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:

December 19, 2006

 

STRATEGIC GOAL:

Goal 5

 

AUTHORIZATION(S):

 

 

Executive Summary

 

Issues for Discussion

 

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

 

1.                  Statement on the Governance Role of a Trustee or Board Member

2.                  Types of Audit Reports Presented to the Regents Subcommittee on Audits

3.                  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.                  Statement on the Governance Role of a Trustee or Board Member Ė Department staff will brief the Members on a revised document.  The original was issued in November of 2001.  Recent changes have been made to update its content. (see separate Regents item)

 

2.                  Types of Audit Reports Presented to the Regents Subcommittee on Audits Ė Staff will brief the Members on the different types of audits that are presented to them for review.  The different audit groups will be described as well as report release processes. (Attachment II)

           

3.         Completed Audits

            Reports are provided as follows:

 

            Office of Audit Services

Ramapo Central School District

Tompkins-Seneca-Tioga BOCES

 

Office of the State Comptroller

State Education Department, NYC Department of Education Administration of Payments for Preschool-Related Services and Special Education Itinerant Teachers (Follow-up Report) 2006-F-18

New York State Education Use of Technology for Professional Licensing and Renewal Report 2006-S-22

Scotia-Glenville Central School District

Gowanda Central School District

Cairo-Durham Central School District

Greater Johnstown School District

Chazy Central Rural School District

Beekmantown Central School District

Oswego City School District

Candor Central School District

LeRoy Central School District

Clyde-Savannah Central School District

Owego Apalachin Central School District

Roslyn Union Free School District

Broadalbin-Perth Central School District

Canajoharie Central School District

Cincinnatus Central School District

Corinth Central School District

Coxsackie-Athens Central School District

Inlet Common School District

Laurens Central School District

Wells Central School District

Mount Vernon City School District

Yonkers City School District

Voorheesville Central School District

Hinsdale Central School District

Evans-Brant Central School District

 

Recommendation

 

For item one (Statement on the Governance Role of a Trustee or Board Member), Member advice and input is sought.  For item two (Types of Audit Reports Presented to the Regents Subcommittee on Audits) and item three (Completed Audits), no further action is recommended.

 
Timetable for Implementation

 

            N/A

 

The following materials are attached:

               Roadmap

               Minutes of the December Meeting (Attachment I)

               Draft Statement on the Governance Role of a Trustee or Board Member (separate item)

               Audit Report Process (Attachment II)

               Audit Report Abstracts (Attachment III)

 


 

REGENTS SUBCOMMITTEE ON AUDITS

MEETING ROADMAP

 

Date:  January 2007

Time:  TBD

Location:  TBD

TOPIC

OUTCOME

WHO

MINUTES

Opening Remarks

 

Chair

2

Review Agenda/Minutes (Attachment I)

Approval

Conway

1

Statement on the Governance Role of a Trustee or Board Member

Update

Staff

15

Types of Audit Reports Presented to the Regents Subcommittee on Audits (Attachment II)

Update

Spring

15

Audit Report Abstracts (Attachment III)

Questions Addressed

SED and OSC Staff

25

Next Session

Preview

Staff

2

 


Attachment I

 

MEETING OF THE REGENTS SUBCOMMITTEE ON AUDITS

December 4, 2006

 

Subcommittee Members in Attendance:

 

Regent Geraldine D. Chapey, Chair

Regent Joseph E. Bowman, Vice Chair

Regent John Brademas

Regent Milton Cofield

Regent Arnold Gardner

 

Discussion Items

 

Regent Chapey opened the meeting by noting that she, as well as Department staff participated in a forum held in Manhattan to address Education Leadership in Colleges.  The forum addressed topics related to financial management and financial accountability. Regent Chapey stated that she hopes those who attended the forum will incorporate the information they heard into college course curriculum and in professional development.  Those actions should help to alleviate many of the recurring issues found in school district audits. 

 

Regent Chapey announced the Departmentís new Director of Audit Services, James Conway. 

 

Regent Cofield moved to accept the minutes of the previous meeting and Regent Bowman seconded the motion.

 

The Members of the Subcommittee (Members) were informed that the U.S. Department of Education, Office of Elementary and Secondary Education has issued program determinations on two audits conducted by the Office of the Inspector General that were previously presented to the Subcommittee. The audits are of the Wyandanch Union Free School Districtís use of Title I and Title II funds and the William Floyd Union Free School Districtís use of Title I funding.  The program determination sustained the findings of the audits and directs the Department to take certain actions. Among the actions required are the recovery of $202,000 in funds used for unallowable activities at William Floyd and the review of supporting documentation at both schools. The Departmentís Office of Audit Services will conduct audits at both schools early next year.  

 

The Members discussed the overlapping role of audit organizations, observing that these two schools had been audited many times. Staff responded that the audit organizations frequently focus on different topics in defining the scope of audits. Staff did observe that cooperation among audit units can help to eliminate the appearance of duplicate audit effort.

 

The Commissioner stated the Department has requested 24 auditors for the Department. He believes the Department as well as other organizations need audit capacity to focus on critical accountability issues in school districts.

 

 

Staff briefed the Members on activities related to the Violent and Disruptive Incident Reporting System.  Since the release of the Comptrollers audit in June of 2006, over 100 Department and BOCES staff visited 25 schools to assess the reliability of the data. The Department recently provided training to over 1,500 school district personnel from over 600 districts and will visit an additional 75 schools prior to the end of the school year.

 

Finally, staff briefed the Members on the U.S. Department of Educationís Office of Inspector Generalís (OIG) audit of the Department administration of the Reading First Program. The audit was discussed by the Members as well as Commissioner Mills. The audit examined the award of over $215 million in Reading First funds to school districts across the State. The specific findings contained in the audit, as well as the Departmentís response to each, were discussed with EMSC staff. The next step in the process will be a determination by the U.S. Department of Educationís Office of Elementary and Secondary Education.

 


Attachment II

 

Regents Subcommittee on Audits

December 2006 Meeting

Audit Report Process

 

The Regents Subcommittee on Audits (RSOA) receives audit reports from numerous audit organizations examining USNY institutions. The audit organizations follow auditing standards and the reporting processes are similar. However, some differences exist. Below is a discussion of the four sources of audit reports that are received by the RSOA.

 

 

New York State Education Department Ė Office of Audit Services (OAS)

 

Three types of audits:

 

  1. External audits of USNY institutions primarily focused on school districts and BOCES;

 

  1. Internal audits of Department operations; and

 

  1. Audits of providers of pre-school special education programs. These audits, though issued by OAS, are often times conducted by accounting firms under contract with counties or the NYC Department of Education.

 

Reporting process - standard process of preliminary findings, draft to auditee for comments, and final report including response to the draft.  OAS requests the written status of recommendations 90 days after issuance of final report. There is no process to prepare a press release upon final audit.

 

Office of the State Comptroller (OSC)

 

Division of State Services Ė State Audit Bureau

 

Several types of audits are provided to the RSOA including:

 

  1. Audits of State Education Department programs and grants;

 

  1. Tuition Assistance Program (TAP) recipients; and

 

  1. Follow-up audits.

 

Reporting process Ė standard for SED program and grants, as well as TAP.  Preliminary findings, draft report for comments and final report including the response to the draft. Normally, they are issued by some type of press release depending on the nature of the audit.

 

Follow-up audits Ė compressed time period. The OSC issues a discussion document to auditee and then a final report without the response to the draft attached.

 

The release of these audits is often accompanied by a press notification or release. 

 

Local Government Services and Economic Development

 

Local Government Services and Economic Development - responsible for audits of municipalities of all types.

 

Audits presented to the RSOA would include audits of school districts and BOCES. This Office follows the preliminary, draft, final report process, with the response to the draft attached to the final.

 

The release of these audits is often accompanied by a press notification or release. 

 

United States Department of Education Ė Office of Inspector General

 

This Office of Inspector General has conducted audits of the Departmentís administration of federal grant programs as well as individual school districts compliance with grant requirements. The audit process follows the preliminary, draft, final process, with the response to the draft being included as part of the final.  However, the final resolution of the audit is referred back to the federal program office and not handled by the Office of Inspector General. There is a press release which announces the issuance of the audit.

 

New York State Federal Single Audit Findings

 

Any entity which expends over $500,000 in federal grants must have a Single Audit conducted in accordance with the Federal Office of Management and Budgetís (OMB) Circular A-133.  Findings must be included in the report, and the entity must prepare a corrective action plan. The specific findings related to the State Education Department are presented to the RSOA.

 

 

 

 

 


Attachment III

 

Audit Report Abstracts

Regents Subcommittee on Audits

January 2007

 

Office of Audit Services

Audit

Major Finding(s)

Recommendation/Response

Ramapo Central School District

FW-1205-3

9th Judicial District

$0 adjustment

 

The audit found a lack of controls over the time and attendance of certain District employees. 

 

2 recommendations

 

The report recommends that the District formally define the required workday for all employees.

 

The report also recommends that the District develop a time and attendance process, which accounts for the daily attendance of all staff, with consideration given to the methods described in the OSC guide.

 

The District officials indicated they plan to work with the teachers bargaining unit to implement the recommenda-tions.

Tompkins-Seneca-Tioga BOCES

BOC-0104-01

6th Judicial District

$0 adjustment

 

The audit found weaknesses in controls including the submission of incomplete budget status reports to the Board, failure to appoint certain individuals with fiscal responsibilities, lack of policies and procedures in certain areas, and poor accounting controls in the Career and Technical Education area.  The report also found a lack of documentation of Employ-ment Preparation Education (EPE) classroom hours.

 

The audit also found control weaknesses related to invoicing procedures, and the integrated accounting system.

 

Finally, the audit also found weak controls over outstanding payroll checks, treasurerís duplicate receipt books, maintaining accurate and complete inventory records and access to fuel pumps.

18 recommendations

 

The report recommends that a complete budget status report be provided to the Board at least quarterly and that certain positions be filled to enhance control.

 

The report also recommends improvements in invoicing procedures, developing an integrated accounting system, and improved documentation of EPE hours.

 

Further, the report recommends improved controls related to outstanding payroll checks and the treasurer duplicate receipt book.  In addition, recommenda-tions are made to maintain accurate and complete inventory records and restrict access to fuel pumps.

 

Finally, the report recommends appointing an individual responsible for maintaining the attendance register.

 

BOCES officials agree with the recommendations and indicated they plan to take corrective action.

Office of State Controller

Audit

Major Finding(s)

Recommendation/Response

State Education Department (SED), New York City Department of Education, and Erie County

Administration of Payments for Preschool-Related Services and Special Education Itinerant Teachers (Follow-Up Report)

2006-F-18

1st Judicial District

$0 adjustment

 

This report is a follow up on an audit of the Administration of Payments for Preschool Related Services and Special Education Itinerant Teachers (Report 2003-S-39). The original audit found that the New York City Department of Education (Department) overpaid providers by $731,000 because it used the wrong rates. In addition, the Department and Erie County may have overpaid Special Education Itinerant Teachers (SEIT) providers by $358,000 and $17,000 respectively because the municipalities either did not update enrollment-related data or did not verify the service was actually provided.

 

The report contained 11 recommendations. The follow-up audit found that SED, the Department and Erie County have made some progress in addressing the recom-mendations from the initial audit. Of the eight recommendations ad-dressed to SED, two have been implemented, four have been partially implemented and two recommendations have not been implemented. All three recommendations made to Erie County have been implemented. Of the three recommendations ad-dressed to the Department, one has been partially implemented and the remaining two were not applicable.

SED Ė four partially implemented and two not implemented

 

The report recommended SED provide direction to municipalities that restate Manual and payment guidelines, direct municipalities to develop a means of monitoring providers compliance with Manual requirements and billing guidelines, remind municipalities that SEIT sessions should include the starting and ending times of sessions, and provide formal direction to municipalities to ensure that related service providers are only paid for services provided. These recommendations have been partially implemented by SED. SED Officials have drafted a technical assistance memorandum concerning SEIT and related services addressing the audit issues.

 

The report recommends SED require that municipalityís contracts with service providers include a requirement that providers must notify the municipality when a student is illegally absent for 5 consecutive days and formally assess the propriety of paying SEIT services on an enrollment versus attendance-based system. The SED has not yet implemented these recom-mendations.

New York State Education Department

Use of Technology for Professional Licensing and Renewal

Report 2006-S-22

$0 adjustments

 

The audit found that the State Education Department (SED) initiated the Online Licensing Project (Project) to expand its use of technology for the application and registration renewal processes for professional licenses. However, progress on the Project has been limited because there were problems with contractor performance and because SED did not consistently follow standard project management guidelines. The Project is currently more than four years late based on an original contract completion estimate of December 31, 2001. Consequently, SED has not optimized the use of information technology to reduce the processing costs and times for people to apply for and renew professional licenses.

 

The audit also found that since the Project was initiated, SED had five contracts with four vendors. SED cancelled two of these contracts with two vendors. Two other contracts have been completed by one vendor, and the remaining contract has been placed on hold. As of June 2006, SED has spent $2.4 million on vendor contracts for the Project.

 

The audit also stated that the Office is financially self-sufficient, in compliance with State Law, and fees collected for license applications and renewals are used solely for Office operations.

5 recommendations

 

The audit recommends that project management standards be followed, such as those outlined in the Office for Technologyís Guidebook or other project management tools, to ensure the Project is concluded in a timely, efficient and economical manner.

 

The audit recommends that the need and feasibility of establishing a Project Manage-ment Office (or an office with equivalent capabilities and responsibilities) be formally assessed, to help ensure that major IT and other program projects are administered efficiently and effectively.

 

The audit also recommends that periodic data on the number of license applications and renewals pending approval or other disposition is maintained and that data is analyzed to determine if there are significant changes in backlogs that may require corrective actions by management.

 

The audit recommends that plans for an imaging system be completed to ensure an easier and more efficient access to applicant data by Office staff.

 

The audit also recommends that the Officeís system be updated to allow professionals to update information, such as address changes, online.

 

 

 

 

State officials generally agree with the recommendations and indicated they plan to take corrective action.

 

Scotia-Glenville Central School District Internal Controls Over Selected Financial Activities

2006M-145

4th Judicial District

$0 adjustment

 

The audit found purchases made on non-approved credit cards; purchases not supported by itemized receipts; and meal and conference costs that were not approved or properly documented. As a result, the District may have paid for excessive or inappro-priate costs.

 

The audit found that the District did not have a credit card policy for the Districtís retail store cards. Issuing a credit card or charge card without specific Board authorization limits account-ability for District purchases and increases the risk of inappropriate purchases.

 

The audit found that two credit card meal charges, totaling $95.48, were not supported by itemized receipts. The District paid these costs even though the Internal Claims Auditor had not ensured charges complied with the policy.


 

The audit tested payments for meals and refreshments provided at six separate meetings or events during the 2005-2006 school year. Four of these six had receipts, totaling $1,306, that did not show the purpose of the meeting or event, and two receipts did not identify the group that attended.

 

The audit reviewed six travel and conference vouchers and found the Internal Claims Auditor approved payment for three of the six payments without the required documentation.

 

4 recommendations

 

The report recommends that the Districtís Internal Claims Auditor conduct a proper audit of claims to verify that claims are supported by the documentation required by District policies and regulations before they are approved for payment.

The report also recommends that the Board and District officials monitor and enforce compliance with adopted policies, such as those relating to charge card use, meals and refreshments, and travel and conferences.

 

The report recommends that the Board amend the Districtís credit card policy to provide clear guidelines on the use of District credit and purchase cards. The policy should identify the types of cards, who is authorized to use the cards, and the documentation required to support the charges.

 

Finally, the report recommends that the Board consider amending the meals and refreshments policy to require that receipts identify the individuals who attended the meeting or event, and the reason meals or refreshments were needed to conduct District business.

 

District officials generally agree with the recommendations and indicated they plan to take corrective action.

Gowanda Central School District School Resource Officers and Claims Processing 2006M-93

8th Judicial District

 

 

 

$0 adjustment

 

 The audit found that payments made to school resource officers (SROs) were not properly supported or accurate and that the Board does not have an adequate service contract with the SROs.

 

The audit also found that the Board has not established adequately designed internal controls over the audit processing and payment of claims. In addition incompatible duties are not sufficiently segre-gated and the purchase order system is not operating effectively.

9 recommendations

 

The claims auditor should ensure that every claim contains adequate itemization and documentation to demonstrate that it is a proper District charge, approved by the department, certified as received, and complies with District policies, including prior authorization by the Purchasing Agent.

 

The Board should monitor the activities of the claims auditor to ensure that she complies with Board policies and procedures, statutory requirements and good internal control.

 

The Treasurer should not pay claims prior to audit by the claims auditor.

 

The Board should clearly define its policy regarding the use of confirming purchase orders.

 

The District officials generally agree with the recommenda-tions and indicated they plan to take corrective action.

Cairo-Durham Central School District Internal Controls Over Selected Financial Activities 2006M-92

3rd Judicial District

$35,000 adjustment

 

The audit found that the District overpaid certain employees by paying them at their new contract rates even though the payroll included days worked in the previous contract year.  The District also awarded and paid unauthorized vacation and sick days, compensated an employee for two different positions covering the same time period and inconsistently calculated leave buyout payments in the amount of $35,000.

 

The audit also found that District officials do not follow the written policy that addresses the maintenance of capital asset records, they have not appointed a property control manager to track capital assets, certain items on the inventory listings could not be found and several items that were not on the inventory listings were found.

 

10 recommendations

 

The report recommends that an employment agreement be prepared for all employees not covered under a collective bargaining agreement, and that there be an independent review and verification of payroll calculations involving payments to employees for accumulated unused vacation and sick leave.

 

The report recommends that the Board seek to recover leave buyout payments made to the former Treasurer, Superin-tendentís secretary and Business Manager for unused leave.

 

The report also recommends that when a pay period encompasses two fiscal years, either a year-end payroll should be calculated, or the proper payroll expense should be accrued and paid at the proper rates in effect at the time service is rendered.

 

In addition, the report recommends that payroll related duties be assigned so that the work of one individual independently verifies anotherís in the course of their regular duties and that at a minimum, the duties of payroll processing should be separate from entering new employee information into the system.

 

The District officials agree with the recommendations, except for the payments of current earned and unused vacation leave at the conclusion of employment.

Greater Johnstown School District Internal Controls Over Capital Assets and Pur-chasing

2006M-130

4th Judicial District

$32,385 adjustment

 

The audit found that 56 percent of sampled computers and electronic equipment listed on the Business Office records and 22 percent of sampled computers on Information Technology Department records could not be located.  The computers had a value of $32,385.

 

4 recommendations

 

The report recommends that the Board establish procedures to ensure that the Districtís fixed asset policy is adhered to, that District officials complete and maintain a comprehensive inventory of capital assets, that physical inventories be conducted periodically and any differences between the records and inventory results be promptly investigated and resolved.

 

The report also recommends that the District establish policies and procedures to ensure that all computer storage facilities and labs be locked and properly secured when unattended.

1

In addition the report recommends that District officials investigate the unaccounted for equipment and take steps to recover these assets.

 

The District officials generally agree with the recommendations and indicated they plan to take corrective action.

Chazy Central Rural School District Internal Controls Over Capital Assets 2006M-138

4th Judicial District

 

$0 adjustment

 

The audit found that a 2005-2006 inventory had not been completed. Identifi-cation tags were not affixed to all inventory items and purchase information was used to update the capital asset records.

 

3 recommendations

 

The report recommends that District officials designate a property control manager to be responsible for tracking capital assets and ensuring the accuracy and usefulness of the Districtís asset records.

99

The report recommends that an identification number be assigned and affixed on individual assets.

 

The report also recommends that the Board enforce the written guidelines governing the disposal of the Districtís capital assets.

 

The District officials generally agree with the recommend- ations and indicated they plan to take corrective action.

Beekmantown Central School District Internal Controls Over Selected Financial Activities

2006M-126

4th Judicial District

 

$4,596 adjustment

 

The audit found that the District levied taxes in excess of the amount needed to fund the budget approved by District voters.

 

The audit found that there were weaknesses in the Districtís controls over the tracking and accounting of capital assets, a fixed asset inventory was not maintained in a timely manner, the Board had not adopted an adequate fixed asset policy and the Board did not follow the asset disposal policy.

 

The audit found School officials were not able to locate six computers, worth approximately $5,000.

 

The audit also found that the District had no formal written policy covering the processing of payroll, that there were instances where unauthorized leave time was taken and that some employees were paid in excess of contractual allowances. For example, former Associate Superin-tendent for Operations, Finance, and Management was paid for 12 days of compensatory time off, a total of $4,596, although there was nothing in his contract that allows for the accrual of compensatory leave.

 

The audit found that there is no segregation of duties for processing payroll and until recently, there was no separate review of payroll performed by someone independent of the payroll preparation process.

 

12 recommendations

 

The report recommends the Board ensure that the amount approved by District voters is the amount levied and any excess levied should be reflected in the subsequent yearís budget.

 

The report also recommends the Board establish and implement an adequate fixed asset policy for the Districtís capital assets, which properly addresses the accounting and safeguarding of the Districtís computers and computer-related equipment.

 

The report recommends the Board designate a property manager to be responsible for implementing the Districtís fixed asset policy, that identification numbers be affixed to capital assets, require that a comprehensive inventory record of capital assets be completed and updated, and any discrepancies be investigated and resolved.

 

The report also recommends the Board review the policy for the disposal of District capital assets and require that sufficient documentation is maintained when disposing of capital assets.

 

The report also recommends the Board establish written policies and procedures as guidance for the District employees re-sponsible for the processing and distribution of payrolls and that employees are paid and receive benefits only as provided for in a collective bargaining agreement or other employment contract,

 

The report recommends the Board determine whether the payment to the former Associate Superintendent was appropriate, if the Board determines the payment was unauthorized and thus inappropriate, the Board should seek repayment.

 

The report also recommends that someone independent of the payroll process review finalized payrolls to verify that they are based on actual hours or days worked, or authorized leave time charged; verify that the hourly rates or annual salaries used are as authorized; compare net payroll checks to the payroll journals; and review the payroll for overall reasonableness.

 

The report also recommends the Board assign payroll duties to employees in such a manner that the work of one individual independently verifies anotherís in the course of their regular duties.

 

The District officials generally agree with the recom-mendations and indicated they plan to take corrective action.

 

 

 

 

 

 

Oswego City School District Financial Condition and Internal Controls Over Financial Operations

2006M-85

5th Judicial District

 

$0 adjustment

 

The audit found that the District relied heavily on the use of the fund balance to finance operations and that the Districtís general fund unreserved, unappropriated fund balance exceeded the statutory limit at the end of fiscal years 2000-2001 and 2001-2002.

 

The audit also found that by the end of the 2004-2005 fiscal year, the Districtís fund balance was about one-fourth of what it had been at the end of the 2001-2002 and at the same time, reserves, excluding the reserve for encumbrances, were over half of what they were three years prior.

 

The audit found that with declining revenues and generally rising expend-itures, the Board took steps toward developing a multi-year financial plan to address its long-range operating and capital asset needs.

 

The audit found that employee benefit costs in the 2004-2005 budget were estimated at 10 percent less than the actual costs incurred in 2003-2004 and 23 percent less than the actual costs for 2004-2005.

The audit found health insurance costs projections were estimated at just under $6 million for 2004-2005 after the District ex-perienced costs of nearly $7.4 million in 2003-2004 and $6.7 million in 2002-2003. The actual cost of health insurance rose to nearly $7.9 million in 2004-2005, or almost $1.9 million more than had been budgeted.

The audit found that the Board did not always receive timely financial information with which to effectively monitor the Districtís finances, budget transfers were not always approved and documented, budget transfer reports were not always complete and the District inappropriately encumbered funds at year-end to increase appro-priations in various other accounts in the following year.

The audit found that the Claims Auditor has another District job, which is not compatible and did not compare the audited claims with the warrant and checks prepared by the Treasurer.

The audit also found that the Payroll Clerk and the Deputy Treasurer have computer access rights that are not compatible with other payroll duties they perform.

17 recommendations

 

The report recommends the Board require timely and complete financial and budgetary information, that the Board and District managers comply with the adopted policies and procedures for amending the budget, and that the Board ensures accurate estimates of employee benefit costs are included in the Districtís annual budget.

 

The report also recommends that year-end encumbrances only be established for valid commitments of specific future expenditures, that the Board review and comply with the statutory requirements regarding the creation and use of reserve funds, and moneys that exist in the Districtís invalid ďinsurance reserveĒ either be returned to unreserved fund balance or be used to create a legal reserve.

 

The report recommends the District continue long-term financial planning for future operational and capital requirements, that multi-year financial plans be updated annually and reviewed/ evaluated by the Board, that the Board modify plans and projections as necessary and that the Board use plans and projections to measure the Districtís progress toward achieving and sustaining fiscal stability.

 

The report also recommends that the Payroll Clerk and the Deputy Treasurer not have computer access rights that allow them to activate or deactivate employees in the payroll system and that the Districtís computer system automatically record and report when changes are made.

 

The report recommends the Board take steps to ensure that the Districtís capital asset policies are complied with, that all capital assets included in the Districtís inventory are tagged and if District officials decide that the use of blanket purchase orders is appropriate, their use should be strictly controlled with established limits, rules and procedures set forth in the Districtís procurement policy.

 

The report also recommends the Board consider adopting specific written rules and procedures for the use of confirming purchase orders.

 

The District officials generally agree with the recom-mendations and indicated they plan to take corrective action.

 

Candor Central School District Internal Controls Over Capital Assets and Computerized Data

2006M-133

6th Judicial District

 

$0 adjustment

 

The audit found that the Board has not monitored compliance with its adopted capital assets policies. The District has no formal schedule of asset acquisi-tions or asset dispositions to provide to the private company that prepares the updated inventory record. The inventory records that are kept by the information technology and trans-portation departments are not compared to the capital asset listing provided by the outside company.

8

The audit showed that 6 of the 62 items on the asset listing could not be accounted for.

 

The audit found that data stored on computers and servers were not backed up on a routine basis. A formal plan is needed to recover lost data in the event of a disaster.

 

The audit also found that there are six actively assigned computer user accounts but only three active users.

3 recommendations

 

The report recommends the Board require District officials to account for missing assets and monitor compliance with the Districtís current policies and procedures relating to capital asset management.

 

The report recommends the Board adopt policies and procedures to strengthen internal controls relating to computer data backup and disaster recovery and adopt policies and procedures to restrict the number of computer user accounts to only authorized individuals based on job responsibilities.

 

The District officials generally agree with the recom-mendations and indicated they plan to take corrective action.

 

 

LeRoy Central

School District Fuel Inventory Controls

2006M-184

3rd Judicial District

 

$0 adjustment

 

The audit found weak-nesses with segregation of duties and a lack of perpetual inventory records over fuel use.

 

The audit identified control weaknesses regarding the assignment of duties for the Fuel System Software Operator (System Operator) and Head Mechanic.

 

The audit also determined that the District was not maintaining perpetual inven-tory records and billing the Town and Village in a timely manner and there was no regular procedure in place to assess the reason-ableness of total fuel purchased as compared to total fuel dispensed.

 

 

 

4 recommendations

 

The report recommends that the District, Town and the Village define responsibilities related to the operations of the fuel storage and pumping facility and that the District segregate the duties of those employees involved with the fuel depot.

 

The report also recommends that duties of Village employees working with the District should not include pumping fuel, editing consumption records and initializing fuel usage cards. In addition, the same individual should not receive fuel deliveries, take the physical inventory or maintain the periodic physical inventory log.

 

The report recommends that the District maintain perpetual inventory records that identify the quantities purchased, delivered and dispensed and reconcile these records to the periodic physical inventories.

 

The report also recommends that the District bill the Town and Village for current usage on a timely basis and require appropriate billing within the one-week criteria.

 

The District officials generally agree with the recom-mendations and indicated they plan to take corrective action

Clyde-Savannah

Central School District

Separation Payments

and Capital Assets

2006M-99

7th Judicial District

 

$14,000 Adjustment

 

The audit found that the District does not have adequate internal controls over separation payments, which resulted in the Superintendent being inappropriately paid $14,000 when he left employment.

 

The audit also found a lack of segregation of duties and weak internal controls over capital assets.

 

7 recommendations

 

The report recommends the Board take the appropriate steps to recover the improper payments and monitor separation payments to ensure that the Districtís policies and procedures are followed.

 

The report recommends the Board ensure that separation payments made to District officials and employees comply with the provisions of their employment contracts or applicable Board policy and/or resolutions.

 

The report also recommends the Board ensure that a complete physical inventory of capital assets is taken; that acquisitions, dispositions, and transfers of assets are recorded, that moveable capital assets are tagged; that periodic physical inventories are taken with discrepancies resolved.

 

The District officials agree with most recommendations, how-ever, they are still reviewing some recommendations.

Owego Apalachian

Central School District

Internal Controls Over

Capital Assets

2006M-135

6th Judicial District

$0 adjustment

 

The audit found the Districtís internal control policies and practices relating to capital assets do not provide for a comprehensive system to track and account for capital asset acquisitions, dis-positions or transfers.

 

The audit found that the District contracts with BOCES to maintain a listing of the Districtís capital assets but the District has not verified this list. The audit also found that employees of the Districtís Information Technology, Music, and Buildings and Grounds Departments also maintain an asset listing which is also not verified or reconciled to the other asset listing.

 

The audit also found that the Board appointed an employee of the Broome-Tioga BOCES Central Business Office to serve as its Claims Auditor for the 2005-2006 fiscal year. This arrangement is currently specifically prohibited by SED regulations.

3 recommendations

 

The report recommends the Board adopt and implement a written comprehensive capital asset policy and should ensure that a physical inventory count of assets is conducted at least annually with discrepancies investigated and resolved.

 

The report also recommends the Board ensure that its appointment of the Districtís Claim Auditor is in accordance with SED regulations.

 

The District officials generally agree with the recom-mendations and plan to take appropriate actions, though they disagree with the finding concerning the appointment of a BOCES employee as the Internal Claims Auditor.

 

Roslyn Union Free School District Anatomy of a Scandal Follow-Up Audit

2006M-70

10th Judicial District

 

$0 adjustment

 

The audit found that 12 of the 27 recommendations made in the previous audit report were fully im-plemented; that 10 of the 27 were partially implemented; and 5 of the 27 were not implemented.

 

The Board did not take action to effectively implement these 5 recommendations:

1. District personnel are not following the Board adopted travel policies.

2. District officials did not adopt a policy to ensure that all public disclosure requirements of Education Law, Section 1716 were met for the Superintendent and any Assistant Superin-tendent.

3.District officials did not ensure that all amendments to contracts and copies of payroll action sheets, supporting Board-approved changes in the terms and conditions of employment for contractual employees, were filed with the District Clerk. The District Clerk maintained only the Superintendentís contract and amendments to his contract, and her own contract.

4. District officials have not created any written policies or procedures that list employee job descriptions and assign computer system user permissions to match those job functions. Four business office employees inappropriately have permission to access the Treasurerís check signature disk on the computer, which is a serious internal control weakness.

5. District officials did not establish any policy or procedure to review computer system user permissions on an ongoing basis.

 

37 recommendations

 

The report recommends the Board establish written policies for cash receipts and revenue collection; cash disbursements and accounts payable; payroll; accounting and auditing of extra-classroom activity funds; bank and account recon-ciliations; travel; credit cards; checks; signature plates/disks; cellular phones; fixed assets; and petty cash.

 

The report recommends an annual evaluation of District policies and procedures by the Board and that the Districtís policy on budget transfers and budget monitoring be brought into compliance with laws, rules and regulations.

.

The report recommends that the Treasurer present an analysis of the Budget Status Report at least quarterly at a public meeting and that the Board routinely review District financial information and reports, including the Budget Status Report on a monthly basis.

 

The report recommends that the Board establish an audit committee and that Board members are adequately trained in areas covering the basics of financial oversight, account-ability and fiduciary respon-sibilities.

 

The report recommends that press-numbered purchase orders be used to help guarantee that purchase orders are not duplicated, the sequence is intact and outstanding purchase orders are easily identified and accounted for.

 

The report recommends that District policies clearly state the circumstances under which District employees may receive reimbursements, specify the circumstances under which employees may travel, require government rates for lodging, and apply the government per diem rates for meal allowances.

 

The report recommends computer user permissions match job functions and that some functions involved in processing transactions need to be separated among different individuals to reduce the risk of fraudulent activities.

.

The report recommends that a procedure be established to review computer system user permissions on an ongoing basis, ensure that each computer user is set up with a unique user account and permission level, establish a standard procedure with the Finance Manager software company for remotely accessing the Districtís network for upgrades to the Finance Manager software package and institute controls over the software companyís network user account, as well as with all District employeesí user accounts, that would limit unauthorized access to the Districtís computerized records.

 

The report also recommends that the Board and other management personnel set a good control environment by establishing and effectively communicating their code of ethics and written policies and procedures; and behave in an ethical manner and observe the same rules that they expect everyone else to observe.

 

The report recommends that all payroll-related changes should be supported by adequate written documentation and that the Board adopt a policy requiring that the District complies with all of the public disclosure requirements of Education Law.

 

The Board should adopt a policy requiring that payroll action sheets be prepared and signed by the Board, that all amendments to contracts and copies of the action sheets be filed with the District Clerk, and that employee contracts clearly specify the benefits that they are willing to provide.

 

The report recommends the District designate an individual to approve all journal entries, or journal entries above a certain amount, that the mail be opened by an individual who is not involved in the accounting process, and a listing of mail received should be forwarded to the Accounting Supervisor, Treasurer, Deputy Treasurer, or other appropriate accounting personnel.

 

The report recommends that duplicate deposit slips contain additional information such as check numbers or individualsí names and that journal entry capability should be given only to those employees whose job specifications require that they perform this function.

 

The District officials generally agree with the recom-mendations and plan to take appropriate actions, however, they disagree that District personnel continue to circumvent the Internal Claims Audit process by making payments before the Internal Claims Auditor reviews and approves warrants.

Broadalbin-Perth Central School District Internal Controls Over Online Banking Transactions and Purchasing

2006M-120

4th Judicial District

$0 adjustment

 

The audit found that the Board has not established written policies and procedures for online banking transactions and that the District Treasurer can make transfers between District accounts within the same bank and make transfers between District and non-District accounts without any approval process.

 

The audit also found that the Board has not established a limit on amounts that can be transferred to non-District accounts, does not require a monthly report of all online banking transactions or a reconciliation of such a report with the monthly bank statement.

 

3 recommendations

 

The report recommends that the Board establish a com-prehensive online banking policy that adequately addresses the duties, records, and procedures required to implement effective controls over the Districtís online banking transactions and that District officials establish appropriate online banking limits specifically addressing the District Treasurerís ability to transfer money from District to non-District bank accounts.

 

The report also recommends that District officials require a monthly report that lists all online banking transactions for the period and have someone independent of the online banking process reconcile this report with the monthly bank statement.

 

The District officials generally agree with the recom-mendations and indicated they plan to take corrective action.

Canajoharie Central School District Internal Controls Over Electronic Equipment Inventories and Employee Reim-bursements

2006M-110

4th Judicial District

 

$0 adjustment

 

The audit found that the most recent physical inventory did not capture all the information needed to provide for an adequate accountability over the Districtís electronic equip-ment.

 

The audit also found that the Board has not developed formal policies and District employees do not have clear standards upon which to base their decisions and actions for travel, meals and other expenses.

 

 

6 recommendations

 

The report recommends that the Board establish a compre-hensive inventory policy, that physical inventories should be conducted periodically and differences resolved, that assets be tagged, and that procedures for disposing of old electronic equipment be established.

 

The report recommends that the Board establish a policy governing reimbursements of expenses incurred by employees and require that all submittals for reimbursement be accompanied by the appropriate documentation, including itemized receipts.

 

The District officials agree with the recommendations and indicated they plan to take corrective action.

Cincinnatus Central

School District

Internal Controls

2006M-116

6th Judicial District

$0 adjustment

 

The audit found the Board appointed an employee from the Broome-Tioga BOCES Central Business Office to serve as its Claims Auditor for the 2004-2005 and 2005-2006 fiscal years.   This arrangement currently is specifically prohibited by SED regulations.

1 recommendation

 

The report recommends that the Board ensure that its appointment of the Districtís Claims Auditor is in accordance with SED regulations.

 

The District officials agree with the recommendations and indicated they plan to take corrective action.

 

Corinth Central School District Internal Controls Over

Selected Financial Activities

2006M-103

4th Judicial District

 

$6,244 adjustment

 

The audit found that the Board and Superintendent failed to establish adequate internal controls over cash disbursements for the Reading First grant. The Districtís elementary school principal who served as the Reading First coordinator was a recipient of the grant money and was allowed to administer the grant.

The audit also found that the Board did not approve the appointment of the principal as the Reading First coordinator or the reading teacher as the coach, nor did the Board set salaries for these positions. As a result, we cannot determine the propriety of over $36,000 in salaries paid to the principal and the coach. In addition to travel reimbursements and other money they received under the grant, the principal and coach were each paid $2,500 stipends that they were not entitled to for administering the grant. Finally, the principal and coach billed the school for $1,244 in excess travel expenses incurred while attending the national Reading First conventions in July of 2004 and 2005.

The audit found that the Board has not adopted a capital asset policy.

7 recommendations

 

The report recommends that the Board seek recovery of the excess payments to the principal and the reading coach and that the Board approve all appointments to positions established under grants.

 

The report also recommends that a grant administrator be someone other than the individual(s) receiving extra pay, benefits or reimbursements for services provided in the performance of the grant.

 

The report recommends the District ensure that employee travel expenses are kept to the minimum amount necessary and unnecessary costs are avoided.

 

The report recommends the Board establish written policies to address when and at what rate teachers are eligible to be paid for attending training.

 

The report also recommends that District officials develop a comprehensive capital asset policy, tag assets and require a physical inventory count of assets be conducted at least annually, with discrepancies resolved.

 

The District officials generally agree with the recom-mendations and indicated they plan to take corrective action.

Coxsackie-Athens

Central School District

Internal Controls Over

Selected Financial Activities

2006M-65

3rd Judicial District

$26,262 adjustment

 

The audit found that the District inappropriately paid the former Superintendent a total of $20,820 for vacation days that were not available and for unused vacation days exceeding the contractual annual limit of 12 days. Additionally, the District inappropriately paid the former Director of Technology $5,442, upon retirement, for 22 unused vacation days.

The audit also found that the District made payments totaling $168,522 for physical therapy, occupa-tional services, and computer consulting ser-vices during the 2004-2005 and 2005-2006 fiscal years without the solicitation of requests for proposals as required by their pro-curement policy.

The audit found that the District has not established adequate controls over claims processing, to determine if the charges were legitimate, reasonable, and proper charges.

The audit also found that District officials have not established adequate con-trols to protect capital assets and found that 18 of 65 items tested, with a value of over $24,000, were missing.

 

14 recommendations

 

The report recommends that the Board establish policies and procedures to ensure that all payments for unused leave time are made in accordance with employment agreements and are supported by accurate records of unused leave time.  Also, the Board should establish policies prohibiting District officials from authorizing payments to themselves.

 

The report recommends that the Board require all District employees to submit docu-mentation of leave time taken and the Board should further investigate and take appropriate actions to recover overpayments to former administrators.

 

The report also recommends that Board and District managers establish procedures to ensure that leave time provided to District employees is accurately recorded in accordance with negotiated contracts, that leave usage is accurately charged against leave accruals and that District officials enforce their policy requiring employees to use the Request for Leave/Report of Absence forms to request leave time.

 

The report recommends that the Board and District managers comply with the District procurement policy by periodically soliciting RFPs as a basis for awarding contracts for professional services, and that the Board and District managers monitor and enforce compliance with adopted policies for travel and credit card use.

 

The report also recommends that the Board consider establishing reasonable maximum rates for lodging which cannot be exceeded without approval, and ensure that the Internal Claims Auditor is aware of all Board policies regarding the audit of claims, and conducts a proper and thorough audit of claims in accordance with laws.

 

The report also recommends that the Board adopt a comprehensive capital asset policy, designate a property control manager, tag assets, require a physical inventory and investigate discrepancies.

 

The District officials generally agree with the recom-mendations.

Inlet Common

School District

Internal Controls Over Purchasing

2006M-104

4th Judicial District

 

$0 adjustment

 

The audit found that the Board has not adopted a Code of Ethics to provide guidance on the standards of conduct reasonably expected of its officers and employees.

 

The audit also found that the District made payments for electrical and heating work completed at the school to a business owned by a Board member and her husband.

 

5 recommendations

 

The report recommends that the Board adopt a purchasing policy in accordance with General Municipal Law Section 104-b, competitively bid transportation contracts and require that a contract be signed detailing the transportation services and associated costs.

 

The report also recommends that the Board adopt a code of ethics and review pertinent sections of Article 18 of the General Municipal Law to avoid transactions that may constitute prohibited conflicts of interest.

 

The District officials generally agree with the recom-mendations and indicated they plan to take corrective action.

 

Laurens Central School District Internal Controls Over Purchasing and Capital Assets

2006M-113

6th Judicial District

 

$0 adjustment

 

The audit found that the Board adopted a pro-curement policy that was not always operating effectively because District staff made purchases without adhering to the procurement policy.

 

The audit found that certain claims were not audited and approved by the Districtís claims auditor.  For example all special aid fund disbursements totaling $249,750 (excluding payroll) and disbursements from two trust and agency funds entitled ďPouring RightsĒ and ďPepsi FundĒ totaling $1,813 and $2,434, respectively, were not audited and approved by the claims auditor.

 

The audit also found that vouchers were approved for payment without docu-mentation of compliance with the procurement policy.

 

4 recommendations

 

The report recommends that the Board ensure that all District staff involved in the purchasing function are aware of the requirements of Districtís procurement policy and comply with them.

 

The report recommends the Board ensures that the claims auditor is auditing all special aid fund claims, that Pouring Rights and Pepsi Fund revenues should be recorded in the general fund (and be subject to the budgetary process) and the claims auditor not approve payments unless in compliance with Board policy.

 

The report also recommends the Board enhance their capital assets internal control policies and procedures to ensure that they include guidance on when capital assets should be appropriately recorded. In addition, the policy should require periodic (annual) inventories and that disposal of capital assets be completely addressed.

 

The District officials generally agree with the recom-mendations and indicated they plan to take corrective action.

Wells Central School District Internal Controls Over Payroll

2006M-131

4th Judicial District

 

$0 adjustment

 

The audit found that the District had no written policies and payroll procedures which resulted in the Treasurer developing informal procedures.  There were several instances where employeesí pay and leave accruals were inconsistent with their employment contracts.

 

The audit also found a lack of management oversight and no segregation of duties in the Districtís business office which allowed errors and irregularities to occur and go undetected.

 

The audit found that the Board failed to provide specific guidance through well developed policies and procedures.

 

The audit found that the Superintendent approved additional payments to the Treasurer for $2,800 and $3,000, respectively, for the 2004-2005 and 2005-2006 fiscal years as com-pensation for monitoring a Federal grant. However, no documentation existed to substantiate this approval. The Treasurer was also allowed to receive a payment for five vacation days that were not used during the fiscal year ended June 30, 2005. Although these payments were approved in writing by the Superintendent, they were made without evidence of the Boardís approval or any supporting written employ-ment contract.

 

The audit also found that six employeesí leave accruals did not conform to the benefits authorized in either an employee contract or collective bargaining agreement which represent significant weaknesses in internal controls over payroll processing.

 

 

5 recommendations

 

The report recommends that the Board adopt written policies and procedures as guidance for the employees responsible for processing and distributing payroll, and ensure that employees are paid and receive benefits only as authorized by and provided for in its collective bargaining agreements or other employment contracts.

 

The report recommends the Board ensure that District personnel calculate leave records accurately for all officers and employees who are entitled to leave benefits and the Board determines the propriety of 16 additional leave days to teachers.

 

The report also recommends that someone independent of the payroll process review final payrolls to verify that they are based on actual hours or days worked, or authorized leave charged; check that the hourly rates or annual salaries paid were authorized; compare net payroll checks to the payroll journals; and review the payroll for overall reasonableness.

 

The District officials generally agree with the recom-mendations and indicated they plan to take corrective action.

 

 

Mount Vernon

City School District

Internal Controls Over

Purchasing and Assets 2006M-29

9th Judicial District

 

$0 adjustment

 

The audit found that the Board adopted a bond resolution which authorized the issuance of serial bonds aggregating $100 million, but should have adopted and submitted for voter approval two separate bond resolutions. Change orders for the construction projects totaling $827,817 could not be located by District staff. Subsequently, District offi-cials provided OSC with documentation showing that $185,372 of these change orders were proposed but never approved or paid.

The audit found significant weaknesses in internal controls over purchasing practices. The District did not seek bids for $378,522 of purchases and public works contracts that were subject to competitive bidding. Also, the District paid four professionals $836,988 when their contracts did not contain a clear understanding of the amount of compensation they were entitled to.

The audit found internal controls over the Districtís assets were weak. In one instance a $941,709 transfer was made to the wrong account. In two other unrelated instances, it resulted in the overpayment and underpayment of withholding taxes.

The audit found that the Board assigned conflicting duties to three key members of its management team, the District Treasurer, Internal Auditor and Purchasing Agent.

The audit also found that bank reconciliations are not completed timely and there is a lack of oversight of the extra classroom accounts.

 

10 recommendations

 

The report recommends that the Board adopt amended bond resolutions to effect any changes to the purposes of original resolutions. The Board should not adopt a bond resolution authorizing the issuance of bonds for more than one purpose unless the adoption of such a resolution is authorized by section 31.00(d) of the Local Finance Law.

 

The report recommends that the District ensure that docu-mentation is available to support the Districtís expenditures for all capital projects and ensure that all change orders and final cost reports are submitted to the SED in the most efficient manner to obtain timely State aid reimbursements.

 

The report recommends that the District ensure that all items which exceed the bidding thresholds are competitively bid and ensure that all purchasing officials and department heads are properly trained in bidding laws and the use of State contracts.

 

The report also recommends the District ensure that written agreements with all professionals clearly define the amount of compensation and the duration of work to be performed.

 

The report recommends the Treasurer review all payroll tax computations and wire transfer documentations before allowing clerks to execute wire transfers. The report also recommends the Board review the scope of duties of the District Treasurer, Internal Auditor and Purchasing Agent, separating the incom-patible functions or imple-menting compensating controls.

 

Finally, the report also recommends the Assistant Superintendent of Business ensure that all bank accounts are reconciled on a monthly basis and differences resolved.

 

The District officials generally agree with the recom-mendations and indicated they plan to take corrective action.

Yonkers City School District Internal Controls Over Selected Financial Operations

2006M-79

9th Judicial District

 

$0 adjustment

 

The audit found instances in which the Board had either not established critical internal controls or had not provided adequate oversight to ensure that controls were implemented and operating effectively. The audit identified 162 employees who were paid $692,648 in excess of the Board-established overtime caps and without sufficient detail to substantiate the hours worked during the 2004-2005 fiscal year. Four employees were provided higher salaries than they were entitled to by Board-policy or negotiated contracts, resulting in overpayments of $134,840. In addition, the District paid five other employees for sick leave they were not entitled to while they were receiving workerís compensation benefits.

The audit found that the District paid claims totaling about $154.7 million without an audit by the Board or an internal claims auditor. The District also contracted for various professional ser-vices without seeking quotes from other vendors.

The audit also found that the Board and District management had not adequately protected or accounted for District cash receipts and disbursements. Audit testing determined that the District had not identified $3.3 million in duplicate checks; had not deposited more than $927,000 in checks on a timely basis; had not adequately tracked out-standing and voided checks; and had not accounted for the purchase and sale of hundreds of thousands of dollars worth of school bus stickers and passes. The audit attributes the problems found to the Districtís failure to segregate critical financial duties or perform regular reconciliations, and to the Boardís failure to adopt and monitor compliance with policies.

 

16 recommendations

 

The report recommends that District officials take steps to enforce compliance with existing payroll and overtime provisions contained in resolutions, policies and negotiated employee contracts and that the Board periodically review payroll related expenditures such as overtime to monitor and assess the reasonableness of such costs.

 

The report recommends that District officials provide written pre-approval for all overtime for administrators, schedule staff to minimize the use of overtime in after-school programs, itemize overtime records to include date, time of day and the specific purpose of overtime and that the Board authorize total compensation for new employees, and stipulate the employeeís base pay and amount of prior service credit in the minutes.

 

The report recommends that all District employees be paid according to the terms of their contracts or as approved by Board resolution and that District officials ensure that future ďsick bankĒ compensation claims are verified with the Workerís Compensation Board prior to payment.

 

The report recommends that the Board audit all claims against the District, or appoint an independent internal claims auditor to perform this function, and amend the Districtís procurement policy to provide additional guidance for procuring professional services, including requiring the use of RFPs and documentation of the contract award process.

 

The report recommends that the Director of Finance segregate duties in the Finance office so that the work of one individual will be independently verified by another, review bank recon-ciliations monthly, follow up on long-term outstanding checks and investigate and correct any discrepancies.

 

The report recommends that the Board adopt a cash receipt policy which establishes the number of days in which cash should be deposited.  In addition, the Board and District officials should develop and implement policies and procedures for purchasing, distributing, selling and accounting for school bus passes and stickers.

 

The report recommends that the Director should develop a system to account for school bus stickers and passes in accordance with District policies and procedures and the Director or Finance Department personnel should periodically reconcile cash receipts from the schools to the total passes given to the schools and any unsold passes.

 

The District officials generally agree with the recom-mendations and indicated they plan to take corrective action.

Voorheesville Central School District Payments for Employee Benefits and Former Admin-istratorsí Claims

2006M-59

3rd Judicial District

 

$0 adjustment

 

The audit found that the District inappropriately paid the current Assistant Superintendent (former Treasurer) $8,425 and $5,575 for unused leave and tuition reimbursement, respectively, and the District also paid the Superin-tendent $2,105 for unused leave to which he was not entitled.

The audit found that the Board did not have an adequate system of internal controls in place to ensure that payments for employee benefits were authorized and accurate, and did not authorize tuition reim-bursement for management/ confidential employees in any approved employment contract or policy.

The audit found that the former Superintendent was able to override or disregard existing internal controls and provide benefits to employees without proper authorization from the Board.

The audit also found that the Districtís internal controls over the former administratorís expense claims also were not effective. The former Superintendent charged at least $11,500 in various personal expenses to the District for hotels (out-of-town and local), entertainment, meals and alcohol, gifts, and donations and only reimbursed the District for $611 of the personal expenses charged.

The audit found that the Districtís travel policy in effect during the audit period was vague and non-specific.

The audit also found that the Supervisor received an improper gift when a school bus vendor provided an all expense paid, two-day trip to Tulsa, Oklahoma to tour a bus manufacturing facility. Subsequent to the trip, the District purchased three busses at a cost of $208,000 through a state contract from the vendor, giving rise to a question of impropriety.

 

12 recommendations

 

The report recommends that the Board review the payments provided to the current Assistant Superintendent and Superin-tendent to which they were not entitled and then take appropriate formal action based on the results of their review.

 

The report recommends that the Board should either ratify the half-day Fridays benefit extended to business office employees in the summer or end the practice and that the Board should ensure all employee benefits are authorized in writing.

 

The report recommends that the Board and District officials establish a system of checks and balances over employee leave records to reduce errors and irregularities, and the Board should pursue collection of the personal expenses that the former Superintendent has not already reimbursed.

The report also recommends the Board provide the Claims Auditor with detailed guidance about its expectations for the function. Included in this guidance should be information about how to conduct an audit of claims and what to do when questions arise about questionable or undocumented expenses. The Claims Auditor should ensure that that all officials submit the Conference & Workshop Request, Approval and Expense Voucher form for conference-related travel and credit card expenses.

 

The report recommends that the Board establish reasonable maximum rates that it will reimburse employees for lodging, and require all employees to provide detailed travel itinerary information (i.e., destinations and times) to support claimed mileage and other expenses.

 

The report recommends that the claims auditor ensure that all travel-related expenses sub- mitted by officials are supported with adequate documentation and are for District purposes.

 

The report also recommends that the Board ensure that District officials and employees do not accept gifts that are prohibited by law and that District officials do not accept gifts from vendors which they currently or will potentially conduct business to avoid the perception of impropriety.

 

 

The District officials generally agree with the recom-mendations and indicated they plan to take corrective action.

Hinsdale Central School District Employee Separation Compensation and Claims Processing

2006M-82

8th Judicial District

 

$0 adjustment

 

The audit found that the Districtís controls over employee separation compensation were not operating effectively and that the Board paid the Superintendent $40,000 in additional separation com-pensation without justifying these payments.

The audit found the Board accepted the Superin-tendentís retirement and agreed to changes in his contract which increased the Superintendentís salary by $15,000 and allowed him to remain on the payroll while out sick. The Superin-tendent did not provide a medical reason for his use of 124 sick days, and the District could not provide adequate records to support the 124 days of sick leave benefit. However, even if the stated leave balance was accurate, the Board paid the Superintendent about $25,000 more than necessary for these leave days.

The audit found the Board has not adequately designed internal controls over claims processing and as a result, the District may have paid for unnecessary or inappropriate expenses.

The audit found that the claims processing function did not effectively control payments because the claims auditor was not independent of other District business functions, and reported directly to the Superintendent.

5 recommendations

 

The report recommends that the Board establish procedures for tracking administratorsí leave time accruals and usage and adopt a policy, or include a clause in individual admin-istrative contracts, to delineate the proper use of leave by the administrative staff covered by such contracts.

 

The report recommends that the Board appoint a claims auditor who is independent of District business functions and who is not directly supervised by top District administrators.

 

The report recommends that the Board establish comprehensive written policies and monitoring procedures to ensure that expenses for meals and lodging are reasonable; the claims auditor requires that every claim contains enough itemization and supporting documentation to indicate that it is a proper District charge and it complies with District policies including those for travel and credit card use; the claims auditor reviews and signs the warrant to ensure that only those claims approved for payment are listed in the amounts approved; and no money is paid out by the District treasurer, except where statutorily allowed, unless the treasurer receives a signed warrant from the claims auditor.

 

The report also recommends that the Board should seek to recover any payments made for other than appropriate District purposes.

 

The District officials generally agree with the recom- mendations.

Evans-Brant

Central School District

Administrative Compensation

and Benefits, Claims Processing

and Inventories

2006M-54

8th Judicial District

 

$0 adjustment

 

The audit found that the District overpaid certain former and current administrators because the Board did not provide for the establishment of policies and procedures to ensure administrative employees are compensated only for authorized salary, benefits and related separation payments. The District inappropriately paid the former Superintendent $60,885 in salary and benefits, in excess of his employment contracts. The former Assistant Superin-tendent, former Business Administrator, and former Crew Chief also received compensation in excess of their contracts of approx-imately $1,600, $6,300, and $12,000, respectively. In addition, the Treasurer paid herself a $2,000 stipend without Board authorization.

 

The audit also found that District officials do not effectively control the processing and payment of claims, the Claims Auditorís duties were not adequately segregated from the business operations, the former Superintendent served as the Claims Auditor in addition to his duties initiating certain purchases and approving claims as Superintendent.

 

The audit found deficiencies in departmental approval, purchasing agent authori-zation, and itemization in claims.

 

The audit found that current Board policies concerning travel do not establish limits on lodging expenses incurred while traveling.

The audit also found that several assets listed on the inventory asset records could not be located.

15 recommendations

 

The report recommends that the Board assume greater governance responsibilities by establishing and maintaining a control environment that supports ethical behavior and conformance to controls, and take appropriate steps to recover improper payments made to prior employees.

 

The report recommends that the Board ensure that employee compensation is based on properly authorized employee contracts, collective bargaining agreements or Board policies; adopt a policy for verifying and approving administrative payroll and separation payments; and ensure that the Superintendent, or his/her designee, develops adequate procedures to implement the policy.

 

The report also recommends that the Board periodically monitor employee compensation and benefit payments to ensure that they are consistent with applicable Board policies, employment contracts and/or collective bargaining agree-ments.

 

The report recommends that District officials restrict the treasurerís access to the payroll program and develop a compensating control procedure to verify that all payroll changes are authorized and properly documented.

 

The report recommends that with certain exceptions, the treasurer should pay only those claims that have been audited and authorized for payment, and are listed on a warrant signed by the claims auditor.

 

The report recommends that the Board adopt more com-prehensive written inventory policies to properly safeguard assets and monitor compliance with these policies; and that District officials establish procedures to ensure complete and accurate inventory records are maintained and periodic physical inventories are conducted.

 

The report recommends that District officials ensure that assets are physically secured and safeguarded, establish and maintain perpetual inventory records for central supply items, reconcile the perpetual inventory records periodically to a physical inventory and follow-up on any material differences.

 

The report also recommends that the Business Administrator perform analytical reviews of financial data to help reveal unusual items or trends requiring further investigation.

 

The District officials generally agree with the recom-mendations and indicated they plan to take corrective action.