AUDITOR GENERAL WEIGHS IN ON SCHOOL BOARD’S SPENDING ON CATERED MEALS

On December 27, 2011, Pennsylvania Auditor General Jack Wagner released a final report concerning an investigation undertaken by the Department’s Office of Special Investigations into the spending practices of the former Superintendent and Board of School Directors of theReadingSchool Districtduring the 2005-2006 through 2008-2009 school years.  The report concluded that the practices of the former Superintendent and Board—which resulted in $76,000 being spent on catered meals for Board and Administration functions over a 3 ½ year period—violated state law and constituted a waste of taxpayer resources.  A link to the full report can be found at our firm’s website.  The facts involved are fairly extreme, and as a result, the degree to which this report can provide guidance to other school districts may be limited, but it is nonetheless useful for districts to consider the information and findings contained in the report in setting Administrative and Board practice. 

The matter began when the Federal Bureau of Investigation (FBI), which was engaged in a separate investigation of criminal allegations concerning the Board of School Directors of the Reading School District, informed the Pennsylvania Auditor General’s Office that it had become aware of information suggesting that the District’s Board and Superintendent were authorizing significant expenditures for Board and Administration catered events.  Specifically, the Auditor General discovered that the District’s Food Service Department had invoiced the Board for over $43,000 in food expenses over a fourteen-month period in 2007-2008, while outside catering expenses exceeding $14,000 were charged to the District over the same period.  Food was provided for such occasions as Board Committee and Voting Meetings, open house, a Key Communicator dinner, a thank-you breakfast and teacher induction training.  The Auditor General also noted that the food provided to the Board and upper-level Administration was “lavish” in nature.  Multiple invoices from the Food Service Department were for jumbo lump crabmeat, while one particular dinner, catered by an outside firm, included a menu of grilled chicken breast stuffed with goat cheese, teriyaki salmon fillets and pan-fried risotto. 

Apart from the actual expenditures made by the Superintendent and Board, the Auditor General also found numerous irregularities in the manner in which theReadingSchool Districtwas handling its finances in this area.  The Superintendent was the only District employee to possess a credit card, and his charges were not preapproved or audited after the fact.  Further, when the invoices for food were paid by the District’s Business Manager, they were coded erroneously as “supplies” on the District’s Annual Financial Reports, thus keeping them hidden from view and scrutiny.  The Superintendent signed the Financial Reports for submission to the Commonwealth with those coding errors intact, and while the Auditor General did not find that the Superintendent knew the food expenditures were being concealed, it did find that the Superintendent failed to exercise due diligence in reviewing the manner in which General Fund expenses were being entered on the Reports.

As for the purchase of food for school district functions, prior Auditor General investigations had held that school cafeteria services may not be used to cater private events, but “[t]he issue of whether the Public School Code prohibits the expenditure of school district money to cater meals for school board and other administrative meetings is not quite clear.”  The Auditor General noted that there is no express authorization in the School Code to provide meals to Board Members or Administrators, while there is express authorization for reimbursement of travel and conference expenses. He then concluded that the general powers of school districts granted in Section 211 of the School Code do not include the power to expend funds on catered meals for Board and Administrative Meetings.  However, although the Auditor General noted that the law was unclear, he entered a finding against the Reading School District for the $76,000 which had been spent and “acknowledge[d] that no court of competent jurisdiction has decided this precise issue, but unless and until such a court holds that providing catered meals for school board and other administrative meetings and social events at taxpayer expense is authorized by the Public School Code, the position of the Department of the Auditor General will be that such expenditures are illegal.  Even if a court were to rule that such expenditures are not illegal, we would still find the egregious expenditures discovered in this investigation to be grossly wasteful and abusive.”  To carry out these findings, the Auditor General recommended that the District change its catering and accounting practices and pursue legal action against its former Superintendent and Business Manager and seek reimbursement from the Superintendent, Administrators and Board Members who accepted the meals.

What does this mean for your district, and especially for the punch, cookies or sandwiches you might serve before or after a Board Meeting?  Recall the old maxim that bad facts make bad law.  When it was discovered that the Board and Superintendent of the financially-distressed Reading School District, with the Commonwealth providing up to 80% of its operating budget, paid $76,000 for “lavish” food for the Board and Administration over a 3 ½ year period, the Auditor General was going to bring an end to that practice, one way or another.  Following this report’s release, neither the Department of Education nor the Auditor General has made any further public statements on the underlying issue of whether food may be provided at Board meetings.  Until further clarification is provided, the issue remains unresolved.  Therefore, it is not our recommendation that school districts immediately discontinue current practices, but it is advisable that any food provided at Board Meetings by districts be simple and inexpensive.  As is generally the case, a reasonable, prudent approach is the best course of action.  We will provide further updates as developments occur.    

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