THE STATE EDUCATION DEPARTMENT / THE UNIVERSITY OF THE STATE OF NEW YORK / ALBANY, NY 12234

 

TO:

The Honorable the Members of the Board of Regents

Subcommittee on Audits

 

FROM:

Theresa E. Savo 

 

SUBJECT:

Board of Regents Oversight Ė Financial Accountability

 

DATE:

August 21, 2006

 

STRATEGIC GOAL:

Goal 5

 

AUTHORIZATION(S):

 

 

Executive Summary

 

Issues for Discussion

 

            Four items are presented for discussion with the Members of the Subcommittee on Audits including:

 

1.                  Processes Followed in Issuing Audit Reports

2.                  Annual Report on the Activities of the Regents Subcommittee on Audits

3.                  Reporting of Violent and Disruptive Incidents by Public Schools

4.                  Completed Audits

 

Reason(s) for Consideration

 

            Update on Activities

 

Proposed Handling

 

            Discussion and Guidance

 

Procedural History

 

The information is provided to assist the Subcommittee in carrying out its oversight responsibilities related to audits of financial and reporting practices; performance audits or reviews; ethical conduct issues arising from audits; internal controls; and compliance with laws, regulations, and policies.

 

 

Background Information 

 

1.         Processes Followed in Issuing Audit Reports Ė Staff will brief the members on different processes used to issue final audit reports. The processes of the Office of Audit Services and the Office of the State Comptroller will be described.

           

2.         Annual Report on the Activities of the Regents Subcommittee on Audits Ė Department staff will present the report which described the key activities of the Subcommittee during the 2005-2006 year. These activities assist the Board of Regents in carrying out its oversight responsibilities.

 

3.                  Reporting of Violent and Disruptive Incidents by Public Schools Ė Department staff will brief the Members on the 90-day response to the Comptrollerís audit and the schools on the Persistently Dangerous Schools list.

 

4.         Completed Audits

            Reports are provided as follows:

 

            Office of Audit Services

Our World Neighborhood Charter School

The Milestone School for Child Development

 

Office of the State Comptroller

Village Child Development Center

Written Support of Internal Controls Over the State Aid Management System

Marathon Central School District

Wyandanch Union Free School District (2)

Dundee Central School District

East Irondequoit Central School District

Westmoreland Central School District

Deposit Central School District

Saranac Lake Central School District

Enlarged City School District of Troy

William Floyd Union Free School District

 

Recommendation

 

For item one (Processes Followed in Issuing Audit Reports), item three (Reporting of Violent and Disruptive Incidents by Public Schools), and item four (Completed Audits), no further action is recommended.

 

For item two (Annual Report on the Activities of the Regents Subcommittee on Audits), it is recommended that the summary of the activities of the Subcommittee be presented to the full Board.

 


Timetable for Implementation

 

            N/A

 

The following materials are attached:

              Roadmap

              Minutes of the June Meeting (Attachment I)

              Annual Report on the Activities of the Regents Subcommittee on Audits (Attachment II)

              Audit Report Abstracts (Attachment III)

              Audit Reports


 

REGENTS SUBCOMMITTEE ON AUDITS

MEETING ROADMAP

 

Date:  September 11, 2006

Time:  8:30-9:30 am

Location:  Room 146 EB

TOPIC

OUTCOME

WHO

MINUTES

Opening Remarks

 

Chair

2

Review Agenda/Minutes (Attachment I)

Approval

Conway

1

Follow-up on Previous Meeting

Update

Conway

5

Processes Followed in Issuing Audit Reports

Update

Spring

10

Annual Report on the Activities of the Regents Subcommittee on Audits (Attachment II)

Update

Conway

5

Reporting of Violent and Disruptive Incidents by Public Schools

Update

Staff

15

Audit Report Abstracts (Attachment III)

Questions Addressed

SED and OSC Staff

20

Next Session

Preview

Staff

2

 


Attachment I

 

MEETING OF THE REGENTS SUBCOMMITTEE ON AUDITS

June 19, 2006

 

Subcommittee Members in Attendance:

 

Regent Geraldine D. Chapey, Chair

Regent Joseph E. Bowman, Vice Chair

Regent John Brademas

Regent Milton L. Cofield

 

Other Members of the Board of Regents in Attendance:

 

Regent Roger B. Tilles

 

Discussion Items

 

Regent Chapey opened the meeting by noting the increased interest in financial matters as exemplified by the inclusion of an item on the Regents 24 month calendar to develop a framework to increase awareness of the importance of financial management and accountability in all institutions within the University of the State of New York.

 

Previous Meeting Minutes

 

The Subcommittee approved the minutes of the prior meeting.

 

Follow Up on Previous Meeting

 

Staff responded to follow-up questions by informing the Members that Regent Tilles had provided an example of a school districtís ethics statement which included a conflict of interest statement.  EMSC staff is reviewing the document to consider the most appropriate way to share with other districts.  The members were also informed that the Statement on the Governance Role of a Trustee or Board Member is being updated to reflect changes precipitated by the accountability legislation.   

 

Audit of the New York City Department of Educationís Administration of the Early Grade Class Size Reduction Program.

 

Staff from the Office of the State Comptroller briefed the Members of the Subcommittee on the key findings of the audit.  The Regents and Commissioner Mills asked questions to obtain a more specific understanding of the audit findings.  Associate Commissioner Evans-Tranumn advised the Members that there has been subsequent legislation which will enable a better monitoring of the effect of the program.  Commissioner Mills concluded that the intent of the legislation was clear and that EMSC staff must take the lead in assessing the effect of the new legislation and in considering methods of improved monitoring.

 


Annual Report on the Activities of the Regents Subcommittee on Audits

 

Staff provided the Members with a summary of the key activities of the Subcommittee during the eight meetings held since September of 2005.  The draft report contains nine items and was written to provide a report to the full Board of Regents.  Regent Bowman asked that the report be changed to include a description of the extent of technical assistance that is provided by Department staff as well as including key web sites and publications that support increased accountability.  The changes will be considered and the report will be provided to the Subcommittee at the next meeting.

 

Office of Audit Services Draft 2006-2008 Audit Plan

 

Staff briefed the Members of the Subcommittee on the proposed audit coverage for the period from July 1, 2006 through June 30, 2008.  The plan was developed based on the input of the Deputy Commissioners as well as an analysis of data collected through a risk assessment.  The Members were asked for any input they may have.  Regent Tilles asked that consideration be given to auditing placements at proprietary schools and schools of education, Regent Gardner expressed his support for an audit of preschool special education programs in BOCES.

 

Audits

 

Staff were available to answer questions on the following audits:

 

            Office of the State Comptroller

        Reporting of Violent and Disruptive Incidents by Public Schools Report 2005-S-38

        Audits of SUNY Campus Contracting Practices Report 2005-S-37

        Phoenix Central School District Report 2006M-12

        Franklin Central School District Report 2006M-14

        Cassadaga Valley Central School District Report 2006M-16

        Sidney Central School District Report 2006M-19

        Stockbridge Valley Central School District Report 2006M-11

        Examination of Tentative Budgets of the Beacon City School District and the Fabius-Pompey Central School District

 

 

 

 

 


Attachment II

Report on the Regents Subcommittee on Audits

2005-2006

 

In accordance with its written charge, the Regents Subcommittee on Audits (Subcommittee) assisted the Board of Regents in carrying out its oversight responsibilities for audits, ethical issues arising from audits, internal controls, and compliance with laws and regulations.  The Subcommittee, which consists of five independent members, met eight times during the year.  A summary of key items presented at the meetings follows.

 

1.      The need for internal controls and fiscal accountability dominated the discussions in the Subcommittee meetings.  Members were provided with periodic updates on the status of the school district accountability regulations.  The Regents approved the regulations on an emergency basis in February 2006 and approved the regulations for final adoption in May 2006.

2.      A total of 57 audit reports were presented to the Subcommittee members for their review and comments.  These reports on school districts, BOCES, and Department programs identified 487 recommendations for improvements.  In almost all cases, the auditees agreed to implement the recommendations.  Members encouraged staff to make the results of the audits available to others.

3.      Members were informed of the process used by the Office of Audit Services to follow-up on the status of recommendations 90 days after the issuance of the final audit report. This process is designed to ensure action is taken on each of the recommendations. 

4.      Information was presented on the Departmentís recently initiated Fraud, Waste, and Abuse hotline.  It provides an outlet for individuals to notify the Department of allegations of impropriety in USNY institutions.

5.      A KPMG partner presented information on the results of the audit of the financial statements of the State of New York and the specific activities related to the Department.  KPMG suggested that the Subcommittee members focus on the internal controls which lead to the development of the Departmentís fiscal reports.

6.      The Departmentís Director of the Bureau of Budget Coordination described the process used to prepare the Department's Monthly Fiscal Report. He also described the process to monitor the program officesí fiscal status and to address any problems that are identified.  The Members requested that this information be shared with all members of the Board.

7.      Members were provided with an overview of the Departmentís oversight activities related to the 400 non-degree granting proprietary schools that serve about 100,000 students. Department staff visit each school at least once every four years and also routinely visit schools to follow up on student complaints.  The Subcommittee members challenged staff to develop a risk-based approach to monitoring schools to supplement those identified by student complaints. 

8.      The Departmentís Internal Control Officer (ICO) briefed the members on the annual certification process, the process used by offices to assess internal controls, plans to issue a revised Administrative Policy Manual, and the development of internal control training.  

9.      Members were provided with the opportunity to comment on the draft 2006-2008 Audit Plan.   The Plan calls for audits of school districts, BOCES, charter schools, and Department operations along with reviews of financial statements and Single Audit reports. 

 

Through these activities, the Subcommittee helped set the ďtone at the topĒ for quality financial reporting, effective internal controls, safeguarding assets, compliance with laws and regulations, effective use of resources, and accomplishment of goals and objectives. 


Attachment III

 

Audit Report Abstracts

Regents Subcommittee on Audits

September 2006

 

Office of Audit Services

Audit

Major Finding(s)

Recommendations/Response

Our World Neighbor- hood Charter School 

Report CH-1005-1

11th Judicial District

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$0 adjustment

 

The audit found the Board of Trustees (Trustees) meeting minutes did not document adequate monitoring of the Schoolís financial condition or discussions of audit findings and staff requests to attend training/conferences.

 

The Schoolís fiscal year and the actual number of school days provided were inconsistent among the Schoolís Charter, by-laws, and the School calendar. School bank reconciliations were not signed and dated by the preparer or the reviewer.

 

The audit also found the Parent Teacher Organization (PTO) is not independent of the School in financial matters; the Schoolís Chief Administrative Officer is a signer on the PTO checking account and the PTO is using the Schoolís tax-exempt identification number. The School does not have specific procedures that define the types of expenditures that are appropriate and the documentation required for reimbursement from the petty cash fund.

 

In addition, personnel files do not contain all necessary information such as documentation of reference checks and evidence of required certifications.

 

Finally, the School did not establish adequate controls over the $2.8 million in assets that it owns.  Specifically, about $200,000 of furniture and equipment lacked School identification tags, the fixed asset inventory did not contain sufficient identifying information, and a physical inventory was not taken within the last year.

29 recommendations

 

The report recommends the Board officially meet to approve the budget and any budgetary transfers; monitor the budget and establish a process to monitor budget status reports; authorize bank accounts for School use; approve corrective action plans to address audit findings; and establish a policy to review staff requests to attend training conferences.

 

In addition, the report recommends amending the School by-laws to reflect the dates in the Charter for the fiscal year, strengthening School bank reconciliation procedures, separating financial operations between the PTO and the School, and modifying the petty cash procedures to provide guidance on appropriate expenditures and required documentation for reimburse- ment.

 

Furthermore, the report recommends that personnel file documentation be strength- ened to include support for references and appropriate certifications, and that the School establishes policies and procedures for fixed assets and equipment inventory.

 

School officials agree with all but one of the recom- mendations; they have taken action to implement the recommendations that they agree with. In response to the recommendation they disagree with, School officials believe they have an adequate process in place to approve bank reconciliations.

The Milestone School for Child Develop-ment

Report CA-0602-12

 

An audit conducted by the Office of the Auditor General, Department of Educa- tion of The City of New York and Approved by the State Education Depart- ment Pursuant to Education Law Section 4410

2nd Judicial District

$67,696 adjustment

 

The audit determined that the School did not comply with some State Education Department (SED) regula- tions and guidelines that govern fiscal operations of schools for children with disabilities.

 

 The School both under and over-reported student enroll- ment data; misreported personal service and fringe benefit costs; and did not maintain adequate docu- mentation for other-than-personal-service and admin- istration expenses, some of which were not reim- bursable.

 

Parking violation fines, late payment fees to credit card companies, and corporation franchise taxes paid above the minimum allowed amount were disallowed by the auditors as not reimbursable.

3 recommendations

 

The report recommends that the School calculate its enrollment data in accordance with SED regulations, report accurate personal service and fringe benefit data to the appropriate cost center, comply with SED guidelines for all reimbursable expenditures, and maintain the required documentation for all expen- ditures.

 

School officials generally agree with recommendations.

 

The Rate Setting Unit will use the results of the audit to establish audited tuition rates.

.

Office of the State Comptroller

Audit

Major Finding(s)

Recommendations/Response

Village Child Development Center  Report 2004-S-81

12th Judicial District

$600,101 adjustment

 

The audit found material errors on Village Child Development Centerís (VCDCís) Consolidated Fiscal Reports (CFR) for fiscal years 2003 and 2004, which totaled $600,101.  The errors on the CFRs resulted from the misclassifications of personal service costs and the inclusion of ineligible other-than-personal-service (OTPS) costs.  For example, VCDC improperly charged staff salaries to the wrong program or care class- ification; claimed non-reimbursable consulting, accounting, legal, and entertainment costs; and lacked documentation to support other various expenses.

 

The report also found that VCDC combined costs on the CFR for two of its programs and neglected to use the CFR Manualís prescribed methodology to calculate full-time equivalent (FTE) enrollments.

3 recommendations to SED

6 recommendations to VCDC

 

The report recommends that SED review the adjustments identified in the audit report and take appropriate action to recover any overpayments; require VCDC to report program information on the CFR separately; and formally advise VCDC to comply with the Manualís methodology for calculating FTE enrollment.

 

The report also recommends that VCDC ensure personal service costs reported on the CFR are accurately charged to the appropriate program, all costs are reported correctly as either direct care or non-direct care, and all OTPS costs reported on the CFR are eligible and adequately documented. In addition, VCDC should report program information separately on the CFR and comply with the Manualís methodology for calculating FTE enrollment.

 

SED officials agree with all of the recommendations. VCDC did not respond specifically to the recommendations, but indicated disagreement with findings regarding retainer payment to its accountants and payments to other consultants for team meetings.

 

The Rate Setting Unit will use the results of the audit to establish audited tuition rates.

 

Written Support of Internal Controls Over the State Aid Management System

Report 2006-S-32

$0 adjustment

 

The audit found the Departmentís written support documenting internal con- trols over the State Aid Unit and the State Aid Management System is adequate. These controls help provide assurance that the financial information for reporting support of public schools to the Office of the State Comptroller (OSC) for use in the Stateís Comprehensive Annual Financial Report is reliable.

0 recommendations

Marathon Central School District - Internal Controls Over the Audit of Claims

Report 2006M-27

6th Judicial District

$0 adjustment

 

The audit found that the Board of Education (Board) has not established policies or procedures for the audit of claims, nor has the Board deliberately and thoroughly audited them.  In addition, Board members stated that they do not audit every claim because they trust the work of District staff to ensure the accuracy and appro-priateness of claims.

 

An audit test of 80 claims revealed that eight lacked evidence that goods or services were received and two included mileage reimbursements that were paid at rates other than the established rate set by the Board.

1 recommendation

 

The report recommends that the Board enhance the Districtís internal controls by establishing policies and procedures to ensure the deliberate and thorough audit of all individual claims.

 

District officials agree with the recommendation; they stated that they would appoint a part-time internal claims auditor and prepare written internal control policies and procedures.

Wyandanch Union Free School District Ė Independent Audit Services

Report 2006M - 3

10th Judicial District

$0 adjustment

 

The audit found the District did not effectively procure its annual audit services by obtaining requests for proposals. The District contracted with the firm they had used in the past without seeking competitive offers from other firms.

 

The audit also found that the CPAís annual audit of the District did not meet several critical professional stan- dards. Specifically, the CPAís were not in compliance with standards for consideration of fraud, risk of District management overriding controls, under- standing internal controls, documentation of work, and disclosure of non-compliance with law and regulations.

6 recommendations

 

The report contains four recommendations regarding the proper procurement of audit services at least every five years. The report recommends that the District and Board ensure they understand the scope and limitation of the annual independent audit. Finally, the report recommends the district establish an audit committee.

 

District officials generally agreed with the recom- mendations and indicated they planned to take corrective action.

 

 

Wyandanch Union Free School District - Internal Controls

Report 2006M-7

10th Judicial District

$0 adjustment

 

The audit found District officials did not adopt policies, maintain perpetual inventory records, conduct periodic inventories, nor establish other safeguards to ensure that capital assets were protected from loss. Auditors found that the District has possession of less than 50 percent of computer equipment obtained through a SED surplus computer program; they were unable to locate 74 of the 181 donated computer-processing units, 24 donated laptops, and 81 of the 120 donated monitors.

 

The report also found the control environment over employee personnel files and payroll processing is weak.  Personnel files lacked proof of fingerprint clearances, background checks, and SED clearances to work with children.  In addition, District personnel made recordkeeping errors that led to the overpayment of 17 employees and the underpayment of 14 employees.  Furthermore, the auditors could not determine how a 1.5 percent employee bonus was calculated.

 

The District did not comply with its own procurement policy and General Municipal Law competitive bidding requirements.  Ten contracts totaling more that $600,000 were awarded without using a request for proposal process, two contracts totaling $130,000 were for consultant services that the District did not need, and the contractual service provision for one contract totaling $68,000 was never fully realized.

 

The District had one person performing the duties of accountant and treasurer.  The treasurer/accountant prepared deposits, posted entries in the accounting records, printed and signed checks, and performed bank reconciliations.

 

21 recommendations

 

The report recommends that the Board establish compre- hensive capital assets policies, take immediate action to recover the missing computers, update its payroll policies and procedures, assign payroll duties appropriately, ensure vouchers are audited prior to payment, provide procurement guidance, and review payments on contracts where services were either unneeded or not provided (to determine legal action/repayment).

 

The report also recommends that the District ensure that its capital assets inventory is complete and up-to-date, contracts are clear and concise, contractual com- pliance is monitored, and employee duties are segregated.  The report also recommends the District require that personnel files contain all required forms, create a system to accurately track employee time records, and develop and document criteria for the 1.5 percent employee bonus.

 

District officials agreed with the recommendations and indi- cated they plan to initiate corrective action.

Dundee Central School District - Food Inventories

Report 2006M-45

7th Judicial District

$0 adjustment

 

The audit found that District officials did not establish the controls and maintain the records necessary to safeguard food inventories.  Auditors found that the Districtís cafeteria manager performed virtually all of the administrative duties asso- ciated with the cafeteria with little or no oversight, and did not keep a perpetual inventory system.  In addition, custodial staff had access to food inventories without managerial super- vision.  Auditors also noted discrepancies (shortages and overages) with the Districtís physical inven- tories.

4 recommendations

 

The report recommends the Board and District manage- ment establish policies and procedures to address the acquisition, storage, and use of food inventories. The report also recommends that the cafeteria manager establish and maintain a perpetual inventory system; District officials improve physical security over stored food items; and the Districtís internal auditor perform periodic reviews to identify any unusual food inventory items or trends.

 

District officials generally agreed with the recom- mendations and indicated they plan to initiate corrective action.

East Irondequoit Central School District - Internal Controls Over Payroll and Personal Services

Report 2006M-74

7th Judicial District

$0 adjustmemt

 

The audit found that the Districtís internal controls over payroll and personal services are appropriately designed and operating effectively.

0 recommendations

 

Westmoreland Central School District - Internal Controls Over Procurement and Capital Assets

Report 2006M-30

5th Judicial District

$0 adjustment

 

The audit found that District personnel are not complying with the Board procurement policy.  Auditors examined 23 purchases totaling $200,000. Support for these purchases in the form of oral or written quotes, or requests for proposals from vendors were nonexistent.  Additionally, auditors found no written evidence supporting a sole-source determination for a $31,150 public works contract.

 

The audit also found that District officials did not ensure capital assets were protected from loss by assigning responsibility for record maintenance to someone independent of purchasing.  The District did not maintain adequate perpetual inventory records, conduct periodic inventories, tag District assets, and approve capital asset transfers to District employees.

6 recommendations

 

The report recommends the Board ensure District em- ployees follow the Districtís procurement policy, assign responsibility for updating capital asset records to someone independent of the purchasing process, and approve and note in minutes of its meeting any transfers of capital assets to District employees.

 

The report also recommends that District officials ensure that District personnel maintain adequate capital asset/ computer equipment records, perform inventory reviews, and identify all District property via decals, tagging, or serial numbers.

 

District officials generally agreed with the recommendations and indicated they plan to initiate corrective action.   

Deposit Central School District - Cash Disbursements;

Report 2006M-61

6th Judicial District

 

$0 adjustments

 

The audit found that the Districtís internal controls over non-payroll cash disbursements were appropriately designed and operating effectively and there was adequate segregation of duties over cash disbursements.

0 recommendations

Saranac Lake Central School District - Internal Controls Over Capital Assets; Report 2006M-42

4th Judicial District

$0 adjustment

 

The audit found that the Board of Education (Board) had not adopted a written policy to protect and account for the Districtís fixed assets.

 

The audit also found that the Districtís fixed asset inventory records for its capital assets were not timely or accurate.  Auditors were only able to locate 70 of 77 computers that were in the Districtís inventory records.  In addition, serial numbers for 30 of the 70 computers were not recorded in the inventory records.

 

Lastly, the audit found that the District does not have written guidelines for the disposition of computers and computer equipment.  Auditors found that the District gave away an unknown number of com- puters, however, because guidelines and supporting documentation did not exist, they were unable to determine whether the computers should have been discarded.

5 recommendations

 

The reportís recommendations focus on the establishment and implementation of fixed asset policy and disposal guidelines for the Districtís capital assets, and requiring District personnel to assign an identification number to all applicable capital assets.

 

District officials generally agreed with the recom- endations and indicated they plan to initiate corrective action.

 

 

Enlarged City School District of Troy Ė Internal Controls Over Information Tech-nology and Payroll

Report 2006M-62

3rd Judicial District

$0 adjustment

 

The audit found that the District has inadequate controls over the assigned passwords used to access the Districtís computer network, and that the Board had not established policies and procedures for the creation and administration of the usersí network passwords.  Auditors found that the District does not require users to change passwords periodically; in fact, all users can use their initial assigned password for the entire period of their employment.

 

The audit also found that the District assigned certain users in the business office with administrative rights for the financial management system when they had no need for full access to the system. These rights allow them to view, modify, edit, create financial transactions in functions, and create management overrides.

 

Finally, the audit found that the District did not have a standard procedure for documenting the calculation and supervisory approval of employeesí retirement pay- ments, and it identified weaknesses in the segregation of duties over payroll and authorized signatures on paychecks.  Auditors found that the District allowed the former Superintendent to cash in 11 unused vacation days in the amount of $5,450 and determined that the former Associate Superintendent was paid $5,010 for vacation days that were in excess of her available leave balance.  Auditors also found that the Districtís payroll clerk performed a majority of the payroll duties at the District.

 

13 recommendations

 

The reportís recommendations focus on establishing policies and procedures over the administration of user accounts; restricting access to the financial management system; strengthening controls over employee leave records, benefits, and retirement pay- outs; and instituting additional payroll processes.

 

District officials generally agreed with the recom- mendations and indicated they plan to initiate corrective action.

William Floyd Union Free School District Ė Controls Over District Assets

Report 2006M-36

10th Judicial District

$0 adjustment

 

The audit found that the Districtís internal control structure was inadequate to detect and prevent fraud.  Auditors identified several control deficiencies including employment contract approvals subsequent to service provision, unapproved changes to the Superintendentís contract, failure to segregate critical duties, lack of communication between the Treasurer and the Board of Education (Board) regarding District financial information, failure to monitor the effectiveness of internal controls by the Board or the Superintendent.

 

The audit also found that the District incurred $3.2 million in inappropriate or ques- tionable costs.  Auditors found District administrators were paid without Board approved contracts, the Superintendent increased his own salary and obtained reimbursement for personal costs, the former business manager transferred the ownership of life insurance policies from the District to six District officials, and various District officials obtained meals and lodging costs in excess of federal per diem rates.

 

Furthermore, the audit found the District had ineffective contract procurement and claims processing policies, and procedures that did not detect improper payments or overpayments for District procurements. Auditors found that the Board contracted with the former Assistant Superintendent for Business immediately after his retirement and even though he was ineligible to perform the services the District paid him approx- imately $834,920 over a six-year period based on an unspecific and unsigned contract.  In addition, auditors found the District paid seven providers for services amounting to $940,451 without Requests for Proposals for the services, nor did it negotiate written contracts with six of the seven providers, and the District paid for services that were not competitively bid.

 

Finally, the audit identified deficiencies in the Districtís controls over payroll and capital assets.  Payroll deficiencies allowed the District to make unautho- rized payments of $159,197 to its former Treasurer and allowed the Superintendent to increase nine admin- istratorsí salaries, which totaled approximately $40,182 without Board approval.  Capital asset inventories were not properly accounted for, cost records were not up-to-date, and District policy does not provide guidance on inventory updates that result from the disposal of assets or a change in an assetís location.

35 recommendations

 

The reportís recommendations focus on strengthening internal controls; providing public accountability for decisions involving employment contracts and other District business;  increasing Board oversight to lessen the likelihood for future theft, misuse, and waste of District funds; strengthening procurement, claims processing, and payroll practices; and improving capital asset inventory policies, procedures, and record keeping processes.

 

District officials generally disagreed with the audit, which they believed focused unfairly on past problems, and contend that they had already implemented most of the reportís recommendations.