, the type of activity that will be performed, and
       the expected length of the project. Once PDE reviews and approves the
       project PDE assigns funding to the project. The funding is limited to one
       funding source. For example, if the project is ARRA-related, it will be
       funded solely by ARRA funds. At this point PDE should know the type of
       expenditures that will be incurred over the life of the project. The
       majority of an LEA’s projects fund LEA salaries. After PDE approves an
       LEA’s project, the project request is sent to the Comptroller’s Office for
       review and processing. Comptroller’s Office officials review the project
       to ensure compliance with grant requirements. The Comptroller’s Office
       then inputs the project into the Commonwealth’s Financial Accounting
       Information system. This system calculates the amount of each monthly
       payment the LEA will receive based on the number of months the project
       will last.

Overall, the Comptroller’s Office believed that the combination of PDE’s review of
LEAs’ project applications, periodic site monitoring, Comptroller’s Office fiscal controls
and monitoring, and the various LEA audits have shown over the past several decades
that the risk of LEAs charging unallowable or unsupported costs to a particular funding
stream are minimized. However, as stated above and in Finding No. 1, these reviews, site
visits, and audits are happening after the fact, and in some cases, not frequently enough.
Furthermore, these controls do not ensure that the LEA has spent all the funds it has been
advanced each month, which can lead to the accumulation of excess cash and the earning
of excess interest on Federal funds (see the sub-finding below).

According to 34 C.F.R. § 76.702, a State should use fiscal control and fund accounting
procedures that ensure proper disbursement of and accounting for Federal funds. In
addition, States are responsible for managing the day-to-day operations of grant and
subgrant supported activities. States must monitor grant and subgrant supported activities
to assure compliance with applicable Federal requirements (34 C.F.R. § 80.40[a]). The
Comptroller’s Office processes do not ensure that these requirements were being met.

One of the guiding principles of ARRA is to use the funds quickly. Given the current
economic climate, LEAs may be experiencing tight budget constraints, increasing the risk
of unallowable or inadequately documented expenditures or misuse of funds related to
ARRA programs. If the Comptroller’s Office does not have adequate monitoring
procedures for funds received under the ARRA Title I, IDEA and SFSF programs, it
cannot ensure that LEAs are properly reporting complete and accurate information or
spending funds in accordance with ARRA requirements.
Audit Report
ED-OIG / A03J0010                                                                          Page 12 of 23

The Comptroller’s Office’s Procedures Were Not Adequate to Minimize Excess Cash
Balances at LEAs and to Ensure That LEAs Properly Remitted Interest Earned on
Federal Cash Advances

The Comptroller’s Office did not have adequate procedures in place to minimize the time
lapsing between the transfer of funds advanced to its LEAs and the disbursement of those
funds by the LEAs. The Comptroller’s Office also did not have adequate procedures in
place to ensure that when an LEA earned interest in excess of $100, that the LEAs
properly remitted interest earned on Federal funds, at least quarterly, to the Department.

As discussed above, the Comptroller’s Office had in place a quarterly cash reconciliation
process; however, this process was not frequent enough to determine whether the LEAs
were accumulating substantial cash balances on a day-to-day and/or monthly basis. The
purpose of this reconciliation was to ensure that the scheduled payments to the LEAs
were adequate to cover the monthly cash needs of the LEAs without allowing the LEAs
to accumulate substantial cash reserves. However, because the Comptroller’s Office did
not verify whether an LEA actually expended all the funds it was advanced monthly, it
was not able to adequately monitor whether an LEA maintained excess Federal cash.

The Comptroller’s Office also did not require LEAs to monitor their cash needs on a
more regular basis, such as daily, weekly, or monthly. In addition, Comptroller’s Office
officials relied on PDE to monitor LEAs’ OMB Circular A-133 Single Audit report
findings and resolve any interest issues noted in that report. However, this process was
not adequate because LEAs could accumulate excess interest earnings throughout the
year and not return them to the Department in a timely manner. Also, PDE relied on
LEAs to voluntarily comply with the excess interest requirement. In the
Commonwealth’s FYs 2008, 2007, and 2006 OMB Circular A-133 Single Audit reports,
the Commonwealth’s IPA determined that the inadequate monitoring by the
Comptroller’s Office of one LEA’s cash balances resulted in that LEA accruing and
retaining both excess cash and interest. Accruing interest and retaining it results in
additional excess cash. For example, one LEA identified in the Commonwealth’s
FY 2007 OMB Circular A-133 Single Audit report10 was able to accumulate $5.5 million
in excess cash. This same LEA was also identified in the Commonwealth’s FY 2008
OMB Circular A-133 Single Audit report as retaining $975,009 in excess interest.11 A
similar condition of earned and retained interest on Federal cash balances for the same
LEA was identified in the Commonwealth’s FY 2006 OMB Circular A-133 Single Audit
report. According to a Comptroller’s Office official, the Commonwealth was only aware
of this one incident over the past decade where a school accumulated excess cash
balances and earned interest greater than $100 per year. Furthermore, the Comptroller’s



10
   As part of the State IPA’s OMB Circular A-133 Single Audit of major programs administered by PDE,

the IPA reviewed subrecipient OMB Circular A-133 Single Audit reports issued by larger-dollar LEAs for

any potential impact on the State’s OMB Circular A-133 Single Audit.

11
   The LEA earned and improperly retained $858,487 in Title I, $51,313 in Title II, and $65,209 in Special 

Education interest on Federal cash balances. 

Audit Report
ED-OIG / A03J0010                                                                         Page 13 of 23

Office official corresponded with us via e-mail, stating that-

                 The history of the lack of other instances in LEAs [sic] A-133
                 Single Audits demonstrates that the current process is working as
                 expected …. In the worst case scenario an LEA would be able to
                 cumulate [sic] three months were [sic] of payments, at which
                 point when they file their Quarterly Reconciliation of Cash-on-
                 Hand futures [sic] payments would be stopped. As stated
                 previously, the majority of projects support salary and benefit
                 expenses at LEAs. As monthly payments are made to the LEAs
                 by the Commonwealth, the Commonwealth is confident that the
                 LEAs are incurring salary expenses equal to the payments being
                 made. In addition, the project payments do not start until after
                 the project has been approved. Normally it takes a couple of
                 months before the LEAs begin to receive monthly payments and
                 were likely incurring expenses since the project approval date.

Our audit did not involve a review of LEAs’ project expenditures. Therefore, we cannot
determine whether the Commonwealth’s statements above are accurate. The lack of a
past occurrence, however, especially with inadequate controls in place, does not preclude
an incident from occurring in the future and does not indicate that other incidents did not
occur in the past that may not have been identified. Also, although most funds may be
for salary purposes, based upon our past audit work,12 LEAs have spent a significant
amount of funds on non-salary items which were unallowable or inadequately supported.

We did note that PDE’s Bureau of Special Education (BSE), the office responsible for
monitoring subgrantees’ use and administration of IDEA funds, provided an ARRA-
related training session in July 2009 that identified the interest requirements of
34 C.F.R. § 80.21(i); however, LEA attendance was not mandatory. Comptroller’s
Office officials also stated that PDE had given guidance to LEAs to refrain from
accumulating excess cash and earning interest. They also stated that procedures are in
place for the LEAs to return interest earnings to the Federal Government. Other than the
BSE guidance, we were not provided with evidence of any additional PDE excess cash
and interest earning guidance. We were also not provided with written policies to
support the existence of any procedures being in place for LEAs to return interest earned
to the Department.

According to 34 C.F.R. § 80.21(c), “Grantees and subgrantees shall be paid in advance,
provided they maintain or demonstrate the willingness and ability to maintain procedures
to minimize the time elapsing between the transfer of the funds and their disbursement by
12
   Examples of unallowable and unsupported costs are included in our audit reports entitled, “Philadelphia
School District's Controls Over Federal Expenditures,” A03H0010, issued January 15, 2010; “Adequacy of
Houston Independent School District’s Fiscal Controls over Accounting for and Using Federal Funds,”
A06H0017, issued June 30, 2009; “Adequacy of Fiscal Controls Over the Use of Title I, Part A Funds at
the Dallas Independent School District,” A06H0011, issued April 14, 2009; “The School District of the
City of Detroit’s Use of Title I, Part A Funds Under the No Child Left Behind Act of 2001,” A05H0010,
issued July 18, 2008; and “Elizabeth Public School District Allowability of Title I, Part A Expenditures,”
A02G0020, issued October 9, 2007.
Audit Report
ED-OIG / A03J0010                                                                         Page 14 of 23

the grantee or subgrantee.” Methods and procedures for payment should also minimize
the time elapsing between the transfer of funds and disbursement by the grantee or
subgrantee, in accordance with Treasury regulations at 31 C.F.R. Part 205
(34 C.F.R. § 80.21[b]). If PDE or LEAs earn interest on advances that exceed $100 in
one year, they should promptly, but at least quarterly, remit this interest to the
Department. LEAs may keep interest amounts up to $100 per year for administrative
expenses. These requirements are identified at 34 C.F.R. § 80.21(i), Interest earned on
advances.

The Department reinforced the above cash management requirements in the ARRA-
specific guidance it issued in April 2009.13 In particular, the guidance addresses funds
made available under the ARRA for three programs: (1) Title I; (2) IDEA; and
(3) Title XIV of Division A of the ARRA (SFSF).

By not determining each LEA’s cash position on an appropriate regular basis, prior to
disbursing additional Federal cash advances, the Comptroller’s Office cannot be sure that
LEAs were not maintaining excess cash. By drawing Federal funds and disbursing them
to LEAs too far in advance of the LEAs’ immediate cash needs, there is an increased risk
that ARRA funds might be misused.

Recommendations:

We recommend that the Assistant Secretary for OESE, in coordination with the Assistant
Secretary for OSERS, the Director for Risk Management Service (RMS), and the Chief
Financial Officer (CFO), require the Comptroller’s Office and/or PDE to:

2.1	    Develop and implement procedures to review LEA expenditures charged to
        ARRA and non-ARRA funds to determine whether the funds advanced were
        actually expended and whether the expenditures are reasonable, allowable,
        and properly supported prior to reimbursement.

2.2	    Develop and implement procedures to proactively monitor cash balances at
        LEAs on a more regular basis and minimize the time lapsing between the
        transfer of funds advanced to its LEAs and the disbursement of those funds
        by the LEAs.

2.3	    Issue fiscal guidance to LEAs on the excess cash and interest remittance
        requirements. This guidance should instruct LEAs on how to accurately
        calculate and timely remit interest.


13
   Department guidance for the three programs are titled: (1) Funds Under Title I, Part A of the Elementary
and Secondary Education Act of 1965 Made Available under The American Recovery and Reinvestment Act
of 2009; (2) Funds for Part B of the Individuals with Disabilities Education Act Made Available under The
American Recovery and Reinvestment Act of 2009; and (3) Guidance on the State Fiscal Stabilization Fund
Program.
Audit Report
ED-OIG / A03J0010                                                             Page 15 of 23

2.4	   Develop and implement monitoring procedures to ensure that LEAs properly
       calculate and remit interest earned on all Federal cash advances.


PDE Response

PDE did not concur with the Finding. PDE restated its position that the Comptroller's
Office and PDE officials have several controls in place to ensure compliance with
applicable statutes and regulations, the charging of allowable costs to the grants, and to
minimize the ability for LEAs to accumulate excess cash and earn significant amounts of
interest on those funds. PDE also restated that it had issued guidance to LEAs advising
them to avoid accumulating excess cash and interest earnings. In addition, procedures for
returning interest earned that is greater than $100 per year were also provided to LEAs.

PDE informed us that the Comptroller's Office had recently accelerated the timeliness of
OMB Circular A-133 Single Audit subrecipient reviews and its assistance in helping PDE
resolve any OMB Circular A-133 Single Audit findings. The Commonwealth has
implemented a policy that requires all agencies to report the status of their OMB Circular
A-133 Single Audits on a quarterly basis, so that reported findings will be resolved more
timely. PDE indicated that, along with the Comptroller's Office, it planned to establish a
policy that strongly encouraged LEAs to use non-interest-bearing accounts for Federal
funds.

Finally, PDE saw no justifiable cost benefit or regulation to require additional fiscal
monitoring efforts at LEAs because it was aware of only one instance of excess cash on
hand cited in one LEA’s OMB Circular A-133 Single Audit report.


OIG Comments

The Finding remains unchanged. We commend PDE for establishing new policies
relating to excess cash and earned interest. However, we were not provided copies of
these policies; therefore, we could not determine the sufficiency of the policies and
related processes. PDE did not state how or whether the guidance on accumulating
excess cash and earning interest instructs LEAs to determine and subsequently inform the
Comptroller’s Office that the LEAs had accumulated excess cash prior to their
performing the quarterly cash reconciliation process. We suggest that PDE ensure that
the guidance issued instructs LEAs to determine and subsequently inform the
Comptroller’s Office if they have accumulated excess cash. The guidance should also
instruct LEAs how to calculate and remit interest quarterly to the Department.

PDE’s policy that encourages LEAs to use non-interest-bearing accounts for Federal
funds may not be the best policy for managing Federal funds. The U.S. Treasury will
lose the potential benefit of using any yearly interest earnings in excess of $100. In
addition, the policy will not ensure early detection of or mitigate the inappropriate use of
funds. The policy also will not prevent LEAs from having the ability to accumulate
Audit Report
ED-OIG / A03J0010                                                                        Page 16 of 23

excess Federal cash. The Comptroller’s Office will still need to monitor LEAs for the
accumulation of excess cash and the earning of interest.

Finally, we assert that being aware of only one instance where an LEA had excess cash
on hand does not mean that other LEAs did not have similar circumstances or that the
condition cannot occur with other LEAs. We understand the justifiable cost benefit
concept relating to the implementation of additional internal controls; however, testing
LEAs on a sample basis may still be a justifiable cost benefit option. Without the
Comptroller’s Office monitoring LEAs’ monthly expenditures on a more regular basis,
this condition might lead to an LEA earning excess cash. More importantly, disbursing
funds to LEAs too far in advance of an LEA’s immediate cash need increases the risk that
ARRA funds might be misused.



FINDING NO. 3: 	          PDE Had Not Developed a Policy to Disclose ARRA Data
                          Deficiencies

Although PDE had provided information and guidance to LEAs on ARRA reporting
requirements, it did not have a policy to ensure that ARRA data deficiencies are disclosed
to the Department. We were informed that PDE had taken steps to report a data
deficiency issue to OMB relating to entities having multiple DUNS14 numbers; however,
this action did not address the reporting of data deficiencies to the Department. Based on
a meeting held with PDE officials, we concluded that they were not aware of the
Department’s guidance on reporting data deficiencies. During the exit conference, PDE
officials informed us that if they discovered a data deficiency, their policy would be to
take appropriate actions based on the Department’s guidance. PDE officials further
explained that if errors occur, there would be no need to report the inaccurate data,
because they would not transmit data with errors and because the data would not make it
through their review process. PDE officials explained that there were no data
deficiencies in the reported data transmitted on October 10, 2009, and that this is
sufficient evidence to show that their system works. Our audit work did not involve a
review of these data. Therefore, we cannot determine whether there were deficiencies in
the reported data.

Although PDE may not have had any omissions or errors in its October 2009 reporting,
PDE still needs to develop a policy and disseminate it to all appropriate parties.

According to Section III of Department clarifying guidance, entitled “U.S. Department of
Education Clarifying Guidance on American Recovery and Reinvestment Act of 2009




14
  The DUNS number is a unique nine-character number that identifies an organization. It is a tool of the
Federal Government to track how Federal money is distributed.
Audit Report
ED-OIG / A03J0010                                                                          Page 17 of 23

Section 1512 Quarterly Reporting,” revised on October 5, 2009,15

                    If the prime recipient identifies material omissions or significant
                    reporting errors in its reports (or that of its subrecipients), take
                    action to correct the deficiencies. If the report cannot be
                    corrected or if a known deficiency cannot be remedied, contact
                    the Department of Education to advise it of the deficiencies and
                    the actions being taken to correct the deficiency.

The absence of a policy requiring the disclosure of ARRA data deficiencies could allow
inaccuracies and omissions in data to not be reported to the Department, ultimately
leading to unreliable data being reported to the FederalReporting.gov Web site. The lack
of the disclosure of data deficiencies would not alert the Department to the source of the
inaccurate data.

Recommendation:

We recommend that the Director for RMS, in coordination with the CFO, require the
Governor’s Office and PDE to:

3.1 	      Develop and disseminate a policy to disclose ARRA data deficiencies to the
           Department.


PDE Response

PDE did not concur with the Finding. PDE believes that it was not required to establish
and disseminate a data deficiency policy. Furthermore, PDE believes its only obligation
was to correct any data deficiencies. However, PDE developed a draft policy reiterating
the clarifying guidance on ARRA data deficiencies. PDE planned to distribute this policy
to its subrecipients and vendors.


OIG Comments

We commend PDE for developing the data deficiency policy. Although the guidance did not
specifically state that a policy was required to be developed and disseminated; a documented policy
that is developed and disseminated will assist those responsible for reporting ARRA data. Those
responsible will know exactly what the policy is and can follow consistent steps in the guidance to
report data deficiencies. PDE should finalize and expedite the dissemination of the policy.




15
     This guidance was originally issued in September 2009.
Audit Report
ED-OIG / A03J0010                                                             Page 18 of 23

FINDING NO. 4:         The Governor’s Office Should Define and Delineate the Roles
                       and Responsibilities of Commonwealth Agencies
                       Administering SFSF Funds

The Governor's Office had not entered into any type of agreement among PDE, DOC and
the Department of General Services (DGS) regarding the allocation of SFSF funds that
these agencies expected to receive. The Department allocated a total of about $1.9 billion
in SFSF funds (about $1.56 billion for the Education Stabilization Fund [ESF] portion
and about $347 million for the Government Services Fund [GSF] portion) to the
Governor’s Office. For the Commonwealth to receive its SFSF funds, it needed to
submit an application to and obtain approval from the Department. The Governor’s
Office submitted its initial SFSF application to the Department for approval on
April 24, 2009, and then resubmitted the application on June 26, 2009. However, the
Department did not approve the application, because the Governor’s Office did not make
the revisions to it that the Department requested. On October 9, 2009, the
Commonwealth approved its State budget. The Commonwealth’s budget allocated
100 percent of the ESF funds to PDE, 99.7 percent of the GSF funds (approximately
$346 million) to DOC for public safety purposes, and the remaining .3 percent (exactly
$1 million) of the GSF funds to DGS to fund overall ARRA administrative expenses.
The Commonwealth then resubmitted its SFSF application to the Department for
approval on October 20, 2009, allocating the funds based upon the approved State budget
SFSF allocations. The revised application included the revisions the Department
requested.

According to Commonwealth officials, when the Commonwealth’s application was
resubmitted, it requested that the Department award the ESF funds to PDE and
100 percent of the GSF funds to DOC, instead of awarding them directly to the
Governor’s Office. Commonwealth officials believed that if the Department awarded the
funds to PDE and DOC, no agreement (interagency or other) among the Governor’s
Office and the three Commonwealth agencies would be necessary. On October 27, 2009,
the Department approved the Commonwealth’s SFSF application. The Department
awarded the funds to the Governor’s Office. According to a Department official, because
the funds were awarded to the Governor’s Office, the Governor’s Office is fully
accountable for the overall administration and management of the SFSF funds; not PDE
and DOC as Commonwealth officials anticipated.

We reviewed the Commonwealth’s Management Directive 310.19 Amended, Accounting
for Disbursements of Funds for Interagency Agreements, Memorandums of
Understanding, and Notifications of Subgrant; Accounting for the Subgranting of
Federal, Federal Matching Funds, or State Funds Between Commonwealth Agencies,
dated September 4, 1997, and found that it did not require the Commonwealth to enter
into any type of agreement among the three agencies or document agency roles and
responsibilities. However, we believe that it is a good control and business practice for
the Governor’s Office to document and delineate the roles and responsibilities of the
three agencies to ensure that the agencies are aware of their respective roles and
responsibilities. If roles and responsibilities are not properly established, there is a risk
Audit Report
ED-OIG / A03J0010                                                                       Page 19 of 23

that proper controls over data quality, cash management, subrecipient monitoring, and
use of funds will not be implemented at the State agencies designated with the
responsibility of administering portions of the Commonwealth’s SFSF funds. The
Governor's Office will also run the risk of not complying with the terms and conditions of
its SFSF grant.

The Commonwealth’s SFSF Grant Award Letter, dated October 27, 2009, was addressed
to the Governor. The letter stated that the Commonwealth’s SFSF funds were subject to
the requirements in the ARRA. Because the Department awarded the funds to the
Governor’s Office, the Governor’s Office was therefore responsible for the reporting
requirements under Section 14008 of ARRA and ARRA Section 1512 Quarterly
Reporting.

In addition, according to Section III of Department clarifying guidance, entitled “U.S.
Department of Education Clarifying Guidance on American Recovery and Reinvestment
Act of 2009 Section 1512 Quarterly Reporting,” revised on October 5, 2009,16

                 If grant funds are transferred from one state agency to another
                 for purposes of administering or carrying out the program, the
                 state agency whose name and DUNS number appear on the
                 Grant Award Notification is the prime recipient for reporting
                 purposes . . . .17 This policy applies to all Department grants,
                 including the State Fiscal Stabilization Government Services
                 Fund and Education Stabilization Fund. If a state agency
                 performs administrative functions for the Governor’s Office, or
                 carries out a portion of the grant activities, the Governor’s Office
                 is still the prime recipient . . . . As a result of this policy, the
                 state must collect data from all state agencies that receive funds
                 from a particular grant, summarize the activities and
                 expenditures, and report them as the activities and expenditures
                 in the prime recipient section of the report.

Therefore, if the roles and responsibilities for the administration of the SFSF funds are
not established, there is a risk that the required data may not be reported.

Recommendation:

We recommend that the Assistant Secretary for OESE, in coordination with the Assistant
Secretary for OSERS, require the Governor’s Office to:

4.1	    Document and delineate the roles and responsibilities of PDE, DOC, and
        DGS with respect to the SFSF funds.

16
  This guidance was originally issued in September 2009.
17
  According to the Department official, the funds awarded to the Governor’s Office were assigned to its
DUNS number. In order to honor the Commonwealth’s request to have the funds flow more easily to DOC
however, the Department did cross-reference the DUNS number for the Governor’s Office to DUNS
numbers assigned to PDE and DOC. PDE and DOC will both be representative payees.
Audit Report
ED-OIG / A03J0010                                                           Page 20 of 23

PDE Response

PDE believes that the Governor’s office has appropriately defined roles and
responsibilities regarding the administration of SFSF funds. Also, PDE stated that an
interagency agreement would neither be appropriate nor necessary, because the
Governor’s Office, PDE, DOC, and DGS are all executive agencies, and interagency
agreements are not required between executive agencies in the Commonwealth.


OIG Comments

We agree that the Governor’s Office, PDE, DOC, and DGS are executive agencies and
do not require an interagency agreement according to Commonwealth requirements. We
have revised our Finding to reflect this. However, while an interagency agreement may
not be required, we believe documenting each agency’s roles and responsibilities is
appropriate to ensure that SFSF funds are being used efficiently and effectively. ARRA
funding is subject to the most stringent standards of accountability and transparency.
Therefore, the Governor’s Office needs to identify and delineate the role and
responsibility of at least DGS. Because DGS is being allocated SFSF funds for
administrative purposes, its role in relation to the other agencies needs to be defined.
Documenting these roles and responsibilities is a good business practice and will aid in
providing clarifying guidance to the other agencies. For items such as reporting, failure
to document such roles and responsibilities could lead to information being misreported
or unreported.


                                   BACKGROUND

On April 1, 2009, the Department awarded 50 percent of the funds for the
Commonwealth’s Title I, IDEA, and VRSG ARRA funds without new applications. By
the end of March 2009, Governors were able to apply for 67 percent of their State’s SFSF
funds. These funds were expected to be released within 2 weeks after approvable
applications were received. Additional Title I, IDEA, VRSG, and SFSF funds were made
available to States between July 1, 2009, and September 30, 2009.

PDE was allocated $400.6 million in Title I ARRA funds and $457.8 million in IDEA
ARRA funds. Voc Rehab was the recipient of $20.9 million in VRSG funds. All Title I
and IDEA grant funds were administered by PDE. VRSG funds were administered by
Voc Rehab.

In its State application, the Commonwealth agreed to appropriate ARRA Title I and
IDEA funding over the 2009-2010 and 2010-2011 school years. During our fieldwork,
we were informed that ARRA funds could not be used or distributed by the State
agencies until they were appropriated in a final Commonwealth budget. The
Commonwealth’s budget was approved on October 9, 2009. Prior to the budget being
approved, however, the Governor signed a “bridge budget” on August 5, 2009,
Audit Report
ED-OIG / A03J0010                                                                      Page 21 of 23

authorizing the use and distribution of the Title I and IDEA funds that the Department
made available on April 1, 2009.

The Governor’s Office was also allocated approximately $1.9 billion in SFSF funds,
which included approximately $1.56 billion in ESF funds (81.8 percent of SFSF funds
allocated) and approximately $347 million (18.2 percent of SFSF funds allocated), in
GSF funds. The Commonwealth’s Application for Initial Funding under the SFSF
program was approved on October 27, 2009. In its approved SFSF application,18 the
Governor’s Office planned to use $654.7 million of its Education Stabilization fund
allocation to restore the level of State support for elementary and secondary education in
FY 2010. The application also indicated that the Governor’s Office planned to allocate
99.7 percent (approximately $346 million) of its GSF allocation to DOC for public safety
and .3 percent ($1 million [$500,000 for each year of the ARRA funds]) to DGS to fund
overall ARRA administrative expenses.


                      Table: ARRA Allocations to PA State Agencies

           Catalog of
            Federal                                                       Total            Total
Grant                                         Total Allocated            Drawn           Expended
           Domestic         Agency
Title                                          (in millions)19          Down (in             (in
           Assistance
              No.                                                       millions)20      millions)21

Title I      84.389           PDE                           $400.6         $70.3             $46.7
 IDEA        84.391           PDE                           $457.8         $74.7             $57.5
VRSG         84.390        Voc Rehab                         $20.9           $0.2             $0.2
                                       Education
             84.394                                         $1,559         None              None
                           Governor’s Stabilization
 SFSF
                            Office    Government
             84.397                                         $346.8         None              None
                                        Services
          Total                                    $2,785


18
   The Commonwealth initially submitted its SFSF application on April 24, 2009, submitted a revised
application on June 26, 2009, and submitted the final approved application on October 20, 2009.
19
   These data were obtained from the Department’s Web site
http://www.ed.gov/policy/gen/leg/recovery/state-fact-sheets/pennsylvania.doc. The total allocated funds
for the IDEA grant include Parts B and C. We could not break out the amount allocated per Part.
20
   These data were obtained from the Department’s Grants Administration and Payments System. The data
were reported as of October 23, 2009.
21
   These data were reported on the Reports section of the Commonwealth’s Recovery Web site
http://www.recovery.pa.gov/portal/server.pt/community/reports/6019. The report was dated
September 22, 2009, and the report indicated the data were as of September 18, 2009. These amounts were
reported after the end of our fieldwork; therefore, all the funds may not have been expended during our
review.
Audit Report
ED-OIG / A03J0010                                                                      Page 22 of 23

                             SCOPE AND METHODOLOGY

Our review consisted of an assessment of the designed system of Commonwealth-level
internal controls that PDE, the Comptroller’s Office, DOC, Voc Rehab, and the
Governor’s Office planned, at the time of our field work, to use in administering funds
received under ARRA for the Title I, IDEA, OVR, and SFSF programs. For the SFSF
program, we focused our review on the SFSF funds to be administered by PDE and DOC.
We reviewed the Commonwealth-level controls related to data quality, cash management,
subrecipient monitoring, and use of funds.

Our review was limited to assessing the design of the internal controls. Given that much
of the ARRA funding had not yet reached the Commonwealth and LEAs, we could not
validate nor test the accuracy of the statements made by officials regarding their
accounting and tracking systems. Also, during and subsequent to our fieldwork, PDE,
the Comptroller’s Office, DOC, Voc Rehab, and the Governor’s Office were continuing
the process of designing and implementing internal controls for administering ARRA
funds. Thus, the plans and processes reviewed during our audit may be modified or not
implemented as designed. In addition, we may not have been aware of unique factors
related to the administration of ARRA funds during our assessment of the design of
internal controls.

To gain an understanding and assess the designed system of ARRA internal controls that
PDE, the Comptroller’s Office, DOC, Voc Rehab, and the Governor’s office planned at
the time of our field work, we:

     	 Reviewed prior OMB Circular A-133 Single Audit and other applicable reports
        issued by our office, the Government Accountability Office (GAO), the
        Comptroller’s Office, and the Pennsylvania Department of the Auditor General;
     	 Identified ARRA funds allocated to PDE, DOC, Voc Rehab, and the Governor’s
        Office for the Title I, IDEA, and SFSF grant programs;
     	 Obtained and reviewed PDE’s written policies and procedures related to data
        quality, cash management, subrecipient monitoring, and use of funds for the
        Title I and IDEA grant programs;
      Obtained and reviewed PDE’s monitoring instruments for the Title I and IDEA
        grant programs;
      Obtained and reviewed examples of Voc Rehab’s contract and ARRA amendment
        documents;22
      Obtained an understanding of Voc Rehab’s review process for monthly invoices
        submitted by contractors;
      Obtained and reviewed the Commonwealth’s SFSF applications signed by the
        Governor and various budget documents;


22
  Voc Rehab planned to use the funds it was allocated to fund existing non-ARRA vendor contracts.
Voc Rehab contractors were provided an addendum to their current contracts that was related to ARRA
requirements.
Audit Report
ED-OIG / A03J0010                                                            Page 23 of 23

   	 Interviewed PDE officials, including officials from the following offices: Budget
      and Fiscal Management, Office of Policy, Division of Federal Programs, Chief
      Information Officer, Office of Strategic Services, Office of Administration,
      Bureau of Special Education, Payroll Operations, and Quality Assurance;
   	 Interviewed Governor’s Office officials, including the Secretary of the Budget;
      and the Chief Accountability Officer of the Pennsylvania Stimulus Oversight
      Commission;
    Interviewed DOC officials, including the Director of Administration, the Chief of
      Budget and Finance, and the Chief of the Employee Services Division;
    Interviewed Comptroller Office officials, including the Directors from the Bureau
      of Audits and the Bureau of Accounting;
   	 Interviewed Voc Rehab officials, including the Executive Director, Director for
      the Bureau of Central Operations, Chief for the Budget Grant Administration
      Service, and the Supervisor for Program Policies and Evaluation;
    Interviewed officials from the Pennsylvania Office of the State Auditor General;
    Interviewed GAO officials; and
    Obtained and reviewed other documents pertaining to PDE’s, the Comptroller’s
      Office’s, DOC’s, Voc Rehab’s, and the Governor’s Office’s processes for data
      quality, cash management, subrecipient monitoring, and use of funds, as
      applicable.

We conducted our work at PDE, the Comptroller’s Office, DOC, Voc Rehab, and the
Governor’s Office from May 27, 2009, through September 15, 2009. We discussed the
results of our review and recommendations with PDE on November 5, 2009.

Although we did conduct work at three LEAs, the results of those reviews are not
presented in this report. None of our LEA work was used to form the conclusions on the
State-level controls presented in this report. We plan to issue a separate report providing
the results of our LEA work at a later date.

We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based on our audit
objectives.




Enclosure
               Anyone knowing of fraud, waste, or abuse involving
                U.S. Department of Education funds or programs
            should call, write, or e-mail the Office of Inspector General.

                                    Call toll-free:
                             The Inspector General Hotline
                          1-800-MISUSED (1-800-647-8733)

                                       Or write:
                               Inspector General Hotline
                             U.S. Department of Education
                              Office of Inspector General
                               400 Maryland Ave, S.W.
                                Washington, DC 20202

                                       Or e-mail:
                                   oig.hotline@ed.gov

             Your report may be made anonymously or in confidence.

For information on identity theft prevention for students and schools, visit the Office of 

                     Inspector General Identity Theft Web site at: 

                                  www.ed.gov/misused




                   The Department of Education’s mission is to promote 

             student achievement and preparation for global competitiveness 

              by fostering educational excellence and ensuring equal access.


                                      www.ed.gov
                                    Enclosure 

                                  PDE Comments





                          COMMONWEALTH OF PENNSYLVANIA
                            DEPARTMENT OF EDUCATION
                                   333 MARKET STREET
                                 HARRISBURG, PA 17126-0333
                                  www.education.state.pa.us


                                     February 4, 2010

Mr. Bernard Tadley
Regional Inspector General Audit
Region III
U.S. Department of Education
The Wanamaker Building
100 Penn Square East, Suite 502
Philadelphia, PA 19107

Dear Mr. Tadley:

Please find below the Pennsylvania Department of Education’s (PDE) response to the
preliminary copy of your audit report entitled Commonwealth of Pennsylvania Recovery
Act Audit of Internal Controls over Selected Funds, Audit Control Number ED­
OIG/A03J0010. This document was sent on Thursday, January 14. 2010.


RESPONSE TO FIRST FINDING:

Note: This finding primarily involves Title I and IDEA, which are administered by two
different offices within the Pennsylvania Department of Education. Each office has a
process for awarding funds, program oversight and monitoring/compliance. As a result,
each office needs to respond to different parts of this finding. Additionally, each of these
offices report to a different office at USDE, who will ultimately decide which of the
findings need further response and will work with the offices at PDE to implement any
necessary corrective actions in response to the findings.

Title I Response:

PDE’s monitoring and oversight of ARRA and other federal funds are in compliance with
all existing published guidance. The Division of Federal Programs (DFP) has established
extensive processes and procedures as determined necessary for reviewing and approving
                                   Enclosure 

                                 PDE Comments

Title I ARRA applications for subgrants and amendments to those applications, for
providing technical assistance, for evaluating projects, and for performing other
administrative responsibilities. These processes and procedures have been consistently
approved by the U.S. Department of Education’s Office of Elementary and Secondary
Education (PESE) in relation to our regular Title I program over the past forty-five years.
PDE believes the finding is inconsistent with DOE’s previous examinations and the
suggestions are outside the scope of existing guidance. Therefore we request this finding
be withdrawn.

Background: The administration of these processes and procedures in conjunction with
the application of pertinent provisions of the Title I Grants to States Program,
Pennsylvania Public School Code (School Code), federal regulations, and adherence to
the principles and accounting structures contained in the Manual of Accounting and
Financial Reporting for Pennsylvania Public Schools provides sufficient monitoring
procedures to ensure that LEAs comply with Federal fiscal requirements. See
Attachment 1. The full copy of this document can be found at

http://www.portal.state.pa.us/portal/server.pt/community/accounting_information/18327

Use of amounts and allowable costs are an integral component of the Rider and the state-
approved application. Allowable costs are based on and consistent with Federal
regulations and cost principles as well as DFP guidance, policies, and priorities. DFP
Staff review LEA fiscal information through the maintenance of effort process in order to
reasonably determine that Title I funds are not used to reduce the level of non-federal
support for special education and related services for the preceding fiscal year.

The Division of Federal Programs has required LEAs to update both budget and LEA
plans for how the LEAs use their Title I ARRA no less than three times during the project
period (May 2009 when funds were awarded, August 2009 and January 2010). As part of
the update process, DFP Regional Coordinators review and approve the narratives,
budgets and ensure that appropriate set-asides are being applied in accordance with Title
I regulations. LEAs are required throughout the life of the Title I ARRA grant to submit
to DFP requests for budget revisions when their expenditures exceed their approved
budgeted amount by more than 20%. LEAs are also required to submit narrative
revisions any time they want to deviate from their state-approved plan.

While we disagree with OIG’s findings, we are committed to exceeding minimum
requirements. Recently PDE developed an RFP and subsequently awarded a contract in
response to the ARRA’s data and reporting requirements. PDE has initiated procedures
whereby each LEA receiving ARRA Funds, including Title I ARRA Funds, submits
detailed data to validate proper use and reporting of these funds. The contractor is
responsible to review all verification data submitted, review and analyze submissions and
provide recommendations to DFP regarding the information submitted and select a
sample of LEAs for on-site review visits and follow-up.
                                          Enclosure 

                                        PDE Comments

If OIG’s comments are not merely the result of a preliminary understanding of PDE’s
processes, but are suggestive of pending or not yet released official instruction, we look
forward to working collaboratively with the Office of Elementary and Secondary
Education (OESE) to implement any future official guidance/instruction that OESE may
implement.


Bureau of Special Education Response:

PDE has established extensive processes and procedures as determined necessary for
reviewing and approving IDEA-B §611 applications for subgrants and amendments to
those applications, for providing technical assistance, for evaluating projects, and for
performing other administrative responsibilities. These processes and procedures have
been consistently approved by the U.S. Department of Education’s Office of Special
Education Programs (OSEP) over the past twenty-five years. PDE believes the finding is
inconsistent with DOE’s previous examinations and the suggestions are outside the scope
of existing guidance. Therefore we request this finding be withdrawn.

Background: The administration of these processes and procedures in conjunction with
the application of pertinent provisions of the IDEA-B Grants to States Program,
Pennsylvania Public School Code (School Code), federal regulations, and adherence to
the principles and accounting structures contained in the Manual of Accounting and
Financial Reporting for Pennsylvania Public Schools provides sufficient monitoring
procedures to ensure that LEAs comply with Federal fiscal requirements. See
Attachment 1. The full copy of this document can be found at

 http://www.portal.state.pa.us/portal/server.pt/community/accounting_information/18327

Although PDE previously provided this information, we are providing additional copies
of pertinent School Code sections – Article XXIV – Auditing of School Finances, Article
VIII – Books, Furniture and Supplies, including Section 807.1–Purchase of Supplies. See
Attachment 2a, 2b. 2c).

Please also reference PDE’s previous response of its bifurcated system for the
programmatic and fiscal management and administration of state and federal special
education programs and funding. However, we believe it will be beneficial if we further
illuminate our fiscal oversight responsibilities delegated to our Intermediate Units (IUs).
See Attachment 3. The IUs23 are PDE’s statutory LEAs under IDEA and are the direct
recipients of IDEA-B §611 funds. They exercise due diligence on behalf of PDE for the
proper administration, oversight, and management of the local regional IDEA funding
allocations as well as for the day-to-day management of IDEA-B §611 fiscal program
requirements including disbursement of pass through funding to eligible LEAs serving

23
  Pennsylvania has twenty-nine IUs and except for IU #2 each serves as the LEA for its member school
districts and public charter schools. IU # 2 -- the Pittsburgh-Mt. Oliver Intermediate Unit is coterminous
with the Pittsburgh City School District -- its single member school district. The Pittsburgh City School
District is PDE’s LEA for the IU #2 region.
                                    Enclosure 

                                  PDE Comments

eligible students with disabilities within their region. IU special education program and
fiscal staff work as a team in collaboration with their member school district and charter
school (LEA) colleagues to ensure sound management and proper expenditure and
reporting for the local regional IDEA funding. IU special education program and fiscal
staff meet with their member LEA colleagues on a regular and on-going basis. This
ensures that everyone is aware of the most current Federal requirements and PDE policies
and priorities regarding the distribution and use of local regional funding allocations. IUs
advise member LEAs about allowable costs/use of funds based on these requirements and
develop mutual strategies to maximize the benefits derived from the IDEA funds for their
eligible students with disabilities.

Disbursement of funds is predicated on written agreements between IUs and their
member LEAs. The written agreements include provisions that enable the IU as the
State’s LEA to determine that eligible member LEAs use and report the use of IDEA
funds in accordance with pertinent regulatory and procedural requirements.

Use of amounts and allowable costs are an integral component of this written agreement.
Allowable costs are based on and consistent with Federal regulations and cost principles
as well as PDE guidance, policies, and priorities. IUs review member LEA special
education fiscal information in order to reasonably determine that IDEA funds are not
used to reduce the level of non-federal support for special education and related services
for the preceding fiscal year.

Invoicing and payment procedures are designed to minimize the time elapsing between
the transfer of funds from the IU and disbursement of funds by its member LEAs.
Member LEAs may be paid in advance, provided they maintain or demonstrate the
willingness and ability to maintain procedures that minimize the time elapsing between
the transfer of funds and their disbursement. In instances where no procedures are in
place or where there is an unwillingness to minimize the time elapsing between the
transfer of funds from the IU and disbursement of the funds, reimbursement for actual
cash disbursements is the required payment method.

Regional management of IDEA-B §611 fiscal program requirements also encompass:
       	 Excess Cost Requirements (§300.16)
       	 Use of Amounts – Allowable costs (§300.202 and §80.22)
       	 Supplementation of State, local and other Federal Funds (§300.162)
       	 Prohibition against commingling IDEA funds (§300.162(b))
       	 Early Intervening Services (§300.226)
       	 Timely obligation and liquidation of funds (§§76.707 – 710 and §80.23)
       	 Review and validation of claimed costs/expenditures that, at minimum,
           include member LEAs’ certification that services/programs and claimed
           costs comply with pertinent statutory and regulatory program and fiscal
                                   Enclosure 

                                 PDE Comments

           requirements as well as PDE fiscal policies and procedures. The IU review
           provides backup for its accounts payable process. (§300.202 and §80.22)
       	 Invoicing process and payment procedures (§80.21 and 22)
       	 Timely, accurate and complete reporting of program and fiscal data
           (§300.600(d) and §80.23)

Summary: While we disagree with OIG’s findings, we are committed to exceeding
minimum requirements. Recently PDE developed an RFP and subsequently awarded a
contract in response to the ARRA’s data and reporting requirements. PDE has initiated
procedures whereby each LEA receiving ARRA Funds, including IDEA-B §611 ARRA
Funds, submits detailed data to validate proper use and reporting of these funds. The
contractor is responsible to review all verification data submitted, review and analyze
sample of LEAs for on-site review visits and follow-up.

If OIG’s comments are not merely the result of a preliminary understanding of PDE’s
processes, but are suggestive of pending or not yet released official instruction, we look
forward to working collaboratively with the Office of Special Education and
Rehabilitative Services (OSERS) and OSEP to implement any future official guidance or
instruction that OSERS and/or OSEP may implement.

RESPONSE TO SECOND FINDING:

Comptroller Operations and the Pennsylvania Department of Education (PDE) have
several controls in place to ensure compliance with applicable statues and regulations, to
ensure sub grantors charge allowable costs to the grants, to minimize the ability for LEAs
to accumulate excess cash and earn significant amounts of interest on those funds. We
believe that the finding was based on a preliminary understanding of PDE’s processes
and after reading the detailed explanation which follows, the finding should be
withdrawn.

Background: PDE has issued guidance refraining LEAs from accumulating excess cash
and interest earnings. In addition procedures to return interest earnings to the federal
government have been provided to LEAs in the event they earn interest greater than $100
per year. Additional fiscal oversight is accomplished through A-133 Single Audits and
LEA audits conducted by the Pennsylvania Auditor General.

The review and monitoring process begins when an LEA applies for project funding. An
LEA’s project application identifies the types of activities to be performed, the expected
length of the project, the amount of financial resources needed and a project budget for
those resources. Based on the project budgets, the majority of LEA project resources are
utilized for payroll costs. As a result, PDE has knowledge about the types of
expenditures that will be incurred over the life of the project. Once PDE’s project review
is fully complete, they approve the project and assign an applicable funding source code.
The projects funding is limited to one funding source. For example, if the project is
ARRA related it will be funded solely by ARRA funds.
                                     Enclosure 

                                   PDE Comments

After a project has been approved by PDE it is sent to Comptroller Operations for review
and approval. Comptroller Operations reviews the project to ensure compliance with the
applicable grant requirements. After Comptroller approval, the project is entered into the
Financial Accounting Information (FAI) system. This system calculates the amount of
each monthly payment an LEA will receive for a project. The monthly payment is based
on the number of months the project will last. For example, if a project is scheduled to
last 15 months the LEA would receive 15 equal monthly installments.

During a quarter in which monthly payments are disbursed, Comptroller Operations
requires the LEAs to submit a Quarterly Cash Reconciliation report. This reconciliation
report must be completed quarterly for each project and is certified by a responsible LEA
official that the provided information is true and accurate. These reports allow the
Comptroller to monitor project expenditures and excess cash. Currently Comptroller
Operations reviews approximately 10,000 reconciliation reports a year.                This
reconciliation process limits the LEA’s ability to accumulate large sums of excess cash.
If the LEA is not spending a project’s funding at the expected rate and has accumulated
excess cash greater than or equal to one dollar plus one scheduled monthly payment, the
project payments are discontinued until the excess cash is spent.

In a worst case scenario, should an LEA not incur any project expenditures, an LEA
could accumulate three months worth of payments, at which point when they file their
Quarterly Reconciliation of Cash-on-Hand report, future payments would be stopped.
Project payments do not start until the project has been approved by Comptroller
Operations. Generally an LEA begins to receive monthly project payments a couple of
months after the approved project start date. In most instances the LEA has incurred
project expenditures between the approved start date and the receipt date of the project’s
first monthly payment. Over the past decade the Commonwealth is only aware of one
incident where a school has accumulated excess cash balances and earned interest greater
than $100 per year. This combination of PDE’s review and periodic site monitoring,
Comptroller Operations fiscal controls and monitoring and the various audits that the
LEAs are subject to demonstrates that the risk of LEAs accumulating excess amounts of
cash and interest earnings is minimal and that the current review and monitoring process
is working as expected.

The Commonwealth has had only one instance of excess cash on hand cited in an LEA
Single Audit report, so it is our position there is no justifiable cost benefit or regulation to
require additional fiscal monitoring effort at the LEA, PDE, or Comptroller Office.

The Comptroller has recently accelerated the timeliness of Single Audit sub-recipient
reviews and their work in helping PDE resolve SA findings. The Commonwealth has
also implemented a policy that requires all agencies to report the status of their SA
findings on a quarterly basis, so SA findings will be resolved more timely.

Summary: If OIG’s comments are not the result of a preliminary understanding of
PDE’s processes, but are suggestive of pending or not yet released official instruction, we
                                     Enclosure 

                                   PDE Comments

look forward to working collaboratively to implement any future official guidance or
instruction that USDE may implement.

While there has only been one instance of an LEA earning interest in excess of $100 from
federal funds, PDE and the Comptroller will establish a policy that strongly encourages
LEAs to use non-interest-bearing accounts for these funds.

RESPONSE TO THIRD FINDING:

USDE-OIG asserts in Finding No. 3 that "PDE still needs to develop a formal written
policy and disseminate it to all appropriate parties." In actuality, despite USDE-OIG's
reference to "the requirement to have a specific policy to report data deficiencies to the
Department," no such requirement exists. Neither the Recovery Act, OMB's guidance,
nor USDE's clarifying guidance mandates such a policy.

Background: In its finding, USDE-OIG cites the following passage from Section IX.1
of USDE's clarifying guidance:

       "If the prime recipient identifies material omissions or significant reporting errors 

       in its reports (or that of its sub-recipients), take action to correct the deficiencies. 

       If the report cannot be corrected or if a known deficiency cannot be remedied, 

       contact the Department of Education to advise it of the deficiencies and the

       actions

       being taken to correct the deficiency."


A recipient's obligation is not to draft and disseminate a data deficiency policy, but to
"take action to correct the deficiencies." Only if "the report cannot be corrected" is the
recipient obligated to notify USDE.

Summary: PDE believes that USDE-OIG should withdraw this finding, since there is no
actual requirement to establish such a policy. However, to address any remaining
concerns on this issue, PDE has recently established a written policy reiterating the
clarifying guidance on ARRA data deficiencies and providing contact information for
questions. PDE will distribute this policy to its sub recipients and vendors. The current
draft policy is attached. See Attachment 4.

RESPONSE TO FOURTH FINDING:

The Pennsylvania Department of Education (PDE) believes that the Governor’s office
has appropriately defined roles and responsibilities regarding the administration of State
Fiscal Stabilization Fund (SFSF). It is our belief that the concerns largely arise from
confusion regarding Pennsylvania's organization, policies, and intended uses of SFSF
funds. What follows is clarification which we believe will address these concerns.

Background: USDE-OIG suggests a series of "interagency agreements" between the
Governor's Office and the Departments of Corrections, Education, and General Services,
                                    Enclosure 

                                  PDE Comments

based upon USDE-OIG's reading of Management Directive 310.19. In Section 4a, MD
310.19 explicitly defines an interagency agreement as one "in which at least one
[Commonwealth agency] is not an executive agency as defined in the Commonwealth
Attorneys Act." The Commonwealth Attorneys Act (71 P.S. §732-102) defines an
executive agency as, "The Governor and the departments, boards, commissions,
authorities and other officers and agencies of the Commonwealth government..."
Therefore, an interagency agreement would neither be appropriate nor necessary, since
every entity identified above qualifies as an executive agency.

Section 5b of MD 310.19 governs Memoranda of Understanding, "which must be used
only for" master lease participation agreements or for certain interagency billings for
services charged as operating expenses; neither situation applies here. Instead, as Section
5c of MD 310.19 indicates, the best match would be the "Notification of Subgrant,"
which "does not create any contractual rights or obligations between the agencies [§4c]."
Even this structure would not be ideal; the wording of MD 310.19 does not suggest that
Secretary Bittenbender anticipated a situation in which the Governor's Office would itself
be one of the executive agencies participating in an agreement. Instead, as a general rule,
these kinds of agreements are designed for situations in which peer agencies are working
together, and need to define their respective areas of responsibility. These agreements
are necessary when peer agencies collaborate, because neither party has the authority to
direct the activities of the other.

In the case of SFSF, USDE has awarded the funds to the Governor's Office, which in
turn, has made allocations to three program agencies - Corrections, Education, and
General Services. After the Governor's Office allocated the funds to the program
agencies, the General Assembly appropriated the funds directly to each of the agencies
for them to spend and manage the funds according to state and federal law. Further, the
secretaries of these agencies are the Governor's subordinates; therefore, the Governor
need enter into no agreement in order to compel these three officials to carry out their
compliance obligations to USDE. This subordinate relationship mitigates the need for a
formal agreement.

In its list of concerns, USDE refers to "sub recipient monitoring, cash management, use
of funds, and data quality." PDE would like to reiterate that because of the way these
funds are being allocated, the Departments of Corrections and General Services will not
have any sub recipients for their ARRA funds. Corrections will use its entire allocation
for payroll expenses, as permitted under the grant award letter - there will be no other use
of these funds. Also, we believe that we have adequately addressed the cash management
issue in our response to Finding No. 2. This leaves only data quality. The
Commonwealth's Section 1512 compliance efforts have been centralized under a
workgroup staffed by the Governor's Office of Administration (OA) and the Governor's
Office of the Budget (OB). The responsibilities of OA, OB, and the state's various
program agencies have been spelled out in a series of memoranda that date back to early
2009.
                                Enclosure 

                              PDE Comments

Summary: Based on the clarification offered, we believe that this finding should be
withdrawn.

Thank you for the opportunity to respond to this preliminary audit report. We look
forward to our continued collaborative relationship in the future.

                                                Sincerely,



                                                Gerald L. Zahorchak, D.Ed.

Attachments
         Enclosure 

       PDE Comments


Response - USDE OIG Preliminary Report




               Attachment 1




Manual of Accounting and Financial Reporting
      for Pennsylvania Public Schools
                                   Enclosure 

     \   ,
                                 PDE Comments

,<




                 ~anualofAccounting
              and Financial Reporting
              for Pennsylvania Public
                      Schools

                  Labor, Education and Community Services (LECS)
                                Comptroller's Office
                            School Accounting Division
                                      P.O. Box 60310
                         Harrisburg, Pennsylvania      17106-0310

                                        May, 2001

                                      Updated 2005



             Edward G. Rendell, Governor                   Michael J. Masch, Secretary
             Commonwealth of Pennsylvania     Office of the Budget and Administration
                                     Enclosure 

                                   PDE Comments

,,,




                                               Foreword

                    The 2001 Manual of Accounting and Financial Reporting for Pennsylvania
      Public Schools culminates an extensive project to capture and illustrate the budgeting,
      accounting and financial reporting requirements of Pennsylvania public elementary and
      secondary school systems. This Manual provides for a uniform and standardized system
      of nnancialmanaaement and reportina for all Pennsulvania public schools and ensures
      cOlnpal'ability in subsidy distribution ulid annual fin~ancial ;eporting among all public
      schools.

                      The key features of the Pennsylvania School Accounting System provide for a
      standard account code structure that allows for the accumulation of program costs at the
       level of detail the school administl'ation chooses, as well as provides for financial reporting
       in conformance with Generally Accepted Accounting and Financial Reporting Principles
      for- all state and local governments, including public school systems. The account code
      structure in this Manual is modeled after the current, Fedel'alAccounting Handbook II, as
       revised, and promulgated by the National Center for Education Statistics, U.S.
      Department of Education. The generally accepted accounting and reporting guidance
      included in this Manual began with the National Council on Governmental Accounting,
      Statement #1. Governmental Accounting and Financial Reporting Principles,
      and were adopted by the Governmental Accounting Standards Board (GASB) in 1984 in
       their first pronouncement, GASB Statement #1. GASB Statement #1 through GASB
      Statement #36 have been included in the 2001 Manual and as we collectively implement
       the New Financial Reporting Model additional guidance will be added as it becomes
      available.

                    A project of this scope and magnitude obviously requires the dedication,
      support and cooperation of many individuals from all facets of the school and financial
      community. And, while it is impossible to individually name all those that contributed to
      this effort, we want to especially thank the Pennsylvania Association of School Business
      Officials and their dedicated task force of school business officials and the consultants that
      helped get this project underway. The Task Force members were essential in guiding the
      scope and content of the Manual, and we are extremely grateful for all their time,
      knowledge and commitment to this initiative. Equally important were the business
      associates, other Commonwealth agencies, and the school community at large who offered.
      their insight and recommendations to make this Manual a valuable tool for all new and
      experienced school business administl'atol's. Many of these contributors went above and
      beyond expectations to improve the value and usability of the 2001 ManualofAccounting.
                             Enclosure 

                           PDE Comments




                                 Acknowledgement

             The Labor, Education and Community Services (LECS) Comptroller's Office
wishes to acknowledge and sincerely thank all those individuals that provided theil'
leadership, knowledge, experience, insights and valuable resources to produce this newly
written 2001 edition of the Manual of Accounting and Financial Reporting for
Pennsylvania Public Schools.

             The School Finance Division of the LECS Comptroller's Office worked in
cooperation with many individuals, the Pennsylvania Association of School Business
Officials, and other CPAs and professional organizations to collectively bring this
important resource tool to school business officials, administrators, educational
associations and the public school business community.

             For a project of this scope and magnitude, we are grateful for the many
individuals who contributed to its success. We also want to especially recognize and show
our sincere appreciation for the support we received from the following dedicated
professionals:


   * Intermediate
     Mr. William     H. Eisel, III, PRSBA, Business Administrators for the Colonial
                     Unit #20 and chairman of the Task Force Planning Committee
      responsible for laying the groundworkfor the project.

   * Accounting
     Ms, Venita Wood, CPA, CGFM, Private Consultant and former Governmental
                Standards Board staff member and project manager for various
      national accounting standards projects, who provided invaluable knowledge and
      advice on GASB Statement #34 implementation strategies and asset accounting
      requiremen ts.

   * MI'. Thomas E. Delaney, CPA, PRSBA, Business Administrator for the Garnet Valley
      School District and Chairman of the PASBO Accounting Committee for his support
      with the PASBO workshop series to disseminate the new accounting and reporting
      requirements.

   * fm'mer
     Mr. Jay Himes, CAE and PASBO Executive Directors, as well as Mr. James DiIorio,
            PASBO Assistant Executive Director, for their support and dedication of
      resources for project meetings, PASBO report articles, and for providing
      association-sponsored workshops throughout the State.          The Pennsylvania
      Association of School Business Officials helped the project team tremendously in
      their efforts to tap a broader base school community involvement with the content
      and refinement of the 2001 edition of the Pennsylvania Public School Accounting
      Manual.


              Although this Manual is a complete and essential tool for school business
officials, governmental accounting and financial reporting requirements continue to
                                  Enclosure 

                                PDE Comments


evolve as the public demands more and more accountability over the financial resources in
our schools. As this project was coming to a close, the Governmental Accounting
Standards Board issued their Statement #34, Basic Financial Statements and
Management's Discussion and Analysis for State and Local Governments, which changes
financial reporting in all public school systems. This statement revolutionizes the way our
schools prepare annual financial reports by adding a whole new dimension for reporting
the long-term effects offinancial transactions. It also requires additional accounting and
reporting for capital assets and irifi'astruCtl/re.

               In recognition of the new GASB Statement #34 requirements and our ever
changing financial environment, we have posted this version of the Manual on the
Pennsylvania Department of Education's website ....T-faving the .l\1anual on the website loiU
enable the LECS Comptroller's Office staff to update the iriformation contained in the
manual and disseminate the information as changes arise. This could not have been made
possible without the assistance of Mark Vanderslice of our Bureau of Management
Iriformation Systems, as well as Ann Witmer and Deborah Smlder of the Pennsylvania
Department of Education's Bureau of lTiformation.8ystems. We are sincerely gratefulfor
their efforts on this project, also.

             And finally, we want to express our gratitude and appreciation to all those
individuals on the Accounting Manual Task Force who helped plan the contents of this
Manual. Many of the Task Force members coniTibuted a significant amount of their time
to write or edit portions of the Manual and shared their knowledge, experience, and
recommendations to make the Manual a useful tool for all Pennsylvania public school
business administrators.


PASBO Accounting Manual Task Force

   .William E. Eisel, III, PRSBA, Business Administrator for Colonial Intermediate Unit #20
    Venita Wood, CPA, CGFM, Private Consultant, Mechanicsburg, Pennsylvania
    Robert W. Reinhart, CPA, PRSBA, Business Administrator, Salisbury Township School District
    Pamela W. Baker, CPA, Partner, Barbacane, Thornton & Company, Wilmington, Delaware
    Christine A. Wegemer, CPA, CGFM, Commonwealth of Pennsylvania, Office of the Budget -
       Bureau ofAudits
    Susan H. Famularo, PRSBO, Assistant Director of Business Affairs, Bethlehem Area School
       District
    Janis E. Reeser, PRSBO, Financial Services Administrator, Central Susquehanna Intermediate
       Unit #16
    Sharon L. Jones, PRSBO, Director of Finance, Chester County Intermediate Unit #24
   Adrienne F. Craig, PRSBO, Business Manager, Jersey Shore Area School District
    Ernest W. Werstler, Jr., PRSBA, Business Manager / Board Secretary, Exeter Township School
       District
    Laura E. Cowburn, PRSBA, Business Manager / Board Secretary, Columbia Borough School
       District
    Randy Hensinger, PRSBA, Business Administrator, Lehigh Career and Technical Institute
    Charles E. Linderman, PRSBA, Director of Business Affairs, Great Valley School Distict
    Anna Maria Anderson, CPA, CGFM, PRSBS, Commonwealth of Pennsylvania, Office of the
       Budget
                               Enclosure 

                             PDE Comments


The following members of the Labor, Education and Community Services Comptroller's
Office sincerely thank the PASBO Task Force for their assistance and contributions in
compiling the 2001 edition of the Pennsylvania Manual of Accounting and Financial
Reportingfor Pennsylvania Public Schools.

   W. A. Hardenstine, Jr., Comptroller
   Lan'y P. Scott, Assistant Comptroller for Accounting
   Connie S. Huber, CPA
   Mary Kay Beer
   Dellllis Peachey
   Lauren M. Dungan
  lvI. Sue Leonard
   Anita Butcher
   Barbara Mazich
   Jeanne Lenker
   Irene Sauls
   Collette Kelly
                            Enclosure 

                          PDE Comments


                            HONORABLE MENTIONS


  DEPARTMENT OF EDUCATION
    Charles Zogby, Acting Secretary
    Ronald Tomalis, Executive Deputy Secretary
    Donald Lunday. Deputy Secretary for Administration
    Dr. Thomas P. Carey, Deputy Secretary for Elementary and Secondary Education


  OFFICE OF THE BUDGET
    Harvey C. Eckert, Deputy Secretary for Comptroller Operations


      LABOR. EDUCATION AND COMMUNITY SERVICES (LECS)
      COMPTROLLER'S OFFICE
        WilliamA. Hardenstine, Jr., Comptroller


         OFFICE OF ACCOUNTING
           Larry P. Scott, Assistant Comptroller


            DIVISION OF SCHOOL ACCOUNTING
              Connie S. Huber, Chief


               STATE SUBSIDIES SECTION
                 Lauren Dungan, Chief
                 Barb Mazich
                 M. Sue Leonard
                 Irene Sauls
                 Jeanne Lenker
                 Anita Butcher
                  Collette Kelly


               SCHOOL ACCOUNTING SECTION
                 Mary Kay Beer, Chief
                 Dennis Peachey


               ADMINISTRATIVE SUPPORT
                 Jessica Byerly


Significant Contributions
  Eugene Hickok, Former Secretary - Department of Education
  Anna Maria Anderson, Former School Finance Division Chief, LECS Comptroller's Office
  Vanessa M. Gibboney, Former Chief of School Accounting, LECS Comptroller's Office
                                 Enclosure 

                               PDE Comments


       The updated Manual reflects accounting changes implemented since the original
publication date of May 2001. Many chapters saw little revisions, while others required
extensive updating. Most of the changes involved deleting guidance that was applicable to
school entities pre GASB Statement #34. Other changes reflect items that appear to be of
concern to school communities in Pennsylvania and require additional clarification from
the Comptroller's Office. The updated Manual is available on the Comptroller's website at
VJww.pde.state.pa.lls/schooL acct as downloadable PDFfiles.

   The following members of the LECS Comptroller's staff were involved in the process of
reviewing and updating the Manual:

                Connie S. Hllber, COlnptroller
                Stanley J. McCollum, Assistant Comptroller for Accounting

                LECS Comptroller's Office - School Finance Division

                Bonnie Kabonick, Chief of the School Finance Division
                Mary Kay Beer, School Accollnting Section Chief
                Collette Kelly, Staff member School Accounting Section
                LouAnn Caidarella, Staff member School Accounting Section
                                             Enclosure 

                                           PDE Comments

                                                                                    .l:'age 1 or L




School Accounting Information
                     Manual of Accounting
                                    Chapters
 The following chapters are all PDF documents which require the use of
 Adobe Acrobat Reader software, which can be downloaded· for free,

                                 Contents

 Chapter 1:     Principles of Accounting, Budgeting, and Financial
                Reporting for Pennsylvania Local Education
                Agencies..                                         05/01/05
 Chapter 2:     Fund Accounting..                                        01/03/05
 Chapter 3:     Measurement Focus and Basis of Accounting ..             01/03/05
 Chapter 4:     The General Fund ..                                      07/19/06
 Chapter 5:     Special Revenue Funds ..                                 01/03/05
 Chapter 6:     Capital Projects Fund ..                                 07/19/06
 Chapter 7:     Debt Service Funds ...                                   01103105
 Chapter 8:     Permanent Funds ..                                       01/03/05
 Chapter 9:     Proprietary Funds ..                                     01103105
 Chapter 10: Fiduciary Funds..                                           03/04/05
 Chapter 11: Fixed Assets, Capital Assets, and Infrastructure..          03/04/05
 Chapter 12: Debt Management, Accounting, and Reporting..                08/01/05
 Chapter 13: Accruals and Deferals....                                   01/03/05
 Chapter 14: The Budgeting Process..                                     01/03/05
 Chapter 15: Financial Reporting for PA Public Schools..                 05/01/05
 Chapter 16: Audit Responsibilities.. .                                  05/01/05
 Chapter 17: State and Federal Funding and Reporting..                   05/01/05
 Chapter 18: Special School Entities..                                   05/01/05
 Chapter 19: Advanced Accounting Issues and Board Policies ... 05/01/05

 Chart of Accounts: Formerly Chapter 20            Updated 7/2009


 Chart of Accounts - Summary of Changes             Updated 7/2009

 Glossary

 Reference Section




 for more information contact:

   Central Agencies &. School finance Division
   School Accounting Section
      E-mail: RA-schlfin@state.pa.us

http://www.pde.state.pa.us/school_acct/cwp/view.asp?a=184&Q=60161&pp=12&n=1         10/2412009
                                              Enclosure 

                                            PDE Comments

,,"'~llUU1 ","eel.: ~naplers ~1VlanUa1 U1 fu;euUIlung)                        yage L or L




        Fax:       (717) 425-6572




  Content Last Modified on 7/23/2009 11 :44: 13 AM




http://www.pde.state.pa.us/school_acct/cwp/view.asp?a=184&Q=60161&pp=12&n=1   10/2412009
          Enclosure 

        PDE Comments





    Manual of Accounting
and Financial Reporting for PA
        Public Schools


   Chart of Accounts
         Revised 7-1-09
                                  Enclosure 

                                PDE Comments


          Manual of Accounting and Reporting for PA Public Schools
                                Summary of Account Code Changes


                            Changes effective for the 2009-10 Fiscal Year
                                             Updated 7/17/09
                   Previous    New
    Code Type                              Description
                     Code      Code
Revenue                       6833'   ARRA - IDEA Received as Pass Through
                              6834'   ARRA - Workforce Investment Act (WIA) Received as Pass Through
                              8700'   Grants from American Reinvestment and Recovery Act (ARRA)
                              8701'   ARRA - IDEA, Part B
                              8702'   ARRA -IDEA, Section 619
                              8703'   ARRA - Title I, Parts A & D
                              8704'   ARRA - Title I, School Improvement
                              8705'   ARRA - Title II, Part D Education Technology
                              8706'   ARRA - MCKinney-Vento Homeless
                              8707'   ARRA - National School Lunch Program Equipment
                              8708'   ARRA - State Fiscal Stabilization Fund
                              8721'   ARRA - Head Start
Funding Source                 981'   ARRA - IDEA, Part B
                               982'   ARRA -IDEA, Section 619
                               983'   ARRA - Title I, Pa'rt A
                               984'   ARRA - Title I, School Improvement
                               985'   ARRA - Title II, Part D Education Technology
                               986'   ARRA - McKinney-Vento Homeless
                               987'   ARRA - National School Lunch Program Equipment
                               988'   ARRA - Basic Education Funding up to 4,1%
                               989'   ARRA - Basic Education Funding over 4,1 %
                               990'   ARRA - State Fiscal Stabilization Grant
                               991'   ARRA - Head Start
                               992'   ARRA - Title I, Part D
                               993'   ARRA- WIA Revenue Received as Pass Through


, All ARRA related codes may be used to record activity applicable to the 2008-09 fiscal year,




                              --- Summary of Changes ---                                         Page 1
                                  Enclosure 

                                PDE Comments


              Manual of Accounting and Reporting for PA Public Schools
                                Summary of Account Code Changes


                            Changes effective for the 2008-09 Fiscal Year
                                           Updated 7/17/09
                   Previous   New
    Code Type                               Description
                    Code      Code
Revenue              6700       ---     Title and description changes
                      ---      7340     State Property Tax Reduction Allocation - Added
                     8518       ---     Will no longer be funded effective 2008-09
                     8810       ---     Title and description changes
                     8820       ---     Title and description changes
Other Fin Source     9110               Title and description changes
Funding Source        ---      204      State Property Tax Reduction Allocation - Added
                     205        ---     Read to Succeed - Deleted
                      ---      221      Accountability to Commonwealth Taxpayers (ACT) - Added
                      ---      281      Adu It Education Impact Prog ram - Added
                     891        --..,   Added "Transportation" to title
                     892        ---     Removed "Transportation" from title
                     952        ---     Use of code discontinued
Expenditure           ---      1140     Early Intervening Services - Added
                                        NonPublic School Programs - description revised to include use by
                               1500
                                        School Districts

                     1800     1801 to Series has been expanded to include 1801 - 1807
                              1807     (see Chart of Accounts for breakdown)
                      ---      2350     Title and description changes
Object                ---      280      Other Postemployment Benefits (OPEB) - Added
                      ---      281      OPEB for Cost of Retiree's Health Benefits - Added
                      ---      282      OPEB for Retiree's Costs Other Than Health Benefits - Added
                                        Eliminated for 07-08 reporting; record all amounts due to/from
Asset                0133       ---     Governmental/Business Type Activities to account code 0403.
Liabilities          0403       ---     Description changes

• Please refer to Summary of Account Code Changes effective for 2009-10 for all ARRA related codes that
may be used to record activity applicable to the 2008-09 fiscal year.




                              --- Summary of Changes ---                                                 Page 2
                                      Enclosure 

                                    PDE Comments


          Manual of Accounting and Reporting for PA Public Schools
                              Summary of Account Code Changes

                            Changes effective for the 2007-08 Fiscal Year
                                              Updated 9/17/07
                 Previous    New
  Code Type                             Description
                  Code       Code
Revenue            ---       6131   Act 1 EIT - Added
                   ---       6132 Act 1 PIT - Added
                   ---       6431   Delinquent Act 1 EIT - Added
                   ---       6432 Delinquent Act 1 PIT - Added
                                                                                                       --
                   ---       7292 Pre-K Counts - Added 8/6107
                   ---       9130 Bond Premiums - Added
                                    Other Financing Sources Not Listed Elsewhere in the 9000 series -
                   ---       9910
                                    Added
                   ---       9990 Insurance Recoveries - Added
Funding Source     ---       216    College and Career Counseling Grants - Added
                   ---       217    Pre-K Counts - Added 8/6/07
                             218    Full Day Kindergarten Supplement - Added 9/5/07
                             281    Adult Education Impact Program - Added 9/17/07
Expenditure                         Federally Funded Regular Programs - Code was created to segregate
                                    federal expenditures within the 1100 function if desired by the LEA. The
                  1190        ---   use of code 1490 for this purpose is no longer allowable starting with
                                    fiscal year 2007 -08
                                    Text added to description to include public information preparation for
                  2823        ---   the internet
                   ---       5150 Bond Discounts - Added
Object             ---       116    Employee Insurance Opt Out - Added
                                    Revise description to state: contributions to retirement plans other than
                   230        ---   PSERS should be recorded to object 290
                   ---       894    Student Conference fees and dues - Added




                              --- Summary of Changes --.                                                 Page 3
                                        Enclosure 

                                      PDE Comments


              Manual of Accounting and Reporting for PA Public Schools
                                Summary of Account Code Changes

                              Changes effective for the 2006-07 Fiscal Year
                                               Updated 10/19/06
                   Previous    New
   Code Type                              Description
                    Code       Code
Revenue              ---       6832 Pass thru IDEA Funds - Added
                     ---       7504 SchoollmprovementiProfessional Development (IU use only) - Added
                     ---       7920 Classrooms for the Future - .Added
Funding Source       ---       215    SchoollmprovementiProfessional Development (IU use only) - Added
                               216    College and Career Counseling Grants - Added 10/19/06
                     ---       341    Classrooms for the Future - Added

Expenditure          ---       1190 Federally Funded Regular Programs - Added (Use of this code is
                                    currently optional, but will be required startinq with fiscal year 2007 -08)
Object               170        --- Changed
                                    code
                                              title and description to add laborer related duties to this object


                     180        --- Changed   title and description to move laborer related duties from object
                                    code 180 to object code 170
                     210        ---   Changed title to Group Insurance - Contracted Provider
                     270        ---   Changed title to Group Insurance - Self Insurance
                     ---       324    Professional Educational Services - Added
                     ---       597    Direct Payments to IUs for Institutionalized Children's Programs-'Added

Liabilities          ---       0446 Other Postemployment Benefits Payable (OPEB) - Current Liability
                                    Account - Added
                     ---       0560 Other Postemployment Benefits (OPEB) - Long Term Liability Account -
                                    Added




                                --- Summary of Changes ---                                                 Page 4
                                   Enclosure 

                                 PDE Comments


          Manual of Accounting and Reporting for PA Public Schools
                           Summary of Account Code Changes

                         Changes effective for the 2005-06 Fiscal Year
                                           Updated 1/10106
                 Previous New
  Code Type                           Description
                  Code    Code
Revenue            ---    7502 Dual Enrollment - Added
                   ---    7503 Project 720 Hig h School Reform - Added
                  8650     ---   Energy Conservation Grants through the State - Deleted
                  8670    8517 Drug Free Schools - code changed effective 7/1/03
                                 Medical Assistance Reimbursements (Access) - Early Intervention -
                   ---    8830
                                 Added 1/3/06
Funding Source     ---    213    Project 720 High School Reform - Added
                   ---    214    Dual Enrollment - Added
                  890     891    Regular Medical Assistance - Added 1/3/06
                   890    892    Medical Assistance Transportation and Admin Costs - Added 1/3/06
                   ---    893    Early Intervention Medical Assistance - Added 1/3/06

Expenditure        ---    5140 Short Term Borrowing - Interest and Costs - Added
                                 Additional text added to description regarding specific dual enrollment
                  1490     ---   costs to code within this function
                                 Additional text added to description regarding specific dual enrollment
                  1700     ---   costs to code within this function
                                 Additional text added to description stating Early Intervention costs
                  1800     ---   should continue to be coded to Function 1280
                                 Additional text added to description stating fuel purchased for use by
Object             513     ---   contracted carrier should be coded here
                  561      ---   Title changed to Tuition to Other School Districts Within the State
                  565     566    Tuition to State University Lab Schools will now be included in 566
                   567    566    Tuition to Community Colleges for AVTS will now be included in 566
                                 Tuition to Institutions of Higher Education and Technical Institutes will
                   ---    566
                                 now include costs previously reported in objects 565 and 567
                   ---    568    Description changed to exclude APS costs
                   568    567    APS costs originally reported in 568 will now be reported in 567
                   ---    891    Other Miscellaneous Expenditures - Added
                   ---    892    PA State Imposed Fines - Added
                   ---    893    Scholarships - Added




                           --- Summary of Changes ---                                                  Page 5
                                     Enclosure 

                                   PDE Comments


          Manual of Accounting and Reporting for PA Public Schools
                               Summary of Account Code Changes

                            Changes effective for the 2004-05 Fiscal Year
                                              Updated 7/1/05
                                                                                                       --
                 Previous   New
  Code Type                            Description
                  Code      Code
Revenue            ---      7291 Educational Assistance Program revenue - Added
                 ~-
                            7299 Other program subsidies not listed in 7290 - Added
                   ---      7290   This code is now a summary for lower level revenue accounts
                   ---      7501   PA Accountability Grants - Added
                   ---      7510   Voc Ed Tutoring Funds - Added (may be used in FY 2003-04)
                   ---      7500   This code is now a summary for lower level revenue accounts
                   ---      7599 Other State Revenue not listed in 7000 - Added
                  6950       ---   Education Impact Fees - Deleted
                  7150       ---   School Performance Incentives - Deleted
                  8680       ---   Goals 2000 Educate America - Deleted
Funding Source     ---       211   Educational AssistancellutoriQ91 - Added
                   ---       212   PA Accountability Grants - Added
Expenditure        ---      1450   Instructional Programs Outside the EstabliShed School Day - Added
                   ---      1800   Instructional Programs for Pre-K students - Added
Object             ---      115    Impact of termination payouts - Added




                               --- Summary of Changes ---                                              Page 6
     Enclosure 

   PDE Comments



This page intentionally left blank
            Enclosure 

          PDE Comments





            Chart of Accounts


                     ** Revised 7/1/09 **
Specific text or codes can be easily located within this pdf
document by using the search icon located above in the Adobe
basic tool bar. If the icon is not available for your use, you can
use the Edit - Search feature as an altemative search method.


     Account code changes for this revision:

       Revenue ........................... 6833 -         added
           ......................... " .. "".6834 -       added
           .... " ...... " ............ " ...... 8700 -   added
           """""""""" .... "" .. ,," 8701 -               added
           .................................. 8702 -      added
           ..... " ..................... " .... 8703 -    added
           .......... " .............. " .... ,,8704 -    added
           .......................... " .... ,,8705 -     added
           .............. " ...... " ...... " .. 8706 -   added
           .... " .................... " ...... 8707 -    added
           ............ "" .......... " ...... 8708 -     added
           .... ;" ........................... 8721 -     added

       Funding Source .......... " ..... 981 - added
            ...... " ................. " ....... 982 - added
            " ........................ " ...... 983 - added
            " .......... " .... " ............ ,,984 - added
            ............ " .......... "" .... ,,985 - added
            " ................................ 986 - added
            .................................. 987 - added
            ............ " .................... 988 - added
            ..... " .................. " ....... 989 - added
            .................. " .............. 990 - added
            ........ " ........................ 991 - added
            " .......... " ........ " ...... ".992 - added

       Expenditures" .......... " ...... 1500 - revised
  Enclosure 

PDE Comments



 This page intentionally left blank
                               Enclosure 

                             PDE Comments


                                          Manual of Accounting and Financial Reporting for
                                                             Pennsylvania Public Schools

                                                            CHART OF ACCOUNTS
                                                                TABLE OF CONTENTS
                                                                       •• Revised 711109 ••



SECTION A _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ A-1
 Account Classification and Coding Structure _ _ _ _ _ _ _ _ _ _ _ _ _ _ A-1
  .!. Explanation Of Revenue And Expenditure Dimensions And Their Coding Structures _ A-2
  .:. Assigned Serial Number (ASN)                                     A-5
  .:. Expenditure Dimensions _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ A-5
  .:. Revenue Dimensions                                                               A-6
  .:. Balance Sheet Dimensions                                                         A-6

SECTION 8 _ _ _ _ _ _ _ _ _ _ _ _,--_ _ _ _ _ _ _ _ 8-1
 Fund Dimension _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 8-1
  .:. Governmental Funds                                                               B-1
  .:. Proprietary Funds                                                                B-2
  .:. Fiduciary Funds                                                                  B-3

SECTION C _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ C-1
 Assets And Other Debits _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ C-1
  .!. Current Assets                                                                   C-1
      • 0100 CASH                                                                      C-1
  .:. Capital And Infrastructure Assets                                                C-5
      • 0200 PROPERTY                                                                  C-5
  .:. Budgetary Accounts And Other Debits                                              C-7
     •   0300 BUDGETARY REVENUES                                                       C-7

SECTION 0 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
                                                    Enclosure 

                                                  PDE Comments

,1   ,'~   ,., I




     SECTION E _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ E-1
           Expenditures And Other Financing Uses _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ E-1
                   .:. Expenditures                                                             E-1
                   .:. Other Financing Uses                                                     E-1
                      •   1000 INSTRUCTION                                                      E-1
                      •   2000   SUPPORT SERVICES                                               E-8
                      •   3000   OPERATION OF NON-INSTRUCTIONAL SERVICES                       E-22
                      •   4000   FACILITIES ACQUISITION, CONSTRUCTION AND IMPROVEMENT SERVICES E-24
                      •   5000   OTHER EXPENDITURES AND FINANCING USES _ _ _ _ _ _ _ _'--_E-25

     SECTION F _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _~_ _ F-1
           Object Dimension _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ F-1
                     •    100   PERSONNEL SERVICES - SALARIES                                   F-1
                     •    200   PERSONNEL SERVICES - EMPLOYEE BENEFITS                          F-3
                     •    300   PURCHASED PROFESSIONAL AND TECHNICAL SERVICES                   F-5
                     •    400   PURCHASED PROPERTY SERVICES                                     F-7
                     •    500   OTHER PURCHASED SERVICES                                       F-10
                     •    600   SUPPLIES                                                       F-14
                     •    700   PROPERTY                                                       F-16
                     •    800   OTHER OBJECTS                                                  F-19
                     •    900   OTHER USES OF FUNDS                                            F-21

     SECTION G _ _ _ _ _ _ _ _ _ _ _ _ _ _~_ _ _ _ _ _ G-1
           Funding Source Dimension _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ G-1

     SECTION H _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ H-1
           Instructional Organization Dimension _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ H-1
           Operational Unit Dimension I School Level                                            H-4
           Subject Matter Dimension                                                             H-5
           Job Classification Dimension                                                        H-12
           Special Cost Center Dimension                                                       H-21

     SECTION 1_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1-1
           Revenues And Other Financing Sources _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1-1
                   .:. Revenues                                                                  1-1
                   .:. Other Financing Sources _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1-2
                   .:. Revenue Codes                                                             1-2
                      •   6000   REVENUE FROM LOCAL SOURCES                                      1-2
                      •   7000   REVENUE FROM STATE SOURCES                                     1-22
                      •   8000   REVENUE FROM FEDERAL SOURCES                                   1-28
                      •   9000   OTHER FINANCING SOURCES                                        1-33
                Enclosure 

              PDE Comments


     Response - USDE OIG Preliminary Report




                      Attachment 2




Article VIII of the Public School Code of 1949 as amended

  Section 8-801 to 8-810 - Books, Furniture and Supplies
                   (24 PS 8-801 to 8-810)




Article VIII of the Public School Code of 1949 as amended

           Section 807.1- Purchase of Supplies
                   (24 PS §24-8-807.1)




Article XXIV of the Public School Code of 1949 as amended

 Section 24-2401 to 24-2462 - Auditing of School Finances
                (24 PS 24-2401 to 24-2462)
                                          Enclosure 

                                        PDE Comments


                                            TITLE 24-EnuCATION                                           24 PS 8-804

                                       Article VIII
                             BOOKS, FURNITURE AND SUPPLIES

                Purchases; use in schools; rules and        24 PS 8-808           Employe of district as agent.
                  regulations.                              24 PS 8-809           Giving or offering bribes; penalty.
                Repealed.                                   24 PS 8-810           Seeking or receiving bribes; penalty.
                Time and manner of adopting and
                  furnishing textbooks and supple­
                 mentary books.
                Use of school books during vacations.
                 Repealed.
                Purchase of supplies.




 8-801 Purchases; use in schools; rules and regulations
  board of school directors of each school district shall purchase all necessary furniture, equipment, text­
  school supplies, and other appliances for the use of the public schools, or any department thereof, in
tesPlective districts, and furnish the same free of cost for use in the schools of the district, subject to such
     regulations regarding the use and safe-keeping thereof as the board of school directors may adopt. All
     equipment, books, school supplies, and other appliances purchased by the board of school directors of
      district, for the use of the public schools therein, shall be purchased in the manner provided in this

  Act 14, Art VIII, § 801 (PL 30), eff. 7-1-49, 5-18-11, § 701 (PL 309)
                                  NOTES ON DECISIONS AND OPINIONS

  v. Pittinger, 374 F. Supp. 639 (E.D. Pa. 1974). State    use and pay for the use of bathing suits and towels provided
  of loaning textbooks to nonpublic school students,       by the district for a required course in swimming, if the
       were made on individual student basis and           district also provides for waiver of the cost upon applica,tion
      loaned had to be approved for use in the public      by indigent parents and students.
      not have the effect of advancing religion or
   the state in an impermissible entanglement with            Mathias v. School Dist. of Trafford Borough, 35 Wes. C.L.J.
                                                            143 (Pa. C.P. 1953). Physical education is as much a part of
                                                           the school curriculum as are subjects of intellectual study,
     v. Farrell Area School Dist., 74 Pa. D. & C.2d        and athletic Bupplies, therefore, are as necessary for school
   WL 16968 (Pa. C.P. 1975). A board of school direc­      use as maps, globes, and similar objects.
  the authority to require students in the district to

        Repealed
    9-11-59, Act 346, § 1 (PL 869), eff. 9-11-59; 3-10-49, Act 14, Art VIII, § 802 (PL 30); 5-18-n, § 702 (PL 309)

 8-803 Time and manner of adopting and furnishing textbooks and supplementary books
         textbooks, in school districts of the second, third and fourth class, shall be adopted by the board of
              at any regular meeting between the first day of April and the first day of August following.
         so adopted, shall be provided for the use of the schools at the beginning of the school terms next
         in said school districts there shall be a district superintendent, such district superintendent shall
             subjects new textbooks are needed, and after consultation with 'the teachers under his supervi­
 h~;,;::~~~~~~~~,Should be adopted or changed. No adoption or change of.textbooks shall be made without
 1I                 except by a two-thirds vote of the board. Books, supplementary to textbooks regularly
    may be adopted and purchased for use in the schools at any time. Such supplementary books shall be
   in the same manner as textbooks are herein required to be adopted.
    : 1-14-70, Act 192, § 20 (PL 468 (1969)), eff. 7-1-70; 5-4-70, Act 103, § 1 (PL 326) amended effective date of Act 192
  . 3-10-49, Act 14, Art VIII, § 803 (PL 30); 5-18-11, § 703 (PL 309)

        Use of school books during vacations
        of school directors in any district may allow any pupil in such district the use of school books dur­
         under such rules and regulations as it may adopt.

                                                                                                                     307
                                                Enclosure 

                                              PDE Comments


24 PS 8-804                                    PENN. SCHOOL CODE OF           1949                                          Pt. 3
HISTORY: 3·10·49, Act 14, ATt VIII, § 804 (PL 30), eff. 7·1-49; 5-18-11, § 704 (PL 309)

24 PS 8-805 to 8-807 Repealed
HISTORY: 7-31-68, Act 242, § 2 (PL 796), eff. 7-1-69; 1-18-68, Act 429, § 2, 3 (PL 963 (1967)); 10-21-65, Act 314, § 1, 2 (PL
640); 9-19-61, Act 630, § 1 (PL 1484); 6-15-61, Act 210, § 1 (PL 423); 6-8-61, Act 162, § 1 (PL 277); 5-24-51, Act 89, § 2 (PL
397); 3-10-49, Act 14, Art VIII, § 805 to 807 (PL 30); 5-29-31, § 18 (PL 243); 5-4-27, Act 348, § 1 (PL 689); 5-18-11, § 706 to 708
(PL 309)
  Note: See now Sec. 8-807.1.

24 PS 8-807.1 Purchase of supplies
   (a) All furniture, equipment, textbooks, school supplies and other appliances for the use of the public schools,
COB Ling ten thousand dollars ($10,000) or more shall be purchased by the board of schooi directors only aftel'
due advertisement as hereinafter provided. Supplies costing ten thousand dollars ($10,000) or more shall be
purchased by the board of school directors only after public notice has been given by advertisement once a week
for three (3) weeks in not less than two (2) newspapers of general circulation. In any district where no
newspaper is published, said notice may, in lieu of such publication, be posted in at least five (5) public places.
   (a.l) Written or telephonic price quotations from at least three qualified and responsible vendors shall be
requested by the board of school directors for all purchases of supplies that exceed four thousand dollars
($4,000) but are less than the amount requiring advertisement and competitive bidding, or, in lieu of price
quotations, a memorandum shall be kept on file showing that fewer than three qualified vendors exist in the
market area within which it is practicable to obtain quotations. A written record of telephonic price quotations
shall be made and shall contain at least the date of the quotation, the name of the vendor and the vendor's rep­
resentative, the supplies which were the subject of the quotation and the price of the supplies. Written price
quotations, written records of telephonic price quotations and memoranda shall be retained for a period of three
years.
   (b) The board of school directors shall accept the bid of the lowest responsible bidder, kind, quality, and ma­
terial being equal, but shall have the right to reject any and all bids, or select a single item from any bid. The
board of school directors in any district may authorize or appoint the secretary of the board or other executive
as purchasing agent for the district, with authority to purchase supplies costing less than ten thousand dollars
($10,000).
   (c) The following shall be exempt from the above provisions: maps, music, globes, charts, educational films,
filmstrips, prepared transparencies and slides, pre-recorded magnetic tapes and disc recordings, textbooks,
games, toys, prepared kits; flannel board materials, flash cards, models, projectuals and teacher demonstration
devices necessary for school use.
   (d) No board of school directors shall evade the provisions of this section as to advertising for bids or
purchasing materials piecemeal for the purpose of obtaining prices under ten thousand dollars ($10,000) upon
transactions which should, in the exercise of reasonable discretion and prudence, be conducted as one transac­
tion amounting to more than ten thousand dollars ($10,000). This provision is intended to make unlawful the
practice of evading advertising requirements by making a series of purchases or contracts each for less than
the advertising requirement price, or by making several simultaneous purchases or contracts each below said
price, when in either case the transaction involved should have been made as one transaction for one price.
HISTORY: 5-4-90, Act 38, § 2 (PL 164), eff. 7-3-90; 2-4-82, Act 1, § 4 (PL 1); 10-4-78, Act 236, § 2 (PL 1040); 2-25-72, Act 28,
§ 1 (PL 81); 7-31-68, Act 242, § 3 (PL 796); 3-10-49, Act 14, Art VIII, § 807.1 (PL 30)

                                          NOTES ON DECISIONS AND OPINIONS
  Committee to Keep Our Public Schools Public v. Schweiker,          Berryhill v. Dugan, 89 Pa. Commw. 46, 491 A.2d 950 (1985)
803 A.2d 869 (Pa. Commw. Ct. 2002), School reform commis­          requiring competitive bidding served the purposes of inviting
sion had power to suspend public 'bidding requirements, and        competition and guarding against favoritism, improvidence,
thus provision of this' section requiring that school boards       extravagance, fraud, and COlTuptioll-,in the awarding of mu~
advertise all purchases of $10,000 or more of furniture,           nicipal contracts.
equiplnent, textbooks, school supplies, and other'supplies did       Clemson Corp. v. McKeesport Area School Dist., 87 Pa.
not apply.                                                         Commw. 374, 487 A.2d 103 (1985). Competitive bid require­
  J,P. Mascaro & Sons, Inc. v. Bristol Tp., 95 Pa. Commw.          ments of Sec. 807.1 create no cause of action for breach of
376, 505 A.2d 1071 (1986). The court held that Mascaro, a          contract damages in lowest bidder; where analysis of coal af~
disappointed bidder, has no standing to assert violations of       tel' acceptance of bid proved coal to be nonconforming, no en­
its due process rights undel' eithel' the federal or state         forceable contract had been formed.
constitutions as it had no legitimate claim of entitlement to        Baum v. Hanover Township School District, 71 Pa. D. &
the township's contract.                                           C. 409, 1950 WL 11114 (Pa. C.P. 1950). Where the athletic

308
                                                  Enclosure 

                                                PDE Comments


Pt.   '3                                             TITLE 24-EDUCATJON                                 24 PS 9-921 to 9-930

.board consisted of all the members of the school board and              Flinn v Sto-Rox School Dist., 122 PLJ 157 (1974). In ac­
HllJ!.fullauthority to contract for and purchase supplies for         cepting bids submitted pursuant to this section, a board is
athletic equipment III amounts less than $300, and the school         not bound to award a contract to the lowest bidder but it
b~al'.4 at a later date took \,ossession of all the athletic equip­   may exercise its discretion in considering such other matters
m,~rtt purchased and contInued to use the same, the school
                                                                      as efficiency of the bidder and its ability to perform the par­
)$~o~rd is liable on the qu~ntUI~ meruit basis for the contract
                                                                      ticular service.
pnee on the theory of ratIficatIOn.
24,PS 8-808 Employe of district as agent
   No person shall act as agent for school books or school supplies, in any district in which he is engaged or
r;mployed as a sup~rintendent, t~acher, or employe of the school district in any 'capacity, or in which he was
'thUs employed dUrIng the precedIng school year.
HISTORY: 3-10-49, Act 14, Art VIII, § 808 (PL 30), eff. 7-1-49; 5-18-11, § 709 (PL 309)

24 PS 8-809 Giving or offering bribes; penalty
   Every person, firm, association, or corporation that shall directly or indirectly, individually or through an
agent or representative, give or promise to give to any school director, officer of any school board, superinten­
dent, teacher, or any other person, any sum of money or other valuable thing, or shall make any promise of any
lippointment or position, in order to secure, procure, or influence the recommendation, adoption, rejection, or
pUrchase of any books, school furniture, or supplies, by any superintendent, teacher, or school district in this
Commonwealth, shall be guilty of a misdemeanor, and on conviction thereof shall be sentenced to pay a fine of
Ilot less than five dollars ($5) or more than five hundred dollars ($500), or be sentenced to imprisonment in the
county jail for not less than thirty (30) days or more than one (1) year, either or both, at the discretion of the
~ourt.
HISTORY: 3-10-49, Act 14, Art VIII, § 809 (PL 30), eff. 7-1-49; 5-18-11, § 710 (PL 309)

24 PS 8-810 Seeking or receiving bribes; penalty
   Any school director, officer, superintendent, supervising principal, or teacher, who shall ask for or accept
money or other valuable thing for his vote, recommendation, or influence, in order to secure the recommenda­
tion, adoption, rejection, or purchase of any school books, school furniture, or other school supplies, from any
person, firm, association, or corporation, or any agent or representative thereof, either directly or indirectly,
shall be guilty of a misdemeanor, and on conviction thereof shall be sentenced to pay a fine of not less than five
dollars ($5) or more than five hundred dollars ($500), or to be sentenced to imprisonment in the county jail for
not less than thirty (30) days or more than one (1) year, either or both, at the discretipn of the court.
HISTORY: 3-10-49, Act 14, Art VIII, § 810 (PI, 30), eff. 7-1-49; 5-18-11, § 711 (PL 309)

                                           NOTES ON DECISIONS AND OPINIONS

  Com. v. Shipp, 30 Pa. D. & C.2d 368, 1963 WL 6250 (Pa.              charges solicitation of a bribe, which is also a common law
C.P. 1963). A transcript charging a defendant with having             offense, not supeTseded by any of the provisions of the Public
committed the crime of common law bribery by demanding                School Code of March 10, 1949, PL 30, and will not be
money of a person for a position as a school teacher really           dismissed.


                                     Article IX
           SCHOOL DIRECTORS' ASSOCIATIONS AND COUNTY BOARDS OF SCHOOL
                                    DIRECTORS         .
24 PS 9-901 to 9-908 Repealed
HISTORY: 1-14-70, Act 192, § 21 (PL 468 (1969)), eff. 7-1-70; 5-4-70, Act 103, § 1 (PL 326) amended effective date of Act 192
to 7-1-71; 7-5-57, Act 294, § 1 (PL 523); 5-24-56, Act 560, § 1 (PL 1665 (1955)); 3-29-56, Act 429, § 1 (PL 1356 (1955)); 2-14-56,
Act 330, § 1 (PL 1040 (1955)); 7-27-5.3, Act 177, § 1 (PL 619); 9-26-51, Act 364, § 1 (PL 1472); 8-10-51, Act 260, § 1 (PL 1159);
8-10-51, Act 257, § 1 (PL 1155); 5-2-49, Act 204, § 1 (PL 804); 3-10-49, Act 14, Art IX, § 901 to 908 (PL 30); 4-18-45, Act 118,
§ 1 (PI, 258); 6-20-39, § 3,4 (PL 491); 5-13-37, § 5,6 (PL 605); 3-31-21, Act 40, § 1 (PL 71); 5-18-11, § 801 to 809 (PL 309)

24 PS 9-921 to 9-930 Repealed
HISTORY: 1-14-70, Act 192, § 21 (PL 468 (1969)), eff. 7-1-70; 5-4-70, Act 103, § 1 (PL 326) amended effective date of Act 192
to 7-1-71; 6-18-68, Act 99, § 1 (PL 213); 5-14-68, Act 62, § 1 (PL 119); 12-22-65, Act 487, § 1 to 3 (PL 1209); 10-21-65, Act 312,
§ 17 to 19 (PL 601); 8-14-63, Act 463, § 1 (PL 1065); 7-31-63, Act 206, § 10 (PL 389); 10-2-61, Act 521, § 1 (PL 1159); 9-19-61,
Act 631, § 1 (PL 1485); 9-12-61, Act 559, § 1 (PL 1274); 7-25-61, Act 361, § 1 (PL 841); 12-21-59, Act 715, § 1 (PL 1961); 12-18-

                                                                                                                                309
                                                  Enclosure 

                                                PDE Comments

their respective districts, and furnish the same free of            textbooks regularly adopted, may be adopted and pur·
cost for use in the schools of the district, subject to             chased for use in the schools at any time. Such
such rules and regulations regarding the use and safe­              supplementary books shall be adopted in the same
keeping thereof as the board of school directors may                manner as textbooks are herein required to be
adopt. All furniture, equipment) books, school sup­                 adopted.
plies, and. other appliances purchased by the board of              HISTORY 1-14-70, Act 192, § 20 (PL 468 (1969)), eff.
school directors of any school district, for the use of             7-1-70; 5-4-70, Act 103, § 1 (PL 326) amended effective date
the public schools therein, shall be purchased in the               of Act 192 to 7-1-71, 3-10-49, Act 14, Art VlII, § 803 (PL
manner provided in this act.                                      30); 5-18-11, § 703 (PL 309)
3-10-49, Act 14, Art VlII, § BOl(PL 30), eff 7-k49,
5-18-11, § 701 (PL 309)                                           24 PS 8-804        Use of school books during vaca·
                                                                          tions
         NOTES ON DECISIONS AND OPINIONS                             The board of school directors in any district may
  74 D&C(2d) 779 (1975), Cameron v Fanell Area School             allow any pupil in .such district the use of school books
Dist. A board of school directors has the authority to require    during vacations, under such rules and regulations as
students in the district to use and pay for the use of bathinl!   it may adopt.
suits and towels provided by the di;trict for a required cours;
                                                                  HISTORY 3-10-.49, Act 14, Art VlIl, § 804 (PL 30), eff
in swimming, if the district also provides for waiver of the
                                                                  7-1-49; 5-18-11, § 704 (PL 309)
cost upon application by indigent pru:ents and students.                                                                           pr
  35 West 143 (1953), Mathias v School Ed of Borough of           24 PS 8-805 to 8-807         Repealed
                                                                                                                                   m
Trafford. Physical education is as much a part of the school                                                                       Pr
                                                                  HISTORY 7-31-68, Act 242, § 2 (PL 796), eff 7-1-69;              be
curriculum as are subjects of intellectual study, and athletic
                                                                  1-18-68, Act 429, § 2, 3 (PL 963 (1967)); 10-21-65, Act 314,
supplies, therefore, are as necessary for school use as maps,                                                                      ril
                                                                  § 1, 2 (PL 640); 9-19-61, Act 630, § 1 (PL 1484); 6-15-61,
globes, and similar objects.                                                                                                       or
                                                                  Act 210, § 1 (PL 423); 6-8-61, Act 162, § 1 (PL 277);
  374 F.8upp. 639 (1974), Meek v Pittenger; modified by 421       5-24-51, Act 89, § 2 (PL 397); 3-10-49, Act 14, Art VIII,
U.s.  349, 95 S.Ct. 1753, 44 L.Ed.2d 217 (1975) State pro·        § 805 to 807 (PL 30); 5-29-31, § 18 (PL 243); 5-4-27, Act        pl
gram of loaning· textbooks to nonpublic school students,          348, § 1 (PL 689); 5-18-l+, § 706 to 708 (PL 309)                pl
where loans were made on individual student basis and where                                                                        tf
                                                                     Note: See now Sec. 8-807.1
book!> loaned had to be approved for use in the public schools,
                                                                                                                                   U
did not have the effect of advancing religion or involving the
state in an impermissible entanglement with religion.
                                                                  24 PS 8-807.1       Purchase of supplies                          TO

                                                                     (a) All furniture, equipment, textbooks, school sup+           a
24 PS 8-8112        ]Repealed                                     plies and other appliances for the ·use of the public             d
                                                                  schools, costing ten thousand dollars ($10,000) or more           u
HISTORY 9-11-59, Act 346, § 1 (PL 869), eff. 9-11-59;
3-10-49, Act 14, Art VIII, § 802 (PL 30); 5-18-11, § 702 (PL      shall be purchased by the board of school directors
309)                                                              only after d-q.e advertisement as hereinafter provided.
                                                                  Supplies cQsting ten thousand dollars ($10,000) or
24 IP'S 8-8113 Time and manne.· of adopting and                   more shall be purchased by the board of school di­
       fUJ1'IOlisJhing textbooks amd supplementary                rectors only after public notice has been given by
       I~,",,,ik§                                                 advertisement once a week for tlrree (3) weeks in not
  All school textbooks, in school districts of the second,        less than two (2) newspapers of general circulation. In
third and fourth class, shall be adopted by the board of          any district where no newspaper is published, said
school directors at any regular meeting between the               notice may, in lieu of such publication, be posted in at
first day of April and the first day of August following.         least five (5) public places.
Such books, so adopted, shall be provided for the use of             (a. 1) Written or telephonic price quotations from at
the schools at the beginning of the school terms next             least three qualified and' responsible vendors shall be
following. If in said school districts there shall be a           requested by the board of school directors for all
district superintendent, such district superintendent             purchases of supplies that exceed four thousand dollars
shall report in which subjects new textbooks are need­            ($4,000) but are less than the amount requiring adver­
ed, and after consultation with the teachers under his            tisement and competitive bidding, or, in lieu of price
supervision) what textbooks should be adopted or                  quotations, a memorandum shall be kept on file show­
changed. No adoption or change of textbooks shall be              ing that fewer than three qualified vendors exist in the
made without his recommendation, except by a two­                 market area within which it is practicable to obtain
thirds vote of the board. Books, supplementary to                 quotations. A written record of telephonic price quo-

                                                              316
                                                        Enclosure 

                                                      PDE Comments

    Pt. 3                                            UTlLE 24--EDUCA'rWN

    tations shall be made and shall contain at least the               inviting competition and guarding against favoritism, impro­
    date of the quotation, the name of the vendor and the              vidence, extJ:avagance, fraud, and corruption in the awarding
    vendor's representative, the supplies which were the               of municipal contracts.
    subject of the quotation and the price of the supplies                87 Pa.Cmwlth. 374, 487 A.2d 103 (1985), Clemson Corp v
    Written price quotations, written records of telephonic            McKeesport Area School Dist. Competitive bid requirements
    price quotations and memoranda shall be retained for               of Sec. 807.1 create no cause of action for breach of contract
    a period of three years.                                           damages in lowest bidder; where analysis of coal after accep­
                                                                       t.ance of bid proved coal to be nonconforming~ no enforceable
        (b) The board of school directors shall accept the bid         contract had been formed.
     of the lowest responsible bidder, kind, quality, and
                                                                          71 D&C 409, 41 Luz L Reg Rep 157 (1950), Baum v
     material being equal, bnt shall have the right to reject
                                                                       Hanover Twp School Dist. Vi'here the athletic board consist·
     any and all bids, or select a single item from any bid.           ed of all the members of the school board and had full
     The board of school directors in any district may                 authority to contract for and purchase supplies for athletic
     authorize or appoint the secretary of the board or                equipment in amounts less than $300, and the f>chool bOUl'd at
     other" executive as purchasing agent for the district,            a later date took possession of all the athletic equipment
     y..'ith authority to purchase supplies c~sting less than          purchased and continued to use the same; the school board is
     t~n thousand dollars ($10,000).                                   liable on the quantum meruit basis for the contract price on
                                                                       the theory of ratification
             .(c)· The following shall be exempt from the above
           provisions: maps, music, globes, charts, educational           95 Pa.Cmwlth. 376, 505 A.2d 1071 (1986), J.P. Mascaro &
          "fIlms, filmf:1trips, prepared transparencies and slides,    Sons, Inc v Bristol Twp. The court held that Mascaro, a
                                                                       disappointed bidder, has no standing to assert violations of its
 . _. p~e.recorded magnetic tapes and disc recordings, text­           due process rights under either the fedeTal or state constitu·
", ,'-: ~ .·_b~oks, games, toys, prepared kits, flannel board mate­    tions as it had no legitimate claim of entitlement to the
                   flash cards, models, projectuals·and teacher dem­   township's contract.
                         devices necessary for school use.
                                                                          122 PW 157 (1974), Flinn v Sto-Rox School Dist In
                   board of school directors shall evade the           accepting bids submitted pursuant to this section, a board is
                    of this section as to advertising for bids or      not bound to award a contract to the lowest bidder but it may
    \ii:UfC.h..,ing materials piecemeal for the purpose of ob­         exercise its discretion in considering such other matters as
                         under ten thousand dollars ($10,000)          efficiency of the bidder and its ability to perform the Pal·ticu­
    'iUllO'i,traJ,sa.ctions which should, in the exercise of           lar service.
                                 and prudence, be conducted as
                          amlounting to more than ten thousand         24 PS 8-808       E.mploye of district as agent
                             This provision is intended to make          No person shaH act as agent for school books or
                                 of evading advertising require-       school supplies, in any district in' which he is engaged
               h,;' ~'''''"N a series of purchases or contracts        or employed as a superintendent, teacher, or elnploye
                      than the advertising requirement price, or       of the school district in any capacity, or in which he
                  . several simultaneous purchases or contracts        was thns employed during the preceding school year.
                          price! when in either case the transac­      HISTORY 3-10-49, Act 14, Art VIII, § 808 (PL 30), eff.
                        should have been made as one transac-          7-1-49; 5-18-11, § 709 (PL 309)

                         Act 38, § 2 (PL 164), eff. 7-3-90; 2-4-82,    24 PS 8--809      Giving or offering bribes; penalty
                    1);10-4-78, Act 236, § 2 (PL 1040); 2-25-72,
                                                                          Every person, firm, association, or corporation that
                   (PL 811;    7-31-68, Act 242, § 3 (PL 796);
                  14, Art VIII, § 807.1 (PL 30)                        shall directly or indirectly, individually or through an
                                                                       agent or representative, give or promise to give to any
                      ON DECISIONS AND OPINIONS                        school director, qfficer of any school board) supti!rinten­
                      (Pa.Cmwlth.2002), Committee to Keep Our          dent, teacher, or any other person, any sum of money
                     Public v. Schweiker. School reform commis­        or other valuable thing, or shall make any promise of
                     to suspend public bidding requirements, and       any appointment or position, in order to secure) pro~
                        this section requiring that school boards      cure, or" influence the recommendation, adoption, rejec­
                             of $10,000 or more of furniture, equip­   tion, or purchase of any books, school furniture) or
                       school supplies, and Qther supplies did not     supplies, by any superintendent, teacher) or school
                                                                       district in this Commonwealtb, shall be guilty of a
                       46, 491 A.2d 950 (1985), Berryhill v Dugan.     misdemeanor, and on conviction thereof shall be sen­
                      competitive bidding served the purposes of       tenced to pay a fine of not less than five dollars ($5) or

                                                                   317
                                                   Enclosure 

                                                 PDE Comments


24 PS 23·2302·A                                  PENN. SCHOOL CODE OF      1949                                          Pt. 3

ing the policy, the institution of higher education shall consider all of the following:
   (1) Requiring registration of on-campus credit card marketers.
  (2) Limiting credit card marketers to specific areas of the campus designated by the institution of higher
education.
  (3) Prohibiting credit card marketers from offering gifts to a student in exchange for completing a credit card
application unless the student has been provided credit card debt education literature, which includes, but is
not limited to, brochures of written or electronic information.
  (4) Providing, at least quarterly, credit card debt education literature with campus bookstore purchases.
  (5) Incorporating into orientation programming a credit card debt education presentation.
HISTORY; 7-15-04, Ad 82, § 3 (PL722), eff'. 9-13-04; 3-10-49, Act 14, Art XXIII-A, § 2302-A (PL 30), elT. 7-1-49

24 PS 23·2303-A Construction
  Nothing in this article shall be construed to impose civil or criminal liability on an institution of higher
education for any claim involving student credit card debt.
HISTORY: 7-15-04, Act 82, § 3 (PL722), eif. 9-13-04; 3-10-49, Act 14, Art XXIII-A, § 2303-A (PL 30), eif. 7-1-49

                                                Article XXIV
                                       AUDITING OF SCHOOL FINANCES

                    (a) GENERAL PROVISIONS,                          (d) SCHOOL DISTRICTS OF THE FOURTH CLASS

24 PS 24-2401           By whom audited.                         24 PS 24-2441         Time of audit; filing copies;
24 PS 24"2401.1         Controllers and auditors not to be                             publication.
                        otherwise employed by scbool districts   24 PS 24-2442         Notice of audit; districts not electing
                        or joint school boards.                                        auditors.
24 PS 24-2402           Statements of accounts, etc.             24 PS 24-2443         Compensation of auditors and certi­
24 PS 24-2403           Subpoenas; administering oaths;                                fied public accountants.
                        perjury.
                                                                    (e) APPEALS FROM AUDITS; DISTRICTS SECOND,
24 PS 24-2404           Disobedience to subpoena; contempt.                   THIRD AND FOURTH CLASS
24 PS 24-2405           Witness fees.
24 PS 24.2406           Audits; surcharges; examination of       24 PS 24-2451         Who may appeal; conditions.
                        official bonds.                          24 PS 24-2452         Accounts investigated de novo; burden
24   PS   24-2407       Notice of surcharges.                                          of proof; single proceeding.
24   PS   24-2408       Copies of reports,                       24 PS 24-2453         Procedure; jury trials; appeals to ap­
                                                                                       pellate courts.
24   PS   24-2409       Employment of attorneys.
                                                                 24 PS 24-2454         Judgment; enforcement; rights of
24   PS   24-2410       Investigation of financial records by                          taxpayers.
                        Superintendent of Public Instruction.
                                                                 24 PS 24-2455         Surcharges; judgments; enforcement.
      (b) SCHOOL DISTRICTS OF THE FIRST CLASS
                                                                     (D ACCOUNTS OF TEACHERS' INSTITUTES AND
24 PS 24-2421           Duties of controller.                             SCHOOL DIRECTORS' AS.SOCIATIONS

 (c) SCHOOL DISTRICTS OF THE SECOND AND THIRD                    24 PS 24-2461         Repealed.
                    CLASSES                                      24 PS 24-2462         School directors' association.

24 PS 24-2431           Time of audit; filing of copies.
24 PS 24-2432           Notice of audit.
24 PS 24-2433           Compensation of auditors.




726
                                             Enclosure 

                                           PDE Comments


Pt. 3                                            TITLE 24-EDUCATION                                 24 PS 24·2401

                                           (a)   GENERAL PROVISIONS

 24 PS 24-2401 By whom audited
    The finances of every school district and of every joint school board, in every department thereof, together
 with the accounts of all school treasurers, school depositories, teachers' retirement funds, teachers' institute
 f!1nds, directors' association funds, sinking funds, and other funds belonging to or controlled by the district,
 shall be properly audited as follows:
    (1) In all school districts of the first class, by the school controller.
    (2) In all school districts of the second, third and fourth class, except as hereinafter otherwise provided, by
 the controller or auditors of the city, borough, incorporated town, or township in which the whole or the greater
 or greatest portion of the area of the district is located.
    (3) When in any school district of the second class the annual expenditures, exclusive of moneys received
 from the sale of bonds, exceeds the sum of five hundred thousand dollars ($500,000), such district may employ a
 certified public accountant within sixty days from the close of the fiscal year.
    (4) Any school district of the second, third or fourth class and any joint school board may employ an indepen­
'dent auditor who shall be a certified public accountant or competent public accountant prior to the end of the
fiscal year, and when so employed, such independent auditor shall audit the finances of such school district or
 such joint school board for such fiscal year instead of the controller or auditors hereinbefore referred to, and
 shall have all the powers and duties of such auditors, except that the audits shall be made in accordance with
generally accepted auditing standards. The compensation of the independent auditor shall be fixed by the
employing board of directors and shall be paid from the funds of the school district or of the joint school board,
as the case may be.
    (5) In any school district constituted of two or more municipal divisions by reason of the creation of a new
city, borough or township, and the fact that such new city, borough or township, or a part of the original school
district remaining after its separation, would constitute a fourth class school district, and the creation of such
fourth class school district has not been approved, the auditors or the controllers of the cities, boroughs, towns,
or townships last created and which do not form a separate school district shall meet annually with the audi­
 tors of the school district and participate in the audit of the school accounts, and such auditors or controllers
shall have the same rights and powers as are conferred by this act upon the auditors of school accounts.
    (6) In all independent school districts, by the proper auditors, herein provided for school districts of the class
in which they belong, and where an independent school district of the fourth class is taken from two or more
school districts, its accounts shall be audited by the auditors of the school district in which its buildings are
located.
   (7) In union or merged school districts the court of common pleas of the county in which the district is lo­
cated, upon petition of the board of school directors of such union or merged school district, shall, as soon as
convenient after the creation of the district, appoint three persons to audit the financial accounts of the district.
The auditors so appointed shall, on the first day of July, at the time of organization, or within five days there­
after, and within thirty days, carefully audit and adjust the financial accounts of the school district for the pre­
ceding school year. At the first municipal election after a union or merged school district is created there shall
be elected three school auditors, one for a term of two years, one for a term of four years, and one for a term of
six years, and their successors thereafter shall be elected for terms of six years each. When a vacancy occurs in
the office of auditor in any union or merged school district by reason of death, resignation, removal from the
school district, or otherwise, the court of common pleas of the county in which the district is located, upon peti­
tion of the board of school directors of such union or merged school district, shall appoint a person to hold such
office for the unexpired term of the person whose place he is appointed to fill. The compensation of both the ap­
pointed and elected auditors shall be ten dollars ($10) per day for each day necessarily spent by each auditor.
The total expense of such auditing, including the cost of filing the report, advertising, and other necessary
costs, shall be paid by the union or merged school district.
   The board of school directors of any union or merged school district may employ a certified public accountant
to audit the finances of such school district for such fiscal year instead of the auditors, hereinabove referred to,
and such certified public accountant shall have all the powers and duties of said auditors and shall receive the
compensation fixed by the board of directors of the union or merged school district and shall be paid by the said
district.
   (8) In county vocational school districts, by the county auditors or county controller.
   (9) The financial accounts of each annual county or district teachers' institute shall be audited by three audi­
tors, two to be elected by the teachers' institute and one by the directors' association for a county institute, and

                                                                                                                  727
                                                Enclosure 

                                              PDE Comments


24 pS 24-2401                                   PENN. SCHOOL CODE OF           1949                                           Pt. 3

by the board of school directors for the district institute.
   (10) The financial accounts of the directors' association shall be audited by the county auditors or county
controller.
   (11) In all school districts established as a result of'the provisions of'the act of August 8, 1963 (P.L. 564), by
a certified public accountant, a firm of certified public accountants, a competent independent public accountant
or a firm of competent independent public accountants who shall be named prior to the end of the fiscal year
and shall have all the powers and duties of such other auditors hereinbefore provided, except that the audit
shall be made in accordance with generally accepted auditing standards. The compensation of the accountant
or firm of accountants shall be fixed by the employing board of school directors and shall be paid from the funds
of the school district.
   The aceount.ant or firm of accountants may be designated for a tel'ln of years, and, at the discretion of the
board, may be authorized to conduct a monthly audit of accounts.
HISTORY: 1-25-66, Act 546, § 2 (PL 1565 (1965)), eff. 1-25-66; 12-1-65, Act 361, § 1 (PL 980); 10-21-65, Act 312, § 49 (PL 601);
7-31-63, Act 206, § 14 (PL 389); 6-18-59, Act 100, § 2 (PL 472); 8-9-55, Act 121, § 1 (PL 310); 9-29-51, Act 426, § 1 (PI, 1634);
3-10-49, Act 14, Art XXIV, § 2401 (PI, 30); 5-23-45, Act 348, § 1 (PL 856); 5-21-43, Act 148, § 1 (PL 320); 7-24-41, Act 237, § 1
(PL 565); 6-24-39, Act 351, § 1 (PL 785); 6-1-33, Act 288, § 13, 14 (PI, 1152); 4-24-29, Act 271, § 1 (PI, 642); 4-30-25, Act 228,
§ 1 (PI, 382); 6-29-23, Act 378, § 1 (PI, 949); 3-23-23, Act 22, § 1 (PI, 31); 5-20-21, Act 369, § 1 (PI, 1023); 5-18-11, § 101, 132,
2601 to 2607 (PI, 309)
                                          NOTES ON DECISIONS AND OPINIONS
  Sutcavage v. W.-B. Bd. of Education, 60 Luz. L.R. 249 (Pa.        disclose the losses due to the defendant's actions.
C.P. 1970). A board of school directors cannot be compelled
by equity to commence legal proceedings against a contractor          Audit of Finances of School Dist. for Fiscal Year Ending
to correct alleged deficiencies in performance, nor has equity      July 3, 1960, of Carlisle Borough, 13 Cumbo L.J. 7 (Pa. C.P.
jurisdiction in a controversy between a taxpayer and the            1962). Where an audit previously filed fails to fix the entire
school directors where the taxpayer alleges that a painting         liability of the tax collector for the year, a supplemental
contract was not awarded to the appropriate bidder and the          report may be filed even though the time for appeal from the
contract was not performed properly. The court will not             original audit had expired.
substitute its judgment for that of the school directors, nor
will it rescind the acceptance of the work and take action            Frushon V. Pittston Tp. School Dist., 8 Pa. D. & C.2d 165,
against the contractor or its surety since the action of the        1957 WI, 6299 (Pa. C.P. 1957). Sec. 2401 et seq. provide an
school directors was not shown to have been arbitrary or            exclusive remedy to taxpayers seeking to surcharge school
capricious. Proper remedy exists under these sections if a          directors, and directors cannot be added as defendants in an
contract is based on an unlawful award,                             equity action against the school district which asks cancel1a~
  Halifax Area Joint School System v. Chaundy, 29 1'a. D. &         tion of a contract with a tax collector and repayment of
C.2d 729, 1962 WI, 9072 (Pa. C.P. 1962). Plaintiff school           moneys paid to him.
system may recover from defendant, the former secretary of            OAG No 164 (1958). The department of the auditor gen­
the joint school system, compensation for damages sustained         eral has the power and the duty to audit the accounts and
by her unlawful appropriation of certain school funds which         records of every school district within the Commonwealth;
include the cost of hiring the services of a firm of certified      the audit power Iuay be exercised as far as may be. necessary
public accountants since such expenditures were damages             to satisfy the auditor general that Commonwealth moneys
reasonably and probably flowing directly as a consequence of        have been or are being expended in accordance with law and
defendant's tort of fraud. Plaintiff was not precluded from         the purposes for which it was paid; the costs of instituting
seeking special accounting and auditing services merely             and conducting such an audit program may be charged to
because its annual audit was performed by the duly elected          the general fund appropriation made to the department of
township auditors, especially where the annual audit did not        the auditor general.

24 PS 24-2401.1 Controllers and auditors not to be otherwise employed by school districts or joint
                    school boards
   No elected county, city, borough, town 01' township controller or auditor, and no controller or auditor ap­
pointed to fill a vacancy in the office of county, city, borough, town or township controller or auditor for the
unexpired term of the previous controller or auditor, shall be employed in any other capacity by a school
district or joint school board if he audits any finances or any funds belonging to or controlled by the school
district or joint school board.
HISTORY: 7-25-63, Act 162, § 1 (PI, 307), eff. 7-25-63; 3-10-49, Act 14, Art XXIV, § 2401.1 (PI, 30)

24 PS 24-2402 Statements of accounts, etc.
   In order that the aforesaid accounts may be thoroughly and properly audited, it shall be the duty of all
boards of school directors and their proper officers, school depositories, district superintendents, treasurers of
directors' associations, treasurers of teachers' retirement funds, and other proper persons, to furnish to such

728
                                               Enclosure 

                                             PDE Comments


Pt. 3                                              TITLE 24-EDUCATION                                        24 PS 24·2406

auditors, whenever required by them for auditing purposes, statements and accounts of all finances of the
district, of teachers' institutes or directors' associations, and other funds belonging to or controlled by the
district, including assets and liabilities, together with access to all books, records, tax duplicates, vouchers,
school orders, payrolls, letters, and other matters pertaining to the same.
HISTORY: 1-14-70, Act 192, § 67 (PL 468 (1969», eff. 7-1-70; 5-4-70, Act 103, § 1 (PL 326) amended effective date of Act 192
to 7-1-71; 3-10-49, Act 14, Art XXIV, § 2402 (PL 30); 5-18-11, § 2608 (PL 309)

24 PS 24·2403 Subpoenas; administering oaths; perjury
   The several auditors herein provided shall have power, and are hereby authorized, to issue subpoenas to
compel the attendance of school officers or other persons whom they may deem necessary to examine as wit­
nesses, and to compel the production of all books, records, vouchers, letters, and papers relating to any ac­
counts being audited by them.
   The auditors shall have power to administer oaths or affirmations to all persons appearing before them as
witnesses, and any person guilty of testifying falsely in any such examination shall be guilty of perjury, and be
liable for and subject to all the penalties provided therefor.
HISTORY: 3-10-49, Act 14, Alt XXIV, § 2403 (PL 30), eff. 7-1-49; 5-18-11, § 2609,2610 (PL 309)
                                         NOTES ON DECISIONS AND OPINIONS
  Frushon v. Pittston Tp. School Dist., 8 Pa. D. & C.2d 165,       ant to its terms, the court granted leave to add the collector
1957 WL 6299 (Pa. C.P. 1957). In a taxpayer's suit in equity       as a defendant but did not permit the addition of the school
against a school district seeking cancellation of a contract for   directors since the Public School Code sets forth a complete
payment of commissions by the district to a collector of delin­    and adequate remedy against them.
quent taxes and the repayment of money paid to him pursu·

24 PS 24·2404 Disobedience to subpoena; contempt
   In case of disobedience to a subpoena to appear and testify, or to produce any papers, books, records, vouch­
ers, letters, or other written or printed matter, as required by the provisions of this act, the Superintendent of
Public Instruction, school controller, or auditors, as the case may be, may invoke the aid of the court of common
pleas of the county, within whose jurisdiction such hearing is held, or accounts are being audited, to compel
compliance with the same. Any such court, in case of contumacy or refusal to obey a subpoena, may issue its
orders to such person so refusing to appear and testify, or to produce books, papers, vouchers, or other written
or printed matter. Any failure to obey such order of court may be punished by the court as contempt thereof.
HISTORY: 3·10·49, Act 14, Art XXIV, § 2404 (PL 30), eff. 7-1-49; 5-18-11, § 2611 (PL 309)

24 PS 24·2405 Witness fees
   Every witness attending before any auditors in any school district shall receive, out of the funds of the
district, to be paid by a proper order drawn on the school treasurer, the same witness fees and mileage as a
witness is allowed in the court of common pleas of the county in which such district is located.
HISTORY: 3-10-49, Act 14, Art XXIV, § 2405 (PL 30), eff. 7-1-49; 5-18-11, § 2612 (PL 309)

24 PS 24·2406 Audits; surcharges; examination of official bonds
   The auditors herein provided to audit the finances of school districts of the second, third and fourth class,
shall carefully inspect every school order issued for the payment of money by the board of school directors, and
the accounts of each official or person whose accounts are to be audited in the district for which they are acting
as auditors during the period of time covered by their audit. Any school order issued in any other manner or for
any other purpose than herein authorized shall, if paid, be disallowed by the auditors, and charged against the
person or persons voting for or approving the same. All such orders disallowed shall be set forth in the report to
be made by the several auditors as herein provided, together with such other sum or sums as should be
properly charged against any person or persons. Such auditors shall also examine, and report to the proper
boards of school directors upon, the sufficiency and the security of the bonds of the officers, employes, and ap­
pointees of the boards of school directors and of the school depositories.
HISTORY: 3-10-49, Act 14, Art XXIV, § 2406 (PL 30), eff. 7-1-49; 5-18-11, § 2613 (PL 309)
                                         NOTES ON DECISIONS AND OPINIONS
  Audit of F,nances of School Dist. for Fiscal Year Ending         1962). Where an audit previously filed fails to fix the entire
JUly 3, 1960, of Carlisle Borough, 13 Cumbo L.J. 7 (Pa. C.P.

                                                                                                                             729
                                              Enclosure 

                                            PDE Comments


24 PS 24-2406                                PENN. SCHOOL CODE OF          1949                                         Pt. 3
liability of the tax collector for the year, a supplemental         Frushon v. Pittston Tp. School Dist., 8 Pa. D. & C.2d 165,
report may be filed even though the time for appeal from the     1957 WL 6299 (Pa. C.P. 1957). Sec. 24-2401 et seq. provide
original audit had expired.                                      art exclusive l'mnedy to taxpayers seeking to surcharge school
  Appeal from Controller's Report of Olyphant School Dist.,      directors, and directors cannot be added as defendants in an
61 Lack. JUl'. 197 (Pa. C.P. 1960). In the absence of fraud or   equity action against the school district which asks cancella­
collusion, school directors may be surcharged only where         tion of a contract with a tax collector and repayment of
there has been an expenditure in violation of the law and        moneys paid to him.
where the school district has suffered a financial loss.

24 PS 24-2407 Notice of surcharges
  In all school districts of the second, third, and fourth class, when any sum is charged against any person,
such person shall be notified by the auditors, at or before the time of filing their report, by mail or otherwise, of
such fact, setting forth the amount charged against him.
HISTORY: 3-10-49, Act 14, Art XXIV, § 2407 (PL 30), eff. 7-1-49; 5-18-11, § 2614 (PL 309)

24 PS 24-2408 Copies of reports
   In all school districts the auditors' report of the finances of the district for the preceding year, as made by the
auditors herein provided, shall be filed with the board of school directors, entered on the minutes of the board
by the secretary thereof and forwarded to the Superintendent of Public Instruction. A copy of such report shall
be filed with the intermediate unit board of directors.
HISTORY: 1-14-70, Act 192, § 67 (PL 468 (1969)), eff. 7-1-70; 5-4-70, Act 103, § 1 (PL 326) amended effective date of Act 192
to 7-1-71; 3-10-49, Act 14, Art XXIV, § 2408 (PL 30); 6-20-39, § 6 (PL 491); 5-13-37, § 10 (PL 605); 5-18-11, § 2615 (PL 309)

24 PS 24-2409 Employment of attorneys
  In all school districts where the accounts are audited by borough or township auditors, the auditors may
employ an attorney whenever the same is deemed advisable. The compensation of such attorney shall be fixed
by the auditors, and shall not exceed the sum payable to one auditor for the making of the annual audit, unless
additional compensation shall be specially allowed by a court of record in connection with any proceeding before
such court, and shall be payable by the school district out of the general fund of the district.
HISTORY: 3-10-49, Act 14, Art XXIV, § 2409 (PL 30), eff. 7-1-49; 7-1-37, Act 475, § 1 (PL 2546); 5-18-11, § 2616 (PL 309)

24 PS 24-2410 Investigation of financial records by Superintendent of Public Instruction
  The Superintendent of Public Instruction may investigate the financial records of any school district in
person or by his authorized representative.
   For the purpose of such investigation, the same duties are imposed upon all boards of school directors, their
members, their officers, agents and employes as are imposed by this act with respect to the audit of the ac­
counts of school districts and the officers thereof, and the same powers are conferred upon the Superintendent
of Public Instruction or his authorized representative as are conferred by this act upon school auditors in audit­
ing the finances of school districts.
HISTORY: 3-10-49, Act 14, A1-t XXIV, § 2410 (PL 30), eff. 7-1-49; 5-21-31, Act 130, § 19 (PL 243); 5-18-11, § 1019, 1020 (PL
309)

                                  (b) SCHOOL DISTRICTS OF THE FIRST CLASS

24 PS 24-2421 Duties of controller
   The school controller herein provided in each school district of the first class, shall properly audit the fi­
nances of the school district, including the accounts of the receiver of school taxes, school treasurer, or other
proper authority collecting school taxes, school depositories, and all other funds under the control of the board
of public education.
  The school controller shall, at the end of each school year, certify to the board of public education that he has
audited the several accounts above stated, and shall report to it the result of such audit.
HISTORY: 3-10-49, Act 14, Art XXIV, § 2421 (PL 30), eff. 1-1-50; 5-18-11, § 2617,2618 (PL 309)

                       (c) SCHOOL DISTRICTS OF THE SECOND AND THIRD CLASSES

24 PS 24-2431 Time of audit; filing of copies
  In every school district of the second and third classes, the proper auditors herein provided to audit the fi-

730
                                                  Enclosure 

                                                PDE Comments


Pt. 3                                                TITLE 24-EDUCATION                                           24 PS 24·2433

nances of the school district shall begin their duties on the first day of July each year, and promptly within
thirty days audit the accounts of the school district for which they were appointed, including the accounts of
the treasurer, the school depositories, and other school funds, for the preceding fiscal year, in the manner
herein provided. On the completion of the audit they shall make correct copies thereof, which shall contain an
itemized statement of all receipts, expenditures, and credits, whatsoever, of school officials, and the assets and
liabilities of the district. One copy shall be filed with the board of school directors of the district, one copy in the
court of common pleas of the county in which the district is located, and one copy with the intermediate unit
board of directors, one copy in the Department of Public. Instruction, by mailing the same sealed, stamped, and
addressed to the Superintendent of Public Instruction, Harrisburg, Pennsylvania, by registered mail with
return registry receipt requested.
HISTORY: 1-14-70, Act 192, § 68 (PL 468 (1969)), eff. 7-1-70; 5-4-70, Act 103, § 1 (PL 326) amended effective date of Act 192
to 7~1-71j 7-31-03, Act 206, § 15 (PL 389); 3-10-49, Act 14, Art XXIV, § 2431 (PL 30); 4-13-43, .LA...ct 21, § 1 (PL 39); 5-29-31, § 43
(PL 243); 4-5-27, § 3 (PL 111); 6-29-23, Act 378, § 3 (PL 949); 5-18-11, § 2620 (PL 309)

                                           NOTES ON DECISIONS AND OPINIONS
  Hare v. Olyphant School Dist., 82 Pa. D. & C. 88, 1952 WL          the preceding year. No remedy is affo~ded by the School Code
4501 (Pa. C.P. 1952). The audit of school district finances          to deal with alleged improprieties in the collection of levied
provided for in the School Code concems only the accounts of         taxes prior to the close of the fiscal year.

24 PS 24·2432 Notice of audit
   The auditors shall, within ten days after completing their report of audit, advertise a notice that the audit
report for the district has been filed and is available for public inspection at the business office of the district in
one newspaper of general circulation published or generally circulated in such district, once a week for three
successive weeks. Such notice shall call attention to the fact that the report was filed on a date therein stated,
and give notice that the same will be confirmed absolutely unless an appeal is taken therefrom within thirty
days after the filing thereof. Any auditor neglecting or refusing to comply with this section shall, upon convic­
tion thereof in a summary proceeding, be sentenced to pay a fine of not more than one hundred dollars ($100),
and, in default of the payment of such fine and costs, shall be sentenced to imprisonment for not mOI'e than ten
days.
HISTORY: 12-19-80, Act 237, § 4 (PL 1314), eff. 2-17-81; 5-2-49, Act 205, § 1 (PI, 805); 3-10-49, Act 14, Art XXIV, § 2432 (PL
30); 5-18-11, § 2621 (PI, 309)

                                           NOTES ON DECISIONS AND OPINIONS

  Hare v. Olyphant School Dist., 82 Pa. D. & C. 88, 1952 WI,         the preceding year. No remedy is afforded by the School Code
4501 (Pa. C.P. 1952). The audit of school district finances          to deal with alleged improprieties in the collection of levied
provided for in the School Code concerns only the accounts of        taxes prior to the close of the fiscal year.

24 PS 24·2433 Compensation of auditors
   (a)'In school districts of the second class, the compensation for auditors shall, together with suitable allow­
ances for qualified assistants and for other necessary expenses, be fixed by the board of school directors of the
district· on application from time to time made by the auditors, with itemized statements of services, assistants,
and other necessary expenses.
   (b) In school districts of the third class, the compensation for auditors shall be ten dollars ($10) per day for
each day necessarily spent by each auditor, except in the case of a certified public accountant employed to act
as auditor, in which event the compensation shall be fixed by the board of directors of the district.
   (c) In school districts of the second and third class, the compensation of any certified public accountant
employed to act as auditor shall be fixed by the directol's of such district and paid by the district.
   (d) In school districts of the second and third class, where the accounts are audited by the controller of the
municipality in which the whole or the greater or greatest portion of the area of each such district shall be lo­
cated, the compensation of the controller shall be fixed by the directors of such district and paid by said district.
   (e) The total expense of auditing, including the cost of filing the report, advertising, and other necessary
costs, shall be paid by the school district.
HISTORY: 8-9-55, Act 121, § 2 (PL 310), eff. 9-1-55; 4-26-49, Act 186, § 1 (PI, 760); 3-10-49, Act 14, Art XXIV, § 2433 (PL 30);
5-21-43, Act 163, § 1 (PL 351); 5-21-43, Act 148, § 1 (PI, 320); 5-4-27, Act 342, § 1 (PL 679); 4-30-25, Act 228, § 2 (PL 382);
6-29-23, Act 378, § 4 (PL 949); 6-17-15, Act 434, § 1 (PL 1019); 6-5-13, Act 293, § 2 (PL 439); 5-18-11, § 2623 (PL 309)

                                           NOTES ON DECISIONS AND OPINIONS

                                                                                                                                  731
                                                   Enclosure 

                                                 PDE Comments


24 PS 24-2433                                  PENN. SCHOOL CODE OF 1949                                                  Pt. 3

  Halifax Area Joint School System v. Chaundy, 29 Pa. D. &         reasonably and probably flowing directly as a-consequence of
C.2d 729, 1962 WL 9072 (Pa. C.P. 1962). Plaintiff school           defendant's tort of fraud. Plaintiff was not precluded from
system may recover from defendant, the former secretary of         seeking special accounting and auditing services merely
the joint school system, compensation for damages sustained        because its annual audit was performed by the duly elected
by her unlawful appropriation of certain school funds which        township auditors, especially where the annual audit did not
include the cost of hiring the services of a firm of certified
                                                                   disclose the losses due to the defendanfs actions.
public accountants since such expenditures wel'e damages

                                  (d) SCHOOL DISTRICTS OF THE FOURTH CLASS

24 PS 24-2441 Time of audit; filing copies; publication
   In every school district of the fourth class, the auditors shall meet annually with the board of school direc­
tors, on the first day of July, at the time of organization, or within five days thereafter, and within thilty days
carefully audit and adjust the financial accounts of the school district for the preceding school year: Provided,
That the meeting of the auditors with the board of school directors shall not be held on the Fourth of July. At
the completion of the audit, they shall make a careful statement, in duplicate, of the finances of the district for
the preceding year, setting forth the assets and liabilities, and an itemized statement of all receipts,
expenditures, and credits, whatsoever, of all school officials, and including therein any sums that have been
charged against any person or persons. One copy of such annual statement shall be filed by the auditors with
the secretary of the board of school directors and one in the court of common pleas of the county in which such
district or the greater or greatest part thereof in area shall be located. A notice that the audit report for the
district has been filed and is available for public inspection at the business office of the school district, shall be
published in a newspaper having general circulation in the district, once a week for three successive weeks,
beginning the first week after filing the same, or be promptly posted, by not less than six copies, in as many
places in the district. The auditors shall also file one copy of their report with the Superintendent of Public
Instruction.
HISTORY: 12-19-80, Act 237, § 5 (PL 1314), eff. 2-17-81; 1-14-70, Act 192, § 68 (PL 468 (1969»; 5-4-70, Act 103, § 1 (PL 326);
7-31-63, Act 206, § 15 (PL 389); 3-10-49, Act 14, Art XXIV, § 2441 (PL 30); 4-13-43, Act 21, § 2 (PL 39); 6-1-33, § 15 (PL 1152);
4-5-27, § 4 (PL 111); 5-18-11, § 2625 (PL 309)
                                          NOTES ON DECISIONS AND OPINIONS

  Frushon v. Pittston Tp. School Dist., 8 Pa. D. & C.2d 165,       ant to its terms, the court granted leave to add the collector
1957 WL 6299 (Pa. C.P. 1957). In a taxpayer's suit in equity       as a defendant but did not permit the addition of the school
against a school district seeking cancellation of a contract for   directors since the Public School Code sets forth a complete
payment of commissions by the district to a collector of delin­    and adequate remedy against them.
quent taxes and the repayment of money paid to him pursu-

24 PS 24-2442 Notice of audit; districts not electing auditors
   In school districts of the fourth class that do not elect auditors, the prothonotary of the court in which the
auditors' report is filed shall advertise a concise summary or statement thereof, including the assets and li­
abilities of the district, in one newspaper published or generally circulated in such district, once a week for
three successive weeks, beginning within a week after the filing of such report. Such notice shall call attention
to the fact that the report was filed on a date therein stated, and give notice that the same will be confirmed
absolutely unless an appeal is taken therefrom within thirty days after the filing thereof.                  .
HISTORY: 3-10-49, Act 14, Art XXIV, § 2442 (PL 30), eff. 7-1-49; 5-18-11, § 2621 (PL 309)

24 PS 24-2443 Compensation of auditors and certified public accountants
  The auditors herein required to audit the accounts of a school district of the fourth class shall be allowed for
their services ten dollars ($10) per day for each day necessarily spent by each of them in performance of his
duty, which, together with the cost of advertising their report, shall be paid by the school district. The
compensation of any certified public accountant employed by a school district of the fourth class to audit the fi­
nances of the school district shall be fixed by the directors of the district, and paid by the district.
HISTORY: 9-27-55, Act 176, § 1 (PL 653), eff. 9-27-55; 8-9-55, Act 121, § 2 (PL 310); 4-26-49, Act 186, § 1 (PL 760); 3-10-49,
Act 14, Art XXIV, § 2443 (PL 30); 5-1-23, Act 94, § 1 (PL 127); 5-18-11, § 2628 (PL 309)
                                         NOTES ON DECISIONS AND OPINIONS

  Halifax Area Joint School System v. Chaundy, 29 Pa. D. &         system may recover from defendant, -the former secretary of
C.2d 729, 1962 WL 9072 (Pa. C.P. 1962). Plaintiff school           the joint school system, compensation for damages sustained

732
                                              Enclosure 

                                            PDE Comments


Pt. 3                                              TITLE 24-EDUCATlON                                          24 PS 24·2451

by, her unlawful appropriation of certain school funds which       seeking special accounting and auditing services merely
include the cost of hiring the services of a firm of certified     because its annual audit was performed by the duly elected
public accountants since such expenditures were damages            township auditors, especially where the annual audit did not
reasonably and probably flowing directly as a consequence of       disclose the losses due to the defendant's actions.
defendant's tort of fraud. Plaintiff was not precluded from

              (e) APPEALS FROM AUDITS; DISTRICTS SECOND, THIRD AND FOURTH CLASS

24 PS 24-2451 Who may appeal; conditions
    The Commonwealth, the school district of the second, third or fourth class, or any taxpayer thereof on behalf
of said Commonwealth, district, or any person or persons against whom any sum has been charged in any
report filed by the auditors of such school district, may appeal from any auditors' report. Such appeal shall be
taken to the court of common pleas of the proper county by the Commonwealth within ninety (90) days after
said report is filed in the Department of Public Instruction, and by all other appellants within forty-five (45)
days after said report is filed in the court of common pleas. Any taxpayer taking or intervening in an appeal
shall file  in said court of common pleas a bond, with one or more sufficient sureties, conditioned that the party
appealing will prosecute said appeal with effect and that said party will indemnify and save harmless said
district from all costs that may accrue upon said appeal or by reason of such intervention subsequently thereto.
Wben any person or persons charged with any sum of money in any such report of auditors shall appeal there­
from, such person or persons shall file in said court a bond with one or more sufficient sureties conditioned to
prosecute the appeal with effect, and to pay all costs accruing thereupon if the final decision obtained shall not
be more favorable to him than the report appealed from.
HISTORY: 3-10-49, Act 14, Art XXIV,§ 2451 (PL 30), eff. 7-1-49; 5-27-37, Act 243, § 1, 2 (PL 908); 5-29-31, Act 130, § 44,45
(PL 243); 4-11-29, Act 210, § 10, 11 (PL 497); 5-21-13, Act 200, § 1, 3 (PL 288); 5-18-11, § 2622,2626 (PL 309)
   Note: Sections 2622 and 2626 of the Public School Code of 1911, from which this section and Sec. 2453 and 2454 were
drafted, were suspended by Rule 2350 of the Rules of Civil Procedure "in so far as it relates to intervention by a taxpayer in
an appeal from an auditors' report of any school district. . . but these rules shall not be deemed to suspend or affect the pro­
visions, of such section relating to the giving of a bond and the settlement of pending actions,"
   Bennett v. Mountain View School Bd., 693 A.2d 651 (Pa. Commw. Ct. 1997). Appeal from the yearly audit report is the
exclusive means of challenging the legality of school district expenditures, absent fraud, even where it is alleged that report
is erroneous, illegal, biased, or unfair.
   Bennett v. Mountain View School Bd., 693 A.2d 651 (Pa. Commw. Ct. 1997). Blanket allegations of fraud and claim that
auditors failed to recognize «hidden expenses" for baseball dugout construction project carried out by school personnel as
"maintenance project" could not bypass exclusive statutory remedy for challenging legality of school district expenditures, by
appeal from yearly audit, where project was conducted openly and expenditures for the project were accounted for on the
books with receipts, and were approved by formal votes of the school board.
                                         NOTES ON DECISIONS AND OPINIONS
   Rankin v. Chester Upland School Dist., 11 Pa. Commw.            the district's tax collector for alleged loss of interest upon
232, 312 A.2d 605 (1973). A1tbough this section provides for       sums collected but delayed in remittance to the district. The
a right of appeal from an audit, it does not provide a complete    tax collector filed a timely appeal and the district filed a mo­
and adequate remedy for an illegal expenditure offunds by a        tion to quash the appeal. The court held that hand need be
board of school directors, so that a court of equity may enjoin    filed only within a reasonable time and not within the time
any expenditure which is illegal under Sec. 610.                   required for filing the appeal. Motion to quash was denied.
   Yough Dist. Taxpayer's League v. Yough School Dist., 62            Appeal from Controller's Report of Olyphant School Dist.,
Pa. D.& C.2d 206, 1973. WL 15173 (Pa. C.P. 1973). The              61 Lack. JUl'. 197 (Pa. C.P. 1960). In the absence of fraud or
method to challenge an improper expenditure of funds by a          collusion, school directors may be surcharged only where
board of school directors is by appeal of the audit as provided    there has been an expenditure in violation of the law and
in this section.                                                   where the school district has suffered a financial loss.
  Appeal of Lefcourt, 49 Pa. D. & C.2d 176, 1970 WL 8776              Frushon v. Pittston Tp. School Dist., 8 Pa. D. & C.2d 165,
(Pa. C.P. 1970). Under Sec. 2451 where all that is required is     1957 WL 6299 (Pa. C.P. 1957). Sec. 2401 et seq. provide an
the filing of an appeal within the time limitation, the court      exclusive remedy to taxpayers seeking to surcharge school
acquires jurisdiction and, ahsent prejudice, the taking of         directors, and directors cannot be added as defendants in an
post-appeal procedural steps leading toward the perfection of      equity action against the school district which asks cancella­
the appeal must be accomplished merely within a reasonable         tion of a contract with a tax collector and repayment of
time. An appeal from a surcharge by a tax collector filed          moneys paid to him.
within the time limit will not be stricken by reason of the
failure to file a bond until five days after the period for tak­      Hare v. Olyphant School Dist., 82 Pa. D. & C. 88, 1952 WL
                                                                   4501 (Pa. C.P. 1952). The audit of school district finances
ing the appeal has expired.
                                                                   provided for in the School Code concerns only the accounts of
  In re Bristol Tp. School Dist. Audit Report, 19 Bucks 568        the preceding year. No remedy is afforded by the School Code
(Pa. C.P. 1970). The auditor for the school district surcharged    to deal with alleged improprieties in the collection of levied

                                                                                                                              733
                                                  Enclosure 

                                                PDE Comments


24 PS 24-2451                                  PENN. SCHOOL CODE OF          1949                                         Pt. 3
taxes prior to the close of the fiscal year.                      and collection of taxes must be uniform in accord with Const
                                                                  IV, § 1.
   Hare v. Olyphant School Dist., 82 Pa. D. & C. 88, 1952 WL
4501 (Pa. C.P. 1952). Where the law does not provide an ad­         Southern Fulton School Dist v McCray, 8 Adams LJ 42
equate remedy, equity will restrain the exoneration of taxes      (1966). Technical opinion on question of filing procedure
levied against' real estate owners. Such exonerations are ille·   before trial.
gal, void and contrary to law in that the assessment, levy

24 PS 24-2452 Accounts investigated de novo; burden of proof; single proceeding
   In any proceeding in the court of common pleas upon an appeal from a report of auditors of any school
district of the second, third or fourth class, the accounts of the officer or officers in question may be investigated
de novo, but the figures and facts found and stated by the audit.ors in their report of audit Rhall he taken as
prima facie correct as against any such officer, and the burden shall be upon each officer whose accounts are in
question of establishing the credits to which he shall be entitled.
   When more than one appeal from a report of auditors has been takE~n, whether by the Commonwealth, the
school district, an officer or officers thereof, or by a taxpayer, or any or all of them, the court of common pleas
shall, upon petition of any party interested, direct the several appeals to be disposed of in a single proceeding.
HISTORY: 3-10-49, Act 14, Art XXIV, § 2452 (PL 30), eff. 7-1-49; 5-13-15, Act 191, § 1, 2 (PL 311)

                                           NOTES ON DECISIONS AND OPINIONS

  Appeal of Auditors' Report, Aliquippa School Dist., 27          4501 (Pa. C.P. 1952). The audit of school district finances
Beaver 22 (Pa. C.P. 1965). The Pennsylvania rules of civil        provided for in the School Code concerns only the accounts of
procedure are not applicable to an appeal from auditors'          the preceding year. No remedy is afforded by the School Code
reports; and hence preliminary objections to an appeal must       to deal with alleged improprieties in the collection of levied
be overruled.                                                     taxes prior to the close of the fiscal year.
   Frushon v. Pittston 'l'p. School Dist., 8 Pa. D. & C.2d 165,      Hare v. Olyphant School Dist., 82 Pa. D. & C. 88, 1952 WL
1957 WL 6299 (Pa. C.P. 1957). Sec. 2401 et seq. provide an        4501 (Pa. C.P. 1952). Where the law does not provide an ad­
exclusive remedy to taxpayers seeking to surcharge school         equate remedy, equity will restrain the exoneration of taxes
directors, and directors cannot be added as defendants in an      levied against real estate owners. Such exonerations are ille­
equity action against the school district which asks cancella­
                                                                  gal, void and contrary to law in that the assessment, levy
tion of a contract with a tax collector and repayment of
                                                                  and collection of taxes must be uniform in accord with Canst
moneys paid to him.
                                                                  IV, § 1.
  Hare v. Olyphant School Dist., 82 Pa. D. & C. 88, 1952 WL

24 PS 24-2453 Procedure; jury trials; appeals to appellate courts
    When any appeal is taken, the appeal may be placed upon the argument list by direction of any party
interested by intervention or otherwise. Depositions of witnesses, and other evidence to be used at the argu­
ment, may be taken on behalf of any party, before any person competent to administer an oath, upon rule for
that purpose, served upon the opposite party or such party's counsel. After hearing argument the court shall
file its finding of fact and conclusions of law, and enter judgment in accordance therewith. If, after argument,
the court shall deem any question or questions of fa.ct so doubtful, under the evidence submitted, as to render it
desirable that an issue be directed as to such question or questions to be tried by a jury, the court may direct
such an issue.
HISTORY: 6-3-71, Act 6, § 1 (§ 509(a)(141)) (PL' 142), eff. 9-11-70; 3-10-49, Act 14, Art XXIV, § 2453 (PL 30); 5-27-37, Act 243,
§ 1, 2 (PL 908); 5-29-31, Act 130, § 44, 45 (PL 243); 4-11-29, Act 210, § 9, 10 (PL 497); 5-21-13, Act 200, § 1, 3 (PL 288);
5-18-11, § 2622,2626 (PL 309)
   Note: The last sentence of this section was repealed by the Appellate Court Jurisdiction Act of 1970 in accordance with the
section added by 1971 Act 6, § 1 (PL 142), eff. 9-11-70. It was also repealed by 1973 Act 152, (PL 433).
   Note: See suspension by Rules of Civil Procedure note under Sec. 2451.

24 PS 24-2454 Judgment; enforcement; rights of taxpayers
   If any sum shall be found by the court to be chargeable to any person whose accounts are involved in any
appeal, the prothonotary shall enter judgment for said sum in favor of the district, and against the person
charged. The Commonwealth, school district, or appealing or intervening taxpayer, may cause said judgment to
be collected from the person charged or his sureties, for the benefit of said district, by any appropriate method,
executionary or otherwise. Any such taxpayer may defend the district, in any appeal taken by any person
charged by the report of auditors, as fully and effectively in both instances as the officers of the district might
do. When any taxpayer has intervened, or when an appeal has been taken by any taxpayer, the officers of the
school district shall not make settlement with any person or persons charged with any sum or sums, or whose

734
                                                Enclosure 

                                              PDE Comments


Pt. 3                                             TITLE 24-EDUCATION                                        24 PS 24·2462

accounts shall be involved in any appeal, without the consent of such taxpayer.
HISTORY: 3-10-49, Act 14, Art XXIV, § 2454 (PL 30), eff. 7-1-49; 5-27-37, Act 243, § 1, 2 (PL 908); 5-29-31, Act 130, § 44, 45
(PL 243); 4-11-29, Act 210, § 9,10 (PL 497); 5-21-13, Act 200, § 1,3 (PL 288); 5-18-11, § 2622,2626 (PL 309)
  Note: See suspension by Rules of Civil Procedure note under Sec. 2451.

                                          NOTES ON DECISIONS AND OPINIONS

  Hare v. Olyphant School Dist., 82 Pa. D. & C. 88, 1952 WL      4501 (Pa. C.P. 1952). Where the law does not provide an ad­
4501 (Pa. C.P. 1952). The audit of school district finances      equate remedy, equity will restrain the exoneration of taxes
provided for in the School Code concerns only the accounts of    levied against real estate owners. Such exonerations are ille~
the preceding year. No remedy is afforded by the School Code     gal, void and contrary to law in that the assessment, levy
to deal with alleged improprieties in the collection of levied   and collection of taxes must be uniform in accord with Canst
taxes prior to tl1e close of the fi!:ical year.                  N, § 1.
  Hare v. Olyphant School Dist., 82 Pa. D. & C. 88, 1952 WL

24 PS 24-2455 Surcharges; judgments; enforcement
   If in any report filed by the auditors of any school district of the second, third or fourth class, there has been
any sum charged against any person or persons, the amount charged against such person or persons shall, in
     absence of an appeal by such person or persons within the time prescribed by this act, become a judgment,
       shall be entered by the prothonotary in favor of the school district against the person or persons charged
" " " tW'"H. Such judgment shall be collected from such person or persons or his or their sureties by the school

           for its use and benefit. Any taxpayer of such district may, on its behalf, proceed to enfol'ce collection of
        judgment for the school district, by any appropriate proceeding, executionary or otherwise, upon filing
         with sufficient surety or sureties, conditioned to indemnify and save harmless the school district from any
        accruing by reason of such proceeding.
""O~"D'J . 3-10-49, Act 14, Art XXN, § 2455 (PL 30), eff. 7-1-49; 5-21-13, Act 200, § 2,4 (PL 288); 5-18-11, § 2624,2627 (PL



                                          NOTES ON DECISIONS AND OPINIONS

  Hare v. Olyphant School Dist., 82 Pa. D. & C. 88, 1952 WL      4501 (Pa. C.P. 1952). Where the law does not provide an ad­
     (Pa. C.P. 1952). The audit of school district finances      equate relnedy, equity will restrain the exoneration of taxes
         for in the School Code concerns only the accounts of    levied against real estate owners. Such exonerations are ilIe·
          . year. No remedy is afforded by the School Code       gal, void and contrary to law in that the assessment, levy
        with alleged improprieties in the collection of levied   and collection of taxes must be uniform in accord with Const
     prior to the close of the fiscal year.                      IV, § 1.
  Hare v. Olyphant School Dist., 82 Pa. D. & C. 88, 1952 WL

         CD ACCOUNTS OF TEACHERS' INSTITUTES AND SCHOOL DIRECTORS' ASSOCIATIONS
   PS 24·2461 Repealed
           1-14-70, Act 192, § 69 (PL 468 (1969)), eff. 7-1-70; 5-4-70, Act 103, § 1 (PL 326) amended effective date of Act 192
    1-71; 3-10-49, Act 14, Art XXIV, § 2461 (PL 30); 5-18-11, § 2629 (PL 309)



        account of the treasurer of a school director association within an intermediate unit shall be properly
         annually by a certified public accountant, and filed with the association .
          . 1-14-70, Act 192, § 70 (PL 468 (1969)), eff. 7-1-70; 5-4-70, Act 103, § 1 (PL 326) amended effective date of Act 192
          3-10-49, Act 14, Art XXIV, § 2462 (PL 30); 5-18-11, § 2630 (PL 309)                                          .

                                            Article XXV
                                   BY COMMONWEALTH AND BETWEEN SCHOOL DISTRICTS

                     (a) DEFINITIONS                                                  (b) INSTRUCTION
                       Definitions.                              24 PS 25-2502          Payments on account of instruction.
                                                                 24 PS 25-2502.1        Repealed.


                                                                                                                           735
                            Enclosure 

                          PDE Comments


                  Response - USDE OIG Preliminary Report




                                  Attachment 3




                                  OVERVIEW

PDE System for the Programmatic and Fiscal Management and Administration of State
               and Federal Special Education Programs and Funding
                                Enclosure 

                              PDE Comments



 PDE System for the Programmatic and Fiscal Management and Administration of
          State and Federal Special Education Programs and Funding

                                        OVERVIEW

Over the course of at least the past twenty-five years and consistently since 1993, PDE has
established a bifurcated system for the programmatic and fiscal management and administration
of state and federal special education programs and funding. The Bureau of Special Education
(BSE) is the lead partner regarding the development of program and fiscal policy to ensure
adherence with federal program requirements. To this end, BSE exercises educational;
procedural; and fiscal program oversight through the establishment and administration of
program and fiscal policy.

BSE works in concert with PDE's Bureau of Budget and Fiscal Management -- Fiscal
Management Division (FMD) and the two entities provide a coordinated, comprehensive system
of program and fiscal management processes supporting the federal Individuals with Disabilities
Part B, Grants to States Program (IDEA-B §611). While BSE remains the principal entity
responsible for IDEA-B general program supervision, including the IDEA-B fiscal program,
day-to-day fiscal program administration and management is delegated to FMD.

PDE has established extensive procedures determined as necessary for reviewing and approving
IDEA-B §611 applications for subgrants and amendments to those applications, for providing
technical assistance, for evaluating projects, and for performing other administrative
responsibilities.

Each of PDE's IDEA-B §611 local education agency subgrantees (LEA) submits eligibility and
separate annual funding applications as required by Statute. BSE is responsible for reviewing
and approving these LEA applications. The Funding Application includes detailed narrative and
budgetary information describing general compliance with IDEA-B §611 program requirements
and proposed use and distribution ofIDEA-B §611 funds.

All LEA IDEA-B §611 budgets and expenditure reports must conform to pre established
reporting parameters and criteria. Detailed guidance is provided to LEAs regarding proper
budget/expenditure report preparation. Each LEA IDEA-B§611 funding application, budget
revision (as applicable) and final expenditure report includes detailed budgetary information
regarding proposed (Application) and actual (Expenditure Report) use ofIDEA-B §611 funds.
IDEA-B §611 budgets and expenditure reports are reviewed to ensure that expenditures are
appropriate; adhere to program requirements and guidelines; are supported; and properly coded
by Expenditure Function and Object/Sub object

Additionally each LEA also submits to BSE a separate annual Special Education Plan that
provides descriptive information regarding specific services and programs to be
operated/provided during the upcoming school year. The Plan separates activities between state
funded and IDEA-B §611 funded activities. Each LEA's Funding Application data must
correlate to its Plan's IDEA-B §611 Section data in order to be approved for funding.

Although BSE conducts formal on-site monitorings on a six year cycle, LEA IDEA-B §611
program and fiscal operations are reviewed on an on-going annual basis through current existing
review cycles and procedures. PDE special education program and fiscal staff provide follow-
                                 Enclosure 

                               PDE Comments



up and technical assistance to LEAs on an ongoing basis through regular meetings - usually
each month during the school term -- andlor on an as needed basis throughout the program year.

BSE does not have separate procedures to ensure that its LEAs have an accounting system
because each of Pennsylvania's LEAs is required to adhere to the principles and accounting
structures contained in the Manual of Accounting and Financial Reporting for Pennsylvania
Public Schools. This Manual provides for a uniform and standardized system of financial
management and reporting for all Pennsylvania public schools and ensures comparability in
subsidy distribution and annual financial reporting among all public schools. The key features
of the Pennsylvania School Accounting System provide for a standard account code structure
that allows for the accumulation of program costs at the level of detail the school administration
chooses, as well as provides for financial reporting in conformance with Generally Accepted
Accounting and Financial Reporting Principles for all state and local goverrnnents, including
public school systems. The account code structure in this Manual is modeled after the Federal
Accounting Handbook II, as revised, and promulgated by the National Center for Education
Statistics, U.S. Department of Education.
                        Enclosure 

                      PDE Comments


              Response - USDE OIG Preliminary Report




                              Attachment 4




Policy to Disclose ARRA Data Deficiencies to the US Department of Education
                                    Enclosure 

                                  PDE Comments


       Policy to Disclose ARRA Data Deficiencies to the US Department of Education


POLICY: ARRA Data Deficiency Disclosure

DATE: January 26, 2010

PURPOSE: To ensure compliance of Pennsylvania recipients, sub recipients and vendors of
ARRA education funds with Section 1512 of the American Recovery and Reinvestment Act of
2009 (ARRA); Office of Management and Budget (OMB) guidance regarding Recipient
Reporting Requirements; and the lJnited States Department of Education (lJSDE) guidance
regarding Recipient Reporting Requirements.

STATEMENT: Section 1512 of the American Recovery and Reinvestment Act of 2009
(ARRA) requires quarterly reports be submitted on the use of funds by all ARRA recipients and
sub recipients to the federal government.

In Pennsylvania, the process of 1512 reporting is being overseen by the Pennsylvania Governor's
Office of Administration (OA) and the Office of the Budget in the Pennsylvania Office of the
Governor. The OA has charged each state agency with the responsibility of collecting all data
required under Section 1512 of ARRA and submitting this to the OA for submission to the
federal Office of Management and Budget.

The Pennsylvania Department of Education is responsible for facilitating the collection of data
required under Section 1512 of ARRA from within the PDE and from any sub recipients and
vendors of ARRA awards overseen by the PDE.

Section IX of the US Department of Education clarifying guidance, entitled "U.S. Department of
Education Clarifying Guidance on American Recovery and Reinvestment Act of 2009 Section
1512 Quarterly Reporting," revised on October 5, 2009, states that:

           If the prime recipient identifies material omissions or significant reporting
           errors in its reports (or that of its sub recipients), take action to correct the
           deficiencies. If the report cannot be corrected or if a known deficiency
           cannot be remedied, contact the Department of Education to advise it of the
           deficiencies and the actions being taken to correct the deficiency.

Thus, since the Commonwealth of Pennsylvania and the PDE are considered the recipients of
several ARRA education awards, any "material omissions or significant reporting errors" in the
1512 reports identifi ed at the recipient level will be communi cated to the appropriate cont.act at
the SDE.

Likewise, any sub recipient or vendor of RR education awards in Pennsylvania Illllst contact
the appropriate contact at the PDE if any " materi al omi ss ions of signific<Ult reporting errors" are
identified. TIle PDE will then eva luate these reporting deficiencies and conlllllnicate them to the
  SDE if warranted. Corrections or questions should be directed to ra-stimulus-pde@state.pa.us.