Learning from the Vallas era

By Alan Butkovitz

The recent revelation that the School District of Philadelphia has an estimated $200 million budget deficit has some rightly asking, "Just who was minding the store and balancing the books?"

In the spring of 2006, I started asking the school district for information and documents on a number of very high-dollar projects, as well as for explanations of the methodology used to determine its yearly budget projections.

Right from the start we encountered strong resistance from former CEO Paul Vallas when we questioned the insufficient progress and costs related to his $1.5 billion capital building program. It had a balance of $469 million - but little to show for it in the way of school construction. Vallas' original plan called for at least 20 schools to be built. At this time, we can only identify seven new schools that have been completed.

Resistance continued when we questioned Vallas' judgment in locking into a low 2 percent interest rate on a 41/2-year investment of $500 million in borrowed capital funds - resulting in an estimated $18 million loss in interest revenue.

It was no easier getting answers to questions about $70,000 in questionable reimbursements approved by Vallas for a school district employee who charged taxpayers for weekly airfare between Philadelphia and her home in Chicago, as well as for living expenses and a sports-car rental while she stayed in Philadelphia during the week.

Our biggest obstacle arose in mid-2006, when the school district refused to meet with my auditors to dispute our assertion that the district had purposely and erroneously mischaracterized past budgets as "balanced," when in fact they were dependent on borrowed bond proceeds to appear balanced. Our numerous requests to meet with top-level officials were all rebuffed.

While it is true that the city controller does not have a legal role in the enactment of the school budget, my staff of financial professionals is highly qualified and experienced from years of fulfilling our legal obligation to review the city's budget and five-year plan. One would think the school district would have taken seriously the questions we raised regarding the district's budget misrepresentations, instead of deflecting, ridiculing and outright ignoring the issues we raised.

The school district also refused to let my auditors and engineering professionals inspect more schools after they uncovered significant life-threatening hazards at 12 district school buildings. The district also refused to let us verify the existence and security of artwork with an estimated value of more than $30 million - despite auditors' finding that 25 percent of the art was not located at the sites indicated on school district inventories.

Despite the controller's unquestioned legal right to audit the school district, the district rarely complied with many of our performance-audit requests in spite of our having resorted to the extraordinary use of subpoenas. As a consequence, many of those audits remain incomplete.

To our credit, I believe it was our relentless pressure and prodding that eventually forced the School Reform Commission to initiate its own internal spending audit, which ultimately led to its begrudging admission of the current $191 million deficit.

Our system of financial checks and balances requires full cooperation by all public agencies to ensure transparency and public oversight. No public agency should be immune from public scrutiny - regardless of how popular the department head. A policy of stonewalling on requests for information and documentation is totally unacceptable, and is a warning that someone is attempting to hide something.

In light of recent lessons learned, I believe in order for us to restore public confidence in the Philadelphia School District, it will be necessary for the school district to start cooperating and provide us the information we need to complete a number of still-pending reviews. This will ensure that our children receive the quality education they deserve, and that tax dollars are being monitored to guarantee they are being spent appropriately.