Pennsylvania’s auditor general is holding up the Lehighton Area School District as an example of how not to handle the public’s finances. You don’t want to be the poster child for this kind of negative publicity, but the district must now deflect outrage from residents who are asking how this could have happened. In a blistering rebuke, Eugene DePasquale’s office suggested that the missteps taken by the Lehighton district during the July 1, 2014, to June 30, 2018, audit period should also serve as a red flag for other districts across the state.

“The Lehighton district greatly overextended itself by taking on enormous amounts of debt, then tapped its reserve funds to build a new stadium for which it had not budgeted,” DePasquale said. “On top of that, the district spent millions of taxpayer dollars on a private education contract that district officials had mistakenly believed would be achieved at no cost.”

This reminds me of the many scams I have written about where unsuspecting citizens are lured into schemes where they are told they are going to get something for nothing. Public officials, aided by their legal counsel, have the means and responsibility to investigate and vet any contracts they sign. At the very least they should know up front what their financial obligations are going to be.

According to DePasquale, Lehighton Area School District’s general fund balance dropped at an “alarming rate” during the audit period and beyond, falling from $14.2 million as of June 30, 2015, to $874,439 as of June 30, 2019. “This was largely due to the district’s failure to budget for capital expenditures coupled with the costs of borrowing $62 million to consolidate and renovate school buildings,” according to the summary of the audit conducted by DePasquale’s office at the request of the district.

“The district racked up a stunning $17.3 million tab for debt service during the audit period,” DePasquale said. “By the time the debt is scheduled to be paid off in 2044, district taxpayers will have paid over $43 million in interest on the loans.” Putting this big number into perspective, it calculates to $2,598.50 for every man, woman and child in the four municipalities which make up the district - Lehighton borough and Mahoning, Franklin and East Penn townships. The district’s latest population is 16,548.

“While the problem seems to be isolated to Lehighton Area School District, this is a reminder that school district officials should carefully vet every proposal that comes before them, especially as so many districts are grappling with serving students during the pandemic,” DePasquale said. “Not only should all proposals undergo a careful legal review, the full school board should vote on whether to move forward with a full understanding of the costs and benefits.”

Perhaps DePasquale’s observation amplifies the turmoil that has been going on in the district, especially at the board level where factions seem to have been using their positions for ax-grinding for years rather than striving to unify on behalf of district residents. Their most public and heated fight occurred over whether to build a new school or renovate four existing school buildings. Residents are also questioning the role that Superintendent Jonathan Cleaver played in these decisions that prompted the audit scolding. He needs to explain it to the public.

One of the most puzzling findings of the audit was the district’s entering into a “supposed no-cost contract” to create Science, Technology, Engineering and Mathematics academies at the elementary, middle and high schools.

This alleged “freebie” wound up costing the district $3 million. DePasquale’s office noted that this contract with the National Education Foundation was “complex,” but, apparently, the district did not pick up on these complexities, which resulted in an extremely costly error.

According to DePasquale, the foundation gives a 10% in-kind match required for the Qualified Zone Academy Bonds proceeds. Lehighton Area School District issued two QZABs during the review period. The audit recommends that the district try to recoup some of the money it paid for services it never received from NEF as part of the arrangement.

Cleaver told the Times News’ Jarrad Hedes that this attempt has already begun. He also said the audit was requested by the administration following financial discrepancies and concerns raised by former business administrator Patricia Denicola in 2019. The public has a right to know what these “discrepancies” involved and who was responsible for them.

Denicola resigned in July after less than 18 months to take another job. She said the lack of “overall professionalism” throughout the district led her to look elsewhere. She had replaced Brian Feick, who left after nearly five years to go to a school district in Schuylkill County.

Denicola inherited a $3.49 million deficit early in the 2020-21 budgeting process with virtually no money left in its district’s rainy day fund. She attributed the district’s financial woes to past overspending and budgeting that didn’t jibe with actual expenditures.

In its review and findings of what went on in the Lehighton district, DePasquale decided to direct his auditing team to review other Pennsylvania school districts that have issued QZABs. “While some of these districts have been audited and similar concerns were not identified, reviewing these bonds and associated contracts will continue to be a part of the Auditor General’s audit process,” DePasquale said.

Among the districts which issued these bonds are the Minersville Area, Tri-Valley and Williams Valley school districts, all in Schuylkill County, and the Shamokin Area School District in Northumberland County.

In all, DePasquale’s report included the two findings and eight recommendations which the district already is working to implement, both he and Cleaver said.

The Lehighton district residents need a full accounting from the administration and school board to understand how this black eye occurred and what is and will be done to prevent these miscues from happening again.

I recommend that a virtual or safe in-person public session be called specifically to give residents answers and give them an opportunity to ask any and all questions. Prior to this, any documentation that illuminates why this happened should be posted online and accessible to the public.

Any official unwilling to do this should resign.

By Bruce Frassinelli | tneditor@tnonline.com