Controller Butkovitz Issues Audit of School District’s Financial Statements

For Immediate Release
Aug. 8, 2017

Contact:  Brian Dries

Controller Butkovitz Issues Audit of School District’s Financial Statements
City Controller finds $6.6 million owed to more than 2,300 former employees

PHILADELPHIA - City Controller Alan Butkovitz today issued an audit of the School District of Philadelphia’s financial statements that found $6.6 million is due to more than 2,300 former employees for termination pay.

Under the current labor agreements with many of its unionized employees, when an employee separates from School District employment, they are entitled to termination pay for the unused leave time within 30 to 75 days of their separation. Of the total amount outstanding for more than one year, $4.1 million is owed to those ages 55 and over at separation and $2.5 million is owed to those under age 55.  

For those 55 or older, the School District is supposed to deposit their termination pay with one or multiple tax shelter annuities as employer contributions. For those under 55, the School District is required to pay the former employee directly by check.

“The School District is in violation of labor agreements by not paying its former employees,” said Controller Butkovitz.  “Additionally, it is in violation of state law for not turning over unpaid amounts to the Commonwealth’s unclaimed fund.”

Pennsylvania’s escheat law states that unclaimed wages or other compensation for personal services that have remained unclaimed by the owner for more than two years is subject to the custody of the Commonwealth.  At the end of Fiscal Year 2016, $2.3 million should have been turned over to the state.

“There are laws in place to ensure that former employees are paid what they are rightly owed,” said Controller Butkovitz.  “The School District needs to dedicate the necessary resources to clean up the significant backlog of unprocessed payments.”

More than half of the employees owed termination pay left the School District more than five years ago, some far back as 2001.  The School District indicated that it will put forth every effort to locate employees whose address is no longer current and checks returned with no forwarding address.

“The School District needs a more efficient human resources strategy for locating terminated employees and ensuring payments are made timely,” said Controller Butkovitz.  “The longer a payment sits idle the less likely the former employee will get their money.”   

Other findings from the City Controller’s audit included the following:

  • Proper administrative approval is not applied to payroll processing which can increase the risk of errors and improper payroll expenditures,
  • Poor enforcement of policies and procedure for the $5 million Student Activity Funds which can increase the risk of theft and misuse; and 
  • School equipment inventory records were not always accurately updated and property tags were not always affixed to the equipment.