T/E taxpayers Facing 6% Tax Increase, $1.2 million Accounting Error Remains Uncorrected & Concerned Citizens contact PA Department of Education

I attended the school board meeting on Monday night and waited until 9:30 PM for the budget discussion to begin.The majority of the meeting to that point was spent on the discussion and subsequent vote (7-2) for delayed school start times for 2019-20 school years. The approved plan moves the high school start time to 7:50 AM, middle school to 8:30 AM and elementary school to 9:10 AM. The financial cost to the District for the change in school start times is $610K (and not contained in the proposed final budget).

School start times is an important issue for many parents but with taxpayers facing the largest tax increase in decades, I was left wondering how does the District find the additional $610K in the 2019-20 budget which contains a projected operating deficit of almost $11 million.

The proposed final budget was approved (5-4) with a 6% tax increase; the public was told again that there is time to adjust that number. But the school board is running out of time – it’s the end of April and the 6% number has not moved since first announced in December.

The review and discussion of the budget was confusing to say the least. Remember folks, there is still the open issue about the $1.2 million accounting error caused by the delayed payment of a special ed invoice(s). This District’s accounting error has been discussed at two school board meetings, a finance committee meeting and a budget workshop over the course of 6 weeks yet the financial “can” continues to be kicked down the road with no resolution.

Residents and some school board members have repeatedly asked the business manager Art McDonnell for data on how correcting the accounting error impacts the budget … but he has yet to supply the corrected numbers.

The school district’s $1.2 million accounting error and lack of answers caused a group of concerned citizens (Ray Clarke, Neal Colligan, Mike Heaberg and myself) to send a formal complaint to the Pennsylvania Department of Education (PDE). For the record, the T/E School Board and Superintendent Gusick were copied on the letter. (Click on “formal complaint” link to read letter).

Although Art McDonnell maintains that the District’s accounting error is not a legal problem, apparently PDE does not agree with his assessment … as a result of our complaint, the matter is now under legal review at the Department of Education. The business manager also stated that the annual financial reports cannot be changed once submitted – again, not true. Art McDonnell, there is a “do-over” button! According to PDE, all you need to do is hit the revision button on their website to make the corrections!

It is absurd that citizens are now going to the Board of Education to get resolution — folks, this is not an insignificant problem. Where do we go from here?

I share with you Ray Clarke’s comments from the school board meeting:

Monday’s budget discussion and vote was a good illustration of the challenge facing even the most diligent of School Board members.  They learned more than a year after the fact that not only was there an error in the numbers submitted to the Department of Education (PDE) to authorize the allowable tax increase for next year, but also that the error could have been corrected in time for consideration of this year’s tax rate.  The arithmetic and PDE processes are a little complicated, so the most concerned of them request a full analysis from the Business Office.  After six weeks and two meetings they finally tease out that the maximum accurate increase for the coming year is 3.9%, and that the district forwent an opportunity for a 0.8% additional increase for the current year.  None of this is documented, and the Board and public have to wait until May 13th for whatever comes next.  In the meantime, the Proposed Final Budget contains the 6% tax increase and the Board has given the Administration no mandate to come up with any concrete plans to balance the budget with a lower tax increase.

Because the Board can not, for some reason, accept the fundamental argument that our School District should base its taxing decisions on calculations that are materially correct, they are left with a problem.  There are no experts in school district finances on the Board, so they tend (to a greater or lesser extent) to accept what is told them.  They are told that the auditor said the error was not material and the audit was “clean”, but we know the audit is unrelated to the Annual Financial Reports (AFRs) from which the tax increase is authorized by PDE.  They were told on Monday that the District does not complete a worksheet for the Exception, but we know that it does complete the AFRs which generate that worksheet.  They were told on Monday that the calculation is “locked down by PDE, you can’t change it, it is what it is”, when we know from PDE that there is in fact a “Start New Revision” Button on the on line AFR system!

The community members who have asked PDE to look into this are not experts in school district finances either, so how do we know what the Board does not?  We do know that there’s a problem with submitting incorrect numbers to the state and a problem with allowing the situation to fester, and we also know that it’s a good idea to get counsel from folks who do have the needed expertise and are not central to the problem themselves.

So I think it is past time for the Board to commission an independent review.  Completely independent unaffiliated with the Administration.  A good candidate for this would be the lawyer that has advised the Board in the past on financially complex contract matters, Jeffrey Sultanik of Fox Rothschild.  In the meantime, I guess the public has to wait for May 13th, take some comfort in the four No votes on the Budget and rely on our neighbors on the Board to eventually come to terms with the fact that a 6% tax increase based on inflated numbers is just not tenable.

Facebooktwitterredditpinterestlinkedinmail

67 Comments

Add a Comment
  1. If the concerned citizens who wrote to the Pa. Dept of Education are correct (full disclosure-I signed the letter. Wish I had written it- it’s a great piece of work!) and the erroneous Spec Ed figures submitted by the District need to be corrected…then the District would be in violation of Act 1. Since the Annual Financial Reports submitted contained the “known” error discussed above….I would hope that the PDE does the right thing and compels the District to correct the error. If they allow the error to stand OR rule that a District can “pack” two years of spending increase for Spec Ed into a single year…I guess the District is in the clear. The members of the Board would still have to determine the “fairness” of passing on this tax increase to our citizens. Without the error; the allowable tax increase would be more in the range of 3.91%. Still very high historically and about twice the rate of economic growth.

    If they are compelled to correct this error (that they knew about when submitted); then they’ve advocated all this time for a Violation of Act 1. That’s a pretty big deal. What corrective actions would then be necessary to restore the faith of the community in this tax setting (out largest local tax) Board?

    [Reply]

    T/E Anonymous Parent Reply:

    I would think the issue would have to be raised at the time of elections. Doubt it would carry that much momentum though. Other than that, we are relying on the Board to step up and admit to their mistakes, along with a personal pledge from each of them to make things right and not repeat these foolish mistakes. Such a task is a tall one and requires a lot of looking into the mirror.

    [Reply]

  2. For those unfamiliar with internet “hot links” — If you want to see the formal complaint sent to the PA Dept of Ed, click on the words formal complaint in Pattye’s post above.

    [Reply]

    Pattye Reply:

    Thanks Keith — I updated the post to include those words.

    [Reply]

  3. Can you provide the vote results by board member? Also, if the state comes down on our side, would that be enough ammo to have McDonnell fired as he should be?

    [Reply]

    Pattye Reply:

    The vote on the proposed final budget (5-4) was as follows:
    Burger yes
    Hotinski Yes
    Boyer Yes
    Whitlow Yes
    Kantorczyk Yes

    Dorsey No
    Ward No
    Sweeney No
    Murphy No

    As for Art McDonnell’s future employment, he has a new contract starting July 1 for $209K plus benefits. Let’s not forget that he didn’t tell the school board for 14 months of the $1.2 million accounting mistake and I believe were it not for the plodding of Ray Clarke, the error may never have been made public.

    [Reply]

    Will O Reply:

    Party line? How much is this error adding to the increase?

    [Reply]

  4. If I understand this correctly, the business manager doesn’t tell the school board about a $1.2 million accounting mistake for over a year. And then when the school board is told what happened, the business manager refuses to correct the error with the board of education!!

    I appreciate that you are trying to make the business manager do what the school board should have told him to do. Instead of reprimanding him for his actions, the reward is a new $209,000 employment contract. I’m telling you if this happened in most workplaces, the business manager would be shown the door not given a new contract!

    [Reply]

    Dine Ciarlello Reply:

    Agree. Perhaps the 1.2 million is lining someone’s pocket.

    [Reply]

  5. The BM doesn’t care what would happen to him if he were in a private sector work place situation. He doesn’t care what anyone in the public thinks about him or his job performance. The only thing he cares about is keeping the support of Board Members.

    It’s very telling that 4 Board members voted no to the illegal tax increase. The Administration and the BM don’t like that because It shows a growing lack of confidence in them and that weakens their power and position. The more this goes on without the Board rectifying the problem, the more scrutiny it brings, and the more scrutiny it brings, the more it weakens Administrative power and position.

    [Reply]

  6. The entire arrogant school board should be voted out for this. They think our money is their money. An attorney should jump on this immediately as the school board clowns have no grip on reality. The are drunk with power – look how they are treating us!

    [Reply]

  7. I don’t believe they are being intentionally arrogant. I believe they are in way over their heads and they have no clue what to do.

    The BM and Administration are fighting hard to keep control of the Bosrd who in theory are above them but the 5-4 vote indicates a significant decrease in confidence in the Administration. Every effort is made to either win over Board Member critics or isolate them if they can’t assimilate them in the established culture and the more critics there are, the harder it is to control them.

    This is an indication that Board Members are snapping out of it and getting back their independence and serving the interests of the public instead of serving as pawns for the Administration.

    [Reply]

  8. This gets worse. Last year I was independently working on new standards to ‘fix’ SB 76 – The Property Tax Adjustment. One of the components to making this bill workable was to determine the actual cost per student without Special Ed, Transportation, Special Programs and retirement benefits. That would allow a comparison per district and basis for remuneration based on the number and cost per student allowing for the changing numbers of students. Mr. McDonnell would not (or could not) provide the figure. Instead he said I would have to file a formal request for Right To Know to get the information. In addition the School Board rejects out of hand SB76 and refuses to find or issue compromise solutions with the exception of opening each resident’s family checkbook with the goal of unlimited funding and taxation. $209,000 for Art – gives me a migraine.

    [Reply]

    TE taxpayer Reply:

    SENATE BILL 76 EXPLAINED

    Goal: Eliminate all school property taxes across the Commonwealth and replace those taxes with a combination of funding from the Personal Income Tax and the Sales and Use Tax.

    Why:

    The school property tax has been a primary source for school funding since the 1830s. The legislature cannot continue to “fix” or “reform” this archaic tax – that is why we are proposing a new education funding model that would promote economic growth and completely eliminate the school district property tax once and for all.

    How:

    Increase the Sales and Use Tax by one percentage point and broaden the base of the state sales tax to include more services and products. Necessities and business-to-business transactions will continue to be exempt from the sales tax.
    Increase in the state’s personal income tax from 3.07 percent to 4.95 percent.
    Include Property Tax Relief Fund – Transfers.

    Of course Art McDonnell would not provide the number. Eliminating the property tax would severely diminish his power and position. It’s not about the students or the taxpayers. It never has been and never will be under the current archaic, unsustainable system.

    It’s about power and control…………Art’s power and control.

    [Reply]

  9. SB76 has many fatal flaws.
    1) SB76 would transfer financial decisions from the locally elected officials to the PA legislature. While I admit there are problems with the TESD board, those problems are small compared to those at the state level. Who brought us the PSERS problem? Who has problems passing a budget on time? The state legislators.
    2) SB76 would lock in funding inequities. Rich districts like Lower Merion would lock in their $33K per student funding. Oxford would get $18K per student. Thus, Oxford residents would be subsidizing Lower Merion residents.
    3)In 2006 school districts were required under Act 1, to place a referendum question on the ballot to see if residents wanted the school district to levy a higher Earned Income Tax on local residents to replace 50% of real estate taxes. Only 8 districts out of 500 voted to approve that tax shift. Voters didn’t like it then. What has changed?

    [Reply]

  10. What has changed is unsustainable, never ending yearly property tax increases to pay for outlandish salaries, benefits and healthcare for school employees.

    People are upset about Art’s $209,000, he’s hardly the only one and his isn’t even the highest!

    It has to stop and the only way to do it is eliminate the property tax.

    [Reply]

  11. The EIT, earned income tax, and SUT, sales and use tax rates tend to remain stable as increased economic activity increases the income generated from them. SB 76 provides for annual school district base funding increases that are tied to the Pennsylvania Average Weekly Wage or available revenue. Under SB 76, school districts can also raise additional funds if needed by enacting a local sales or income tax that is approved by a referendum and limited in amount and duration to the specific project.

    [Reply]

    Keith Knauss Reply:

    I think we’re getting off topic. When SB76 gets out of committee we can have a robust conversation. For now, I’d rather concentrate on the administration’s accounting error that they refuse to correct.

    [Reply]

  12. I agree with Keith on both issues.
    SB76 will take the decision making process that effect OUR children and give that power to a buraucrat in Harrisburg.
    Not to mention, as TE taxpayer states, it will allow local municipalities to raise ADDITIONAL taxes—above the new state taxes.

    It does highlight the fact our local school board needs to wake up and do some critical thinking instead of being spoon fed by the business manager.

    What kind of message does this send to our school children—-it’s ok to hide a mistake for one year, secure your new contract, not own up to it when you’re caught, because your friends (school board) will cover for you???!!

    The school board members who voted “Yes” for this 6% budget increase, who do you represent….certainly not the community!

    By voting “Yes” for this budget (sweep the issue under the rug), shows no moral backbone by the school board and more importantly, it sends the wrong message to our school children.

    [Reply]

  13. If you haven’t gotten around to listening to the Budget Workshop video, I encourage you to listen now. I’m glad I did. As Pattye stated in her essay, start at 1:34:45, and at the very least listen to Mike Heaberg speak. Mike was on the Board of Supervisors for Tredyffrin Township from 2011 to 2015. He served on the finance committee. He begins by stating that:

    “In my opinion , this should be a dialogue between the residents and the Board. We learn a lot from prepared residents, people like the Clarke’s. They show up at meetings, they test our thinking, ask questions and give new approaches. And we learn from them and we learn from the back and forth.”

    Before commenting about the $1.2M accounting error, Mike talks about a revenue oriented issue. He reveals that we have been mislead in presentations for years about lost revenue to the district from assessment appeals. Property owners go to the assessment office and appeal their property values and if they win, the amount of taxes paid on that property is then less. What The BM doesn’t mention is that even with the lost assessment appeals, since Act 1, the amount of assessed real estate in the TE school district is up more than $300 M. The last 2 years alone, from 2017 to 2019 it’s up $147M. This idea that we have a shrinking pie, a shrinking assessment tax base, is simply not true. Nonsense. By presenting information that gives the impression our tax base is shrinking and not growing is a distortion. His presentations look and sound convincing but are destructively distant from the truth. By also omitting a $450,000 breakage savings in the budget while allowing Board Members to look foolish while they agonize over whether to increase student fees is another example of the Business Managers deceit and Board Member ignorance about the Budget.

    These are a few examples of what we know. What don’t we know? As Mike states in the Video, This has damaged the trust the community has in the staff and damaged the confidence that we have in the Boards ability to oversee what’s going on here. You must do the right thing and you must hold to account those that have put you in this position.

    Regarding the $1.2M accounting error, Mike says to take the exceptions is a perilous path. Mike is in finance and served on the finance committee for the Tredyffrin Board of Supervisors from 2011 to 2015.

    Who do you believe?

    [Reply]

  14. This blog is an important vehicle for impacting on the policy debate. I have posted on it as a School Director when there is something to say that is important. The important issue that I wish to address the 6% tax increase in the Proposed Final Budget. I will comment separately on a later date concerning improvements I feel that should be made in the interaction of the Administration with community and stakeholder groups.

    In my view, the proposed 6% tax increase is excessive and would be quite damaging to many and the TESD’s reputation as a “value” community. A 6% increase is bad enough. This tax increase is only afforded by a 1.2 million delayed invoice payment by less than diligent conduct and what appears to me insufficient internal checks and balances. This is an even worse scenario. Both are big deals. I found until fairly recently the explanations for this error are somewhat hollow or incomplete.

    I can think of no other time that we have gone into late April with a proposed 6% tax increase still “on the table.” We are faced not only with the prospect of a large tax increase, but a huge deficit spend making a perhaps irredeemable gap in our revenue versus expenditure picture going into the future without undertaking a Personal Income Tax, an Earned Income Tax, or getting some sort of stream of revenue that seems unlikely.

    Compounding the problem is the 1.2 million dollar invoice error and how it has been handled has justly raised issues of how to speak with authority on next steps. Our administration needs to provide accurate information on matters of public import. The Board should take appropriate steps to make sure the financial information the Administration gives is correct and appropriate controls exist on the payment of invoices, particularly large ones.

    TE residents understand that in private sector businesses, even modest financial errors are treated very seriously. We have to approach the issue with appropriate gravity a $1.2 million dollar mistake deserves. Suffice it to say, the TESD Administration has to undertake the utmost of care in explaining, fully and precisely, the ramifications of this error. The Board need to step in if the Board does not get satisfactory answers.

    In January 2019, when it first came up, I voted and spoke against the 6% tax increase budget. As they say in my profession of the law, res ipsa loquitor, the thing speaks for itself. A six percent tax increase is a non-starter. I felt this point had to be made and that we needed to have a sense of urgency in our budget discussions to review expenditures as 6% was unacceptable. Four months have passed and we still have a far way to go. Going into late April with close to a 6% tax increase still on the table is not acceptable. Our position was made worse Monday night as explained below. We had 1.4 million dollars of proposed cuts conceptually on the table, but have lessened the value of those cuts by $610,000 with an additional “spend” on the Sleep Time Proposal at our Monday meeting. Nuances are important in how matters are handled in public and business affairs.

    On Monday, at our Regular Board meeting at which the Proposed Final Budget was discussed, I once again against the 6% tax increase budget. However, it was not 8-1 vote like my January dissenting vote. Three other school board members (1 other Republican and 2 Democrats) joined this expression of dissent. The vote failed, with a 5-4 vote in favor of the Proposed Final Budget. However, it is unusual for votes to be cast against a Proposed Final Budget. It is very unusual for Board Members of each party to join in that expression of dissent. Some might conclude there is now a strong dissatisfaction on the Board on a bipartisan basis with our current posture. Some might conclude there is also recognition that our lack of progress is unacceptable. Finally, I think most of us on the Board recognize there are problems that exist beyond important budget discussions. This is at least a silver lining and I would urge the Board to make extraordinary measures to handle and straighten out the budget.

    A careful observer would note the subtlety that at Monday’s meeting the Sleep Time Project was authorized by Board vote before we had a discussion on the Proposed Final Budget. The Sleep Time Project is to adjust school times to accord with the scientific research which shows that high school children (and I believe middle school) do better in school with more sleep. We added a proposed $610,000 spend in District money in this vote. The $610,000 is to pay for the additional 10-11 buses which would be need to make this project work. The District has to provide by law buses for non-public schools whose start times we have no control over.

    I voted against the Project because of the absence of a discussion on the funding aspect of the Project. We should have approved the concept but not the spend until we knew how this would fit into our overall spend on the budget. We had not made necessary progress on our budget strategies to close the deficit to vote on the spend. Thus, we were adding to our challenges in this already tough budget year where we have moved too slowly. Our job is to weigh and balance. Teaching reading, math, science, history, and English are essential to the welfare of children. Sleep Time is a valuable, optional project. It can wait if there are more important priorities for TESD this year.

    Please remember that Board Members try to do the right thing. However, our role is to act prudently and carefully, with measure and proportion to each decision and with the welfare of the district in mind. Many of the issues before us have a context that is complex and interrelated. I do hear and understand the argument that a large tax increase above what would normally be the Act 1 exceptions for this year would not be “fair.” My reason for opposition is simpler. It’s just way too much. It was way too much in January. It’s way too much now. It will always be way too much. It’s disregarding the needs of single wage earners, the elderly, those on fixed incomes, and families with children in non-public schools.

    My concern is that in handling this situation that the Board does not weigh and balance correctly (in part because we are running out of time): the Board may vote either for a very large tax increase or the Board may vote for a more modest one that punches an unstainable hole in our annual budgets. Either option is wrong for the District. I write to push us on in this policy debate to find that correct balance. I thank my fellow Board members for their service and dedication and ask that members of the Community continue to weigh in on this important issue.

    Ed Sweeney
    TESD School Director, Region 2
    This is my individual view and not those of the TESD administration or the TESD Board.

    [Reply]

    Pattye Reply:

    Ed, thank you for your comment regarding the proposed 6% tax increase and the District’s $1.2 million accounting mistake. As an elected school board director, I know that it cannot be easy for you to speak out and want you to know that your words are appreciated!

    [Reply]

    Ray Clarke Reply:

    Thank you, Mr Sweeney, for your thoughtful comment. There are important points throughout (eg para 7), but I’d like to highlight your last para, where you encourage the Board and the Community (capital C!) to find the correct balance in the budget. I do believe there are constructive solutions that do not burden today’s students with the full force of the additional programs and the administrative mis-steps. Thanks again for your openness and I look forward to engaging on this.

    [Reply]

    Keith Knauss Reply:

    The administration has mentioned “clean audit” several times. It would be unusual for a $1.2M accounting error not to be mentioned as material in the letter to the board and noted as a control deficiency. The board may want to bring the auditor to a board meeting and ask whether he/she was made aware of the error and why it was not deemed material and a control deficiency.

    [Reply]

    Keith Knauss Reply:

    The board might want to ask the business manager to bring the $1.2M invoice and show it to the board along with the accounting entry for payment.

    Each month the district includes a statement of expenditures (the Check Register) in the material disseminated to the board and public. I can find no $1.1M or $1.2M payment to the CCIU around the November 2017 timer period (Nov 2017 to Feb 2018). Was the invoice in question $1.2M and when was it paid?

    [Reply]

    Pattye Reply:

    I remain confused if it was ‘one’ invoice for $1.2 million or was it several 2017 invoices (which totaled $1.2 million) from Chester County Intermediate Unit (CCIU) that went unpaid until 2018.

    [Reply]

    Neal Colligan Reply:

    Nice piece Edward…thank you for standing tall (in the minority right now) on this issue. The Board, as you point out, is NOT talking in detail about the negative Budget gap. Further-since the proposed tax increase of 6% is ONLY possible because of an accounting error….the 6% level MAY be OFF the table if the PDE compels the Board to correct this mistake. Then, the MAX increase would be in the 3.9% range with an offsetting increase in the proposed deficit. All this with NOT much time left to make budget/spending changes. I do not envy your position….but know that you have some support in this community.

    [Reply]

    Missy Reply:

    Regarding the adjustment to school start times related to a student’s need for sleep, agree with Mr Sweeney that the concept of adjusted start times could be addresssed independent of a decision to spend tax dollars on implementation. Any decision on Implementation must be made in conjunction with a determination of how to cover the cost. Additionally there is a simple and free alternative, parenting. I can attest
    that it is very attainable to impose healthy bedtimes for your children, regardless of their extra curricular activities and grade. While this will
    occasionally require exceptions, as a general rule it is very feasible. It also has the added benefit of our children developing the skills of
    time management, healthy sleep habits, and making wise decisions regarding their commitments, skills they will then take into college and life.
    I do not imply that helicopter parenting is the answer here but rather teaching our children how to handle well that which they face in life, the very essance of parenting.

    [Reply]

    Tredyffrin taxpayer Reply:

    Regarding the comments from Missy and Edward Sweeney, I agree. How can we vote yes to pass a project when there was no discussion on how to fund it?

    Thank-you Edward Sweeney for your comments. Please continue to post on this blog.

    I agree with the idea from a citizen in this reply link to you to ask the Business Manager to show the Board the $1.2M invoice along with the accounting entry for payment. Heads up move for this citizen to check the check register in the time frame given by the Business Manager and Board. Where is that entry and where is that payment?

    My schedule doesn’t allow me to check in here often but I also recall someone saying that the Business Manager hasn’t turned over important information requested by Board Members. That’s not a good sign. Has he turned them over yet? If not, why hasn’t he turned them over? Who is in control here, the Business Manager or the Board?

    [Reply]

  15. Many thanks to Pattye, all blog participants, and especially to Neal, Mike, Ray and others who have sat through long meetings, done analyses, asked questions, and proffered solutions.

    Regarding the delayed start times – the Admin appeared very supportive/comfortable with this change and the additional $610K expense. They know that the Proposed Budget already includes the maximum allowed tax increase. Therefore, it is up to the Admin to suggest which programs/services they will cut to cover this additional cost.

    This Budget process has been a colossal mess. A good budget process requires trust between the Admin and Board based on financial transparency. It’s understandable that the Admin will first submit the most expensive budget (you can’t get what you don’t ask for). It’s then the Board’s responsibility to push back and ensure the best education at a price the taxpayers are willing to pay. The Board needs to understand the real costs & benefits of programs/services so they can direct the Admin to develop an appropriate budget.

    Unfortunately, the current Board does not appear to have the skills (or time) to fully understand the budget and cost drivers – and the Admin has misled them. (Spec. Ed, Tax Base, Breakage, etc…) So, at a minimum, they should have directed the Admin to develop the best program for the students at a specified tax rate (or 2) which they can justify to the taxpayers.

    Finally, the error was an error. However, the Admin did not have to lie, cover it up and make Spec Ed the scapegoat/excuse for a 6% tax increase. The Board needs a moral backbone to stand up to the Bus. Manager and demand that the Special Ed exception be changed to the actual/correct amount. Why has he delayed providing the actual numbers and the 3 year impact as requested? Obviously, the Admin has the numbers and alluded to them at last Monday’s meeting. But again, only a few numbers were provided – no transparency. It’s way past time for the Board to do its job and make the Admin do theirs.

    [Reply]

    TE Taxpayer Reply:

    Carol,

    Couldn’t agree more.

    Unfortunately, the current Board does not appear to have the skills (or time) to fully understand the budget and cost drivers – and the Admin has misled them.

    This is a major fundamental problem. We need citizens like you Ray Neal and Mike who can process and acknowledge new information, and use what you already know to see new solutions and to change. There was no Board duscussuon, comment or surprise when In the Budget work shop Ray asked the BM where the breakage savings was and the BM said he didn’t put it in. This is huge. Not one Board Member said a word, asked a question or expressed outrage. It’s as if they didn’t understand the new information they were presented with or how it could effect the process. A Board Member read from her prepared script as if it was still relevant which it wasn’t because she now had $450,000 to ask the BM about which she did not because I don’t think she understood what was going on. Neither did The President or the rest of them. The BM knows this and does what he wants because he knows there is zero accountability because the Board has no clue about what he’s doing.

    [Reply]

  16. I can’t stress enough how important it is to look at the Budget Workshop Video. There you will discover the anatomy of the TESD budget.

    At time stamp 1:49:20, Ray asks the BM about expense drivers and estimates for breakage savings because he has seen a lot of retirements coming through the Board minutes, The BM says he hasn’t included that in the preliminary budget decision. Why? A potential $450,000 savings seems significant to me.

    Ray then asks about the Adminidtrator Supervisor Confidential salary increases. He says the existing agreement calls for a 1.7% salary increase but magically every year, the numbers turn out to be between 3 and 4% increases. He asks Spt. Gusick what is assumed for these increases. Spt. Gusick replies that “part of the agreement requires us to consider individuals for increases based on job performance (really? Who decides that? What is the criteria and who decided what that is?), change in job responsibilities and market conditions. He then talks about act 93. If anyone knows about Act 93 please, explain. Otherwise, it seems inappropriate and unreasonable that taxpayers are forced into paying tax increases year after year after year, and parents are forced to spend thousands of dollars on top of the outlandish tax increases just so their kids can participate in activities and sports, when Administrators who already make outlandish salaries and get retirement and healthcare benefits no one paying for them gets, grant themselves 2 to 3% raises year after year. Why do Board Members agonize over raising student fees ( but then justify them) while raising administrator salaries?

    Please view the Budget Workshop Video

    [Reply]

    Ray Clarke Reply:

    Thanks for highlighting the problem of Administration salary creep. Ten of those 3.5% increases on $175,000 and you’ve got a starting teacher salary. Where is the data that justifies the market benchmarks? Is it possible that all the districts act in concert to lever the salaries up?

    [Reply]

  17. Neal, Ray and Keith – thank you for all the work you do on this. One thing I am not clear on, is it actually illegal to book both payments in the same year? Businesses often account for payments, sales, or receipts in advance or arrears in order to shift tax burden.

    If I were a school district and knew that I am limited in how much I can raise taxes each year, I might be inclined to move when I book something if it means I can raise taxes higher than normal by doing so.

    I believe this goes against the intention of the legislation that limited tax increases each year. But, it may be a consequence of the legislation.

    Thanks for your time.

    [Reply]

    Ray Clarke Reply:

    I should leave the answer to the qualified CPAs, but here’s a layman’s view.

    Yes, businesses may shift payments, but I think that’s just as illegal as a school district doing so. Just think back to GE – in 2018 the Securities and Exchange Commission opened a probe into how the company recognized revenue from long-term service contracts for projects like power-plant repairs and jet-engine maintenance, recognizing earning before it did the work. How far has the GE share price fallen?

    And to expand on an analogy I used here earlier, suppose I as the HOA Treasurer booked a quarter of 2017’s landscaping charge in 2018. Then said, OMG guys, our costs have shot up, we have to increase the dues. Then, with all that extra money coming in, I decided to replace the perfectly nice Japanese dogwood trees in the traffic circle with native Eastern redbuds, because that’s just better for the environment. And of course they need security cameras and a fence. Plus I’m working so hard and doing such a good job, I deserve a salary. And just in case there’s an issue I use the rest of the money to pay for a lower deductible on the HOA Treasurer’s liability insurance?

    [Reply]

    SL Reply:

    Ray,

    I’m the dumbest person I know. You’re analogies are fun and better than that are educational and help people like me understand exactly what’s going on.

    [Reply]

    Keith Knauss Reply:

    The Office of the Budget of the Commonwealth of PA is responsible for the collection, processing, and review of the AFR-Annual Financial Report (PDE forms 2056 and 2057). Other administrative functions include the maintenance of a uniform accounting manual and the Chart of Accounts and ensuring proper financial reporting in accordance with Sections 2-218 and 9-921A of Public School Code of 1949 (School Code), which states “…all financial accounting and reporting by Pennsylvania Local Educational Agencies (LEAs – school districts, charter schools, area vocational-technical schools/career technology centers and intermediate units) shall be in accordance with generally accepted accounting principles (GAAP).

    GAAP requires school district to reflect the expense for any provided service in the year in which it occurs. Thus the district is required to reflect the $1.2M CCIU expense in 2016-17 rather than in 2017-18. There is no specific penalty for violating the GAAP standards called for in the School Code. However, PDE serves as a quasi-judicial forum for hearing complaints and finding an equitable solution (e.g. recalculating the special ed exception). Beyond PDE there is the possibility of legal action in Common Pleas Court.

    [Reply]

    Pattye Reply:

    Keith — thank you for the information. Here’s hoping that the T/E school board decides to do the ‘right thing’ and that no further action is required on the part of residents (beyond the official complaint)! The instruction to Art McDonnell should be to ‘push that button’ on the PDE website and update it with the correct numbers! This should not be that hard, yet here we are, pushing the proverbial rock up the mountain!

    [Reply]

    Keith Knauss Reply:

    The first paragraph in my post was taken from the PA Accounting Manual.
    https://www.education.pa.gov/Documents/Teachers-Administrators/School%20Finances/Comptrollers%20Office/Manual%20of%20Accounting.pdf

    Two other excerpts from the Accounting Manual are apropos:
    1) “Expenditures should be recognized in the accounting period in which the fund liability is incurred…” page 15 The CCIU service was received in 2016-17 and the $1.2M expenditure for those services should be reflected in 2016-17 AFR. The district made an error by putting the $1.2M expenditure in the 2017-18 AFR.
    2) Accounting data should be Reliable. “The information presented should be verifiable and free from bias and should faithfully represent what it purports to represent. Information must be comprehensible and should not be misleading.” page 87 Clearly the AFRs from 2016-17 and 2017-18 as well as the special ed submission to PDE were in error and unreliable.

    Pattye Reply:

    Well, that says it all doesn’t it! “Expenditures should be recognized in the accounting period in which the fund liability is incurred.” Why doesn’t the T/E School District business manager Art McDonnell understand the state accounting procedure! Clearly, the school board MUST have McDonnell correct the numbers – NOW! It needs to be restated that Art McDonnell starts a new contract on July 1 for $209K/yr plus benefits.

    Neal Colligan Reply:

    Not a lot to add here….the District (like most businesses) operates on an accrual basis. So, expenses and revenues are recognized when they occur.

    Of interest in this example; the CCIU is also a State Dept of Education subsidiary (like all the of the school districts in the Commonwealth) as is TESD. The CCIU correctly recognized this revenue when it occurred….TESD did not. If you think about the “balance” of this….it’s a transaction between two State operating subsidiaries BUT only one side of the transaction was booked. Another reason the TESD should be made to correct their error and recognize the expense in the proper period.

    [Reply]

    Keith Knauss Reply:

    For those who are not familiar with the two accounting methods, accrual and cash basis, consider the following example.

    The CCIU performs services at TESD worth $1.2M in May and June 2017. The bill is sent to TESD in July or August or November which is after the end of the 2016-17 fiscal year of June 30, 2017. If operating under a cash basis (which TESD is not) then the $1.2M would be reflected in the year in which the bill was paid. In this case it would be in the 2017-18 school year.

    But, but law, TESD must operate under the accrual basis. This means the $1.2M expense must be recognized in the fiscal year when the service is performed (2016-17) REGARDLESS of when the bill is received or paid. So, even if the bill was not paid until November 2017 (5 months after the end of the 2016-17 fiscal year, the expense still must be put in the 2016-17 AFR.

    [Reply]

    SL Reply:

    Keith,

    Thank-you for uncovering and prioritizing the important information. It’s valuable and we appreciate it.

    SL Reply:

    Thank-you Neal.

    It’s nice to have citizens who can clarify the rules.

    [Reply]

  18. Thank you for the clarification, and the education along the way. With the reluctance by the BM and Board to clarify and correct the issue, I was starting to wonder if this was an attempt to game the system.

    [Reply]

    concerned resident Reply:

    Every meeting, different subjects, the excuses are the same: can’t get the data, can’t press a button…
    My old pal used to say: where there’s smoke, there’s fire.
    What is the process of getting the BM and Administrator independently audited and possibly fired?

    [Reply]

    Keith Knauss Reply:

    Any board action requires 5 votes.

    [Reply]

    T/E Anonymous Parent Reply:

    AND….the Business Manager likely has an actual contract with the District. He could be owed money upon termination, depending on the wording of the agreement and official reason for the separation of employment. All in, the employment decision could cost the District money, and it may just want to keep the position filled with the current employee. If I were a Board member, I’d be begging for some different news to occur to divert the public’s attention. They are in a no-win situation (somehow) and are dragging their feet waiting for a distraction.

    Pattye Reply:

    The Board approved a new contract for Art McDonnell starting July 1, 2019 at $209K/yr plus benefits. The last contract was for 5 years, so I’m assuming that the new contract is the same. His contract can be terminated with just cause — Here’s the link to McDonnell’s current employment contract which expires June 30, 2019. I’m going to guess that the new contract is similar:
    https://www.tesd.net/cms/lib/PA01001259/Centricity/Domain/42/McDonnell%20agreement5_20_14.pdf
    The following words are contained within McDonnell’s employment contract:
    In the event of an unsatisfactory evaluation issued within 60 days before or after the expiration of a
    renewal term, the Board may elect to terminate your employment upon 180 days notice to
    you. At all times, during the initial term of appointment and any renewal terms, you are
    subject to termination for cause pursuant to and under the procedures stated in Section 1089
    of the Public School Code of 1949, as amended.

  19. Thank-you Keith and concerned resident. Ed Sweeney (thank-you Ed) says:

    On Monday, at our Regular Board meeting at which the Proposed Final Budget was discussed, I once again against the 6% tax increase budget. However, it was not 8-1 vote like my January dissenting vote. Three other school board members (1 other Republican and 2 Democrats) joined this expression of dissent. The vote failed, with a 5-4 vote in favor of the Proposed Final Budget. However, it is unusual for votes to be cast against a Proposed Final Budget. It is very unusual for Board Members of each party to join in that expression of dissent. Some might conclude there is now a strong dissatisfaction on the Board on a bipartisan basis with our current posture. Some might conclude there is also recognition that our lack of progress is unacceptable. Finally, I think most of us on the Board recognize there are problems that exist beyond important budget discussions. This is at least a silver lining and I would urge the Board to make extraordinary measures to handle and straighten out the budget.

    So a 5-4 vote from the Board shows cracks in the Administrstions armor. There is hope.

    [Reply]

  20. First, Thank you Pattye for this informative column.

    I believe that the following candidates are on the Tredyffrin ballot for the upcoming May 21 primary (correct if wrong). Also noted are their votes of the proposed budget (as noted in an earlier post).

    SCHOOL DIRECTOR TREDYFFRIN EASTTOWN REGION I
    Vote for not more than TWO
    TODD KANTORCZYK Voted YES
    ROBERTA M HOTINSKI Voted YES

    SCHOOL DIRECTOR TREDYFFRIN EASTTOWN REGION II
    Vote for not more than TWO
    MICHELE BURGER Voted YES
    EDWARD C SWEENEY Voted NO
    STACY V STONE Not currently on Board

    Although there doesn’t seem to be a lot of choice (other than write-ins), does anyone know of any online resources covering the upcoming May 21 primary and the School Board candidate’s views on issues such as the proposed tax increase?

    Thank you in advance.

    [Reply]

    Pattye Reply:

    School board candidates on the primary ballot for T/E School District also include:
    Region III
    Kate Murphy who voted NO to the budget
    Fran Reardon not on the board

    All candidates in Region I, II and III will appear on the general election ballot in November. In the past, I have asked questions of the supervisor and school board candidates and then posted the results on Community Matters, prior to the general election.

    I want to be clear — although the proposed 6% tax increase has not moved since first announced in December, there is still time (although the clock is ticking down quickly!) for the school board and administration to act upon the $1.2 million accounting error and adjust the tax increase downwards. Taxpayers hope that’s the endgame!

    [Reply]

  21. Back to the Budget Workshop

    Please go to 2:01:35 on the time stamp.

    The finance chair says “I am going to give a comment and I kind of feel like I have to because of Mr. Heaberg’s comments that he “waited til the T.V. cameras were on to make.”

    Mr. Finance Chair——government transparency allows US, the taxpayer, to easily research and hold YOU accountable for how YOU spend OUR money. “The cameras” are critical to an informed public.

    Interesting that he chastised Pattye for her tone. Mr. Finance Chair……what about your tone? In his opening comment statement, the finance chair’s condescending, angry tone that Mr. Heaberg “waited til the cameras were on to speak.” was robustly and strongly meant to support the BM’s actions and squash any question or idea that what he had done was wrong or illegal. He acted like McDonnells personal defense attorney rather than a Board Director serving the school district. Please pay particular attention when a citizen from the audience dares to speak. He rears his head in the direction of the voice and angrily sneers, “I’m speaking”. A very arrogant person who uses bullying and anger to scare people into silence and submission.

    [Reply]

    Pattye Reply:

    It’s interesting to see how the residents are treated by some members of the school board. It wasn’t that long ago when some of the current board members were campaigning for transparency, improved communications and open dialogue with the residents. But you have to question if anything has really changed.

    Often residents do not feel their voices are heard so it should come as no surprise that there are many empty seats at these meetings. At the same meeting that you reference — the budget workshop — taxpayers who stayed until nearly midnight were told by one school board member that they “didn’t represent the community”.

    [Reply]

  22. Patty, I was given a Todd Kantorczyk flyer which contained his school board campaign promises.

    Given what is going on with the budget and the business manager accounting mistake, and proposed 6% tax increase, I had to chuckle over one of Todd’s bullet points on his flyer, “I will insist on transparency, open communication and collaboration with all stakeholders”. After watching that last budget workshop video, I sure don’t see open communication, collaboration with taxpayers or transparency from Mr. Kantorczyk, the finance chair. But then again, he’s running unopposed in this election, so no worries.

    [Reply]

    TE taxpayer Reply:

    FA ——-Thanks for the info. Good Stuff. He may be in there under false pretenses but there’s this pesky little thing called the law that doesn’t care who he is, what he is, where he is, or how he got there.

    It’s important that tax payers keep watching and talking.

    [Reply]

  23. There is an incentive for the administration to “fudge” the budget by leaving out some revenue (breakage), underestimating other revenue and overestimating expenditures. Why? Because Act 1 of 2006 states the district can’t raise taxes more than the Index (2.3%) unless “the revenue raised by the allowable increase under the index is insufficient to balance the proposed budget.” That phrase is in the law to prevent districts from raising taxes more than needed and running a surplus. (collecting more from the taxpayers than needed and banking the difference)

    The district can’t use the 3.7% special ed exception, in addition to the 2.3% index unless the administration constructs a budget that shows a 6% tax increase is needed. Did the administration construct a budget that shows a need for a 6% tax increase or did the administration construct a budget that shows a desire for a 6% tax increase? Needs v wants?

    [Reply]

  24. The TE budget always overestimates expenditures and underestimates revenues. The BM misleads the public into thinking a huge tax increase is required when in reality, there is an actual surplus every year. It’s bogus budgeting. The question is why does the Board allow the BM to mislead the public.
    .

    [Reply]

    TE taxpayer Reply:

    Ed Sweeney,

    It explains why 7 of your fellow Board Members voted for the $610,000 sleep time project with no discussion on how to pay for it.

    They know that the money will be there when a surplus appears after tax payers have been burdened with another bogus budgeting tax increase.

    [Reply]

  25. A couple of updates: PDE has sent a reply to the citizen request for an investigation into the incorrect data submissions underlying the 6% tax increase request, and the District has published the agenda for tomorrow’s Finance Committee.

    PDE provides no solace for the taxpayer. They state that their role in approving referendum exceptions is purely ministerial, that they must grant requests that are based on increases in qualifying expenditures (which include Special Education), that they can not review proposed budgets and that there is no mechanism for PDE to reverse an already approved request.

    So, the responsibility falls squarely on the School Board to decide whether or not to base our taxes on incorrect expenses. The agenda materials include a page that lays out the tax calculations based on the wrong numbers (“Actual”) and what would have resulted from the right numbers (“Extrapolated” – really!). Not easy reading, but it is evident that packing expenses into one year both increases the tax rate – in perpetuity – and also extracts another half million taxpayer dollars by moving forward taxes that could have been levied next year.

    The Board is in a difficult situation, created by the 15 month cover-up of a clerical mistake. An honorable approach would be to own up to that now and accept all of the financial and governance consequences. Last year’s theoretical increase is gone, but a percentage of the inflated increase could be available next year. In the meantime, commit some of that $32 million fund balance to balancing the budget for a year or two (only) without abruptly curtailing programs. Otherwise, balance the budget, per school board policy. Finally, get management that will offer coherent strategies for fiscal sustainability and tax restraint, based on analysis of real numbers.

    Note: one new piece of information in the smallest of small prints in the agenda materials: Special Education expenses will have increased by one third ($6.6 million a year) over the three years to this coming June 30th.

    [Reply]

    Pattye Reply:

    I keep hearing rumors in the community from residents quoting some of the school board directors saying that the tax increase is not 6% but will be less than 4%. I want to be very clear — as of this moment, the tax increase remains at 6%. It has NOT moved since the middle of December when it was first announced. The ticking clock has about run out of time … tomorrow night there’s a Finance Meeting, here’s a link for the agenda: https://www.tesd.net/cms/lib/PA01001259/Centricity/Domain/56/051319%20DRAFT%20Finance%20Committee%20Agenda.pdf

    The meeting is at T/E Administration Building, 940 W. Valley Road, Wayne and starts at 7 PM. At the last Finance Meeting a month ago, one of the school board directors asked the Business Manager to have the Auditor in attendance at this meeting — he’s had a month to arrange it, will he be there? Will we get the answers that we keep asking? The accounting error — who knew what and when? Will the mistake be corrected and will we finally see the proposed 6% tax increase change?

    I believe that elected officials should be held accountable for their actions (or in-actions). We’ve got lots of questions, here’s hoping that we will be given answers at Monday’s Finance Committee meeting!

    [Reply]

    Keith Knauss Reply:

    If the board really wants the auditor to attend a board meeting it will, most likely, take 5 votes to get him there.

    Either the business manager or the auditor is in trouble. Late payment of several invoices totaling $1.2M is the definition of a control deficiency that should have been clearly noted in the auditor’s report. It was not.

    If the auditor was not made aware of the late payments then it goes to the veracity of the business manager.

    If the auditor was made aware of the late payments, then one has to question why he didn’t note a control deficiency and why he allowed the business manager to put the $1.2M expense into the wrong fiscal year.

    I hope the auditor does show up; provides a good explanation of why the expenses were properly recorded; and proves me wrong.

    [Reply]

    Pattye Reply:

    Interesting — When a school board member asked the business manager about the auditor attending tonight’s finance meeting, there was no discussion about the need for a vote. Just Art’s response that he didn’t know the schedule of the auditor or availability. I figured with a month’s notice, there would be no reason that either the auditor or someone from his office could attend — presuming that the business manager even asked him!

    Tredyffrin taxpayer Reply:

    Ray,

    Thank-you. Who is the PDE? retired school district board members, Administrators and controllers from across the state? Who are we dealing with?

    [Reply]

    Pattye Reply:

    PDE = Pennsylvania Department of Education. Ray Clarke, Mike Heaberg, Neal Colligan and myself sent an official complaint to PDE — Ray is commenting on the response that we received. The PDE response basically stated that their role is solely ministerial — they process the form with information as provided by the school districts. Unfortunately for the T/E taxpayers, that means that incorrect numbers were accepted. The crazy part is there is no recourse, no higher power to make the school district/school board to do what’s right – except to legal action in the form of a lawsuit. Here’s hoping that the school board has reflected and we see a reversal in the process.

    [Reply]

    Keith Knauss Reply:

    The head of PDE is a former superintendent at Lancaster. Four of 5 deputy secretaries all have a background in PA school districts. One who oversees colleges comes from the U of Michigan.

    [Reply]

    Tredyffrin taxpayer Reply:

    There you go. They’re not going to go against their own, even when it’s illegal.

Leave a Reply

Your email address will not be published. Required fields are marked *

Community Matters © 2019 Frontier Theme