(The Center Square) – Lincoln Preparatory School fell short of financial requirements tied to its debt and had $257,546 in unpaid bus lease obligations, according to a Louisiana Legislative Auditor report dated Aug. 6.
The Grambling High Foundation, which operates Lincoln Preparatory School, failed to meet two financial covenants required under its bond agreement, auditors found. The school had 23 days of cash on hand, below the required 45 days, and a debt-service coverage ratio of 0.92, below the required 1.00.
Failure to meet the covenants could result in accelerated repayment, penalties, additional financial restrictions or other adverse financial consequences, according to the audit.
Management told auditors it was working with the bond trustee or lender to obtain waivers for the covenant violations.
For the fiscal year, Lincoln Prep reported approximately $12.35 million in revenue and $14.04 million in expenses, resulting in a $1.69 million decrease in net assets.
Auditors identified several other financial and internal-control deficiencies.
Lincoln Prep had an active lease for 19 buses, although its records showed only 14 buses in service. The school also had $257,546 in unpaid or late bus lease payments at the end of the fiscal year. Management reached an agreement with the lessor to pay the balance over 12 months.
The school also improperly classified certain capital purchases as operating expenses, resulting in an estimated $2.8 million overstatement of expenses. It also failed to record approximately $1.7 million in depreciation.
In a review of 29 credit-card transactions totaling $58,224, auditors said the school could not provide reimbursement requests, receipts, invoices or other documentation showing the nature, business purpose or authorization of the purchases.
Auditors also requested documentation supporting approximately $56,000 in miscellaneous revenue but had not received the requested records as of the audit date.
Lincoln Prep management responded with a corrective action plan. The school said it had increased cash on hand from 14 days to 24 days and improved its debt-service coverage ratio from 0.71 to 0.99.
The school said it will implement a monthly debt-covenant dashboard, provide monthly reports to the Board Finance Committee and strengthen procedures for financial reporting, credit-card documentation, bus records and debt tracking.
The audit said management’s efforts to obtain waivers for the debt-covenant violations contributed to a delay in completing the audit.
The report does not conclude that the accounting errors or unsupported transactions involved fraud or misuse of funds.
