Lehighton hears proposals for annual forensic audits

Of the two auditing firms competing for Lehighton Area School District’s business, it is a Delaware company that looks to have the upper hand.

Lehighton’s finance committee on Monday night said it would recommend to the full school board to hire Barbacane, Thornton & Company to do both its regular annual audit and a forensic audit.

The recommendation came after hearing from BT&C managing partner Pam Baker as well as Jeffrey Weiss, a managing partner with Zelenkofske Axelrod, the other firm to submit a proposal for the job.

While Lehighton’s business manager, Patricia Denicola, told committee members that both firms seemed well versed in public education finances, it was the cost proposal that led to the recommendation.

According to Denicola, BT&C proposed a flat rate of $36,000 for three consecutive years of regular financial audits and a forensic audit rate ranging from $80 per hour for a regular employee to $250 per hour for one of the firm’s partners.

Zelenkofske, meanwhile, proposed a fee of $34,500 in the first year, $35,535 in the second year and $36,600 in the third year of a contract for the regular audit. For the forensic audit, it proposed a $95 per hour fee for a regular employee and a $380 per hour fee for a partner.

“When you are looking at a forensic audit, you’re most often going to have a partner doing that work,” Denicola told committee members.

The motion to hire an auditor will be on the agenda for Lehighton’s Sept. 30 school board meeting.

Lehighton’s board unanimously ordered the forensic audit in June following a motion by director David Bradley.

Bradley cited issues in Jim Thorpe Area School District, Penn Hills, Scranton and several other districts as examples of why he pushed for a forensic audit in Lehighton. He also questioned statements made about benefit payments during the previous fiscal year.

The district started with a $4.5 million projected budget deficit for 2019-20 after Denicola, who took over for former business administrator Brian Feick in March, said $3 million of expenses were not shown appropriately as expenditures.

“When the expense payments were made, they were charged as a debit to a liability account, which was an inaccurate accounting treatment,” she said.

“The effect of this was that the monthly board summary reports showed less than the actual expenditures. When I discovered the error, the correcting transactions were made so that the appropriate expenditures were correctly shown on the monthly board reports.”

Bradley, however, contends it was not just an accounting error, and that the funds were actually “missing.”

Both firms, during presentations on Monday, touted their experience and called themselves niche players in the public education auditing field.

“We want to be cost effective while getting to the right answers for you,” Baker said. “We’ll hone in on where the potential is for you to have additional procedures to decrease risk.”

Weiss said 99% of his firm’s work is in the public sector and clients have included Jim Thorpe Area School District, Allentown School District and Lehigh County.

“All of our staff has worked with school districts,” Weiss said.

“If we find something as we’re going along, we’ll bring it up with administration and the school board if need be. If things come up as the year goes on, we’ll also provide that information to you. If there are standards changing or something like that, we’ll let you know ahead of time.”

Both firms said they were contacted by school board director Joy Beers and informed about Lehighton’s request for proposals.

“I sent around 10 emails to different firms and directed them to talk to (Denicola) if they were interested,” Beers said.

Some firms, Denicola said, did inquire but ultimately chose not to submit a proposal. One firm that was interested in the forensic audit asked to be paid for their presentation to the finance committee.

“That is not something we do,” she said.

Director David Bradley, who participated in Monday’s finance meeting by phone, said the firm selection process bothers him.

“This whole thing is corrupt,” Bradley said. “We should not be allowing the administration we are auditing to be involved in hiring the auditor. Let’s table this until we can do it right.”

While Bradley contended it is Lehighton’s administration that is the focus of the forensic audit, Denicola disagreed.

“It is not the administration being audited, it is the work of the former business administrator,” she said.

“We are simply bringing these presentations to the board. The board will make the decision on the auditor, not the administration.”