Meeting of the Board of Regents | June 2010

Report of

REGENTS SUBCOMMITTEE ON AUDITS

to

The Board of Regents

June 22, 2010

 

Regent Geraldine Chapey, Chair of the Regents Subcommittee on Audits submitted the following report.

Your Regents Subcommittee on Audits had its scheduled meeting on June 21, 2010.  Chancellor Tisch, Vice Chancellor Cofield, Regents Bendit, Tallon, Tilles and Young   were in attendance.

Items for Discussion

Chair’s Remarks:  Regent Chapey welcomed everyone and reminded them of Regents Goal #5 - that resources under our care will be used or maintained in the public interest. She commented on the effectiveness of a systems approach in dealing with audit issues. Such an approach involves not only audit staff but other Department staff as well to more effectively address audit issues and concerns.

Analysis of School District Financial Information

The members were presented with the results of the annual review of school district financial statements and single audit reports. Staff described the process and the types of information captured. It was noted that for the July 1, 2008 to June 30, 2009. There were significantly less school districts identified as in fiscal stress than in the past. The Subcommittee discussed ways to use the information captured by the process to inform other Department initiatives.

Report on the Activities of the Regents Subcommittee on Audits

Staff provided a summary of the activities of the Subcommittee during the eight meetings since September of 2009. The summary is attached for the information of all of the members of the Board.

Annual Report of the Office of Audit Services

In response to the Subcommittee’s oversight responsibility, the members were briefed on the accomplishments of the Office of Audit Services (OAS) for the period from July of 2009 to May 2010.  The OAS issued 12 audits; received and reviewed almost 1,100 financial statements, and a similar number of corrective action plans; issued 171 determinations related to single audit reports; and received 250 contacts through the Departments Fraud, Waste and Abuse hotline.   

Presentation of Audits

The Subcommittee was presented with 20 audits. Staff described the results of two internal audits related to inventory controls at the Archives and State Library. Attached is the review of the audits by the Department’s Internal Audit Workgroup.

 

 

Report on the Activities of the Regents Subcommittee on Audits

September 2009 – June 2010

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

 

• The need for strengthened internal controls and fiscal accountability dominated the discussions in the Subcommittee meetings.
• Members were informed of the various types of audits that are presented to the Subcommittee. During this year, the Subcommittee has received audits conducted by the Office of Audit Services (OAS), Office of the State Comptroller (OSC), and the New York City Comptroller.
• A total of 283 audit reports were presented to the Subcommittee members for their review and comments. These reports on school districts, BOCES, and Department programs identified 1,775 recommendations for improvements. In almost all cases, the auditees agreed to implement the recommendations.
• Staff discussed in depth the results of the New York State Single Audit for the Department and the New York State Financial Statement Audit as it relates to the Department.
• The results of many audits of school districts conducted by the OSC and others have been tracked over several months to target areas of need. Three of the trends noted were:  board training, conflict of interest on boards, and fund balances. Over the course of this year, staff briefed the Subcommittee about these audit trends in depth and outlined possible policy changes. 
• Staff briefed the Subcommittee on activities related to the American Recovery and Reinvestment Act of 2009 (ARRA) and audits being performed as a result of ARRA. There were 10 schools for which ARRA audits have been started and six are final.
• The Subcommittee reviewed and approved a modified Statement on the Governance Role of  a Board Member or Trustee. The modification reflected a more specific discussion of issues concerning nepotism.
• The Subcommittee was briefed on a proposal to require the phase-in of scanning for correcting certain exams by school districts. This proposal was in response to a Comptroller’s audit and was subsequently approved by the Regent’s Committee on Elementary, Middle, Secondary and Continuing Education.

 

Through these activities, the Subcommittee sets the standard for high quality financial reporting, effective internal controls, safeguarding assets, compliance with laws and regulations, and effective use of resources.

 

 

Regents Subcommittee on Audits

June 2010

Review of Audits Presented

Department’s Internal Audit Workgroup

 

Newly Presented Audits

We reviewed the 20 audits that are being presented to the Subcommittee this month.  Sixteen of the audits were issued by the Office of the State Comptroller (OSC), three were issued by the Office of Audit Services (OAS), and one was issued by the New York City Office of the Comptroller.  Fifteen of the audits were of school districts, three were of the Department’s inventory control systems and two were of New York City school programs.   

The findings were in the areas of budgeting, procurement, payroll, extraclassroom activity fund, fingerprinting, and others such as inventory controls and computer equipment disposal.

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 audits and categories of findings for further review or follow-up as noted below.

 

• State Education Department – New York State Archives Inventory Control Systems

 

Summary of Audits

The Archives should develop a risk assessment process for identifying series that are the greatest value, whether from a monetary loss or intrinsic basis. The entire contents of those series should be specifically identified, documented, and periodically physically inventoried.  Although the Archives have some control systems in place, improvement opportunities exist in the following areas:  there are multiple systems with some inconsistencies for controlling the records, insufficient descriptions on the contents of some series to allow full identification, insufficient control of items in the vault, inaccurate May 2008 vault inventory, and weaknesses in record security procedures.

Follow-up Action

 

Ninety days from the issuance of the audit report, Department officials are required to submit a report on the actions taken as a result of the audit.  The report will be in the format of a recommendation implementation plan and must specifically address what actions have been taken to address each recommendation.

 

• State Education Department – New York State Library Manuscript and Special Collections

 

Summary of Audits

The Manuscript and Special Collections has some control systems in place; however, improvements are needed in establishing adequate control over the physical inventory of the collection, and properly monitoring the items kept in the vault, rare books room, and in the secure stacks. There were also inconsistencies in the descriptions of the collections, and weaknesses found in the procedures designed to physically secure the records. Finally, there is a lack of separation of duties among the staff.

Follow-up Action

Ninety days from the issuance of the audit report, Department officials are required to submit a report on the actions taken as a result of the audit.  The report will be in the format of a recommendation implementation plan and must specifically address what actions have been taken to address each recommendation.

 

• Budget Review

 

Summary of Audit

OSC reviewed the significant revenue and expenditure projections in 12 school districts’ 2010-2011 budgets.  Half of the districts’ proposed budgets were reasonable.  The remainder of the districts either has budget projections that would result in the fund balance exceeding the statutory limit or over-budgeted certain expenditure categories, or the budget did not provide for future contingencies such as contract negotiation, salary reductions, or layoffs.

Follow-up Action

No follow-up action needed.