Lehighton Area School District’s school board unanimously voted this week to accept its audited financial report for the year ending June 30, 2021, with directors vowing to address several outstanding items.

The audit, completed by Barbacane, Thornton and Company LLP, listed five recommendations still applicable for the upcoming year, one new recommendation, and another recommendation that has already been addressed.

Lehighton’s board said it plans to further discuss the audit at an upcoming workshop meeting.

“I think we need to keep these recommendations at the front of mind,” Director Brian Shaner said. “It’s important we don’t lose sight of this by approving the audit and just moving on.”

Bank review

The items still needing to be addressed from prior audits include implementation of a policy regarding monthly bank reconciliation review.

“Timely preparation of complete and accurate bank reconciliations is a key to ensuring that cash receipts and disbursements are properly recorded,” the audit noted. “During our prior year audit, we noted that the monthly bank reconciliations are prepared by business office staff, but not necessarily reviewed by anyone after completion. If reviews do take place, they are not formally documented. While we did not note any specific problems regarding the completed bank reconciliations in the year under audit, there is room for improvement to help ensure completeness and accuracy.”

Auditors also recommend the district implement a capitalization policy.

“During our prior year audit, we noted that the school district does not have a formally adopted capitalization policy that specifies capitalization dollar value thresholds,” the audit states. “To ensure consistency in its reporting, the school district should adopt a capitalization policy that specifies the cost threshold and other requirements for capitalizing purchases rather than expensing them. This policy should include items such as the threshold for capitalizing expenditures, the minimum useful life an asset must have to be considered for capitalization, the policy for considering repairs and maintenance expenditures for capitalization, how donated assets are valued, and other similar items.”

Payroll

During a prior year audit, auditors also noted that one employee maintains the payroll master file, including making changes to it for pay rate changes, preparing the payroll, and processing the direct deposits.

“We recommended that the school district incorporate an additional business office employee to segregate specifically the maintaining of the payroll master file and processing the normal biweekly payroll,” auditors noted. “Incorporating an additional employee in this process would help to reduce the risk that payroll is being processed improperly.”

Checks

Another recommendation carrying forward is for Lehighton to segregate the preparation and mailing of checks. Auditors said the individual who generates checks out of the accounting software also mails out the checks.

“We recommended that after approval by the school board, and before being sealed and mailed out, the invoices go to another business office employee for final review to ensure the check amount, name and other details agree to the invoice being paid,” the audit states. “This employee will then be responsible for sealing the envelope and mailing out of the payment.”

One final item carried over from a previous audit is for the district to perform an in-depth analysis of fully depreciated assets on the its capital asset schedule.

“This is especially relevant now with the transition to the elementary center to ensure all pieces of equipment associated with the old buildings have been removed from the asset listing,” auditors said.

The only new recommendation in the 2020-21 audit is for the district to reconcile interfund activity on a monthly basis.

“This will enable management to easily identify and make adjusting journal entries to correct activity in real time throughout the year,” the audit states. “This will also prevent management from having to reconcile a full year of activity at year end, and potentially delaying other year-end reconciliations or audit testing.”

One item that Lehighton checked off its list is an upgrade to its accounting system.

The upgrade, auditors said, enables the district to generate reports that directly tie into balance sheet accounts.

“Implementing the change reduces the risk that errors could be made by manually tracking balances,” auditors said.

The full 2020-21 audit is available on the district’s website, www.lehighton.org.