Despite having multimillion-dollar budgets, intermediate units fly 'under the radar'
Audits failed to catch problems at three Pennsylvania intermediate units embroiled in financial scandals since 2011, even though budgets for such organizations can exceed $100 million and spending is subject to local, state and federal reviews.
A judge sentenced one executive director in Northeastern Pennsylvania to federal prison for stealing money. Officials with the Grove City-based Midwestern Intermediate Unit IV question whether a former director spent thousands of agency dollars on herself. School districts accused an IU in Meadville of overcharging them by millions of dollars.
Some problems stretched on for years.
Auditor General Eugene DePasquale, whose office is auditing the Grove City unit, said the state's 29 intermediate units, serving about 50,000 students, receive hundreds of millions of taxpayer dollars and it's difficult to track all their contracts.
Intermediate units provide services ranging from health insurance plans for member school districts to administrative help.
Midwestern, for example, covering districts in Mercer, Butler and Lawrence counties, budgeted $103 million for 2013-14.
Allegheny Intermediate Unit 3, with more than 2,000 employees to cover 42 Allegheny County school districts, handles nearly $183 million. It has nearly 140 budgets for programs, said Executive Director Linda Hippert.
DePasquale's office audits the units every three or four years, a timetable set by law. He said his office and the Department of Education have limited resources.
The Legislature in 2011 required IUs to report contracts and funding sources exceeding $50,000; the Education Department puts the information online. Lawmakers hoped that public examination of records would encourage transparency.
It might be time to look at the law again, said Rep. Duane Milne, R-Chester County, its co-sponsor.
“We may need some separate categories of law as to how they're being monitored,” Milne said.
Said DePasquale: “A law is only as good as the enforcement.”
Controls and reviews
Intermediate units tend to operate under the radar, DePasquale said: “People pay attention to their school districts more than they do intermediate units.”
Grove City police are investigating whether Midwestern's ex-director Cecelia Yauger used an IU credit card for personal expenses for six years. Yearly audits did not flag her expense account. The IU's board looked more closely only when a Pittsburgh attorney sought records.
Annual audits examine overall spending and may include spot checks of expenditures, auditors say. A forensic audit looks at every expense.
A forensic audit of Yauger's expenses questioned more than $72,000 spent since 2007. Yauger, who resigned in April, had approved the payment of her bills.
Lippert said she and Allegheny's employees submit receipts for any spending, and three employees review reimbursement requests. To get reimbursed for a trip to McDonald's, for example, someone's receipt must list food items and note why it's a business expense.
“That couldn't happen here,” Lippert said about Grove City's situation.
This spring, Meadville-based Northwest Tri-County Intermediate Unit agreed to repay districts in Erie, Crawford and Warren counties $9 million because superintendents last year questioned whether it overbilled, though no one alleged misspending or missing money.
Near Scranton, the Auditor General's Office questioned spending by former director Fred R. Rosetti of Northeastern Intermediate Unit 19 and notified authorities in 2011. In March, a judge sentenced Rosetti to 33 months in prison for stealing nearly $140,000 between 1998 and 2010 by faking travel vouchers, having staff perform personal tasks for him and his family, and lying about vacation and sick time.
The Legislature established intermediate units in 1970 to be education service agencies, particularly for special education. When budgets tightened and IUs needed sources of money other than the state, they evolved into cooperatives for joint purchasing. They provide administrative services and train teachers.
School districts pay based on services. IUs receive millions in taxpayer dollars for student instruction.
Intermediate units must file annual budget reports and audits. Their directors told legislators in 2011 that the units get a combined $712 million from state and federal sources.
Governing boards of IUs have members from school boards. The boards keep watch over finances and operations, said Stuart L. Knade, head of the Pennsylvania School Board Association. He believes the units must “establish a culture where employees are expected to report those kinds of improprieties, where employees feel comfortable doing that.”
Bill Vidonic is a Trib Total Media staff writer. Reach him at 412-380-5621 or firstname.lastname@example.org.