Audits Involving City Schools Make for Good Political Theater

by Christopher Paslay

How many audits does it take to get to the center of a Tootsie Pop?  Or in the case of the Philadelphia School District, the center of a political and financial train wreck?  It seems the number just keeps getting bigger. 

Conducting audits on school district officials, and those associated with the district, is quite the new fad for local politicians (I think it is actually trending on Twitter as I write this).  It’s not hard to understand the recent appeal of conducting an audit, especially when you say the word “audit” out loud:  Audit

You have to admit, it sounds so powerful.  So intimidating

The word “audit” can be used two ways, as a verb and as a noun.  Here’s a verb form: The climate was right for the state senator to score some political points with voters, so he decided to “audit” the school district.  Here’s a noun form:  The mayor owed a favor to the school district official, so he used his clout to call off the “audit”.    

Sometimes I wonder how Don Corleone in “The Godfather” would have used the word audit.  I picture him saying something like this: (talking to Sonny):  Never tell anybody outside the family what you’re thinking again.  Not unless you want to get audited.       

Here’s how I picture Don Corleone talking to Bonasera: Some day, and that day may never come, I will call upon you to do a service for me.  I will ask you to make an audit disappear.                

This is how Johnny Depp’s character would use audit in the film “Donny Brasco”:  You think you’re gonna run an audit on me?  Forgetaboutit!   

Imagine if Samuel Taylor Coleridge rewrote his classic poem “The Rime of the Ancient Mariner” around our local politicians’ obsession with conducting audits that seem to go absolutely nowhere:  Audits, audits, everywhere, nor any drop to drink . . .

The recent audit mania that has befallen our city’s public schools is quite curious.  It’s not that the district doesn’t deserve to be investigated; it’s just that these recent audits and “investigations” have thus far amounted to nothing more than political theater.      

Take the much publicized IRS audit of the district’s finances last spring for example.  In May, the Philadelphia Inquirer reported that the IRS was investigating the district and had “28 specific areas of inquiry” and sought “information on reimbursements for travel and meals, the use of district automobiles and credit cards, and ‘checking account data for payments that are processed outside the district’s general fund.’” 

Four months later, what has the IRS audit has amounted to? 

Diddly squat.

In April, when conflict of interest allegations between School Reform Commission Chairman Robert L. Archie Jr. and State Rep. Dwight Evans grew too intense (when Archie had a closed-door meeting with Evans which resulted in Foundations Inc. being offered a contract to take over the failing MLK High School), Mayor Nutter ordered a probe into the situation.  He directed Joan Markman, the city’s chief integrity officer, to conduct an investigation to see if there was any hanky-panky going on.  What has this amounted to so far? 

Nada.   

The best is when school district officials conduct audits on themselves.  Last year, it was reported that the Philadelphia School District abruptly and without reason took a lucrative security contract away from Security and Data Technologies Inc., a Caucasian-owned firm, and gave it to IBS Communications, a minority-owned firm.  It was the second time the district improperly steered work to IBS.  The first time, it ended up paying 12 times the $1,000 estimate offered by a competing firm.  When Ackerman was accused by public officials of breaking the law over the security contracts, she spent over $173,000 of district money to conduct an “internal investigation.”  Guess what the conclusion was?

All clear in here.   

It would be nice if government leaders could finish one audit before starting another one.  Or before starting a dozen other ones.

Here are just a few of the more noteworthy audits/investigations local leaders have recently called for:

Pa. Auditor General Jack Wagner is currently investigating the identities of the anonymous donors who funneled $405,000 through the 501(c)3 charity Children First Fund to buy out Arlene Ackerman’s contract (a charity with an eight-member board that once included Ackerman, SRC Chairman Robert L. Archie Jr., and now-interim Superintendent Leroy Nunery II).           

City Councilman Bill Green has also requested that Jack Wagner investigate whether three members of Ackerman’s staff helped organize protest rallies in her favor while on the clock at work.

Then there’s the review being conducted by the Philadelphia School District’s legal office to see whether the critical comments Arlene Ackerman made about district officials violates her buy-out contract and will void her $905,000 severance package.   

Whether any of these audits/investigations amounts to anything remains to be seen. 

But one thing’s for certain: They sure do make for good political theater.

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District Refuses to Own Up to $630 Million Deficit

In a recent Inquirer commentary, CFO Michael Masch cherry-picks financial data to blame the District’s $630 million deficit on a lack of funding.   

by Christopher Paslay

On June 6th, concerned about the Philadelphia School District’s $630 million budget deficit, I published a commentary in the Inquirer headlined, “District spent its way into massive shortfall.”  In it I commented that the District had only itself to blame for its current financial mess—that officials spent freely on questionable initiatives, banking on temporary federal stimulus money as if it were permanent and ignoring their own five-year financial plan.

Coincidently, on the same morning that my commentary ran in the Inquirer, Phil Goldsmith, who served as interim CEO of the Philadelphia School District in 2000-01, wrote a piece in the Daily News headlined, “If it’s really about the kids, then we need some controls.”  Here, Goldsmith brought-up some of the same points I’d made about the District’s financial woes—that they stemmed more from mismanagement than from cuts in funding; Goldsmith took the argument a step further and called on city leaders (which he insisted had “misdiagnosed” the problem) to make the school budget more transparent and to hold District leaders accountable.

The articles by Goldsmith and myself did not fall on deaf ears.  On June 6th, the very morning our pieces ran, Bill Green, Philadelphia City Councilman-At-Large, wrote a letter to Mayor Michael Nutter asking him for more financial oversight and accountability from the Philadelphia School District.  In it Green wrote:

“The crisis at the School District is not over, but it is a crisis stemming more from a lack of meaningful oversight and good stewardship than from a lack of funding. I refer you to the excellent pieces in the Daily News and Inquirer today by Phil Goldsmith and Christopher Paslay, respectively, which define the issues and problem well. . . .”     

On June 28, Michael Masch, CFO of the Philadelphia School District, publically responded to the growing criticism over the handling of District finances in a commentary in the Philadelphia Inquirer headlined, “Philly School District’s spending under control.”  In it he insisted the District’s budget shortfall is not the result of mismanagement, or bad bookkeeping, or reckless spending.  It is simply the result of a lack of funding.   

“The district’s problem is not spending,” Masch writes in the article.  “It is funding.”

With all due respect to Masch and his recent efforts to raise money and balance the budget, his claim that the District doesn’t have a spending problem is a clear case of denial; it is a total lack of accountability.  He blames the District shortfall on funding cuts, and writes that they are “unprecedented and disproportionate.” 

The concerning part, however, isn’t that he and the District are trying to shuck all responsibility for the $630 million budget deficit, a shortfall that has adversely affected nearly everyone in the city—taxpayers, teachers, parents, children, and unions, to name a few.  The alarming part is that the numbers Masch uses in his Inquirer commentary to explain away all responsibility for the budget shortfall are cherry-picked and taken out of context.

According to the District’s Third Quarter Financial Report, dated April 13, 2011, eight percent of the District’s funding for the 2010-11 school year was federal stimulus, which totaled $258 million.  In the 2009-10 school year, the District received $227 million in stimulus money.  Yet Masch writes in his article:

“State and federal funding for the district is going down next year—for the first time ever, and by an enormous amount—more than $400 million, a 15 percent drop. And this is not due solely or primarily to the district’s loss of federal stimulus funds. The district received an average of $113 million in annual stimulus funds in 2010 and in 2011, but it is losing more than $400 million in total funding next year.”

It appears Masch is getting the number $113 million from “Directly Allocated Federal Stimulus Funds.”  What he fails to mention, however, is that in the school years 2009-10 and 2010-11, the District also received “State Allocated Federal Stimulus Funds,” which brought in an additional $130 million per year.   

Masch also writes in his piece, “The district’s annual operating budget spending grew by just 4 percent in the past three years.”    

He is again playing with words.  Although the District’s “Operating Funds,” which only include “Local Taxes,” “City Grant,” ‘Local Non-Taxes” and “State Funds,” may have only increased 4 percent in three years, the District’s total budget grew from $2.79 billion in 2008-09 to $3.12 billion in 2010-11.  I’m no accountant or mathematician, but 4 percent of $2.79 billion is $111 million.  And from 2008 to 2011, District spending increased over $300 million; interestingly, the student population in the District went down 7,000 students during this time.         

I’m not the only one who finds Masch’s representation of data a bit troublesome.  The City Controller’s Office has also expressed serious concerns about how the School District handles tax dollars, and has recommended that they be required to present a five-year financial plan to an independent accounting authority because of “material weaknesses” found in its financial statements.

If the entire city of Philadelphia is being asked to make sacrifices to help balance the School District budget, if kindergarten and transportation are going to be cut, if unions are going to make $75 million in concessions, if property taxes are going to go up nearly $100 a year and 1,200 schoolteachers are going to lose their jobs, than there must be some real accountability. 

How can Mayor Nutter and the SRC ask so many people to give so much money to District officials who take no responsibility and who spin their financial information?        

This is a question that state and local leaders must start asking themselves.

Are School District Leaders Protected by Powers in Washington?

by Christopher Paslay

“The school superintendent, Arlene Ackerman, is here and doing a great job.”

            –President Barack Obama’s remarks from his speech at Julia R. Masterman High School, Philadelphia, PA, September 14, 2010. 

There is one thing noteworthy about the way administrators have run the Philadelphia School District over the past three years: their education agenda and initiatives are right from President Obama’s playbook in Washington. 

Early in 2009, when the President chose former Chicago schools superintendent Arne Duncan as his Education Secretary, there emerged a new plan for public education in America.  Known as the “National Reform Model,” Obama and Duncan set in motion a movement that has radically changed traditional public schools as we know them (tragically, as test scores and graduation rates continue to show, not for the better).

There are four school intervention models included in Obama’s national reform plan.  They are titled “Turnaround,” “Restart,” “School Closure,” and “Transformation.”

As explained by PSEA.org:

“The Turnaround model requires schools to implement nine broad strategies, including replacement of the principals, high-quality professional development, adoption of new governance, and replacement of at least 50 percent of staff.

The Transformation model includes a new evaluation system for teachers and principals, high-quality professional development and design and development of curriculum with teacher and principal involvement.

The Restart model enables a district to re-open a school as a charter school or elect to have an education management organization run the school.

School Closure enables districts to transfer students to other, higher-achieving schools within the district’s boundaries, within a reasonable proximity.”

Do these reform plans sound a lot like those interventions contained in Dr. Ackerman’s Imagine 2014?  The Philadelphia Inquirer thinks they do.  In an editorial published in September of 2010, the newspaper wrote, “much of [Dr. Ackerman’s] five-year strategic plan almost mirrors Obama’s proposals.”   

In some places the Ackerman and Obama agenda are indeed identical.  In fact, in 2010, in order to receive stimulus money from the federal government’s SIG program (School Improvement Grant), the Philadelphia School District literally had to sign an agreement with the government stating that they agreed to commit to the four intervention models.       

And sign they did.  The District sold its soul to Washington and dove headfirst into a reform plan that took control away from the citizens of Philadelphia and placed it—along with millions of tax dollars—in the hands of charter schools and education management organizations and all manner of untested, experimental reform programs.   

The fact that District officials so eagerly embraced the National Reform Model and are pushing an agenda direct from Washington might explain why they are able to get away with so many missteps (think past the current $629 million deficit to the 2010 controversy over security contracts and even past that to the 2009 debacle with Asian students at South Philly High School), any of which would have normally cost a top administrator his or her job.     

In 2007, when former Philadelphia School District Superintendent Paul Vallas discovered a “surprise” $73 million deficit, he resigned.  Granted, he had another job waiting for him in New Orleans, but there was real pressure coming from Mayor Street to hold him accountable.  Likewise, there was pressure to hold James Nevels, the Chairman of the School Reform Commission, accountable; Nevels also resigned and was replaced with new leadership. 

It seems clear, however, that current District leaders have no plans of going anywhere.  Perhaps the powers that be in Washington have too much invested in the Philadelphia School District and the current direction it’s heading.  This just might explain why Mayor Nutter, as well as the rest of the City, continues to stand down to School District officials.       

Of course, Mayor Nutter will claim differently.  He will tell the public that he has things in control, that he just made the District sign an “Accountability Agreement,” but what is this, really?  Is it anything more than smoke and mirrors?  (Is the pending audit by the IRS, which is now in limbo, much of the same?) 

This isn’t to take away from the recent efforts of a few brave local leaders—such as Philadelphia City Councilmen Bill Green and PA State Reps Angel Cruz and Mike McGeehan—to try to bring an end to the District’s troubled leadership.

McGeehan continues to call for Philadelphia School Superintendent Arlene Ackerman’s resignation in order to bring some financial credibility back to the District in the eyes of Harrisburg. 

In a letter to PA Governor Tom Corbett, McGeehan stated the following: “I am requesting that you, on behalf of the taxpayers of the Commonwealth and the school children of Philadelphia, compel the School Reform Commission to remove Superintendent Ackerman. The continuing controversy surrounding Ms. Ackerman does not serve the best interest of the taxpayers or children of Philadelphia. I ask you to use your authority to request the SRC to immediately end her tumultuous tenure.”  

State Rep. Angel Cruz has also called for laws to regulate the power of the District superintendent.  “The SRC clearly is not properly managing the superintendent or the district,” Cruz told his colleagues in Harrisburg. “My bill would give voters the option to choose the people who are running our school district.”

Philadelphia City Councilman Bill Green, in addition, blasted District leadership in a recent Inquire article headlined, “School District has a management deficit.”  In it Green stated, “Recent events have shown that the crisis at the Philadelphia School District is more about oversight and stewardship than it is about dollars and cents.”

Even the local press seems to be questioning the District’s leadership.  In a recent poll philly.com asked readers, “Does the Philadelphia School District need new management?”  The results were quite telling:  371 folks said YES (97.4%); 3 answered No (.8%); and 7 responded Not Sure (1.8%).

Not that the District seems to care about what anybody thinks about their ability to do their job; they continue to operate as if it were business as usual.  And all the while Philadelphia’s children—as well as the tax payers—continue to pick up the tab. 

Tragically, perhaps because of a blessing from Washington, it appears as if this pattern of reckless management has no foreseeable end.