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HomeMy WebLinkAbout1751 McDonnellPHONE: 717 -783 -1610 TOLL FREE! 1- 800 - 932 -0536 In Re: Barbara McDonnell, Respondent {orb V STATE ETHICS COMMISSION FINANCE BUILDING 613 NORTH STREET, ROOM 309 HARRISBURG, RA 17120-0400 File Docket: X -ref: Date Decided Date Mailed: FACSIMILE: 717- 787 -0806 WEBSITE: www.etlilcs.pa.aav 18011 Order No. 1751 5/6119 5/10/19 Before: Nicholas A. Colafella, Chair Mark R. Corrigan, Vice Chair Roger Nick Melanie DePalma Monique Myatt Galloway Michael A. Schwartz Shelley Y. Simms This is a final adjudication of the State Ethics Commission. Procedurally, the Investigative Division of the State Ethics Commission conducted an investigation regarding possible violation(s) of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et sew., by the above -named Respondent. At the commencement of its investigation, the Investigative Division served upon Respondent written notice of the specific allegations. Upon completion of its investigation, the Investigative Division issued and served upon Respondent a Findings Report identified as an "Investigative Complaint." A Stipulation of Findings and a Consent Agreement were subsequently submitted by the parties to the Commission for consideration. The Stipulated Findings are set forth as the Findings in this Order. The Consent Agreement has been approved. ALLEGATIONS: That Barbara McDonnell, a public official /public employee in her capacity as the Superintendent of the Duquesne City School District, Allegheny County, violated Sections 1103(a), 1104(a), and 1105(a) of the State Ethics Act (Act 93 of 1998) when she utilized the authorityy of her public employment to authorize and receive advanced payments from the School District on her bI- weeKly paychecks, absent any approval or authorization to do same; and when she failed to file Statements of Financial Interests in her position as Acting Superintendent and /or Superintendent for calendar years 2012, 2014, 2015, and 2016. II. FINDINGS: 1. Barbara E. McDonnell ( "McDonnell ") served as the Superintendent of Duquesne City School District ( "District ") from July 1, 2016, until November 2, 2017. a. McDonnell served as the Acting Superintendent/Community Education Liaison for the District from July 1, 2013, through June 30, 2016. b. McDonnell was employed in a variety of other positions with the District from August 28, 2000, through June 30, 2013. 2. The District is a public school district subject to mandates delineated within the Pennsylvania Public School Code of 1949 ( "Code "). McDonnell, 18 -011 age a. The Code includes multiple Articles relating to the public school system as well as certain provisions applicable to private and parochial schools. 3. The District currently educates students spanning the grade range of Pre -K through 6th grade. a. All District students (Pre -K through 6th grade) are currently housed in one central building. 4. District high school students (grades 9 through 12) and middle school students Prades 7 and 8 have been educated at West Mifflin Area School District and/or ast Allegheny School District since the beginning of the 2007 — 2008 and 2012 -- 20'I3 school years, respectively. a. The educational services for District students at West Mifflin Area School District and East Allegheny School District are provided through legislatively mandated contracts. b. District high school and middle school students were transferred to West Mifflin Area School District and East Allegheny School District due to low standardized test scores as well as District financial concerns. 5. The District is currently governed by a Receiver on behalf of the elected nine - Member Board of School Directors ('Board"). a. A Receiver meeting is held on the fourth Tuesday of each month in lieu of the District's regular legislative Board meeting. 1. Although the elected Board Members attend the Receiver meetings, the Receiver makes all decisions at the meetings on the Board's behalf. b. The District does not hold regularly scheduled agenda /workshop meetings. C. The Receiver has the authority to call special meetings as needed. 6. The Receiver and elected Board Members are provided with meeting packets the Friday prior to the Receiver meeting for review. a. The packets are compiled by the District Business Manager /Board Secretary after discussion with the Receiver. b. Items within the meeting packet include, among other items, the agenda for the Receiver meeting, minutes to be presented for approval, and a Cash Disbursement Report/Bill List. 7. McDonnell was classified as an Act 93 Administrative /Supervisory Principal during her employment as the District Acting Superintendent /Community Education Liaison. a. As an Act 93 Administrative /Supervisory Principal, McDonnell's employment term, responsibilities, wages, benefits, etc., were established via an annual District Compensation Plan. b. The annual District Compensation Plan established the employment term, responsibilities, wages, benefits, etc., for multiple positions (including McDonnell, 18011 ag_9__ McDonnell's) at the District. 8. McDonnell maintained an individual contract with the District in relation to her employment as the District Superintendent ( "Superintendent "). a. McDonnell's individual contract identified her employment term, responsibilities, wages, benefits, etc. THE FOLLOWING FINDINGS REFERENCE THE HISTORY OF THE DISTRICT'S CLASSIFICATION AS A FINANCIALLY DISTRESSED DISTRICT AND THE DISTRICT'S ASSIGNMENT INTO RECEIVERSHIP. 9. Prior to October 2000, the District was governed by an elected, nine- Member Board. a. At the September 25, 2000, Board meeting, the Board voted unanimously to send correspondence to the State requesting that the State assume control of District operations. b. In October 2000, the Pennsylvania Secretary of Education declared the District to be financially distressed in accordance with requirements set forth in the Code. 10. From approximately November 2000 through October 2012, the District was governed by a three - Member Board of Control appointed by the Pennsylvania Department of Education ( "PDE "). a. Although the District's elected Board remained in place from November 2000 through October 2012, District operational decisions were made by the Board of Control. 11. In July 2012, the Pennsylvania General Assembly passed Act 141 of 2012 which introduced various amendments to the Code, including, in part, the addition of Article VI -A (School District Financial Recovery). a. The passing of Act 141 essentially converted the classification of a school district from that of being in financial distress to being in recovery status and identified the criteria for entering and exiting recovery status. 12. The Board of Control in place at the District was dissolved at or about the end of October /beginning of November 2012 in conjunction with the passing of Act 141 of 2012. a. Governance of the District reverted to the elected Board at that time. 13. On November 16, 2012, the Pennsylvania Secretary of Education issued a declaration that the District was in severe financial recovery status. a. The Pennsylvania Secretary of Education subsequentlyy appointed Dr. Paul Long ( "Long ") as the District Chief Recovery Officer ( °CRO'). As the CRO, Long (with the assistance of PDE) was responsible for the development, implementation, and administration of a recovery plan for the District. aa. Long's ultimate plan addressed both financial and educational recovery for the District. McDonnell, 18 -011 Page 14. Long's recovery plan was presented to the Board for consideration on or about February 11, 2013. a. The Board rejected the acceptance of Long's recovery plan via 0 -8 -1 vote at a special meeting held on February 21, 2013. 15. After the Board refused to ratify the recovery plan, PDE petitioned the Allegheny County Court of Common Pleas to place the District into receivership, appoint a Receiver, and implement the recovery plan. a. The petition was filed in the Allegheny County Court of Common Pleas on February 26, 2013. 16. The Allegheny County Court of Common Pleas granted PDE's petition on April 2, 2013. a. April 2, 2013, is recognized as the effective date of receivership for the District. b. April 2, 2013, is recognized as the formal date of implementation for the District's recovery plan. 17. The Allegheny County Court of Common Pleas subsequently appointed Long to the position of District Receiver ( "Receiver ") effective April 2, 2013, upon nomination by the Pennsylvania Secretary of Education. a. Upon appointment as the Receiver, Long assumed all powers and duties of both the CRO and the elected Board, except as noted below. b. Once in receivership, the powers and duties maintained by the elected Board were limited to setting District tax rates, modifying District debt, and reorganization. 18. The Pennsylvania Secretary of Education subsequently appointed Dr. Paul Rach ( "Rach ") as the new CRO effective July 1, 2013. a. Act 141 of 2012 allows for the appointment of a new CRO if the original CRO is appointed to the Receiver position. b. As the CRO, Rach's duties focused primarily on serving as an advisor to Long. 1. Rach was serving as the District Acting Superintendent when the District was placed into receivership. 19. Effective March 1, 2018, the Allegheny County Court of Common Pleas appointed Rach to the position of Receiver upon nomination by the Pennsylvania Secretary of Education. a. Rach was appointed as the Receiver upon Long's resignation from the position effective February 28, 2018. THE FOLLOWING FINDINGS RELATE TO DISTRICT EMPLOYEES RECEIVING PAYROLL ADVANCES /LOANS FROM THE DISTRICT. McDonnell, 18 -011 agp e� 20. The District maintains a General Fund Account and a separate Payroll Account at PNC Bank in relation to District operations. a. The Superintendent and the District Business Manager ( "Business Manager") maintain signature authority over District accounts. 1. The CRO and the Business Manager maintained signature authority over District accounts immediately prior to McDonnell's employment as the Superintendent. b. Required signatures are computer generated on District checks when printed. 21. The District issues payroll to its employees on the 15th day of each month and on the final day of each month (semimonthly). a. Payroll issued to Act 93 Administrative /Supervisory Employees is issued for the current payroll period. b. Specific salarieslwages paid to Act 93 Administrative /Supervisory Employees are delineated by position within the annual District Compensation Plan. 22. In or about September 2013, the District (Acting) Elementary Principal (the "Principal ") experienced financial hardship wich led to the need for additional income. a. The Act 93 Administrative /Supervisory Employees Compensation Plan in effect at the District at that time allowed for administrative personnel to be compensated at their per diem rate for up to five unused vacation days. 1. Issuance of per diem compensation for the unused vacation days required the approval of the Superintendent. 2. The Act 93 Administrative /Supervisory Principal Compensation Plan identified the payment date for unused vacation days to be to "... the June pay." 23. The Principal subsequently initiated contact with the District Business Office Specialist ('Business Office Specialist ") and inquired into the possibility of "selling" five unused vacation days to the District. a. The Principal intended to "sell" five vacation days immediately to the District and receive payment at that time. b. The Business Office Specialist informed the Principal that "sale" and payment for unused vacation days was permitted only in June. 24. Discussions were subsequently held at various times between the Principal and Rach; the Principal and McDonnell; and Rach and McDonnell in relation to the Principal's situation and potential options available. a. At the conclusion of the discussions among the various individuals, a determination was made that the Principal could obtain an advance on her contracted salary allotment due for the 2013/2014 school year. 1. The Principal was instructed to submit a written request for the pay advancelloan to McDonnell for approval as the Superintendent and ultimate processing through the Business Office. McDonnell, 18 -011 Page 2. The pay advancelloan was to be repaid to the District by the end of the school year in which issued via automatic payroll deduction. 25. The Principal submitted a written request dated September 27, 2013, to McDonnell, which resulted in the issuance of a pay advancelloan to the Principal in the amount of $1,000.00. a. McDonnell approved the pay advancelloan and forwarded the request to the Business Office Specialist for processing. b. The Business Office Specialist calculated the repayment schedule upon receipt of the request. 1. The repayment schedule was calculated by dividing the pay advancelloan amount by the remaining number of pay periods existing for the 2013 -2014 school year. 2. The Business Office Specialist's calculations were verified by the District Business Office Consultant ( "Business Office Consultant "), James Graham ( "Graham "). 3. The Business Office Specialist input into the District ayroll system the amount to be automatically deducted from each of the Principal's remaining 2013 -2014 paychecks. C. The request was subsequently provided to the Business Manager for coding /processing and ultimate check generation and issuance by Business Office personnel. d. The pay advancelloan was repaid to a zero balance by June 30, 2014, via automatic payroll deduction from the Principal's net wages. 26. Various District employees became aware of the issuance of the pay advancelloan to the Principal, due to participation in the pay advancelloan issuing process and/or through general conversation. a. Individuals involved in the issuing process included McDonnell, the Business Office Specialist, the Business Office Consultant, the Business Manager, and the District Business Office Assistant. b. The District Elementary School Secretary ( "Elementary School Secretary ") gained knowledge of the pay advancelloan through direct conversation with the Principal. 27. Issuance of the initial pay advancelloan in the fall of the 2013 -2014 school year resulted in multiple pay advances /loans being issued to at least three additional District employees over the course of the 2013 -2014 through 2016 -2017 school years. a. Pay advancelloan recipients included McDonnell, the Business Office Specialist, and the Elementary School Secretary. 28. Between the 2013 -2014 and 2016 -2017 school years, a minimum of twenty -two pay advances/loans, totaling approximately $41,250.00, were received by four separate District employees as detailed below: McDonnell, 18 -011 age Employee 2013-2014 2014-2015 2015-2016 2016-2017 Total a. All pay advancelloan checks that were issued originated from the District General Fund Account. b. All reimbursement due the District was reclaimed via automatic payroll deduction from each individual's respective net wages due prior to conclusion of the school year in which the pay advance/loan was issued. 29. McDonnell and/or the Business Manager authorized the issuance of at least ten pay advances/loans to the Principal, the Business Office Specialist, and the Elementary School Secretary by signing or initialing the written requests submitted and forwarding the requests to the Business Office. a. McDonnell approved a total of three pay advances/loans for the Principal and four pay advances/loans for the Business Office Specialist. b. Business Manager Nedene Gullen ("Gullen ") approved one pay advance/loan for the Principal and two for the Elementary School Secretary. 1. Gullen approved the pay advance/loan requests under McDonnell's authority due to McDonnell's absence from the District at the time the requests were submitted. 30. The Principal, the Business Office Specialist, and the Elementary School Secretary did not approve their own pay advance/loan requests. a. Pay advance/loan request approval was granted by McDonnell as the Superintendent or Gullen (under McDonnell s authority). b. The Principal, the Business Office Specialist, and the Elementary School Secretary were all subordinate to McDonnell in the District chain -of- command. 31. Pay advances/loans received by McDonnell during the individual school years between July 2013 and June 2017 totaled as follows: 2013 — 2014: $2,000.00 2014 — 2015: $3,500.04 No. of Loans Total Dollars No. of Loans Total Dollars No. of Loans Total Dollars No. of Loans Total Dollars No. of Loans Total Dollars McDonnell. 1 $2,000.00 3 $3,500.00 5 $10,050.00 2 $7,600.00 11 $23,150.00 Principal: 2 $3,000.00 1 $3,000.00 1 $2,000.00 1 $2,000.00 5 $10,000.00 Business 0 $0.00 1 $2,040.00 0 $0.00 3 $4,900.00 4 $6,940.00 Office Specialist: Elementary 0 $0.00 0 $0.00 0 $0.00 2 $1,160.00 2 $1,160.00 School Secretary: Total 3 $5,000.00 5 $8,540.00 6 $12,060.00 8 $15,660.00 22 $41,250.00 a. All pay advancelloan checks that were issued originated from the District General Fund Account. b. All reimbursement due the District was reclaimed via automatic payroll deduction from each individual's respective net wages due prior to conclusion of the school year in which the pay advance/loan was issued. 29. McDonnell and/or the Business Manager authorized the issuance of at least ten pay advances/loans to the Principal, the Business Office Specialist, and the Elementary School Secretary by signing or initialing the written requests submitted and forwarding the requests to the Business Office. a. McDonnell approved a total of three pay advances/loans for the Principal and four pay advances/loans for the Business Office Specialist. b. Business Manager Nedene Gullen ("Gullen ") approved one pay advance/loan for the Principal and two for the Elementary School Secretary. 1. Gullen approved the pay advance/loan requests under McDonnell's authority due to McDonnell's absence from the District at the time the requests were submitted. 30. The Principal, the Business Office Specialist, and the Elementary School Secretary did not approve their own pay advance/loan requests. a. Pay advance/loan request approval was granted by McDonnell as the Superintendent or Gullen (under McDonnell s authority). b. The Principal, the Business Office Specialist, and the Elementary School Secretary were all subordinate to McDonnell in the District chain -of- command. 31. Pay advances/loans received by McDonnell during the individual school years between July 2013 and June 2017 totaled as follows: 2013 — 2014: $2,000.00 2014 — 2015: $3,500.04 McDonnell, 18 -011 ag�9 - — 2015 — 2016: $10,050.00 2016 — 2017: 7,600.00 Total: $23,150.00 32. Rach was consistently made aware of McDonnell's requests for pay advances. a. McDonnell submitted her requests to the Business Office Specialist, who verbally informed Rach of McDonnell's requests. b. McDonnell, as the Superintendent, was subordinate to Rach in his position as the CRO. C. Rach, as the CRO, had the authority to deny or limit any requests for pay advances, including those for McDonnell. 33. All of McDonnell's payroll advances were documented on the applicable District Cash Disbursement Reports presented for ratification at monthly Receiver meetings, as shown below: 11/26/13 01/15/14 11/24/14 01/21/15 11/24/14 01/21/15 02/17/15 03/17/15 07/01/15 09/18/15 01/20/16 02/17/16 03/15/16 04/08/16 04/09/16 05/13/16 04/09/16 05/13/16 10/20/16 11/28/16 02/17/17 03/23/17 Total -- 38508 12/17/13 Barbara Yes NIA McDonnell -- 39817 11/24/14 Barbara $1,027.38 01/27/15 McDonnell -- 39916 12/23/14 Barbara Yes NIA McDonnell – 40087 02/24/15 Barbara $3,560.00 02/23/16 McDonnell – 40550 07/23/15 Barbara Yes NIA McDonnell – 41405 02/10/16 Barbara $550.00 05/24/16 McDonnell – 41585 04/01/16 Barbara Yes 03022017 McDonnell – 41643 04/19/16 Barbara McDonnell – 41679 04/25/16 Barbara McDonnell – 42435 11/07/16 Barbara McDonnell – 42909 03/01/17 Barbara McDonnell NIA $3,836.66 01/21/14 Yes NIA $1,000.00 01/27/15 Yes N/A $1,027.38 01/27/15 Yes NIA $2,000.00 03/24/15 Yes NIA $2,000.00 09/29/15 Yes N/A $3,560.00 02/23/16 Yes NIA $3,200.00 04/19/16 Yes NIA $800.00 05/24/16 Yes NIA $550.00 05/24/16 Yes 11012016 $5,600.00 12/06/16 Yes 03022017 $2,000.00 03/28/17 Yes $23 150.00^ res are computer printed upon check generation Notes; Check No. 38508 includes $1,836.66 in tuition and mileage reimbursement in addition to $2,000.00 advance /loan Check No. 39916 includes $527.38 in mileage reimbursement in addition to $500.00 advance /loan Check No. 41405 includes $60.00 in mileage reimbursement in addition to $3,500.00 advance/loan ^: Total reflects advance/loan total only a. bong and Rach routinely received the monthly Receiver meeting packet for review at least three days prior to the Receiver meeting. McDonnell, 18 -011 ag'lgee 9 Cash Disbursement Reports were routinely included in the monthly meeting packets. 2. Neither Long nor Rach questioned any of the loan entries attributable to McDonnell or any other District employee receiving a ay advance/loan as documented on the Cash Disbursement Reports. b. Long ratified all of the applicable Cash Disbursement Reports at public Receiver meetings, which documented issuance of pay advances/loans to McDonnell. As Receiver, Long was responsible for acting on behalf of /in place of the elected Board on all Board matters, with the exception of setting District tax rates, modifying debt, and Board reorganization. 34. McDonnell consistently reimbursed the District the specific amount(s) she was advanced /loaned by June 301h of each respective school year in which the pay advance/loan was received. a. McDonnell's reimbursements to the District were made via automatic payroll deduction. b. McDonnell's net pay represented payroll /salary received after the automatic deduction of the repayment amount identified. G. McDonnell reimbursed the District the full amount of salary advances received prior to the conclusion of the fiscal year /school year in which the advances were issued. 35. The District pay advances/loans which McDonnell, the Principal, the Business Office Specialist, and the Elementary School Secretary received were issued with no costs, fees, interest rates, or security required. a. Calculated pay advance/loan repayments required repayment only at face value of the pay advances/loans received. 36. In December 2017, the Pennsylvania Department of the Auditor General released its 2012 -2013 through 2015 -2016 District audit report. a. The audit identified District employees' receipt of interest -free loans (pay advance) as one of four findings relating to the District's failure to apply best practices /non- compliance with relevant requirements. 37. Following issuance of the audit report, Graham calculated the approximate amount of interest the District lost from its General Fund Account as a result of the pay advances/loans issued as well as the approximate amount of statutory interest the advance/loan recipients avoided. a. Interest lost from the General Fund Account was calculated at the interest rates the District was receiving on its account at the times the pay advances/loans were received. The loss to the General Fund Account was calculated as $5.55. McDonnell, 18 -011 ag�F- 2. Long reimbursed the District the calculated interest lost from the General Fund Account via issuance of a personal check to the District. b. An interest rate of six percent (6 %) was utilized to calculate the interest fees avoided by the pay advance/loan recipients. 1. The six percent rate was utilized in accordance with 41 P.S. § 201 (Maximum Lawful Interest Rate). aa. Pursuant to 41 P.S. § 201, a maximum lawful interest rate of six percent applies for all loans or uses of money totaling $50,000.00 or less where no specific lesser rate is set. 38. On March 14, 2018, the District issued individual correspondence to McDonnell and the remaining District pay advance/loan recipients via certified mail, requesting voluntary payment of interest fees calculated in relation to his/her respective total advance/loan received. a. Interest fees assessed to McDonnell as a result of receiving interest -free pay advances /loans from the District were identified in the correspondence to McDonnell as detailed below: School Year 2013 —2014 2014 —2015 2015— 2016 2016— 2017 Total Interest Calculated $44.34 $50.38 $145.77 $132.78 $373.27 39. On March 28, 2018, McDonnell made voluntary payment of the calculated interest fees totaling $373.27 via issuance of a personal check dated March 23, 2018, payable to the District. a. McDonnell documented "Interest" in the "For" section of the personal check. b. McDonnell issued personal payment to the District in the amount of $373.27 representing interest fees associated with her salary advances received. 1. The amount requested in payment of interest fees was calculated by the District. 40. During a sworn statement provided to State Ethics Commission Investigators on September 6, 2018, McDonnell asserted the following, among other information: a. The concept of issuing salary advances to District personnel did not originate with McDonnell. b. Rach was aware of McDonnell's salary advance requests prior to processing the requests. C. McDonnell followed the same process for her own salary advance request that was utilized for the issuance of the original salary advance to the Principal which had been approved. d. McDonnell repaid the entire balance of salary advances received prior to the conclusion of the fiscal year /school year in which issued. McDonnell, 18 -011 ag' e e. McDonnell voluntarily offered to pay interest on the salary advances she received upon notification that the propriety of the advances was being questioned. f. McDonnell did not receive any funds /advances from the District in excess of her contracted annual salary to be received. THE FOLLOWING FINDINGS RELATE TO MCDONNELL FAILING TO FILE STATEMENTS OF FINANCIAL INTERESTS FOR CALENDAR YEARS 2012, 2014, 2015, AND 2016. 41. On March 1, 2018, and March 27, 2018, contact was made with the District during which copies of McDonnell's Statements of Financial Interests ( "SFIs ") for calendar years 2012 through 2016 were requested. a. McDonnell's calendar year 2013 SFI was the only SFI maintained by the District for McDonnell within the requested date range. 42. McDonnell failed to file or otherwise maintain SFIs for calendaryears 2014 through 2016 with the District as required by the State Ethics Act. 43. McDonnell voluntarily submitted newly - completed SFIs to the Investigative Division for calendar years 2014, 2015, and 2016 which were received at the State Ethics Commissions Pittsburgh Regional Office on September 17, 2018. a. McDonnell was informed of her lack of SFIs on file with the District for calendar years 2014, 2015, and 2016 during a September 6, 2018, interview with State Ethics Commission Investigators. b. All of McDonnell's newly- submitted SFIs bear a completion date of September 13, 2018. III. DISCUSSION. As the Acting Superintendent of the Duquesne City School District ( "District ") from July 1, 2013, through June 30, 2016, and as the Superintendent of the District from July 1, 2016, until November 2, 2017, Respondent Barbara McDonnell, also referred to herein as "Respondent," "Respondent McDonnell," and "McDonnell," was a public officiallpublic employee subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act'), 65 Pa. C.S. § 1101 et seq. The allegations are that McDonnell violated Sections 1103(a), 1104(a), and 1105(a) of the Ethics Act when she utilized the authority f her public employment to authorize and receive advanced payments from the District on her bi- weekly paychecks, absent any approval or authorization to do same; and when she failed to file Statements of Financial Interests ( "SFIs ") in her position as the Acting Superintendent and/or the Superintendent for calendar years 2012, 2014, 2015, and 2016. Per the Consent Agreement, the Investigative Division has exercised its prosecutorial discretion to nol pros the allegation under Section 1105(a) of the Ethics Act. Based upon the nol pros, we need not address the Section 1105(a) allegation that is no longer before us. Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is prohibited from engaging in conduct that constitutes a conflict of interest: § 1103. Restricted activities McDonnell, 18 -011 Page 2 (a) Conflict of interest. ---No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 Pa.C.S. § 1103(a). The term "conflict of interest" is defined in the Ethics Act as follows: § 1102. Definitions "Conflict" or "conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. The term does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. 65 Pa.C.S. § 1102. Section 1103(a) of the Ethics Act prohibits a public official /public employee from using the authority of public office /employment or confidential information received by holding such a public position for the private ecuniar benefit of the public official /public employee himself, any member of his immediate family, or a business with which he or a member of his immediate family is associated. Section 1104(a) of the Ethics Act provides that each public official /public employee must file an SFI fort the preceding calendar year, each year that he holds the position and the year after he leaves it. As noted above, the parties have submitted a Consent Agreement and Stipulation of Findings. The parties' Stipulated Findings are set forth above as the Findings of this Commission. We shall now summarize the relevant facts as contained therein. McDonnell served as the Acting Superintendent/Community Education Liaison for the District from July 1, 2013, through June 30, 2016, and as the Superintendent of the District from July 1, 2016, until November 2, 2017. Effective April 2, 2013, the District was placed into receivership pursuant to the provisions of the Public School Code of 1949, and Dr. Paul Long ( "Long ") was appointed as the District Receiver ( "Receiver "). Once the District was placed into receivership, the powers and duties of the Districts elected nine - Member Board of School Directors ( "Board ") were limited to reorganization, setting District tax rates, and modifying District debt, and Long, as the Receiver, assumed all other powers and duties of the Board. Dr. Paul Rach ( "Rach ") was appointed as the District Chief Recovery Officer ( "Chief Recovery Officer "), with duties that focused primarily on serving as an advisor to Long. The District maintains a General Fund Account and a Payroll Account at PNC Bank in relation to District operations. An annual District Compensation Plan establishes the salaries/wages and benefits for the District's Act 93 Administrative /Supervisory Employees. During McDonnell's employment as the Acting Superintendent/Community Education McDonnell, 18 -011 ag —eTF- Liaison, her wages were established by the annual District Compensation Plan. McDonnell's wages as the Superintendent were established by an individual contract that she had with the District. In or about September 2013, the District (Acting) Elementary Principal (the "Principal ") needed additional income due to financial hardship. The District Compensation Plan in effect at that time allowed for administrative personnel to be paid in June for up to five unused vacation days with the approval of the Superintendent. When the Principal contacted the District Business Office Specialist ( "Business Office Specialist ") and inquired into the possibility of immediately "selling" five unused vacation days to the District and receiving payment at that time, the Principal was Informed that "selling" and being paid for unused vacation days was permitted only in June. After discussions were held between the Principal and Rach, the Principal and McDonnell, and Rach and McDonnell in relation to the Principal's situation and potential options available, a determination was made that the Principal could obtain an advance on her contracted salary allotment due for the 2013/2014 school year. The pay advance /loan was to be repaid to the District by the end of the 2013/2014 school year via automatic payroll deduction. The Principal was instructed to submit a written request for the pay advance/loan to McDonnell for approval as the Superintendent. McDonnell approved the Principal's pay advance/loan request dated September 27, 2013, and forwarded the request to the Business Office Specialist, who calculated the repayment schedule for the pay advance/loan and input into the District payroll system the amount to be automatically deducted from each of the Principal's remaining paychecks for 2013 -2014. A pay advance/loan in the amount of $1,000.00 was subsequently issued to the Principal. The payladvance loan was repaid to a zero balance by June 30, 2014, via automatic payroll deduction from the Principal's net wages. After various District employees became aware of the issuance of the pay advance/loan to the Principal, multiple pay advances/loans were issued to at least three other District employees, including McDonnell, over the course of the 2013 -2014 through 2016 -2017 school years. The pay advances/loans were issued with no costs, fees, interest rates, or security required. During that time period, McDonnell or the District Business Manager —under McDonnell's authority— approved at least ten pay advances/loans for the Principal, the Business Office Specialist, and the Elementary School Secretary by signing or Initialing the written requests submitted and forwarding the requests to the Business Office. McDonnell submitted her requests for pay advances/loans to the Business Office Specialist, who verbally informed Rach of McDonnell's requests. McDonnell, as the Superintendent, was subordinate to Rach in his position as the Chief Recovery Officer, and Rach had the authority to deny or limit any requests for pay advances, including those from McDonnell. From the 2013 -2014 school year through the 2016 -2017 school year, McDonnell received eleven pay advances/loans totaling $23,150.00, as detailed in Fact Findin 28. McDonnell repaid the District in full for each pay advance/loan prior to the end oY the school year in which she received the pay advancelloan. McDonnell repaid the District for the pay advances/loans via automatic payroll deduction. All of McDonnell's pay advances/loans were documented on the applicable Cash Disbursement Reports presented for ratification at monthly Receiver meetings. Lon and Rach routinely received the monthly Receiver meeting packet, which included a Cash Disbursement report, for review at least three days prior to the Receiver meeting Neither Long nor Rach questioned any of the pay advance/loan entries attributable to McDonnell or any other District employee as documented on the Cash Disbursement Reports. At public Receiver meetings, Long ratified all of the Cash Disbursement Reports which documented the issuance of pay advances/loans to McDonnell. McDonnell, 18 -011 ag2F___ In December 2017, the Pennsylvania Department of the Auditor General released its 2012 -2013 through 2015 -2016 District audit report, which identified the receipt by District employees of interest -free pay advances/loans as one of four findings relating to the District's failure to apply best practices/non-compliance with relevant requirements. The District Business Office Consultant subsequently calculated that the District General Fund Account had sustained a loss of approximately $5.55 in interest as a result of the pay advances/loans being issued to District employees. Long issued a personal check to the District as payment for the lost interest. The District Business Office Consultant also calculated the approximate amount of interest that McDonnell and other District employees had avoided payin g as a result of receiving interest -free pay advances/loans from the District. The District Business Office Consultant calculated the interest by utilizing a statutory maximum lawful interest rate of six percent pursuant to 41 P.S. § 201. Based upon a six percent interest rate, the total amount of interest that would have been associated with McDonnell's pay advances/loans was calculated to be $373.27, with interest attributed to each school year's pay advances/loans as follows: (1) $44.34 in interest for the 2013 -2014 school year; (2) $50.38 in interest for the 2014 -2015 school year; �3y $145.77 in interest for the 2015 -2016 school year; and (4) $132.78 in interest for the 2 6 -2017 school year. By correspondence issued on March 14, 2018, the District asked McDonnell for voluntary payment in the total amount of $373.27 as interest assessed in relation to the pay advances/loans that she had received. On March 28, 2018, McDonnell voluntarily paid the District the amount of $373.27, which represented interest associated with her pay advances/loans. As for McDonnell's SFIs, on March 1, 2018, and March 27, 2018, the Investigative Division of the Commission requested copies of McDonnell's SFIs for calendar years 2012 through 2016 from the District. McDonnell's SFI for calendar year 2013 was the only SFI within the requested date range that was on file with the District. Having highlighted the Stipulated Findings and issues before us, we shall now apply the Ethics Act to de (ermine the proper disposition of this case. The parties` Consent Agreement sets forth a proposed resolution of the allegations as follows: 3. The Investigative Division will recommend the following in relation to the above allegations: That no violation of Section 1103(a) of the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1103(a), occurred in relation to Barbara McDonnell, in her capacity as the Superintendent of the Duquesne City School District, authorizing advances of biweekly pay to herself, in that insufficient evidence exists to establish either: 1. A use of office to acquire a pecuniary benefit in violation of the Ethics Act; or Receipt of a private pecuniary benefit in violation of the Ethics Act. b. Additionally, any use of office in authorizing advances of bi- weekly pay to herself, or other employees of the Duquesne City School District, McDonnell, 18 -011 ag�F- Loccurred] with the tacit approval of the District Chief Recovery Officer and/or District Receiver. C. That a transgression of Section 1104(a) of the Public Official and Employee Ethics Act, 65 Pa.C.S. LcDonnell, 1104(a), occurred in relation to Barbara in her capacity as the Superintendent of the Duquesne City chool District, failing to file Statements of Financial Interests in her position as Acting Superintendent and/or Superintendent for calendar years 2012, 2014, 2015, and 2016. d. That nofurtheraction be undertaken pursuantto Section 1105(a) of the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1105(a), as the events merge with that of paragraph 3(b) above. McDonnell has, prior to the issuance of the Investigative Complaint/Findings Report, made repayment of any and all pay advance, as well as payment of statutory interest as calculated by the Duquesne City School District, and as such no further action is deemed necessary. McDonnell has, prior to the issuance of the Investigative Complaint/Findings Report, filed complete and accurate Statements of Financial Interests with the Duquesne City School District, through the Pennsylvania State Ethics Commission, for calendar years 2012, 2014, 2015, and 2016. As such no further action is deemed necessary. 6. The Investigative Division will recommend that the State Ethics Commission take no further action in this matter; and make no specific recommendations to any law enforcement or other authority to take action in this matter. Such, however, does not prohibit the Commission from initiating appropriate enforcement actions in the event of Respondent's failure to comply with this agreement or the Commission's order or cooperating with any other authority who may so choose to review this matter further. Consent A regiment, at 1 -2. In considering the Consent Agreement, we agree with the parties that there is an insufficiency of evidence to establish a violation of Section 1103(a) of the Ethics Act in this matter. From the 2013 -2014 school year through the 2016 -2017 school year, McDonnell received eleven pay advances /loans totaling $23,150.00 from the District. McDonnell submitted her requests for pay advances /loans to the Business Office Specialist. Rach, who as the Chief Recovery Officer had the authority to deny or limit any requests for pay advances /loans, was verbally informed by the Business Office Specialist of McDonnell's requests. Neither Rach nor the Receiver, Long, questioned any pay advance /loan entries attributable to McDonnell as documented on Cash Disbursement Reports that Rach and Long received for review. At ublic Receiver meetings, Long ratified all of the Cash Disbursement Reports which documented the issuance of McDonnell's pay advances /loans. McDonnell repaid the District in full for her pay advances/loans, and at McDonnell, 18 -011 ag�F- the request of the District, she voluntarily paid the District the amount of $373.27 as interest associated with her pay advances /loans. There is no basis in the Stipulated Findings for concluding that McDonnell used the authority of her public position(s) as the Acting Superintendent and/or the Superintendent of the District to authorize her own pay advances/loans or that she realized a private pecuniary benefit as a result of receiving those pay advances /loans. Accordingly, based upon the Stipulated Findings and the Consent Agreement, we hold that no violation of Section 1103(a) of the Ethics Act, 65 Pa.C.S. 1103(a), occurred in relation to the allegation that McDonnell, in her capacities as the Acting Superintendent and the Superintendent of the District, authorized advances of bi- weekly pay to herself, in that: (1) insufficient evidence exists to establish either a use of office to acquire a private pecuniary benefit in violation of the Ethics Act or the receipt of a private pecuniary benefit in violation of the Ethics Act; and (2) any use of office in authorizing advances of bi- weekly pay to herself or other employees of the District occurred with the tacit approval of the Chief Recovery Officer and/or the Receiver. We agree with the parties, and we hold, that a transgression of Section 1104(a) of the Ethics Act, 65 Pa.C.S. § 1104(a), occurred in relation to McDonnell, in hercapacities as the Acting Superintendent and the Superintendent of the District, failing to file SFIs for calendar years 2012, 2014, 2015, and 2016 We note that the Consent Agreement provides that prior to the issuance of the Investigative Complaint/Findings Report in this matter, McDonnell filed complete and accurate SFIs for calendar years 2012, 2014, 2015, and 2016 with the District, through this Commission. We determine that the Consent Agreement submitted by the parties sets forth a proper disposition for this case, based upon our review as reflected in the above analysis and the totality of the facts and circumstances. IV. CONCLUSIONS OF LAW: 1. As the Acting Superintendent of the Duquesne City School District ( "District ") from July 1, 2013, through June 30, 2016, and as the Superintendent of the District from July 1, 2016, until November 2, 2017, Respondent Barbara McDonnell McDonnell") was a public official /public employee subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seg. 2. No violation of Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a), occurred in relation to the allegation that McDonnell, in her capacities as the Acting Superintendent and the Superintendent of the District, authorized advances of bi- weekly pay to herself, in that: (1) insufficient evidence exists to establish either a use of office to acquire a private pecuniary benefit in violation of the Ethics Act or the receipt of a private pecuniary benefit in violation of the Ethics Act; and (2) any use of office in authorizing advances of bi- weekly pay to herself or other employees of the District occurred with the tacit approval of the District Chief Recovery Officer and /or the District Receiver. 3. A transgression of Section 1104(a) of the Ethics Act, 65 Pa.C.S. § 1104(a), occurred in relation to McDonnell, in her capacities as the Acting Superintendent and the Superintendent of the District, failing to file Statements of Financial Interests for calendar years 2012, 2014, 2015, and 2016. In Re: Barbara McDonnell, File Docket: 18 -011 Respondent Date Decided: 516119 Date Mailed: 5110119 ORDER NO. 1751 1. No violation of Section 1103(a) of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1103(a), occurred in relation tote allegation that Barbara McDonnell ( "McDonnell "), in her capacities as the Actin Su erintendent and the Superintendent of the Duquesne City School District ('District'), authorized advances of bi- weekly pa to herself, in that: (1) insufficient evidence exists to establish either a use of office to acquire a private pecuniary benefit in violation of the Ethics Act or the receipt of a private pecuniary benefit in violation of the Ethics Act; and (2) any use of office in authorizing advances of bi- weekly pay to herself or other employees of the District occurred with the tacit approval of the District Chief Recovery Officer and/or the District Receiver. 2. A transgression of Section 1104(a) of the Ethics Act, 65 Pa.C.S. § 1104(a), occurred in relation to McDonnell, in her capacities as the Acting Superintendent and the Superintendent of the District, failing to file Statements of Financial Interests for calendar years 2012, 2014, 2015, and 2016. BY THE COMMISSION, Nicholas A. Colafella, Chair