Quakertown Community School District has been fighting hard to keep anyone from looking into their finances. They have opposed audits of their budget process, cash management, and spending. Here's why: For years, while the district has been threatening program cuts, and postponing long-overdue building repairs, it has budgeted poorly, improperly kept millions of extra dollars hidden in its reserves, and juggled money between accounts to keep your taxes artificially high.
Like all districts, QCSD has an emergency fund, called a Fund Reserve. It is supposed to serve as the security blanket in case of a disaster. But under Pennsylvania's Public School Law, if QCSD's Fund Reserve exceeds eight percent of its budgeted expenses, it can not raise property taxes. The reason is to prevent overtaxation. And the district has certified to the state every year that it complies. But at the end of the 2004-05 school year, QCSD had almost $7.9 million in reserve, or 12.6 percent. Yet property taxes were still raised.
Then, in 2006, while the administration threatened to cut sports and other programs, even close a school, to save $3.5 million, the Fund Reserve had $3 million more than the law allows!!! But your taxes were again raised, another 8.6 percent. At the end of June, 2007, while director Linda Martin suggested withholding badly-needed repairs to Haycock Elementary School because angry residents proposed joining the Palisades district, the Fund Reserve was over nine percent, and QCSD had more than $2.3 million in excess cash! Taxes went up again.
It works like this: First, planned spending has been overstated, and expected income understated. That resulted in about $2 million a year in higher taxes, which was then dumped into the Fund Reserve. $2 million which should have stayed in your pockets. Then, a couple of months later, they say "Ooops, we have too much in our fund balance, we need to spend it".
Spend it on what? That's hard to pin down, because the $2 million slush fund, plus whirlwind transfers of cash among budget items, lets them spend where they want, not on what the board authorized. The administration made 270 such transfers in just three months, from October 1 to December 31, 2006!!! But we do know that instead of using it for necessities like long-overdue repairs to Richland and Haycock Elementary Schools, they bought questionable luxuries like software to track students' eating habits.
And even when the money was spent on important items, like the million-dollar roof for the Milford Middle School, it was done in a costly and improper way. Major purchases should be "capitalized", with the cost spread over 10 or 15 years. Paying the entire million up front is bad finance, and bad business. But that's what happens when the district has too much of your money, and must spend it quickly.
For years QCSD overtaxed, collected interest on what they shouldn't have had, transferred the cash around, and then used it in ways that might have angered you if included in the public budgeting process. And it was all approved by board members like President Kelly Van Valkenburgh, Bob Leight, Zane Stauffer, and Linda Martin. But in 2005, businessman Paul Stepanoff, and professional auditor Manuel Alfonso, were elected, and started to question how the budget was created, and how the money was eventually spent. The board formed a four-member committee to investigate, including Paul and Manuel.
They uncovered the huge end-of-year surpluses, and Stepanoff and Alfonso requested the usual Variance Analysis to identify the excesses. You use VA all the time. So does every publicly traded company, and all government audits. It simply shows how the money you planned to spend on something (your budget) compares to what you actually spent. VA is the most important tool for any business to evaluate its budgeting process. But not in QCSD.
Director of Finance Sylvia Lenz objected, saying that that such a study would "raise more questions than it answered". Red flag!!! Red flag!!!
They learned that the various departments have no standard process to create their budgets. Again, Stepanoff and Alfonso requested a Variance Analysis to determine actual needs. Again Lenz refused. The committee voted. Not surprisingly, Leight and Stauffer opposed opening the records to scrutiny. A 2-2 deadlock. But tie votes were to be considered "yes". Lenz still balked, so, last month, Alfonso volunteered to do it. Acting Superintendent Dr. David Landis agreed. Cost to the taxpayers - zero.
After the 2003-04 school year, QCSD had a deficit of more than $1.6 million. Lenz wrote a memo saying "never again" will they repeat the shortfall, and QCSD now "budgets on the high side". The deficit quickly became a surplus of more than $2.3 million. And reserves skyrocketed into illegal territory. It sounds very much like departments were invited to over-budget. The problem isn't just Lenz. Blame a system that lacks standardized budgeting, encourages unlimited transfers which defeat the purpose of a board-approved budget, and has no real checks and balances. There is just no incentive to be accurate. And you pay.
The district has, in effect, two fund balances - unsupervised millions inside the budget, and the improperly-high emergency Fund Reserve. Instead of lowering taxes, QCSD hid the money, and raised taxes! This clearly violates the spirit, and the letter, of the law.
This is just another example of QCSD's wall of secrecy, like the hidden survey results, midnight teacher contracts, information about grads' college performance, grade manipulation, and statistics showing that unrestrained spending, not area development or school construction, is to blame for high taxes. It is our money, but we receive no explanations. It takes two determined board members, and the media, to shake out the truth.
Unfortunately, the budget process - or lack of process - still remains the same. There is no plan to have future Variance Analyses. Unless new Superintendent Lisa Andrejko, or the new board next year, adopts the standard accounting tool used in most businesses, we will never know if tax increases are truly necessary. Or if our school leaders still flout the law.