Auditor General Jack Wagner Says Gettysburg, Allentown Superintendent Buyouts Cost Taxpayers $889,000

Gettysburg buyout: $622,000; Allentown, $267,000

HARRISBURG, Pa., May 23, 2012 /PRNewswire-USNewswire/ -- Auditor General Jack Wagner today released audits that showed superintendent contract buy-outs in the Allentown and Gettysburg school districts cost taxpayers $889,000, bringing the total to nearly $2.3 million in excessive superintendent buy-outs Wagner's auditors have identified during his tenure.

The audit of the Gettysburg Area School District superintendent employment contract buy-out revealed $589,412 in taxpayer dollars were paid to the former superintendent including, salary, benefits, and mortgage loan and interest forgiveness on a house he had purchased from the school district.  In addition, the district spent an additional $32,603 on costs related to filling the vacant position. The audit of the City of Allentown School District's superintendent contract buy-out determined that at least $267,000 in taxpayer dollars were paid to the district's former superintendent including, no change in annual salary, a tax deferred annuity, and a lump sum payment.

"In these difficult financial times, school districts cannot afford to be wasting hard-earned taxpayer dollars on contract buyouts," Wagner said. "Lofty buy-outs of key administrator contracts send a message to the public that school districts are out of touch with taxpayers and are not being careful stewards of taxpayer dollars."

Wagner's audits of early terminations of superintendent employment agreements are separate and distinct from the school districts' cyclical performance audits, which are completed approximately every three years. In August 2011, the Department of the Auditor General began immediately auditing instances where school districts or any other public school entities prematurely ended or altered their employment contracts with their chief administrators, because these alterations frequently lead to large sums of limited taxpayer dollars being spent without taxpayers receiving any services in return and without knowing the details of the costly buy-out.

"Whenever a buy-out of a superintendent contract occurs, it should be publicly justified, Wagner said. "Pennsylvania taxpayers deserve to know if their tax dollars are being spent in a wise and prudent manner."

Wagner's audit of the Gettysburg Area School District covered the period Jan. 8, 2010, through Dec. 1, 2011, and his audit of the City of Allentown School District covered the period Aug. 18, 2011, through Nov. 21, 2011.

The audit of the Gettysburg Area School District found that only nine months into a four-and-a-half year contract, the school district's board placed its superintendent on immediate and paid administrative leave beginning Sept. 21, 2010. According to the district, the leave was for personal reasons.  During the period Sept. 21, 2010, to Jan. 31, 2011, the district paid the former superintendent $49,367 for administrative leave. In addition, the school board approved a settlement agreement effective Feb. 1, 2011, subsequent to the superintendent's approved paid leave that included: a requirement for the district to make payments to the superintendent totaling $226,752, and to award the superintendent mortgage loan and interest forgiveness totaling $313,293, and the district also spent $32,603 on expenses related to replacing the superintendent and maintaining interim management.

The audit of the City of Allentown School District found that on Aug. 18, 2011, the school district's board voted to end the superintendent's original five-year contract at the beginning of the superintendent's second year of employment with the district. The school board then rehired the superintendent as the school district's Director of Strategic Initiatives for one year, but he could not be required to report to work for more than 10 days out of the entire year that he was to remain an employee of the school district. However, the altered agreement stipulated that the superintendent's annual salary of $195,000 would remain the same, as would many of the benefits, including a tax deferred annuity worth $17,000.  Additionally, the altered agreement required that a $55,000 lump sum payment be made to the superintendent. Moreover, the District spent $27,503 to fill the vacant position of superintendent, as a result of a pay increase given to the individual who assumed the position as Acting Superintendent.  

Wagner's review also found that both the Gettysburg Area School District and the City of Allentown School District may have improperly reported ineligible retirement wages to the Public School Employees' Retirement System (PSERS).

Wagner made several recommendations to correct the deficiencies identified by his audits, including that the school boards of the Gettysburg Area School District and the City of Allentown School District should:

• Enter into employment contracts with prospective superintendents at the three-year minimum term permitted by state law to limit potential financial liability by the district and taxpayers,
• Ensure that future employment contracts with prospective administrators contain adequate termination provisions sufficient to protect the interests of the district and its taxpayers in the event that the employment ends prematurely for any reason,
• Provide as much information as possible to the taxpayers of the district explaining the reasons for entering into an altered agreement and justifying the district's expenditure of public funds,
• Fully disclose in official board minutes the reasons  the district chooses to expend extremely large sums of public money on ending an administrator's contract,
• Work with successors to the superintendent to include in their current and future employment contracts provisions that address the compensation and benefits payable to, or on behalf of, said administrators in the event of a premature termination of their contracts,
• Avoid future real estate deals that require the district to act as a mortgage lender,
• Obtain detailed documentation that illustrates the services and deliverables provided by a former superintendent working in a new capacity,
• Upon termination of any employee, follow the provisions of the original employment contract and pay only what is due to the employee prorated for the term of services provided.

In addition, to address the issue of the possible improper reporting of retirement wages and service years, Wagner recommended that the school boards of the Gettysburg Area School District and the City of Allentown School District:

• Contingent upon PSERS final determination, report to PSERS only those wages allowable for retirement purposes, as stated in the PSERS Employer Reference Manual,
• Implement procedures for reviewing all salary and contribution reports, in order to ensure that only eligible wages are being reported to PSERS for retirement contributions,
• Require the administration to maintain all documentation to support assignments given to and performed by the former superintendent in his new position.

Complete copies of Wagner's reports are available at www.auditorgen.state.pa.us.

Auditor General Jack Wagner is responsible for ensuring that all state money is spent legally and properly.  He is the commonwealth's elected independent fiscal watchdog, conducting financial audits, performance audits and special investigations.  The Department of the Auditor General conducts thousands of audits each year.  To learn more about the Department of the Auditor General, taxpayers are encouraged to visit the department's website at www.auditorgen.state.pa.us.

SOURCE Pennsylvania Department of the Auditor General