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Meeting of the Board of Regents | April 2008

Tuesday, April 1, 2008 - 9:20am

sed seal                                                                                                 


 


 

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

 


TO:

Subcommittee on Audits

 


FROM:

Theresa E. Savo 

 


SUBJECT:

Board of Regents Oversight – Financial Accountability

 


DATE:

March 27, 2008

 


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:

 

  • Results of the State of New York Single Audit (Attachment II)
  • Audit Trend – Procurement (Attachment III)
  • Completed Audits – Including a Summary of the Department’s Internal Audit Workgroup (Attachment IV)

 


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.           State of New York Single Audit – Department staff will brief the Members on the results of the State of New York Single Audit as it relates to the State Education Department. The single audit looks at the Department's internal controls related to the larger federal grant programs as well as compliance with federal regulations. The Department receives in excess of $3 billion in federal funds, most of which is sent to local education agencies. (Attachment II)

 

2.           Audit Trend – Procurement – The results of the many audits of school districts conducted by the Office of the State Comptroller and others have been summarized and tracked over several months. One of the most common audit findings is in the area of procurement of goods and services including professional services. Department staff will describe the issue in more detail including possible policy changes. (Attachment III)

 

3.           Completed Audits

              The Subcommittee is being presented with 23 audits this month.  The audits have been reviewed by the Department’s Internal Audit Workgroup.  Their report is attached.  (Attachment IV)  

 

              Reports are provided as follows:

 

Office of the State Comptroller

 

              Argyle Central School District

Baldwin Union Free School District

Bellmore-Merrick Central High School District

Camden Central School District

Copiague School District

East Hampton Union Free School District

East Meadow Union Free School District

Eden Central School District

Glens Falls Common School District

Hamburg Central School District

Harborfields Central School District

Johnsburg Central School District

Letchworth Central School District

Mount Morris Central School District

Nassau County BOCES

Perry Central School District

Piseco Common School District

Prattsburgh Central School District

Saratoga Springs City School District

Schoharie Central School District

Shelter Island Union Free School District

Tompkins-Seneca-Tioga BOCES

West Valley Central School District

 


Recommendation

 

For item two (Audit Trend), the advice and guidance of the Members of the Subcommittee is sought.  For item one (State of New York Single Audit) and item three (Completed Audits), no further action is recommended.


 


Timetable for Implementation

 

              N/A

 

The following materials are attached:

  • Roadmap
  • Minutes of the March Meeting (Attachment I)
  • State of New York Single Audit (Attachment II)
  • Audit Trend – Procurement (Attachment III)
  • Review of Audits Presented – Department’s Internal Audit Workgroup (Attachment IV)
  • Summary of Audit Findings (Attachment V)
  • Audit Report Abstracts (Attachment VI)

 


 

REGENTS SUBCOMMITTEE ON AUDITS

MEETING ROADMAP

 


Date:  April 2008


Time:  TBD


Location:  TBD


TOPIC


OUTCOME


WHO


MINUTES

Opening Remarks

 

Chair

3

Review Agenda/Minutes (Attachment I)

Approval

Conway

2

State of New York Single Audit (Attachment II)

Information

Toski, Schaefer & Co.

20

Audit Trend – Procurement (Attachment III)

Information

OAS Staff

20

Completed Audits – Including a Summary of the Department’s Internal Audit Workgroup (Attachment IV), Summary of Audit Findings (Attachment V), and Audit Report Abstracts (Attachment VI)

Questions answered

OSC and Department Audit Staff

15





 

Your Subcommittee on Audits held its scheduled meeting on March 17, 2008.

 



Subcommittee Members in Attendance:

 

Regent Geraldine D. Chapey, Chair

Regent Arnold B. Gardner

Regent Milton Coffield

Regent Joseph Bowman Jr.

 



Other Members of the Board of Regents in Attendance:

 

Regent Roger B. Tilles




 





Discussion Items



 

  • Regent Chapey expressed her appreciation for the recent developments in the reporting procedures to the Subcommittee.  She commented on the Internal Audit Workgroup’s second report identifying specific audits that need follow-up action and the Office of Audit Services’ (OAS) report on another audit findings trend. 

 

  • Regent Coffield moved to accept the minutes of the February meeting, Regent Gardner seconded.

 

  • Audit staff briefed the Subcommittee members on another audit trend identified through the audits conducted by the Office of the State Comptroller (OSC). The trend presented involved weaknesses in the area of information technology (IT) controls. Staff described the type of audit findings and the criteria and available resources to guide school districts into compliance.  A multi-office workgroup will be convened to assess the needs, evaluate the extent of information available, and consider approaches to provide further support.

 

  • Audit staff discussed the financial statement analysis process and the resulting list of districts in fiscal stress and concern.  There was a discussion regarding the possible correlation between fiscally stressed districts and poor academic performance, as well as the significant number of small city school districts in fiscal concern on the list.    Department staff will continuously monitor these districts and communicate with district officials as needed.

 

  • At the April meeting, OAS will provide the Subcommittee members a report on the audits of charter schools.

 

  • Completed audits by the OSC presented this month:

Adirondack Central School District

Amagansett Union Free School District

Bridgehampton Union Free School District

Canisteo-Greenwood Central School District

Capital Region BOCES

Clinton Central School District

Fire Island Union Free School District

Great Neck Union Free School District

Greenport Union Free School District

Madrid-Waddington Central School District

New Suffolk Common School District

Newcomb Central School District

Onteora Central School District

Pine Bush Central School District

Remsenbury-Speonk Union Free School District

Roosevelt Union Free School District

Sagaponack Common School District

 

 


          Attachment II


STATE OF NEW YORK SINGLE AUDIT



 


STATE OF NEW YORK

Schedule of Findings and Questioned Costs

March 31, 2007


School Breakfast Program (10.553)


National


School


Lunch Program (10.555)


Special Milk Program for Children (10.556)


Summer Food Service Program for Children (10.559)


Title 1 Grants to Local Educational Agencies (84.010)


Special Education - Grants to States (84.027)


Vocational Education - Basic Grants to States (84.048)


Special Education - Preschool Grants (84.173)


Twenty-First Century Community Learning Centers (84.287)


Reading


First State


Grants (84.357)


English Language Acquisition Grants (84.365)


Improving Teacher Quality State Grants (84.367)


 


State Education Department


 


Reference: 07-05


 



Requirement

 

In accordance with OMB Circular A-133 section .400, a pass-through entity is responsible for (a) Ensuring required audits are performed within nine months of the end of the subrecipient’s audit period; (b) Issuing a management decision on audit findings within six months after receipt of the subrecipient’s audit report; and (c) Ensuring that the subrecipient takes timely and appropriate corrective action on all audit findings. In cases of the continued inability or unwillingness of a subrecipient to have the required audits, the pass-through entity shall take appropriate action using sanctions.

 



Finding


 

The Office of Audit Services (OAS) has automated the receipt and review process of the A-133 reports by using an electronic control log system. The Department also has procedures in place to remind subrecipients of their obligation to submit A-133 reports and procedures to follow up on late reports. A letter is sent to all subrecipients in November stating that the A-133 report must be submitted within nine months subsequent to the subrecipient’s fiscal year end. Additionally, in March, a follow up letter is sent to all subrecipients with June fiscal year ends who have yet to submit the A-133 report, reminding them of their obligation to submit the report by March 31. The Department also sends out dunning letters to subrecipients that are past the submission deadline, reminding them that Federal awards may be suspended if they fail to submit the report. Late reports are followed up with numerous phone calls and faxes, once again indicating that aid may be withheld if the reports are not submitted.

 


STATE OF NEW YORK

Schedule of Findings and Questioned Costs

March 31, 2007

 

We noted that 142 of the A-133 reports required corrective action which required the Department to issue a management decision within six months. For eight of 142 reports, the Department had not issued the management decision within the six-month time frame and in two of the eight reports, the corrective action plans had not been received by the Department as of August 2007.

A similar finding was included in the prior year Single Audit Report as finding 06-08 on page 46.

 



Recommendation


 

We recommend that the Department strengthen their procedures to ensure that all subrecipients submit corrective action plans when necessary and issue timely management decisions in accordance with OMB Circular A-133.

 



Related Noncompliance


 

Based on the above, the Department was not in compliance with the requirement described above.

 



Questioned Costs


 

None

 



Views of Responsible Officials


 

Presented in the State Agency Corrective Action Plans attached as an appendix to the Single Audit Report.

 

 

 







STATE OF NEW YORK

Schedule of Findings and Questioned Costs

March 31, 2007

 


Special Education - Grants to States (IDEA, Part B) (84.027)


Special Education - Preschool Grants (IDEA Preschool) (84.173)


 


State Education Department


 


Reference: 07-17


 



Requirement


 


IDEA, Part B


Formula Subgrants to LEAs


 

Any funds under this program that the State Education Agency (SEA) does not retain for

administration and other State-level activities shall be distributed to eligible Local Education Agencies (LEA) in the State. An SEA must distribute to each eligible LEA the amount that LEA would have received, from the fiscal year 1999 appropriation, if the State had distributed 75 percent of its grant for that year to LEAs. (This amount is based on the IDEA-B child count conducted on December 1, 1998.) The SEA must then distribute 85 percent of any remaining funds to those LEAs on the basis of the relative numbers of children enrolled in public and private elementary and secondary schools within the LEA’s jurisdiction; and then distribute 15 percent of any remaining funds to those LEAs in accordance with their relative numbers of children living in poverty, as

determined by the State educational agency (20 USC 1411(f)(2)).

 



Redistribution of Formula Funds to LEAs


 

If a new LEA is created within a State, the State shall divide the base allocation for the LEAs that would have been responsible for serving children with disabilities now being served by the new LEA among the new LEA and affected LEAs based on the relative numbers of children with disabilities currently provided special education by each of the LEAs. If one or more LEAs are combined into a single LEA, the State shall combine the base allocation of the merged LEAs. If, for two or more LEAs, geographic boundaries or administrative responsibilities for providing services to children with disabilities ages 3 through 21 change, the base allocation of affected LEAs shall be redistributed among affected LEAs based on the relative numbers of children with disabilities currently provided special education by each affected LEA (34 CFR section 300.705(b)(2)).

 



Finding


 

One of 40 formula subgrants we tested was incorrectly awarded to an LEA. Three districts were merged and the resulting December 1, 1998 child count was computed incorrectly, which resulted in the child count being overstated by 107 children. Because of this, the LEA received a total of $166,199 in excess funds over the past three years. The three school districts merged on July 1, 2004 using a child count of 604 for the newly merged district. The SED should have used the correct child count of 497.

 



Recommendation


 

When a school district is created or merges with another school district, the child counts should be recalculated and reviewed by the appropriate supervisor.

 



Related Noncompliance


 

Based on the above, the Department was not in compliance with the requirement described above.

 



Questioned Cost


 

2004-2005 IDEA Part B $ 55,386

2005-2006 IDEA Part B 55,396

2006-2007 IDEA Part B 55,417

Total Questioned Costs $ 166,199

 



Views of Responsible Officials


 

Presented in the State Agency Corrective Action Plans attached as an appendix to the Single Audit Report.

 

 

 







STATE OF NEW YORK

Schedule of Findings and Questioned Costs

March 31, 2007

 


Special Education - Grants to States (IDEA, Part B) (84.027)


Special Education - Preschool Grants (IDEA Preschool) (84.173)


 


State Education Department


 


Reference: 07-18


 



Requirement


 


IDEA, Part B


 

Formula Subgrants to LEAs: Any funds under this program that the State Education Agency (SEA) does not retain for administration and other State-level activities shall be distributed to eligible Local Education Agencies (LEA) in the State. An SEA must distribute to each eligible LEA the amount that LEA would have received, from the fiscal year 1999 appropriation, if the State had distributed 75 percent of its grant for that year to LEAs. (This amount is based on the IDEA-B child count conducted on December 1, 1998.) The SEA must then distribute 85 percent of any remaining funds to those LEAs on the basis of the relative numbers of children enrolled in public and private elementary and secondary schools within the LEA’s jurisdiction; and then distribute 15 percent of any remaining funds to those LEAs in accordance with their relative numbers of children

living in poverty, as determined by the State educational agency (20 USC 1411(f)(2)).

 


IDEA, Preschool Grants Program


 

Formula Subgrants to LEAs: Any funds under this program that the SEA does not retain for administration and other State-level activities shall be distributed to eligible LEAs in the State. An SEA must distribute to each eligible LEA the amount the LEA would have received from the fiscal year 1997 appropriation if the State had distributed 75 percent of its grant for that year to LEAs. (This amount is based on the IDEA-B child count conducted on December 1, 1996.) The SEA must then distribute 85 percent of any remaining funds to those agencies on the basis of the relative numbers of children enrolled in public and private elementary and secondary schools within the agency’s jurisdiction; and then distribute 15 percent of any remaining funds to those agencies in

accordance with their relative numbers of children living in poverty, as determined by the SEA. (If an SEA determines that an LEA is adequately providing a Free Appropriate Public Education (FAPE) to all children with disabilities aged 3 through 5 residing in the area served by that agency with State and local funds, the SEA may reallocate any portion of the funds under this program that are not needed by that LEA to provide a FAPE to other LEAs in the State that are not adequately providing special education and related services to all children with disabilities aged 3 through 5 residing in the areas they serve) (20 USC 1419(g)).

 









STATE OF NEW YORK

Schedule of Findings and Questioned Costs

March 31, 2007



 



Finding

 

Two of 40 formula subgrants to LEAs we tested were incorrectly awarded. The State Aid Unit provides the relative numbers of children living in poverty for each of the school districts to the Strategic Evaluation Data Collection Analysis and Reporting Unit (SEDCAR). The SEDCAR Unit determined that the relative number of children living in poverty in District 1 to be 82. District 2 had zero children living in poverty. When the SEDCAR unit transferred the data, District 2 was miscoded and resulted in District 2 receiving a child poverty count of 82 and District 1 receiving a child poverty count of zero. District 2 received an allocation of $6,719 for IDEA Part B and $22 for IDEA Preschool Grant Program when the funds should have gone to District 1; District 2 should not have received any funds.

 



Recommendation


 

The SEDCAR Unit should use the query software system that they developed to import the data received from the State Aid Unit. This will eliminate the possibility of human error that resulted in the miscoding described above. The State Aid Unit should send the list of relative numbers of children living in poverty for each of the school districts with there corresponding twelve digit State Education Department code. The SEDCAR unit should review the data after it has been entered in to the system.

 


Related Noncompliance


 

Based on the above, the Department was not in compliance with the requirement described above.

 


Questioned Cost


 

None

 


Views of Responsible Officials


 

Presented in the State Agency Corrective Action Plans attached as an appendix to the Single Audit Report.

 

 

 







STATE OF NEW YORK

Schedule of Findings and Questioned Costs

March 31, 2007

 


Rehabilitation Services - Vocational Rehabilitation Grants to States (84.126)


 


State Education Department


 


Reference: 07-25


 



Requirement


 

The State Vocation Rehabilitation (VR) Agency must determine whether an individual is eligible for VR services and that only eligible individuals participated in the program. An individual is eligible for VR services if the individual (a) has a physical or mental impairment that, for the individual, constitutes or results in a substantial impediment to employment; (b) can benefit in terms of an employment outcome from VR services; and (c) requires VR services to prepare for, secure, retain, or regain employment (Section 102(a)(1) of the Act (29 USC 722(a)(1))).

 



Finding


 

We reviewed a sample of 40 case files, in the Syracuse District VESID VR Office, to determine if an individual was eligible for VR services. In three of 40 cases tested, the individual’s eligibility determination was not signed or dated by the counselor. A similar finding, from the Buffalo District VESID VR Office, was included in the prior year’s single audit report as finding 06-22 on page 75.

 



Recommendation


 

The Department should strengthen its procedures over the review of the eligibility of individuals to ensure compliance with the requirement.

 



Related Noncompliance


 

Based on the above, the Department was not in compliance with the requirement described above.

 



Questioned Costs


 

None

 



Views of Responsible Officials


 

Presented in the State Agency Corrective Action Plans attached as an appendix to the Single Audit Report.

 

 

 


STATE OF NEW YORK

Schedule of Findings and Questioned Costs

March 31, 2007

 


Rehabilitation Services - Vocational Rehabilitation Grants to States (84.126)


 


State Education Department


 


Reference: 07-26


 



Requirement


 

The State Vocational Rehabilitation (VR) Agency must determine whether an individual is eligible for VR services within a reasonable period of time, not to exceed 60 days, after the individual has submitted an application for the services unless:

• Exceptional and unforeseen circumstances beyond the control of the State VR Agency preclude making an eligibility determination with 60 days and the State agency and the individual agree to a specific extension of time;

• The State VR Agency is exploring an individual’s abilities, capabilities, and capacity to perform in work situations through trial work experiences in order to determine the eligibility of the individual or the existence of clear and convincing evidence that the individual is incapable of benefiting in terms of an employment outcome from VR services (Section 102(a)(6) of the Act (29 USC 722(a)(6))).

 



Finding


 

We reviewed a sample of 40 case files, in the Syracuse District VESID VR Office, to determine if the eligibility status was determined within the timetable required. In nine of 40 cases tested, the individual’s eligibility was not determined within 60 days and an eligibility extension was not filed to note a reason for additional time needed to process the determination.  A similar finding, from the Buffalo District VESID VR Office, was included in the prior year’s single audit report as finding 06-21 on page 73.

 



Recommendation


 

The Department should strengthen its procedures over the review of the eligibility of individuals to ensure compliance with the requirement.

 



Related Noncompliance


 

Based on the above, the Department was not in compliance with the requirement described above.

 



Questioned Costs


 

None

 


STATE OF NEW YORK

Schedule of Findings and Questioned Costs

March 31, 2007



 



Views of Responsible Officials


 

Presented in the State Agency Corrective Action Plans attached as an appendix to the Single Audit Report.


 








Attachment III

 


Regents Subcommittee on Audits


OSC Audit Trend – Procurement


April 2008


 



Background

 

School districts and BOCES purchase thousands of products and services each year. A district’s purchasing process should ensure maximum value is received for each dollar spent on equipment, supplies, and contracted services. Policy and procedures as well as other internal controls should provide assurance that purchases result in securing goods and services in the right quantity, at the right time, and for the right price, and should ensure that purchases are made in compliance with law and district policy.

 



Common Findings

 

The audits conducted by the Office of the State Comptroller (OSC) have identified numerous findings related to procurement.  More specifically, the audits have found:

 

  1. Many districts have failed to competitively bid for the procurement of goods and services even though it is required.
  2. Some contracts for goods or services were not provided to the boards of education for review and approval.
  3. Many boards of education have not adopted comprehensive written policies and procedures detailing the key elements of the procurement process.
  4. In some cases, there is no signed contract documenting the expected outcomes of a service engagement.
  5. Internal controls are not always in place to ensure appropriate procurement practices are followed.

 

Audit findings related to procurement were found in 6 of the 17 OSC audits presented to the Regents Subcommittee on Audits in March and in 4 of the audits being presented this month. Since May 2007, 97 of the 267 OSC audits presented to the Subcommittee contained findings related to procurement.

 



Criteria



 

The procurement process in municipalities, including school districts, is regulated by the requirement of General Municipal Law (GML).  Section 103 of GML establishes the requirement that all contracts for public work involving an  expenditure of more  than  twenty  thousand  dollars  and  all  purchase   contracts  involving  an  expenditure of more than ten thousand dollars, shall be competitively bid. GML also requires in section 104-b  that goods and services  which are not required by law to be procured by  competitive  bidding  must be   procured in a manner so as to assure the prudent and economical  use  of  public  moneys  in  the best interests of the taxpayers of the political subdivision or district, to facilitate  the  acquisition  of  goods  and  services  of  maximum  quality  at  the  lowest  possible cost under the circumstances. GML 104-b requires the development of policies and procedures to guide the decision making when competitive bidding is not required. Education Law was amended in 2005 to require school districts to use a Request for Proposal process in procuring accounting services.

 



Guidance and Training



 

There is extensive guidance available to school districts and BOCES in the area of procurement. The Department has a webpage devoted to procurement topics which includes a Purchasing Handbook.  The Office of the State Comptroller’s Local Government Management Guide provides guidance on procurement in the area of policy development, processes and internal controls. In addition, training is provided by the New York State Association of School Business Officials.



 



Recommendations

 

Sufficient guidance is available for districts and BOCES to guide the procurement process. The following possible actions have been considered to address the findings in the area of procurement:

 

  1. expanded training and outreach;

 

  1. comprehensive and concrete follow-up with the districts including on-site verification of corrective actions; and

 

  1. consideration of policy changes in the area of procurement that would enhance accountability.


Attachment IV



 


Regents Subcommittee on Audits


April 2008


Review of Audits Presented


Department’s Internal Audit Workgroup



 

Newly Presented Audits

 

We reviewed 21 school district audits and two BOCES audits that are being presented to the Subcommittee this month. The audits were all issued by the Office of the State Comptroller and the findings were in the areas of payroll, claims processing, cash, segregation of duties, information technology, procurement, capital assets, and financial reporting. For the most part, districts indicated agreement with the findings in the response to the audits.

 

The Department has issued letters to all 21 of the districts and the two BOCES reiterating the requirement to submit corrective action plans to the Department within 90 days of their receipt of the audit report.

 

The Department’s Internal Audit Workgroup identified 7 school district audits and 1 BOCES audit for further action.  Five of the school district audits involve one finding and the finding is summarized in the first bullet below.

 

  • Baldwin, Bellmore-Merrick, Copiague, East Meadow and Harborfields School Districts - The audit of these five Districts found that the school districts did not have a formal procedure to distinguish between employees and independent contractors.  The Districts were incorrect in classifying an attorney as an employee.  Moreover, the Districts have simultaneously employed the same attorney under similar circumstances.  Staff from Counsel’s Office is working with the Attorney General’s Office.

 

  • Eden Central School District - The audit found that the board and District officials did not provide adequate capital project planning, monitoring and oversight.  The board delegated its duties to plan and monitor the activity of its capital program activity to its Architect.  The board did not develop clear plans for the projects, and the Architect’s initial assessments for the projects were often inaccurate, resulting in the District’s capital plans not achieving their intended objectives.  The Office of P-16 Education will incorporate these audit findings into training sessions that are provided to districts’ architects.

 

  • Hamburg Central School District - The audit found that District officials failed to provide the board with adequate and timely financial data. As a result critical budget decisions were made without complete financial information.  The Office of Audit Services has identified the District to be in fiscal stress, notified the District and requested a plan to address its financial condition.

 

  • Nassau County BOCES – The audit found that the BOCES hired a significant number of consultants without the benefit of competition, some had no written contracts, and for those that had contracts, some were not presented to and approved by the board.  Officials were also found to be using BOCES’ cars 77 percent of the time for personal business.  Lastly, the board only required that claims be audited on a test basis after they are paid.  Staff from P-16 Education and Audit Services will meet with the District Superintendent to discuss the audit findings.

 

Follow-up Actions

 

Since the last Subcommittee meeting:

 

  • Audit staff have reviewed the corrective action plans of eight school districts that had been previously identified for follow-up.  Based on the corrective action plans OAS will continue to follow-up with three of the districts.

 

  • On March 5, staff from the Offices of P-16 Education and Audit Services met with the interim Superintendent of the Capital Region BOCES and the Finance Director to discuss the results of the Comptroller's Audit. The discussion found that the BOCES has strengthened internal controls in compliance with the recommendations contained in the report. 

 

 

 

 

 

 

 

 



 



 



 








Audit

Procurement

Capital Assets

Claims Processing

Payroll

Cash

Financial Reporting

Information Technology

Segregation of Duties


 


Office of the State Comptroller

Argyle Central School District

 

√ 

 

 

 

 

 

Baldwin Union Free School District

 

 

 

 

 

 

 

Bellmore-Merrick Central High School District

 

 

 

 

 

 

 

Camden Central School District

 

 

√ 

√ 

 

 

 

Copiague School District

 

 

 

 

 

 

 

East Hampton Union Free School District

 

 

 

 

 

√ 

East Meadow Union Free School District

 

 

 

 

 

 

 

Eden Central School District

 

 

 

√ 

 

 

Glens Falls Common School District

 

 

√ 

 

 

 

Hamburg Central School District

 

 

 

 

 

 

 

Harborfields Central School District

 

 

 

 

 

 

 

Johnsburg Central School District

 

 

 

 

 

Letchworth Central School District

 

√ 

 

 

 

 

 

Mount Morris Central School District

 

 

 

 

 

 

Nassau County BOCES

 

 

 

 

Perry Central School District

 

 

 

 

 

 

 

Piseco Common School District

 

 

 

 

 

 

 √

Prattsburgh Central School District

 

 

 

 

 √

 

 

Saratoga Springs City School District

 

 

 

 

 

 

 

 

Schoharie Central School District

 

 

 

 

√ 

Shelter Island Union Free School District

 

 

 

 

 

 

Tompkins-Seneca-Tioga BOCES

 

 

 

 

 

 √

West Valley Central School District

 

 

 

 

 

 

 


April Total


4


1


9


12


7


3


4


6



Summary of Current and Prior Audit Findings

 

 

May 2007

June 2007

July 2007

October 2007

December 2007

January 2008

February 2008

March 2008

April 2008

Running Total

Procurement

9

11

12

20

12

11

12

6

4

97

Capital Assets

10

1

2

4

0

0

0

0

1

18

Claims Processing

13

3

12

17

17

18

13

6

9

108

Payroll

12

3

11

20

18

14

12

5

12

107

Cash

6

2

8

15

14

15

8

5

7

80

Financial Reporting

12

3

2

16

6

11

4

7

3

64

Information Technology

10

10

9

14

15

15

17

6

4

100

Capital Construction

2

1

1

0

0

1

0

0

0

5

Extraclassroom Activity Fund

1

1

0

1

1

2

1

0

0

7

Segregation of Duties

0

0

3

0

15

19

0

4

6

47

Budgeting

2

3

0

1

1

0

1

1

0

9

Conflict of Interest

0

0

0

4

3

3

0

0

0

10

Other

0

2

0

0

0

1

1

3

0

7

Total

77

40

60

112

102

110

69

43

46

659







Definitions of Categories


 

Procurement – includes findings related to lack of a contract, failure to competitively bid, failure to use purchase orders, lack of segregation of duties, no approval of the purchase and a lack of documentation.

 

Capital Assets – includes failure to have a manager responsible, lack of policy, and inappropriate disposal.

 

Claims Processing – includes claims being paid without adequate documentation, failure to audit the claim, an untrained claims auditor, and a claims auditor that lacks independence.

 

Payroll – includes a lack of segregation of duties in the payroll process, no policy and procedures and inappropriate payments to district administrators including leave accruals and health benefits.

 

Cash – includes poor control of cash, failure to prepare bank reconciliations, and weaknesses in the treasurer’s duties.

 

Financial Reporting – includes inaccurate accounting statements, such as, an overstated fund balance, fund balance exceeding the legal limit, and general fund transfers without voter approval.

 

Information Technology – includes lack of a disaster recovery plan, failure to back up information, inappropriate or undocumented user rights, inappropriate or missing password protection, and no policy and procedures.

 

Capital Construction – includes a lack of detailed accounting records related to a capital project, undocumented expenses, inappropriate and unapproved change orders.

 

Extraclassroom Activity Fund – includes poor accounting over funds and no documentation of expenses.

 

Conflict of Interest – includes personal conflicts of board members, district officials and district employees where they have an interest in a contract, where they have the power, or may appoint someone who has the power to negotiate, authorize, approve, prepare, make payment or audit bills or claims of the contract.

 

Budgeting – includes poor revenue projections and use of fund balance.

 

Segregation of Duties – includes weakness in control caused by individuals having responsibility for incompatible functions.

 









Office of the State Comptroller


Audit


Major Finding(s)


Recommendation/Response


Argyle


Central School District


Internal Controls Over Selected Financial Operations


2007M-304


4th Judicial District


 

The current purchasing policy does not prescribe a process to follow when competitive bidding is not required. Fourteen purchases in excess of $1,000, totaling $60,220, were reviewed, and none of the purchases were supported by more than one quote.

 

Additionally, the District’s purchase order system is not operating effectively. Sixty-two out of 80 purchases totaling ($209,152 of $366,213) were made without purchase orders.

 

The District also had inadequate controls over the processing and payment of claims generated from the purchase of goods and services. Fourteen claims ($49,703) lacked documentation of proper approval and/or verification that billed goods or services were received.

 

There were no significant deficiencies found in the records related to the provision of employee compensation.

 


3


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding purchasing and employee compensation.

 


District officials have agreed to assign the purchasing agent with the responsibility of ensuring the procedures relating to the acquisition of goods and services are adhered to. Officials also agreed to improve upon their current requisition system as well as implement a process for prior approval through purchase orders. Lastly, the District has appointed a claims auditor to review and approve all claims for payment.


Baldwin UFSD, Bellmore-Merrick CHSD, Copiague SD, East Meadow UFSD, and Harborfields CSD


Policies to Distinguish Between Public Employees and Contractors


2008M-47


10th Judicial District


 

The Baldwin, Bellmore-Merrick, Copaigue, East Meadow and Harborfields school districts did not have formal procedures to distinguish between employees and independent contractors.

Mr. Reich was an independent contractor and each of the five districts incorrectly classified him as an employee. District officials at the five school districts neither supervised nor controlled how Mr. Reich performed his work, nor did they establish the amount of hours he worked on a normal workday.  Mr. Reich worked from his private law office and did not work fixed hours at any of the aforementioned districts. No resources were supplied to Mr. Reich to carry out any of his duties by any of the districts, and he serves as an employee to several districts concurrently, as well as offers his services to the public.

 

As a result, the Districts were incorrect in classifying Mr. Reich as an employee and should not have reported him as an employee to the Employees Retirement System (ERS).

 


1


recommendation for each district


 

The report’s recommendation was to submit corrected retirement reports to the Employee Retirement System (ERS).

 


Officials at all five districts agreed that Mr. Reich was not an employee of their Districts and should not have been reported as such to ERS.

 


It should also be noted that the Harborfields superintendent stated that when she started at the District in July 2005, the former superintendent did not inform her of the arrangement between the District and Mr. Reich. When she became aware, she suggested that Mr. Reich submit documentation of his days and hours worked. However, he never submitted any documentation, and as a result, the issue was not resolved.


Camden


Central School District


Internal Controls Over the Treasurer’s Check Disbursement Process


2007M-294


5th Judicial District


Contract for Excellence


 

There were deficiencies in the treasurer’s oversight of the check-signing function. District general fund accounts payable checks and payroll checks are printed at the Mohawk Regional Information Center, and the employees imprint the treasurer’s signature on the checks without any involvement by the treasurer. The treasurer also does not compare checks to an approved warrant or certified payroll register before the District issues the checks to ensure that all check disbursements have been approved by the claims auditor (claims) or approving officer (payroll).

 

The treasurer also failed to monitor the continuity of check number sequences between warrant or payroll periods, and therefore, does not maintain accountability for all checks issued.

 


3


recommendations


 

The report’s recommendations focused primarily on strengthening policies and procedures regarding the treasurer’s check disbursement process.

 


District officials agreed with the recommendations regarding the check disbursement process, but have indicated that they would like to continue with their current process of using the print service at the Mohawk Regional Information Center to produce printed checks for distribution. They will ensure that the treasurer’s signature is affixed only to approved payments.


East Hampton


Union Free School District Internal Controls Over Selected Financial Operations


2007M-297


10th Judicial District


 

The claims auditor audited claims prior to payment; however, the audit of claims was not documented.  In addition, the claims auditor did not report to the board.

 

The payroll clerk and the accounts payable clerk have access to the treasurer’s signature disk and the ability to print checks even in the absence of the treasurer.


3


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding claims auditing and the treasurer’s signature disk.

 


District officials agreed with the recommendations and have already established a corrective action plan to address the findings.


Eden


Central School District


Internal Controls Over District Operations


2007M-165


8th Judicial District


 

The board and District officials were remiss in their responsibilities to provide adequate planning, monitoring, oversight and management of capital project activitities.  The board delegated its duties to plan and monitor the activity of its capital program to its Architect.

 

The board and District officials do not adequately monitor the contractor that manages the District’s energy saving initiatives. For example, the District entered into a contractual amendment with a contractor to revise its Energy Performance Contract. The technical support for Energy Saving Improvements has escalated from $172,000 to almost $525,000.

 

The board has also failed to effectively address the treasurer’s duties and responsibilities to ensure they are properly segregated, and sufficient compensating controls to mitigate the risk and identify any errors were not established. As a result of these deficiencies, bank statements from August 2006 were not reconciled until January 2007.

 

Lastly, internal controls over claims processing are not operating effectively. Twenty-two Capital Projects Payments over a four-month period, totaling almost $2.7 million, were made before the claims auditor approved them. In addition, 50 claims paid in 2005 and 2006 were tested (totaling $635,000), and 90 percent of them had at least one deficiency.


15


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding planning and oversight, the treasurer’s segregation of duties and claims processing.

 


District officials have agreed to address the recommendations pertaining to contracts with the District’s architect, the planning and monitoring of all capital projects and bids, upgrading telephone and communications systems, as well as monitoring energy performance initiatives.

 


The District also stated that they plan to adequately segregate the duties of the District treasurer and implement procedures to ensure the effective audit of claims and protection of taxpayer monies.


 


Glens Falls


Common School District


Internal Controls Over Payroll and Claims Processing


2008M-5


4th Judicial District


 

The board did not approve payroll policies or procedures to guide employees in their day-to-day duties. The treasurer performed her duties without written guidance and direction from the board. There were no policies, resolutions, employment contracts, or collective bargaining agreements for 17 non-instructional employees.

 

The exit payment made to the most recently retired non-instructional employee was reviewed, and it was found that although the employee received a payment consisting of $4,200 for accumulated sick days and $1,703 for remaining vacation days, there was no policy or collective bargaining agreement to authorize this payment.

 

There were no major discrepancies in the District’s claims processing procedures.

 


2


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding claims processing and payroll.

 


The District generally disagreed with the recommendations pertaining to the failure of the board to approve salaries for non-instructional employees and they also disagreed with the recommendation addressing the approval of salary increases.

 


However, they have since adopted adequate payroll policies and they have also established corrective action to ensure that all salaries and benefits provided to employees are covered by the terms of district-wide policies.


Hamburg


Central School District


Financial Condition


2008M-2


8th Judicial District


Fiscally stressed


 

The superintendent and the business administrator failed to provide the board with adequate and timely financial data. The District had a fund balance deficit of more than $200,000 in June of 2006. The board president stated that during the preparation of the 2006-07 budget, he was aware the general fund balance was being projected to be in a deficit position in June 2006. The budget relied on the use of $875,000 in fund balance that would not be available. There was no indication in the meeting minutes, that the board president informed the other board members there was a deficit. As a result, the board passed a budget that was fiscally irresponsible. The District ended the 2006-07 fiscal year with a general fund balance deficit of approximately $2 million.

 

District revenues were more than $1.2 million overestimated, which included $450,000 in Use of Money and Property, $215,000 in State aid, $160,000 in Sales Tax and $450,000 in other miscellaneous revenues.

 

The board also did not have a written plan to alleviate the District’s poor financial condition. The District’s estimates for 2007-08 in regards to their unreserved fund balance, was that it would likely be reduced to between $800,000 to $1.2 million. Based on the results of the report, this was found to be unreasonable.


5


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding to the District’s financial condition.

 


District officials agreed with the recommendations pertaining to developing a written plan to address the fund deficit as well as adopting realistic balanced budgets, establishing timely and complete financial information, and revising District policy for amending the budget.


 


Johnsburg


Central School District


Internal Controls Over Selected Financial Operations


2007M-240


4th Judicial District


 

The board did not adopt procedures to ensure that District officials monitored employees to ensure they had complied with board policies and related internal controls. Fourteen out of nineteen claims that were tested, did not contain required verbal or written quotes and were processed using confirming purchase orders, or exceeded the approved purchase order amounts. District personnel also did not include sufficient documentation for five credit card purchases, and nine other transactions out of seventy-nine claims reviewed.

 

The board also had not established any policies or procedures for auditing District claims, nor did it perform a proper audit of claims.

 

The board also failed to establish a payroll policy or any formal written procedures to guide the payroll process. There were 15 employees found that did not always sign their time cards, and at that time, cards of five of the fifteen employees were unsigned and/or lacked evidence of supervisory approval.


7


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding purchasing and claims processing and payroll.

 


The District agreed with the recommendations pertaining to the procurement policy, payroll review procedure and the timecard system. It was also indicated that the District plans to put forth extra effort to ensure the accuracy of the employee attendance system.


 


Letchworth


Central School District


Internal Controls Over Purchasing


2007M-306


8th Judicial District


 

Nineteen claims ($157,214) were tested to determine whether the District officials were complying with the board’s adopted procurement policy. We found that nine claims (totaling $125,160) were paid without evidence that District officials obtained the required verbal or written quotations. District officials confirmed that they did not seek competitive pricing in accordance with the board’s adopted procurement policy.

 

Five claims totaling $59,598 that were identified by District officials as purchases from state contracts were tested. All five were made from authorized state contract vendors; however, two of the purchases ($40,593) were not billed to the District at state contract pricing. Two vendors were found to have overcharged the District by a total of $3,580, and this happened as a result of the District not comparing vendor pricing to state contract documents for accuracy. After this was brought to the District’s attention, they obtained confirmation from the vendors that the District will receive credit for these overpayments.


2


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding purchasing.

 


District officials have agreed to require verbal and written quotes for purchase orders, as well as requiring state contract pricing lists from all state contract vendors.


 


Mount


Morris Central School District


Internal Controls Over Selected Financial Activities


2007M-301


7th Judicial District


 

The board audited claims on an exception only basis and, therefore, did not perform a proper audit of claims.

 

The District also failed to have adequate segregation of duties over cash receipts and payroll processes to ensure that one person does not control all phases of a transaction. The board also has not established written procedures over cash receipts and payroll processes.

 


4


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding claims processing and segregation of duties.

 


The District stated that they welcome the recommendations contained in the report, and that they will submit a corrective action plan within 90 days to address each finding.


Nassau County BOCES  Internal Controls for the period July 1, 2003 -  June 30, 2005 and July 1, 2006 - June 30, 2007


2007M-05


10th Judicial District


 

The board only required that claims be audited on a test basis after they are paid. This policy was contrary to law, and undermines the minimum requirements for a sound system of internal controls intended to manage and safeguard public resources entrusted to the board. The 2006-07 claims for diesel fuel, travel-related expenditures, meals, and credit card charges still lacked sufficient supporting documentation.

 

During the period of July 2003 through June 2005, BOCES paid approximately $11.6 million to 28 consultants for various professional and educational services. BOCES paid $10.8 million to 27 consultants without the benefit of competition. Only 12 of the 27 consultants had written contracts and only eight of those 12 contracts were presented to the board for review and approval. Lastly, BOCES paid $6.3 million to the other 15 consultants without a written contract.

 

As of August 2007, BOCES had not changed its procurement policy. Payments to 19 consultants were tested, and it was found that BOCES paid $2.8 million to 13 consultants without the benefit of competition. Three of the nineteen consultants were paid $692,622 without written contracts, and the services provided by seven consultants costing $968,248 were not approved by the board.

 

BOCES spent approximately $43,000 on credit card transactions. The supporting documentation was not always sufficient and usually consisted of credit card and illegible receipts, some of which were copies.

 

BOCES also did not require a password to access the operating system and network resources; and computer application users were required to change their password only when they suspected that someone had compromised their passwords.

 

Lastly, BOCES officials were using BOCES’ cars 77 percent of the time for personal business. $189,000 over five years could have been saved had it reimbursed its administrators for the business use of their personal vehicles.


19


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding control environment, claims processing, procurement, computer operations, and administrative expenses.

 


BOCES officials disagreed with the findings, and stated that the comptroller’s report presents an unbalanced and inaccurate picture of the internal controls within Nassau BOCES. BOCES officials state that the majority of the comptroller report’s findings were findings that BOCES had already addressed and were in the process of correcting prior to the audit team’s arrival.

 


Lastly, BOCES states that the Executive Summary did not reflect the changes implemented related to business practices and operations.


 


Perry


Central School District


Information Technology


2007M-285


8th Judicial District


 

The District’s two network servers are located on open-shelving in a file room in the business office. The file room is adjacent to an unlocked door which opens to a hallway in the high school. The door was also routinely open due to climate control issues. Under such conditions, it would be difficult for the District to ensure the prevention of unauthorized access. The District had also failed to establish the necessary policies and procedures for the backup of District information, including financial data. In addition, there was no formal disaster recovery plan in place.

 

The technology coordinator does not monitor the use of the District’s password, which allows the by-pass of the system’s filter.  The intent of such a filter by-pass is to allow students to research topics for school projects that would otherwise be blocked by the filter. With this password many non-educational related sites were accessed, which is a clear violation of the terms of the agreement between the District and internet provider.


4


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding information technology.

 


District officials agreed with the recommendations regarding access to the network servers, the security of back-up data, disaster recovery, and filter by-pass. They have indicated that they have since strengthened procedures, tightened security regarding passwords and computer usage, and have secured back-up data.


 


Piseco


Common School District


Internal Controls Over Payroll


2007M-280


4th Judicial District


 

The District has not established any written policies and procedures to describe employee responsibilities in processing and distributing bi-weekly payrolls or maintaining leave records. In the absence of a policy, the treasurer and secretary developed informal systems for payroll processing and accounting for leave accruals. As a result, the treasurer was solely responsible for processing $549,000 in payroll and fringe benefits with limited oversight. The secretary was also responsible for maintaining the leave accruals for all employees in the District with no oversight.

 

The treasurer was also directly responsible for almost all of the payroll duties, such as adding and deleting employees, entering payroll changes, entering hours worked, etc. Additionally, the only oversight included in the payroll system occurred when the board president signed payroll checks, and there was no indication that accuracy of the payroll was verified.

 

Although there were only three instances where leave request forms were not submitted, leave was not approved and leave usage could not be traced to attendance/time records. There were also five instances where the hours worked recorded on the timesheets were inaccurate because the time was estimated and submitted by the secretary and not the actual employee. Thirty additional timesheets were reviewed, and none of them were reviewed or approved, and 13 lacked the employee’s signature.


3


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding payroll.

 


The District is in agreement with the findings, and they have indicated that they have already taken corrective action to address the concerns.


 


Prattsburgh


Central School District


Internal Controls Over Information Technology


2007M-296


7th Judicial District


 

The board did not adequately safeguard the District’s computerized data and assets by establishing and implementing appropriate control policies. Employee access was not properly restricted. The treasurer’s signature was also stored in the computerized financial system and applied to all District checks by a BOCES employee. The District’s accounts payable clerk also used the treasurer’s unprotected signature without his direct oversight.

 


3


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding information technology and controls over the check signing process.

 


District officials have agreed to address all recommendations pertaining to user access rights, security controls in the financial accounting software, as well as the treasurer’s electronic signature.


Saratoga Springs


City School District


Internal Controls Over Payroll


2007M-286


4th Judicial District


 

All collective bargaining agreements and individual employee contracts covering the report period were reviewed, to ensure that payments and benefits were properly authorized and in accordance with the agreements. Salaries and leave time records, health insurance buy-out payments, and health/dental insurance contributions were reviewed, and no major discrepancies were found. All minor issues were addressed previously with the District officials. The District’s system of controls over the payroll process were designed appropriately and were working effectively.


0


recommendation


 

There were no recommendations.


 


Schoharie


Central School District


Internal Controls Over Selected Financial Activities


2007M-245


6th Judicial District


 

Formal policies and procedures relating to installation of personal software on District computers; addition, modification and deletion of user access rights; and a strong password system have not been adopted. The board also has not developed a formal disaster recovery plan or policies and procedures for the backup of financial and non-financial data.

 

The board also did not audit claims or appoint a claims auditor to do so. Seventy-seven percent of claims ($13.2 million) paid during the report were not audited. The claims auditor who was appointed, also does not report directly to the board, as required.

 

Lastly, the board did not adequately address control risks inherent in the District treasurer’s duties to ensure that she was accurately accounting for payroll-related transactions. The treasurer and senior account clerk also have full user access rights to the payroll functions in the financial software.

 


12


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding computerized data and assets, audit of claims, and payroll.

 


The District agreed with the recommendations pertaining to the adherence to the Computer Use Policy, network security, computer usage agreements, password procedures, and the physical security of the District server.

 


However, the District also stated that there was a major changeover in board membership, which is why control risk in the treasurer’s duties were not always previously addressed by the administrator.


Shelter


Island Union Free School District Internal Controls Over Employee Fringe Benefits and the School Lunch Fund


2007M-293


10th Judicial District


 

The District reimbursed four employees a total of $20,392 for waiving their right to participate in the health insurance plan, even though they were not specifically entitled to this benefit. As a result, the District paid more than necessary for waivers of the right to receive medical benefits.

 

Twenty-one days of cafeteria receipts were examined ($7,397) and found that they were deposited timely, but the District does not use cash registers and the cafeteria supervisor does not reconcile cash receipts to cafeteria sales.

 


4


recommendations


 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding employee fringe benefits and cafeteria receipts.

 


District officials agreed with the recommendations pertaining to updating the board policy on non-contractual personnel; however, they disagreed with those that regarded the historical intent of the board, as well as the board’s definition of medical insurance coverage.


Tompkins-Seneca-Tioga Board of Cooperative Educational Services Internal Controls Over Payroll and the Treasurer's Signature Disk


2007M-290


6th Judicial District


 

There is a lack of segregation of duties within the payroll process. The payroll clerk has complete control over the payroll process and full user-access rights to payroll functions in the computerized financial system. The board also appointed the payroll clerk as the BOCES official responsible for certifying the payroll. The payroll clerk processed approximately $12.8 million in payroll expenditures for the 2006-07 fiscal year with little or no oversight.

 

Payroll earnings reports, hourly timecards/timesheets, and cancelled payroll checks were selected and reviewed, and while no discrepancies were found, improper segregation of duties poses a risk to the District and should be amended.

 

Additionally, the treasurer does not supervise and control the use of her facsimile signature, nor is she present when clerks apply her signature to checks.


3


recommendations


 

The report's recommendations focused primarily on strengthening the policies and procedures regarding payroll and the treasurer's signature disk.

 


District officials agreed with the recommendations pertaining to the segregation of duties in payroll, and the supervision of the treasurer's signature disk, and have indicated that they plan to initiate corrective action.


 


West


Valley Central School District


Service Contract for the Internal Auditor


2007M-275


8th Judicial District


 

The BOCES employee serving as the internal auditor of the District would not be independent in performing the internal audit function.  The District has a contractual relationship with BOCES and paid approximately $1M for services.  This current arrangement is likely to put the BOCES employee in the position of evaluating significant services or programs that are provided to the District by BOCES, the individual’s employer, or reviewing the system of documentation for payments to the BOCES.

 


1


recommendation


 

The report recommended for the board to terminate the internal audit relationship with the Cattaraugus-Allegany BOCES and replace this position with an internal auditor who meets the independence requirements of the State Education Department guidance.

 


District officials agreed with the recommendation suggesting that the board terminate the internal audit relationship with BOCES, and replace this position with an internal auditor who meets the independence requirements. The District has indicated that they will seek a cost effective alternative to this agreement.