Meeting of the Board of Regents | March 2009
A Report on the March 16 2009 Meeting
Of the Regents Subcommittee on Audits
Your Regents Subcommittee on Audits met yesterday morning.
Counsel briefed the Subcommittee on a follow-up action which led to members of a school board coming into compliance with mandatory board training regulations.
The rest of the meeting was largely focused on the presentation of significant audit findings. The Department administers in excess of $3 billion in federal funds annually. Auditors from Toski, Schaefer, and Co., presented the results of the single audit of the Department administration of federal grant funds. The single audit examines our control systems and control activities to determine if we have complied with federal regulations. For the 2007-08 state fiscal year, the auditors identified four findings. One involved the Child Nutrition Program, two involved VESID, and the fourth the Reading First program. The auditors described the findings and the Departments corrective actions taken as a result.
We also received a detail briefing on an Office of the State Comptroller’s audit of the Department’s Oversight of Criminal History Background Checks for School Employees. The audit found that Department was not fully monitoring the status of ongoing background checks and that a small number of applications for background checks could not be processed because of data transmission failures or blurred images. Staff from the Office of Higher Education described changes that the Department has made to correct the deficiencies including the routine production of reports that clearly identify applications that are taking too long and that may require intervention.
We were briefed on the fiscal condition of the Hempstead Union Free School District. The District has a negative fund general fund balance and as such is considered to be in fiscal stress. The District also has a negative School Lunch Fund deficit which District officials are planning to pay off over a ten year period. As recently as 2003-04, the District had a strong positive fund balance; however, the lowering of tax rates and other factors led to its current fiscal condition. The Members of the Subcommittee asked that the monitoring continue and that they be updated at the June meeting.
The Subcommittee was presented with 14 audits in addition, to those already mentioned. The findings were in the areas of procurement, cash, information technology, financial reporting, reserve funds, payroll, claims processing, segregation of duties, budgeting, and the effectiveness of audit services.
I have attached the results of the full Review of Audits presented by the Department’s Internal Audit Workgroup for your information.
Regents Subcommittee on Audits
Review of Audits Presented
Department’s Internal Audit Workgroup
Newly Presented Audits
We reviewed 15 audits that are being presented to the Subcommittee this month. One audit was of a Department function, ten were of school districts and four were of BOCES; all were issued by the Office of the State Comptroller (OSC). The findings were in the areas of procurement, budgeting, information technology, financial reporting, claims processing, cash, fingerprinting, payroll, segregation of duties, and other, such as, effectiveness of independent audit services. Three of the four BOCES audits which assessed controls at Regional Information Centers did not result in any recommendation.
The Department has issued letters to the auditees, reminding them of the requirement to submit corrective action plans to the Department and OSC within 90 days of their receipt of the audit report.
The Department’s Internal Audit Workgroup identified five of the audits for further review and follow-up.
- State Education Department Criminal History Background Checks for School Employees
Summary of Audit
The Department was not monitoring the status of its ongoing background checks and was unaware that many of the background checks could not be completed because of data transmission failures, or blurred fingerprint images. When the background checks were completed, it was determined that at least 157 of the 469 applicants being checked had been hired by public schools before their background checks were complete. Thirty of the 157 applicants had some kind of criminal history, and 1 of the 30 would not have been cleared to work in schools if his background check had been completed before he was hired.
The Department has instituted the recommendations and made other significant improvements to strengthen the process. The Department has addressed technical issues, revised internal controls, and implemented new measures to streamline fingerprint application processing. Some of the actions are: making the computer system fully operational, having electronic fingerprint processing available at 38 BOCES and school district locations, and tracking fingerprint applications on a daily basis. The Subcommittee will be briefed on the actions taken, and Office of Audit Services (OAS) will provide information on the 90-day status of recommendations.
- Copiague Union Free School District
Summary of Audit
The balance of the District’s Employee Benefit Accrued Liability Reserve (EBALR) exceeds the liability for compensated absences by $3,857,591. Further, interest earned by the EBALR has been improperly added to the general fund.
Upon the District’s submission of the corrective action plan for this audit, OAS staff will review to ensure all findings have been addressed. OAS will also monitor any legislative changes affecting this Reserve account and will keep the Subcommittee informed.
- Greenburgh Central 7 School District
Summary of Audit
The District’s unreserved, unappropriated fund balance in the general fund, totaled $2.8 million as of June 30, 2007. This was in excess of the amount allowed by Real Property Tax Law by about $1.2 million. The board also retroactively established a tax certiorari reserve fund of nearly $2 million in October 2007 to fund the settlement of tax certiorari cases of the preceding 2006-07 fiscal year, which is not in compliance with Education Law. The District also failed to establish a proper procedure to ensure that background checks are performed on independent contractors who have contact with students. Four independent contractors with direct student contact were tested, and it was found that District officials had not performed required background checks on any of them.
Upon the District’s submission of the corrective action plan for this audit, OAS staff will review to ensure all findings have been addressed. OAS will also analyze the district’s fund balance and reserves for the last seven years. The Department’s Office of School Personnel Review and Accountability (OSPRA) sent a letter to District officials reminding them of their obligation under the SAVE law. OSPRA also provides annual guidance to school districts, BOCES, Charter and private schools and other interested parties which reminds them of the obligations under the SAVE law and provides updated information about new technology advancements for the processing and management of fingerprint applications and information. OSPRA staff will continue to provide technical assistance.
- North Collins Central School District
Summary of Audit
Expenditures were overestimated by a total of $4.3 million over three fiscal years (2004-05 through 2006-07), and the fund balance appropriated was not used as budgeted. As a result, there was an increase in the property tax levy of approximately $377,600. District officials were also unable to provide adequate justification for three general fund reserves (totaling approximately $2.1 million), and reporting $1.5 million in a bonded debt reserve which sat idle, accumulating interest for over six years, while debt service expenditures paid from operating funds totaled over $7.8 million for that same time period.
Staff from the Office of Education - P-16 will contact the superintendent to discuss the findings. Upon the District’s submission of the corrective action plan for this audit, OAS staff will review to ensure all findings have been addressed. OAS will also analyze the districts fund balance and reserves for the last seven years.
- Sayville Union Free School District
Summary of Audit
Although the District established an Employee Benefit Accrued Liability Reserve (EBALR), payments for compensated absences during the 2005-06 fiscal year were made from the general fund. In addition, the EBALR account is overfunded by as much as $3.2 million. The District also improperly credited more than $853,000 in net interest earned by the EBALR to the general fund.
Upon the District’s submission of the corrective action plan for this audit, OAS staff will review to ensure all findings have been addressed. OAS will also monitor any legislative changes affecting this Reserve and will keep the Subcommittee informed.