Sto-Rox audit reveals scope of financial issues

-BUDGET-


By Elizabeth Perry


The Sto-Rox School District audit revealed the steep challenges faced by a district that only has two years to dig itself out of financial trouble.


Currently, the district is running a budget deficit, faces challenges in restructuring its understaffed business office and has a slim tax base from which to draw funds.


“With two years left of federal money, I don’t know if we get to break even. We have to be careful managers of that money. I don’t know with the lack of local revenue, that’s possible,” said Business Manager Paul Sroka.


The audit report focuses on the time period prior to the state-mandated recovery plan, which was imposed on the district on July 12, 2021.


Mark Turnley, a certified public accountant, presented his findings to district officials on Sept. 22. The fiscal year analyzed ran July 1, 2020 through June 30, 2021, and revealed a budget deficit of about $6.5 million – which was expected.

According to the audit, the district was running a deficit of $6,541,341 on June 30, 2020. A year later, prior to the district’s state takeover, they were running a deficit of $5,935,912.


Sroka said after the cost-cutting measures implemented by the 2021-2022 budget, he believes the deficit will be closer to $4.7 million. Still, Sroka said the budget was only a framework for what the district is trying to accomplish, while the audit reflects the reality of what’s spent.


"The budget is the dream, the audit is the reality check," Sroka said.


The district faces funding issues from its limited tax base and one of the lowest real estate valuations in Allegheny County, according to the audit. The final tax collector reconciliations reflected $1,114,046 in unpaid 2020 property taxes, which represents 15.2% of the total assessed property taxes ($7,341,018) for the current fiscal year. Currently, Sroka said more than 20% of property taxes go unpaid every year.


“We're only collecting local revenue at 80%,” Sroka said. The district will receive Elementary and Secondary School Emergency Relief funding of $12,563,698 over the next two years to support staffing and security needs. ESSER is federal funding established during the COVID-19 pandemic to help school districts.


Sroka said taxes hadn’t been paid and programs hadn’t been situated prior to the recovery plan being locked in place.


Some issues outlined in the audit were:

Unpaid taxes

Payroll tax obligations were not being remitted to the Internal Revenue Service (IRS) in a timely manner, which resulted in penalties. A letter from the IRS cited in the report stated that through December 31, 2020, the district owed approximately $579,580 plus interest of $33,940. The district paid the principal obligation and the interest portion was “abated by the IRS.”

Misappropriation risk

The audit found the district’s business office was responsible for accounting duties which should have been assigned to separate departments in order to prevent the “risk for potential for misappropriation of district assets.” The business office was responsible for the general fund (and other funds) general ledgers, processing and paying invoices along with check writing, bank account reconciliations and bank transfers, payroll processing, fixed asset maintenance and inventory control, and other accounting functions. As a remedy, the auditor said Sroka would be trying to implement procedures that would separate those duties “as feasible within the current cost constraints facing the district.”

Grants

The School District did not complete and submit the required ‘final expenditure report’ (FER) for the Title I grant program for fiscal year 2018-2019, and the Title I, Title II, and Title IV grant programs for fiscal year 2019-2020.




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