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August 09, 2017

Controller: Philly school district owes $6.6 million to former employees

Audits Education
School District of Philadelphia headquarters Thom Carroll/PhillyVoice

The School District of Philadelphia headquarters on North Broad Street.

Philadelphia Controller Alan Butkovitz on Tuesday issued a complete audit of the School District of Philadelphia and found that more than $6.6 million has been withheld from about 2,300 former employees dating as far back as 2001.

While the audit as a whole determined the school district fairly presented its basic financial statements for the fiscal year ending in June 2016, Butkovitz keyed in on an apparent violation of labor agreements and Pennsylvania's escheat law with respect to former employees.

The current labor agreement with many unionized employees stipulates that those who separate from the district are entitled to termination pay for their unused leave time within 30 to 75 days of their separation.

Based on the findings of the audit, of the total unpaid amount outstanding for more than one year, $4.1 million is owed to former employees over 55 years old and $2.5 million is owed to those under 55 years old.

For the first group, the district is supposed to deposit termination pay as employer contributions with one or more tax shelter annuities. Those under 55 are supposed to be paid directly by check.

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

The second violation refers to the state's escheat law, which requires that unpaid wages or compensation for personal services that have gone unclaimed for more than two years are subject to the custody of the commonwealth. At the end of FY 2016, the state should have received $2.3 million from the School District of Philadelphia.

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

Officials with the school district signaled their intention to locate former employees whose addresses have changed and send them their checks. Butkovitz said the district needs a more efficient human resources strategy to find these employees and ensure that they are paid in a timely manner.

The full audit of the School District of Philadelphia can be found here.