parser: parse error at or near "$1"

Hi ,
I'm getting this error :

Error occurred while executing PL/pgSQL function ins_schedule_status
line 42 at SQL statement
parser: parse error at or near "$1"

Unable to locate the cause. Please any hint or clue will be of great help.

Below is the function

CREATE FUNCTION ins_schedule_status(int4,time without time zone,varchar(256),int2,int2,int2) RETURNS int4 AS '
DECLARE
schedule_id ALIAS FOR $1;
var_current_time ALIAS FOR $2;
status ALIAS FOR $3;
status_code ALIAS FOR $4;
module ALIAS FOR $5;
var_level ALIAS FOR $6 ;
last_status varchar(256) ;
last_code int2;
level_value int2 ;
BEGIN
IF ( var_level != 0 )THEN
--select level_value =var_level;
level_value :=var_level;
ELSE

IF ( status_code = 0 or status_code < 0 )THEN
--select level_value = 1 ;
level_value := 1 ;
ELSE
--select level_value = 3 ;
level_value := 3 ;

END IF;
END IF;

-- dont report server control values, just positive values
IF ( status_code < 0 ) THEN
--select status_code = null;
--status_code := null;

-- check for the exact same status string reported
-- previously and skip it if found

select into last_status top 1 status, last_code status_code from status_log where schedule_id =schedule_id order by complete_time desc ;
if ( last_status = status and ( ( last_code is null and status_code is null ) or last_code = status_code ) ) THEN
return ;
END IF;

END IF;

insert into status_log ( log_id, computer_id,schedule_id,status,
status_code,
module,
level,
user_id,
schedule_time,
complete_time )
select 1,
computer_id,
schedule_id,
status,
status_code,
module,
level_value,
user_id,
start_time,
var_current_time
from
event_schedule
where
schedule_id =schedule_id;

return status_code;

END;'
LANGUAGE 'plpgsql' ;

Original MS _SQL stored procedure

create procedure ins_schedule_status
@schedule_id int,
@current_time datetime,
@status varchar(254),
@status_code smallint,
@module smallint,
@level smallint = 0
as
declare @level_value smallint
if ( @level != 0 )
select @level_value = @level
else
begin
if ( @status_code = 0 or @status_code < 0 )
select @level_value = 1
else
select @level_value = 3
end

-- don't report server control values, just positive values
if ( @status_code < 0 )
select @status_code = null

-- check for the exact same status string reported
-- previously and skip it if found
declare @last_status varchar(256)
declare @last_code smallint
select top 1 @last_status = status, @last_code = status_code from status_log
where schedule_id = @schedule_id order by complete_time desc
if ( @last_status = @status and ( ( @last_code is null and @status_code is null ) or @last_code = @status_code ) )
return

declare @tran int
set @tran = @@trancount

if (@tran = 0)
begin transaction

insert into status_log
( computer_id,
schedule_id,
status,
status_code,
[module],
[level],
[user_id],
schedule_time,
complete_time )
select
computer_id,
schedule_id,
@status,
@status_code,
@module,
@level_value,
user_id,
start_time,
@current_time
from
event_schedule
where
schedule_id = @schedule_id

if (@@error != 0)
begin
if (@tran = 0)
rollback transaction
end

if (@tran = 0)
commit transaction

GO

Regards,
-Sugandha