PITTSBURGH, Pa. – The Penn Hills School Board rejected an audit critical of the district’s finances as it awaits the results of a forensic assessment by the Allegheny County District Attorney’s and state Attorney General’s offices.

The rejected 2015-16 audit by CPA Mark Turnley, part of annual state requirement, explained that the district is facing serious financial problems “far and above what most districts are facing.”

According to the Tribune-Review:

The 57-page audit warned that the district was at risk of losing funding if it could not produce missing records on how it spent money on school lunches and low-income students.

Further, the audit said the district will have to enact several years of tax increases and resolve gaps in internal controls to overcome its money problems, which include cash-flow shortages exacerbated by debt approaching more than double the district’s $87 million annual budget.

The financial dilemma beleaguering Penn Hills can be attributed to a combination of increases in pension and health care costs, losing students to charter schools, failure to evaluate the impact of programs and — the costliest misstep — racking up $172 million in construction debt while avoiding recommended tax hikes, according to Turnley and an analysis by the Tribune-Review .

The audit contends the district is over budget in numerous areas and doesn’t scrutinize spending closely enough. It also likely “overclaimed” reimbursements for school food services and is “potentially not in compliance” with reporting requirements for the National School Lunch Program.

District officials also failed to produce documents to justify Title I spending – funds received from the federal government to support low-income students. Turnley recommended the district get that paperwork in order “as soon as possible so as not to jeopardize funding for this program,” which the district budgeted at $1.6 million for the current school year, the Tribune-Review reports.

The audit was presented to the board last week, when the district’s new business manager David Roussos discussed its ramifications.

“The results are serious, and it shows the serious situation we’re in here at Penn Hills,” Roussos said, according to the Tribune-Review. “We’re moving in a positive direction, but we’re nowhere near being where we need to be.”

Roussos said the district is currently paying its debts with borrowed money, as a grand jury probe takes an in-depth look at the finances to determine if any of the financial mismanagement is criminal.

“Roussos said the district has received about $5 million in advances toward debt service payments and ongoing expenses from the state Department of Education,” the news site reports. “A $2 million advance was made March 30, and a $3 million advance arrived March 31.”

Roussos, the district’s third business manager in two years, described the grand jury probe as a good thing for the school district, and the only way out of the mess officials created for themselves.

“We need to understand what happened,” he said. “That would allow us to understand not just why we are here, but I think it would also shed a light on maybe some of the things we can do going forward to correct the situation – because where we are is not sustainable, it’s not acceptable and it has to change.”

Board members, meanwhile, voted 4-3 to shelve Turnley’s report while they await the forensic audit from investigators.

“:The figures that I’m looking at, I don’t know if they’re real,” board president Erin Vecchio said of Turnley’s report. “I want to see the forensic audit from the DA – that’s the only audit I’m going to vote on.”

Superintendent Nancy Hines told the news site officials are now studying how the board’s rejection of the state-mandated audit will impact the district.

“We’re going to review that and probably bring it back up in a month,” Hines said.

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