Auditors: Bookkeeping failures led to $900,000 in IRS, state fees
By Jamie Wiggan
An audit report presented to the Sto-Rox School Board Oct. 21 revealed a pattern of major bookkeeping errors during the past few years that brought about approximately $900,000 in fees owed to the IRS and state revenue department.
Auditor Mark Turnley told school officials the books for the 2019-20 tax year were not correctly reconciled to actual income and expense records at various points. He said on multiple occasions five- and six-figure payments recorded to the IRS were never in fact processed, and letters sent by the IRS reminding the business office of the outstanding payments and accompanying fees were not reported to the superintendent.
With fees mounting and interest accruing over subsequent months and years, the district now owes approximately $772,000 to the IRS and $130,000 to the state treasury.
The audit also uncovered other accounting violations, including a pattern of holding state subsidies earmarked for cafeteria expenses in the general fund to pay off regular monthly bills.
“Legally, to be in compliance you just can’t do that,” said Turnley. “That’s why I’m urging the board to explore any option that you can” to bring the district into compliance.
Board members expressed shock and confusion over the findings.
“I’m speechless,” President Samantha Levitzki-Wright said at the conclusion of the report.
The two business managers, Jacky Beck and Kimberly Puskarich, who oversaw the district’s finances during the 2019-20 tax year have both since left the district.
Turnley said he wasn’t in a position to evaluate what prompted the failings uncovered in the report, but recognized poor bookkeeping methods. Superintendent Frank Dalmas did not attend the Oct. 21 meeting.
Current business manager Paul Sroka said since hired in June he’s been working to repair the issues he inherited and attested the district is up to date on all tax obligations accrued in the four months subsequent.
Sroka encouraged the board to update its financing policies to put in place procedures that could prevent repeat occurrences.
“We have got to do things differently in this business office,” he said.
Sroka said he would “beg for mercy” from the IRS, but noted the department does not have a strong reputation for forgiving tax penalties. He said he had already begun the appeals process with Pennsylvania’s revenue system.
At Turnely’s recommendation, board members discussed reaching out to state representatives for additional support in the appeals process.
These new findings stack on top of existing financial perils – including a fund balance deficit of more than $6 million dollars – which landed the district in a state recovery plan earlier this year.
John Zahorchak, education department chief recovery officer, has been meeting with school officials since late August to draft a comprehensive plan to steer the district back to financial solvency.
An advisory committee is scheduled to present a draft to the school board for approval in November.