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Meeting of the Board of Regents | March 2010

Thursday, March 18, 2010 - 11:40pm

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:

February 18, 2010

STRATEGIC GOAL:

Goal 5

AUTHORIZATION(S):

 

 

SUMMARY

 

Issues for Discussion

              The following topics will be discussed with the Members of the Subcommittee on Audits:

 

  • Modification to the Statement on the Governance Role of a Trustee or Board Member (Attachment I)
  • Results of the New York State Single Audit Findings (Attachment II)
  • Completed Audits – Including a Summary of the Department’s Internal Audit Workgroup (Attachment III)

 

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.

 

Background Information 

 

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

              The Subcommittee will be provided with a draft change to enhance the conflict of interest section of the Statement. (Attachment I)

2.           Results of the New York State Single Audit Findings

              The Subcommittee will be briefed 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)

3.           Completed Audits

The Subcommittee is being presented with 68 audits this month.  The audits have been reviewed by the Department’s Internal Audit Workgroup.  Their report is attached.  (Attachment III)

              Audits are provided as follows:

              Office of Audit Services

              Coxsackie-Athens Central School District ARRA

              Mohonasen Central School District ARRA

Office of the State Comptroller

Albany City School District

Auburn Enlarged City School District

Babylon Union Free School District

Baldwinsville Central School District

Brentwood Union Free School District

Brockport Central School District

Broome-Delaware-Tioga BOCES

Buffalo City School District

Canajoharie Central School District

Cato-Meridian Central School District

Cayuga-Onondaga BOCES

Chenango Valley Central School District

Clymer Central School District

Cobleskill-Richmondville Central School District

Commack Union Free School District

Cortland City School District

Delaware-Chenango-Madison-Otsego BOCES

Dutchess County BOCES

East Syracuse-Minoa Central School District

Erie 1 BOCES

Fairport Central School District

Germantown Central School District

Greater Southern Tier BOCES

Hauppauge Union Free School District

Haverstraw-Stony Point Central School District

Jericho Union Free School District

Kiryas Joel Union Free School District

Lake Placid Central School District

Lavelle School for the Blind

Lexington School for the Deaf

Little Falls City School District

Long Beach City School District

Lynbrook Union Free School District

Margaretville Central School District

Monroe #1 BOCES

Monroe 2-Orleans BOCES

Monroe-Woodbury Central School District

Nanuet Union Free School District

New York City Department of Education Student Participation in the

     Supplemental Education Services Program Follow-up Report

New York Institute for Special Education

North Syracuse Central School District

Oceanside Union Free School District

Palmyra-Macedon Central School District

Penn Yan Central School District

Rochester City School District

Rush-Henrietta Central School District

St. John’s University TAP

St. Joseph’s School for the Deaf

Schoharie Central School District

Schuylerville Central School District

Seaford Union Free School District

Sewanhaka Central High School District

South Glens Falls Central School District

South Mountain Hickory Common School District

Ulster County BOCES

Utica City School District

Valhalla Union Free School District

Valley Stream Union Free School District #13

Vestal Central School District – 2 reports

Warrensburg Central School District

Warsaw Central School District

Wayland-Cohocton Central School District

West Babylon Union Free School District

Williamson Central School District

Williamsville Central School District

 

Recommendation

 

For item one (Modification to the Statement on the Governance Role of a Trustee or Board Member), the Subcommittee’s approval is sought to revise the document.  For item two (Results of the New York State Single Audit Findings), and item three (Completed Audits), no further action is recommended.

 

Timetable for Implementation

 

              N/A

The following materials are attached:

  • Roadmap
  • Modification to the Statement on the Governance Role of a Trustee or Board Member (Attachment I)
  • Results of the New York State Single Audit Findings (Attachment II)
  • Review of Audits Presented – Department’s Internal Audit Workgroup (Attachment III)
  • Summary of Audit Findings (Attachment IV)
  • Audit Report Abstracts (Attachment V)

 


REGENTS SUBCOMMITTEE ON AUDITS

MEETING ROADMAP

 

Date:  March 2010

Time:  TBD

Location:  TBD

TOPIC

OUTCOME

WHO

MINUTES

Opening Remarks

 

Chair

3

Review Agenda

Information

Conway

2

Modification to the Statement on the Governance Role of a Trustee or Board Member (Attachment I)

Information

Questions Answered

Counsel and Audit Staff

10

Results of the New York State Single Audit Findings (Attachment II)

Questions answered

Department and Audit Staff

30

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

Questions answered

Department and OSC Audit Staff

15


 

 


Attachment I

Modification to the Statement on the Governance Role of a Trustee or Board Member

Duty of Loyalty/Conflicts of Interest/Nepotism

Trustee/board members owe allegiance to the institution and must act in good faith with the best interest of the institution in mind.  The conduct of a trustee/board member must, at all times, further the institution's goals and not the member's personal or business interests.  Consequently, trustees/board members should not have any personal or business interest that may conflict with their responsibilities to the institution.  A trustee/board member should avoid even the appearance of impropriety when conducting the institution's business.  Acts of self-dealing constitute a breach of fiduciary responsibility that could result in personal liability and removal from the board.

While there is no specific legal prohibition against an institution's employment of the spouse, children or relatives of, or persons having other personal relationships with, a trustee/board member, care must be taken to ensure that such relationships do not conflict with the duty of the trustee/board member to act at all times in the best interests of the institution.  In addition, institutions may adopt and enforce policies regarding the employment of persons having personal relationships with trustees/board members, and the protocols to be followed by the affected trustee/board member including disclosure of the personal relationship and recusal from voting in instances involving the interests of such persons.  Such policies should be reviewed and discussed with the institution's attorneys and auditors prior to their adoption.   

The board of trustees/board of education should have a written conflict of interest policy that clearly sets forth the procedures to be followed in instances where a board member's personal or business interests may be advanced by an action of the board, including a provision that the trustee/board member may not participate in any decision to approve any transaction where such conflicting interests may be advanced. The policy should also include a requirement that each trustee/board member provide full, ongoing disclosure to the institution of any interest the trustee/board member and/or his or her family has in any entity that the board transacts business with.  The policy should be reviewed and discussed with the institution's attorneys and auditors prior to its adoption.

In addition, there are specific provisions concerning conflicts of interest in Article 18 of the General Municipal Law (applicable to school districts, boards of cooperative educational services [BOCES], county vocational education and extension boards and public libraries), and section 715 of the Not-for-Profit Corporation Law (applicable to education corporations chartered by the Board of Regents).  General Municipal Law §806 requires the governing body of each school district to adopt a code of ethics, including standards for officers and employees with respect to disclosure of interest in legislation before the governing body, holding of investments in conflict with official duties, private employment in conflict with official duties, future employment and such other standards relating to the conduct of officers and employees as may be deemed advisable.  Education Law §3016(2) requires a vote of two-thirds of the members of the board of education to employ a teacher who is related to a board member by blood or by marriage.

A sample conflict of interest policy is available on the Internal Revenue Service website (www.irs.gov ) under Appendix A of the Instructions to IRS Form 1023.

School board members may contact the New York State School Boards Association (NYSSBA) at 1-800-342-3360 or go to the respective NYSSBA websites shown below to access the following sample policies:

2160 School District Officer and Employee Code of Ethics at

http://www.nyssba.org/index.php?src=gendocs&ref=samplepolicy2160

9120.1 Conflict of Interest at

http://www.nyssba.org/index.php?src=gendocs&ref=samplepolicy9120.1


Attachment II

Regents Subcommittee on Audits meeting roadmap

March 2010 summary of audit findings
March 2010 summary of audit findings
March 2010 summary of aidit findings
March 2010 summary of audit findings
Audit Report Abstracts March 2010
Audit Report Abstracts March 2010
Audit Report Abstracts March 2010
Audit Report Abstracts March 2010
Audit Report Abstract March 2010
Audit Report Abstract March 2010
Audit Report ABstract March 2010
Audit Report Abstracts march 2010
Audit Report Abstracts March 2010


Attachment III

Regents Subcommittee on Audits

February – March 2010

Review of Audits Presented

Department’s Internal Audit Workgroup

 

Newly Presented Audits

We reviewed the 68 audits that are being presented to the Subcommittee this month.  Sixty-six of the audits were issued by the Office of the State Comptroller (OSC) and two were issued by the Office of Audit Services (OAS).  Fifty-three of the audits were of school districts, nine of BOCES, one was of an institution of higher education, four were  of Special Act school districts (section 4201, provide educational services to disabled students ) and one was of a  New York City Department of Education program.  

The findings were in the areas of payroll, financial reporting, cash, procurement, information technology, extraclassroom activity fund, claims processing, segregation of duties, conflict of interest, fingerprinting, capital assets, and others such as Medicaid reimbursement, recycling paper program, energy conservation, use of American Recovery and Reinvestment Act funds and administration of the Tuition Assistance Program.

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.

There are 24 follow-up audits that were conducted by OSC and are included in the material this month. Two districts, Brockport and Hauppauge had fully implemented all of the recommendations contained in the original audit.  Vestal had fully implemented all of the recommendations in one of the two audits conducted of that district.

The Department’s Internal Audit Workgroup identified categories of findings and audits for further review or follow-up as noted below:

 

  • Fund Balance, Reserves and Budgeting Practices (Auburn, Balwinsville, Broome-Delaware-Tioga BOCES, Cato-Meridian, Delaware-Chenango-Madison-Otsego BOCES, Fairport, Monroe 2-Orleans BOCES, North Syracuse, Palmyra-Macedon, Rush-Henrietta, Ulster County BOCES, Valley Stream #13, Wayland-Cohocton, Williamson, and Williamsville)

 

Summary of Audits

The findings generally indicate that the districts’/BOCES’ fund balance exceeded the statutory limit and the districts/BOCES over funded some of the reserves.  These reserves were not used for the intended purpose and the district/BOCES made payments out of the General Fund instead.  Some of the districts/BOCES also established reserves when they did not have legal authority to do so (i.e. Reserve for Other than Post Employment Benefit (OPEB)).

Follow-up Action

 

OAS will continue to follow-up on the corrective action plans until all significant recommendations are fully implemented or no longer applicable. OSC will also begin a process to assess the validity of balances in the Employee Benefit Accrued Liability Reserves (EBALR). The Department will monitor legislative actions relative to fund balance and reserves.  A small workgroup has been formed to evaluate the issue of fund balance limitations and the current list of districts/BOCES that are exceeding such limit.  The workgroup will establish a course of action.

 

  • Fingerprinting and Background Check (Delaware-Chenango-Madison-Otsego BOCES, New York Institute for Special Education)

 

Summary of Audits

The audits found instances of employees that did not have the required fingerprinting and criminal history backgroud check conducted.

Follow-up Action

The audits have been referred to the Office of School Personnel Review and Accountability (OSPRA) for follow up and to make the school/BOCES aware of responsibilities related to criminal history background checks.

 

  • Medicaid Reimbursement (Palmyra-Macedon)

 

Summary of Audit

The findings indicate that the district may have lost $175,000 in Medicaid reimbursement due to lack of policies and procedures identifying appropriate responsibilities in the claiming and reimbursement process.

Follow-up Action

OAS will review the corrective action plan to ensure all recommendations are implemented.

 

 

  • Board Member Fiscal Oversight Training (Greater Southern Tier BOCES)

 

Summary of Audit

Audit finding indicates that seven of the eleven board members had not taken the required fiscal oversight training within the first year of being elected.

Follow-up Action

All of the board members have now received the required fiscal oversight training.

 

  • Conflict of Interest (Kiryas Joel, Monroe #1 BOCES, Ulster County BOCES, and Williamson)

 

Summary of Audits

The audit findings indicate that there are board members or employees with prohibited or undisclosed interest in a vendor’s contract with the district/BOCES  due to family or business relations.

Follow-up Action

The Office of Counsel is reviewing the audit findings to assess the need for further action.

 

  • Lack of Disaster Recovery Plan (Albany, Babylon, Cobleskill-Richmondville, Delaware-Chenago-Madison-Otsego BOCES, Long Beach, Monroe 2- Orleans BOCES, Ulster County BOCES, Valley Stream #13)

 

Summary of Audits

The audit findings indicate that the districts/BOCES do not have a disaster recovery plan in place to prevent the loss of equipment and data in the event of a disaster causing computer failure.

Follow-up Action

OAS will review the corrective action plans to ensure all recommendations are implemented.

 

 

 

  • Use of American Recovery and Reinvestment Act (ARRA) funds (Coxsackie-Athens and Mohonasen)

 

Summary of Audits

In one of the audits, it was found that the district’s claim was based on an estimated amount and not actual expenditures. It also included expenditures that were not included in the approved grant application. Expenditures were not posted directly into the ARRA account codes.

The second district did not comply with the federal requirements regarding time and effort documentation.

Follow-up Action

The districts have already implemented the recommendations.

 

  • OSC Follow-up Audits (Brentwood, Brockport, Canajoharie, Clymer, Commack, Cortland, East Syracuse-Minoa, Germantown, Hauppauge, Haverstraw-Stony Point, Jericho, Lake Placid, Margaretville, Nanuet, Penn Yan, Schoharie, Schuylerville, Seaford, Sewanhaka, South Glens Falls, Valhalla, Vestal, Warrensburg, Warsaw)

 

Summary of Audits

OSC auditors revisited 24 districts that had been previously audited to follow-up on the progress of implementing the recommendations. Sixty-five percent of the recommendations have been fully implemented, 19 percent have been partially implemented, 13 percent have not been implemented and the remaining 3 percent are no longer applicable.

Follow-up Action

The Department will assess the significance of the unimplemented recommendations and follow-up where appropriate.

 

  • Special Acts - 4201 schools (Lavelle School for the Blind, Lexington School for the Deaf, New York Institute for Special Education, and St. Joseph’s School for the Deaf)

 

Summary of Audits

One common audit finding among the schools pertains to procurement issue, particularly the failure to competitively bid certain purchases. Other findings generally relate to lack of board oversight.

Follow-up Action

OAS will request from OSC a copy the schools’ 90-day follow-up letter on the implementation of the recommendations.  OAS will review progress of implementation and contact the appropriate program office as necessary.

 

  • Rochester City School District

 

Summary of Audit

The former superintendent provided undocumented bonuses and salary increases to employees belonging to a certain group (Superintendent’s Employee Group, consisting of employees appointed to their positions and primarily serve at the superintendent’s discretion).  In a sample of 30 bonuses, 27 ($164,550) did not have supporting documentation to support bonuses.  The claims auditor did not audit claims related to the $36 million capital project.  The audit also found weaknesses in procurement and contract management such as failure to use request for proposals for professional services, executing contracts prior to board approval and general lack of oversight.

Follow-up Action

OAS will review the corrective action plan to ensure all recommendations are implemented.

       

  • Monroe 2-Orleans BOCES

 

Summary of Audit

The BOCES entered agreements and used public funds for unauthorized purposes. A previous agreement wherein the BOCES provided service to an organization outside the country resulted in the BOCES accumulating $1.2 million.  These proceeds were later placed in the Monroe2-Orleans Educational Foundation, although the BOCES has no authority to use public funds for this purpose. This Foundation appears to have transferred the moneys to the Rochester Area Community Foundation to avoid the restrictions on investments of BOCES moneys.

Follow-up Action

OAS will review the corrective action plan to ensure all recommendations are implemented.


Audit

Procurement

Capital Assets

Claims Processing

Payroll

Cash

Financial Reporting

Information Technology

Extraclassroom Activity Fund

Segregation of Duties

Conflict of Interest

Fingerprinting

Other

Office of Audit Services

* Coxsackie-Athens Central School District (footnote 1)

                     

* Mohonasen Central School District (footnote 1)

                     

Office of the State Comptroller

Albany City School District

   

         

Auburn Enlarged City School District

     

 

           

Babylon Union Free School District

     

 

         

Baldwinsville Central School District

     

 

           

Brentwood Union Free School District

   

             

Brockport Central School District

                     

* Broome-Delaware-Tioga BOCES (footnote 4)

     

         

Buffalo City School District

     

   

         

Canajoharie Central School District

           

         

Cato-Meridian Central School District

       

           

Cayuga-Onondaga BOCES

   

     

         

* Chenango Valley Central School District (footnote 4)

   

   

         

Clymer Central School District

   

 

       

* Cobleskill-Richmondville Central School District (footnote 7)

   

   

 

   

Commack Union Free School District

   

   

         

Cortland City School District

                     

Delaware-Chenango-Madison-Otsego BOCES

     

     

 

Dutchess County BOCES

     

             

East Syracuse-Minoa Central School District

   

 

 

     

Erie 1 BOCES

           

         

Fairport Central School District

         

           

Germantown Central School District

       

         

* Greater Southern Tier BOCES (footnote 4)

     

 

         

** Hauppauge Union Free School District

                       

Haverstraw-Stony Point Central School District

   

             

Jericho Union Free School District

                     

* Kiryas Joel Union Free School District (footnote 5)

   

         

* Lake Placid Central School District (footnote 3)

           

     

* Lavelle School for the Blind (footnote 2)

     

           

Lexington School for the Deaf

                     

Little Falls City School District

     

             

Long Beach City School District

   

 

         

Lynbrook Union Free School District

     

 

 

     

Margaretville Central School District

 

     

         

* Monroe #1 BOCES (footnote 5)

     

             

Monroe 2-Orleans BOCES

 

   

         

Monroe-Woodbury Central School District

 

               

Nanuet Union Free School District

     

             

* New York City Department of Education (Report #2009-F-24)  (footnote 8)

                     

New York Institute for Special Education

   

       

 

North Syracuse Central School District

     

           

Oceanside Union Free School District

   

           

* Palmyra-Macedon Central School District (footnote 6)

     

 

         

Penn Yan Central School District

     

           

* Rochester City School District (footnote 2)

 

         

 

Rush-Henrietta Central School District

   

 

           

* St. John’s University TAP (footnote 9)

                     

* St. Joseph School for the Deaf (footnote 2)

     

           

Schoharie Central School District

           

         

Schuylerville Central School District

           

         

Seaford Union Free School District

                   

Sewanhaka Central High School District

         

         

South Glens Falls Central School District

       

     

     

South Mountain-Hickory Common School District

     

             

Ulster County BOCES

     

   

   

Utica City School District

   

               

Valhalla Union Free School District

   

   

 

     

Valley Stream Union Free School District #13

   

 

     

Vestal Central School District

           

         

Vestal Central School District

   

               

Warrensburg Central School District

   

               

Warsaw Central School District

     

   

       

Wayland-Cohocton Central School District

       

           

West Babylon Union Free School District

   

 

         

Williamson Central School District

         

     

   

Williamsville Central School District

 

   

           
                         

February - March 2010

34

6

13

30

25

22

24

3

6

3

2

15

 

* Other:

1

American Recovery and Reinvestment Act (ARRA) Funds

2

Board Oversight

3

Board-Approved Tax Levy More Than Voter-Approved Tax Levy

4

Control Environment

5

Control Environment, Lease Agreements

6

Medicaid Reimbursement

7

Recycling Paper Program

8

Supplemental Education Services Program (SES)

9

Tuition Assistance Program (TAP)

 

 

**

No recommendations.

 

 


Summary of Current and Prior Audit Findings

 

May 2007 - December 2008

January 2009

February 2009

March 2009

April 2009

June 2009

September 2009

November 2009

January 2010

March 2010

Running Total

Procurement

163

13

16

7

4

8

26

21

11

34

303

Capital Assets

19

0

0

0

0

0

0

1

0

6

26

Claims Processing

151

3

8

2

1

3

9

9

7

13

206

Payroll

168

12

11

1

1

4

16

20

10

30

273

Cash

130

5

13

2

1

3

14

17

10

25

220

Financial Reporting

101

8

11

5

2

7

17

13

15

22

201

Information Technology

162

10

12

6

3

5

24

16

13

24

275

Capital Construction

5

0

0

0

0

0

0

0

0

0

5

Extraclassroom Activity Fund

16

1

0

0

1

0

3

1

3

3

28

Segregation of Duties

65

1

2

1

0

0

6

12

7

6

100

Budgeting

19

1

0

1

0

6

1

4

3

0

35

Conflict of Interest

21

1

3

0

0

0

5

4

1

3

38

Fingerprinting

9

2

0

2

0

0

3

1

3

2

22

Other

55

23

5

1

3

6

21

27

7  

15

163

Total

1,084

80

81

28

16

42

145

146

90

183

1,895


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; improper classification of employees; insufficient policies and procedures for the employee retirement system; improper contractual benefit payments; and improper longevity payments to the former superintendent.

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, general fund transfers without voter approval, and improper use of accrued liability reserve funds.

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.

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

Budgeting – includes budget reviews required for school districts that have received approval for deficit financing, poor revenue projections and use of fund balance.

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, and make payment or audit bills or claims of the contract.

Fingerprinting – includes failure to fully comply with fingerprinting requirements.


Office of Audit Services

Audit

Major Finding(s)

Recommendation/Response

Coxsackie-Athens Central School District  Use of American Recovery and Reinvestment Act (ARRA) funds awarded for the July 1, 2009 - June 30, 2010 school year

ARRA-1009-04

3rd Judicial District

 

The report focused on the District’s use of American Recovery and Reinvestment Act (ARRA) funds awarded for the July 1, 2009-June 30, 2010 school year. The scope was limited to the ARRA Education Stabilization Funds (ESF).

The amount Coxsackie-Athens claimed as Project Cash Expenditures to Date for ARRA-ESF was based on an estimate and not actual expenditures to-date. The amount of the actual expenditures as of September 29, 2009, could not be determined. The District also included anticipated expenditures for the following month in its claim.

The District also included $20,000 in expenditures related to its sports and music program, and $14,000 in maintenance expenditures such as salaries. These expenditures were not included in the approved grant application, or within the guidelines issued by the Department. Because this is an audit of an interim payment request, the District was able to submit a revised payment request.

The District also did not post all ARRA expenditures directly to ARRA account codes. As expenditures were made, they were entered into regular General Fund account codes until October 28, 2009, when a series of journal entries were made to move them into the ARRA-ESF code.

Finally, there were no exceptions with the compliance with federal grant requirements.

2 recommendations

The audit recommended that the District only report actual expenditures incurred, to post all future ARRA expenditures directly to the ARRA account codes, and  to use ARRA funds consistent with the approved grant application and within the guidelines issued by the State Education Department.

The District agreed with the recommendations, and has indicated that it has implemented corrective action.

Mohonasen Central School District

Use of American Recovery and Reinvestment Act (ARRA) funds awarded for the July 1, 2009 - June 30, 2010 school year

ARRA-1009-03

4th Judicial District

 

The report focused on the District’s use of American Recovery and Reinvestment Act (ARRA) funds awarded for the July 1, 2009-June 30, 2010 school year. The scope was limited to the ARRA Education Stabilization Funds (ESF).

There were no audit exceptions regarding the allowability of amounts expended or the financial control system.

The District’s personnel activity reports for employees whose salaries are paid by multiple cost objectives, such as both ARRA-ESF and other federal grants, did not account for the total activity for which each employee was compensated, and were not prepared at least monthly to coincide with one or more pay periods as required by A-87.

1 recommendation

The recommendation stated that the District is to ensure that the personnel activity reports for employees who work on multiple objectives account for the entire activity for which the employee is compensated, and are prepared at least monthly to coincide with one or more pay periods as required in OMB circular A-87.

The District agreed with the recommendation and has since developed a personnel activity report. The report is currently being distributed on a monthly basis to employees, and indicates all compensation activity for the individual.

Office of the State Comptroller

Audit

Major Finding(s)

Recommendation/Response

Albany City School District

Financial Condition and Internal Controls Over Selected Financial Activities

2009M-116

3rd Judicial District

 

The school lunch fund has incurred operating deficits totaling in excess of $1.6 million over the four-year period ended June 30, 2008. These deficits have been covered by both operating subsidies and loans from the general fund. At June 30, 2008, the amount of cash owed to the general fund totaled nearly $950,000 and the potential for the school lunch fund to operate without subsidies and loans from the general fund appears unlikely in the foreseeable future. This negatively impacted the general fund’s cash flow, which makes it necessary to issue short-term debt. The debt appears to have been issued for a longer period of time than necessary, resulting in excess interest costs of at least $110,000 for the debt issuance reviewed.

District officials have also failed to address energy efficiency goals or power management features in regard to computer technology. The District could have saved almost $47,000 annually in addition to reducing its consumption by as much as 666,000 kilowatt-hours by requiring computer users to power down the computers during periods of inactivity.

There were incompatible duties and inadequate verification of eligibility for health insurance buybacks. Payments of health insurance buybacks to 45 employees were tested, and three payments totaling $5,400 to ineligible employees were found, as well as 24 payments totaling over $35,000 that lacked adequate supporting documentation.

Twenty-four professional service contracts were reviewed, and it was found that the District procured almost $3 million in professional services from 21 consultants without using requests for proposals (RFPs) or soliciting competitive quotes.

Further, 16 out of 65 laptops could not be located, with a value of $18,200. Sixteen musical instruments (valued at $20,200) were also unaccounted for.

The District has not adequately restricted user access rights, and certain employees had access rights that were not consistent with their job duties. There is also no disaster recovery plan in place.

Finally, the treasurer’s responsibilities included several duties that were incompatible, and there were no mitigating controls in place. The business administrator also had unrestricted financial software rights, and used the treasurer’s signature disk without involvement or monitoring by the treasurer.

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the school lunch fund, the general fund, energy efficiency and power management with regard to computer technology, health insurance buybacks, procurement, accounting for District laptops, user access rights, and the treasurer’s duties.

The District agreed with the recommendations and indicated that they will implement corrective action.

Auburn Enlarged City School District

Internal Controls Over Selected Financial Activities

2009M-186

7th Judicial District

 

The board of education and District officials have not yet established written policies and procedures for the personnel department, including procedures for maintaining leave records and confidential employee information. The lack of internal controls over payroll resulted in a total cost to the District and taxpayers of over $59,000. The District provided extraordinary post-employment health benefits totaling over $51,700 to three individuals. The total cost to the taxpayers from this benefit will be over $1 million. Post-employment benefits were also not being properly authorized by the board. Further, the District paid over $7,300 to seven employees in leave time that the employees took but had not earned. The District is also not taking appropriate measurers to safeguard confidential employee information.

Finally, the board and District officials used the employee benefit accrued liability reserve (EBALR) to pay for retiree health insurance, which is an improper use of the reserve. They did not use available EBALR funds to pay for compensated absences and they funded the EBALR to an amount that exceeds the liability for compensated absences. As a result, $2 million of excess taxpayer dollars were kept in the reserve.

10 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the maintenance of leave records and confidential employee information, and the proper use of reserves.

The District agreed with the recommendations and had indicated that they plan to implement corrective action as soon as possible.

Babylon Union Free School District

Internal Controls Over Selected Financial Operations

2009M-150

10th Judicial District

 

The District contracted with five professional service providers who were paid $432,904 during the audit period without soliciting professional services through the request for proposal (RFP) process.

The treasurer’s cash duties were also not properly segregated and the District was not in compliance with the State regulations because District officials did not issue duplicate pre-numbered receipts when collecting cash. The District also had 37 outstanding checks (totaling $17,713) issued from three months, to over two years ago.

The board of education also did not ensure that policies and procedures were developed to make certain that all District officers and employees were informed of their obligation to disclose their “interest” in contracts with the District, or to monitor proposed procurements to prevent conflicts of interest.

Finally, several employees had access privileges to the District’s financial data that they did not need to perform their job duties. Procedures were also not developed to ensure disaster recovery in case of an emergency.

15 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the RFP process, the segregation of duties, properly disclosing interest in contracts, and a disaster recovery plan.

The District agreed with the recommendations and has indicated that they plan to implement corrective action as soon as possible.

Baldwinsville Central School District  Financial Condition and Internal Controls Over Selected Financial Operations

2009M-203

5th Judicial District

 

The board of education and District officials routinely overestimated appropriations and underestimated revenues. Poor budget estimates resulted in revenues exceeding expenditures by approximately $11.3 million. The District’s budgetary practices have consistently resulted in operating surpluses that District officials have used to increase reserve funds in excess of $16 million. Three reserves and an improper post-retirement health insurance liability were overfunded by $7.7 million.

The District entered into an employment agreement which allows the former interim superintendent’s salary of $104,000 to be deferred. This allows the former interim superintendent to collect full pension while working full-time. Since then, the former interim superintendent has received partial salary payments from the District (totaling $87,690) as of June 2009. The New York State Teacher’s Retirement System has taken action to recover the overpayment of $32,590 from the former interim superintendent by suspending her September 2009 pension payment, and will continue until the entire amount is recovered.

7 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the District’s budgetary practices, reserve funds, and the overpayment of the former interim superintendent.

The District has agreed with the recommendations, and has indicated that they will implement corrective action as soon as possible.

Brentwood Union Free School District

Internal Controls Follow Up

2005M-70-F

10th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in January 2006 identifying opportunities for District management’s review and consideration.

The District was revisited in June 2009 to review the progress with implementing the recommendations, and it was determined that out of the 18 recommendations, 14 of them were fully implemented, two were partially implemented, and two were not implemented.

The recommendations that were only partially implemented were those pertaining to the timely deposit of cash payments, and adopting a written policy regarding the appropriate use of District credit cards.

The recommendations that were not implemented were those in regard to physical and capital assets inventory, as well as the District’s procurement policy and requests for proposals.

The remainder of the recommendations have been implemented.

Brockport Central School District

Internal Controls Over Credit Card Purchases Follow Up

2007M-63-F

7th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in January 2007 identifying opportunities for District management’s review and consideration.

The District was revisited in September 2009 to assess the District’s progress in implementing the recommendations, and it was found that the District had implemented all four of the recommendations.

The four recommendations pertaining to updating credit card policies, the reduction of the number of credit cards, purchase orders issued prior to credit card purchases, and providing original supporting receipts with credit card claims, have all been fully implemented.

Broome-Delaware-Tioga BOCES

Financial Operations

2009M-215

6th Judicial District

 

Cash receipt duties were not segregated, receipts were not always issued, and detailed records were not retained for credit card payments. As a result, BOCES officials during November 2008 could not account for $3,800 paid by students. BOCES officials also could not verify that credit card refunds totaling $12,000 were for the correct amounts or paid to the correct individuals. They also could not verify that career and technical education (CTE) materials and supplies totaling $85,898 were purchased for instructional purposes, or if the moneys received for CTE services were properly charged and deposited.

Further, purchasing procedures were not specific enough, and the BOCES employees, including the purchasing agent, did not always comply with the established policy or procedures. As a result, 7 of the 12 purchases and public works contracts reviewed (totaling $524,000) were not competitively bid. Thirty-three purchases totaling $140,700 were made prior to approval of the related purchase orders. CTE instructors also did not submit detailed purchase requests for purchases totaling $85,898, nor did they maintain inventory records for equipment and supplies.

The deputy treasurer did not directly affix her signature to any of the 41,870 checks (totaling more than $135.8 million) that were issued during the audit period. Additionally, the nine individuals who had access to her signature did not use it under her supervision. Nine hundred seventy-seven disbursements totaling $267,000 were also made directly from the BOCES bank accounts by third-party vendors without supporting documentation.

Finally, the BOCES has accumulated reserve funds totaling $5.5 million for employee benefits and unemployment insurance, which significantly exceed amounts needed to meet related liabilities. The BOCES has also disbursed $1.8 million from a reserve fund for purposes not allowed by law, and has inappropriately accumulated surplus moneys totaling $1.2 million in the capital fund, rather than using the money to benefit taxpayers.

16 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding cash receipt duties, CTE materials, public works contracts, the treasurer’s signature, and reserve funds.

The BOCES agreed with the recommendations and has indicated that they will implement corrective action.

Buffalo City School District

Internal Controls Over Information Technology and Retiree Health Insurance Benefits

2009M-221

8th Judicial District

(Contract for Excellence District)

Twenty-two of the District’s 47 laptop computers tested were used inappropriately. Pornographic images and full-length movies, music files, unencrypted confidential student information, and evidence of visits to gambling and social networking websites were found on the computers. Four of these 22 laptops were issued to board of education members; one laptop issued to a board member contained thumbnail-size pornographic images, while a second laptop issued to another board member contained unauthorized software; two other laptops issued to board members were wiped clean by an outside vendor before they could be tested, which suggests that these laptops may have contained inappropriate material.

Further, the District’s information system controls such as access controls and virus protection were ineffective and lacked documentation.

The District also does not require users to regularly connect their laptops to the District’s network to update user policies. Of the 47 laptops tested, the users of 39 of them had administrative rights they were not entitled to. Twenty-five of the 47 laptops had virus protection software that was either disabled or not current and another 25 laptops did not have the mobile web filter installed. Therefore, the District is not obtaining value from the almost $220,000 it spent on protection software and web filters and the network and data were exposed to an increase risk of loss, misuse and virus threat.

Finally, the Social Security Administration (SSA) records for 5,269 District retirees and their dependents were reviewed, and it was determined that six individuals currently insured by the District were deceased. The District paid $51,000 in premiums for these six deceased individuals.

12 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding appropriate laptop use, user groups and access rights, the use of the mobile web filters and protection software, and District payments for Social Security.

The District disagreed with the findings pertaining to information system controls, certain aspects of the board member usage of laptops, and health insurance benefits. The District also noted that there were several issues that skewed the audit recommendations and undermined the remedial intent of the audit process.

The District has indicated that they will implement a portion of the recommendations.

Canajoharie Central School District

Internal Controls Over Electronic Equipment Inventories and Employee Reimbursements Follow Up

2006M-110-F

4th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in November 2006 identifying opportunities for District management’s review and consideration.

The District was revisited on October 6, 2009 in order to review the District’s progress in implementing the recommendations. It was found that the District had made considerable progress in implementing the recommendations. Of the six recommendations, three recommendations were fully implemented, one recommendation was partially implemented, and two recommendations were not implemented.

The recommendation pertaining to  a comprehensive inventory of electronic equipment should be completed and maintained on a perpetual basis has only been partially implemented.

The recommendations that were not implemented were those pertaining to the assignment of an identification number to electronic equipment, and establishing a policy to detail procedures for disposing of old electronic equipment to ensure that any such distribution is legally authorized.

The remainder of the recommendations have been fully implemented.

Cato-Meridian Central School District

Reserve Funds and the Treasurer’s Electronic Signature

2009M-193

7th Judicial District

 

The District accumulated Insurance and Liability reserve fund balances totaling $1.18 million. The resolutions establishing these reserves included the titles of the reserves and the dollar amounts transferred to initially fund the reserves. However, the resolutions did not document, and there were no policies or plans to communicate, the board of education’s  rationale for establishing each reserve, the objective, and optimal or targeted funding levels or conditions under which assets from each reserve would be used or replenished. As a result, the District accumulated significant resources that have not been used to benefit taxpayers.

Further, policies and procedures for the use of the treasurer’s electronic signature have not been established. The treasurer does not supervise the use of her electronic signature in the check signing process. Fifty disbursements were reviewed, and no material exceptions were found.

3 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the Insurance and Liability reserve fund, and the use and regulation of the treasurer’s electronic signature.

The District agreed with the recommendations and have indicated that they are currently implementing corrective action.

Cayuga-Onondaga BOCES

Internal Controls Over Selected Financial Operations

2009M-200

7th Judicial District

 

The board of education had not established appropriate policies to guide employees’ actions or District officials did not implement the policies. There is a lack of board oversight over claims processing.  The BOCES personnel have not fully complied with the established policies and have not formulated detailed procedures for the audit of claims. Credit card purchases were also not always reviewed or audited by the claims auditor.

The board also has not established adequate policies and procedures relating to IT system user access rights and monitoring reports.

8 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding board oversight over claims processing, the audit of claims, credit card purchases, and user access rights.

BOCES officials agreed with the recommendations and have indicated that they plan to implement corrective action as soon as possible.

Chenango Valley Central School District  Financial Condition and Internal Controls Over Selected Financial Activities

2009M-190

6th Judicial District

 

District management failed to set the proper “tone at the top” which can have a negative impact on employees’ attitudes and decisions, and contributed to the District’s financial decline. The District’s accounting records were not accurate or complete.

The board of education had an accumulated general fund deficit of $3.5 million as of June 30, 2008.  As a result, District officials obtained approval from the State Legislature and issued $3.5 million in deficit financing bonds. The board also did not have procedures to plan for long-term operational needs, which may contribute to more financial problems in the future.

The improvement is due in large part to the deficit bond financing; however, even without the bond financing at the end of 2008-09, revenues still exceeded expenditures by $3.4 million. As of June 30, 2009, the District has an unreserved fund balance of $1.2 million for the fiscal year ending 2009, and has properly established four reserves totaling $2.1 million.

Finally, the board appointed a BOCES employee as the District’s claims auditor. This is against the New York State Education Department’s guidance on interpreting regulations. The board also appointed a second BOCES employee to serve as the District’s deputy claims auditor; however, there is no provision to permit the board to appoint more than one claims auditor.

7 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding District accounting records, the general fund deficit, the unreserved fund balance, reserves, and the appointment of a BOCES employee as the District claim’s auditor.

The District agreed with the recommendations and have indicated that they plan to implement corrective action as soon as possible.

Clymer Central School District

Internal Controls Over Selected Financial Operations Follow Up

2007M-162-F

8th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in October 2007 identifying opportunities for District management’s review and consideration.

The District was revisited on August 19, 2009 in order to assess the progress with implementing the recommendations made in the previously issued report. It was found that the District has made limited progress in implementing the recommendations. Of the 19 recommendations, nine were fully implemented, nine were partially implemented, and one recommendation was not implemented.

The recommendations that were only partially implemented were those pertaining to restricting user access, password protection, properly maintaining audit logs, cash transfer procedures, fund transfers, student activity fund records, and recovering improper separation payments made to former employees.

The recommendation that states that the business official should conduct an analysis of each account to determine if account balances are accurate has not been fully implemented.

The remainder of the recommendations have been fully implemented.

Cobleskill-Richmondville Central School District

Internal Controls Over Selected Financial Operations

2009M-187

3rd Judicial District

 

The District improperly paid $27,500 in health insurance and prescription plan premiums and reimbursements of Medicare Part B premiums for deceased individuals and their spouses.

Duties within the payroll process and the cash disbursement process were neither appropriately segregated, nor were there compensating controls in place to mitigate the risk. The District overpaid an employee by $3,050 due to a lack of segregation of duties in payroll. The business manager’s facsimile signature was also being used to sign District checks and purchase orders.

The claims auditor had not audited and approved 131 claims (totaling $2.2 million), and 922 claims (totaling $11.4 million) had been disbursed prior to being audited and approved by the claims auditor.

Further, policies and procedures have not been implemented to limit and control access to the financial software and data. The board of education also has not developed a formal disaster recovery plan.

Finally, the District established a recycling paper program in June 2008 through the use of a vendor which has produced significant environmental benefits, as well as some additional financial benefits.

9 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding retiree health insurance payments to unqualified individuals, the segregation of duties in payroll, the use and regulation of the treasurer’s signature, the claim’s auditor’s duties, and the implementation of a disaster recovery plan.

The District agreed with the recommendations and has indicated that they plan to implement corrective action as soon as possible.

Commack Union Free School District

Internal Controls Over Financial Operations Follow Up

2007M-48-F

10th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in May 2007, identifying opportunities for District management’s review and consideration.

The District was revisited in July 2009 in order to review the District’s progress in implementing the recommendations. It was found that the District had made considerable progress in implementing the recommendations. Seven recommendations were fully implemented, and two recommendations were not implemented.

The recommendations that were not implemented were those pertaining to administrative expenses submitted for board of educaton review, and the reimbursement of administrative expenses. The remainder of the recommendations regarding receipts and invoices with regard to administrative expenses, procurement, and computer safeguards, have all been fully implemented.

Cortland City School District

Internal Controls Over Selected Financial Operations Follow Up

2007M-302-F

6th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in March 2008, identifying opportunities for District management’s review and consideration.

The District was revisited on November 5, 2009 to assess the progress made by the District with implementing the recommendations contained in the previously issued report. It was determined that the District has made progress on the implementation of the recommendations. Of the eight recommendations, seven were implemented, and one recommendation was not implemented.

The recommendation in regard to the investigation of the propriety of purchases to ensure they were for legitimate purposes and to verify that all goods were received, has not been implemented.

The remainder of the recommendations have been fully implemented.

Delaware-Chenango-Madison-Otsego BOCES

Internal Controls Over Financial Operations and Employee Background Checks

2009M-173

6th Judicial District

 

Only 22 of the 149 applicable employees tested were properly cleared for required background checks, and ten individuals were not cleared at all.  Eighty-three employees were cleared only after they started work and 34 did not undergo the required clearance updates.

It was also found that the moneys in the other post-employment benefits (OPEB) fund, which totaled $3.5 million in June 2008, constituted fund balance that should have been apportioned to the school districts. BOCES management also did not obtain board of education approval to allocate $290,000 of surplus funds to reserves.

The career and technical education (CTE) director did not ensure that occupational center staff maintained sufficient records for the Adult Education and CTE programs, properly used duplicate press-numbered receipts, or deposited moneys in a timely manner.

The BOCES had not implemented a disaster recovery plan, nor had they established proper IT policies and procedures.

Finally, the board and school lunch manager did not ensure that cafeteria transactions were authorized or that computerized data was safeguarded. Register shortages and overages were found, that occurred on 192 of the 260 school days in the audit period.

18 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding background checks, OPEB monies, money deposits and receipts, IT policies, and cafeteria transactions.

The BOCES agreed with the recommendations and has indicated that they plan to implement corrective action as soon as possible.

Dutchess County BOCES

Internal Controls Over Selected Financial Activities

2009M-183

9th Judicial District

 

BOCES personnel routinely acquired professional services without seeking competitive prices for those services, and the contracts for these professional services did not always sufficiently describe the details of the services provided or the methods that BOCES could use to measure the quality of the services.  The BOCES also made payments to professional service providers without requiring them to provide adequate supporting documentation with their invoices to support those requests for payments.

Sufficient controls over the electronic transfer of moneys, which averaged more than $7.4 million per month, have not been established. Adequate segregation of duties over the wire transfer function also has not been instituted, and the treasurer’s signature is not properly supervised or monitored.

Further, internal controls over revenues and cash receipts need improvement at both the Manufacturing and Technology Institute (MTI) business office, and the Career and Technical Institute (CTI) student accounts office. BOCES officials have not established control accounts for adult education revenues, and do not ensure that MTI and CTI personnel maintain records to adequately track expected revenues, amounts paid, and amounts due for adult continuing education and licensed practical nurse courses. As a result, it was found that one recorded cash payment ($390) was never deposited, and nine LPN student tuition accounts had overdue balances (totaling $25,459).

Finally, the BOCES did not effectively safeguard its IT system, and no security plan has been established.

18 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding competitive bidding, requests for payments, segregation of duties over the wire transfer function, revenues, cash receipts, and the IT system.

The BOCES has agreed with the recommendations, and have indicated that they plan to implement corrective action as soon as possible.

East Syracuse-Minoa Central School District 

Internal Controls Over Selected Financial Operations Follow Up

2008M-17-F

5th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in March 2008 identifying opportunities for District management’s review and consideration.

The District was revisited in August 2009 in order to review the District’s progress in implementing the recommendations. It was found that the District had made significant progress in implementing the recommendations. Of the ten recommendations, seven recommendations were fully implemented, two recommendations were partially implemented, and one recommendation was not implemented.

The recommendations that were only partially implemented were those pertaining to the certification of claims and payrolls, and the segregation of payroll-related duties.

The recommendation pertaining to periodically monitoring the assignment of user access rights has not been implemented.

The remainder of the recommendations have been fully implemented.

Erie 1 BOCES

Internal Controls Over Technology Equipment

2009M-181

8th Judicial District

 

The BOCES failed to formally adopt policies and procedures and implement and monitor the unofficial procedures to identify and track individual BOCES owned equipment that was located in various school districts. Although the BOCES had a procedure to update equipment records following periodic physical inventories, districts were not conducting the inventories as expected. Districts were not disposing of equipment in accordance with BOCES requirements or adhering to BOCES insurance requirements. Management also failed to report on findings associated with the review that the BOCES claims auditor oversaw regarding the location of equipment at various districts.

5 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding equipment and physical inventories, and the claims auditor.

The BOCES agreed with the recommendations and have indicated that they plan to implement corrective action.

Fairport Central School District

Financial Condition

2009M-138

7th Judicial District

 

The District’s total fund balance in the general fund has doubled from approximately $18.7 million at June 30, 2004, to over $37.8 million as of June 30, 2008. Officials raised the tax levy 17 percent from approximately $51.9 million in the 2003-04 fiscal year to over $60.9 million in 2007-08, even while incurring significant operating surpluses.

The District annually appropriated as much as $1.5 million in fund balance that was not needed to finance operations. In addition, District officials increased reserves, resulting in reserves being overfunded by more than $11 million. The District has also improperly recorded accrued liabilities and has accumulated in excess of $16.6 million that should be used to benefit taxpayers.

4 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the total fund balance, accrued liabilities, surplus fund balance, and District reserves.

The District disagreed with the recommendations pertaining to the reasonable estimation of revenues and appropriations, paying off debt in order to benefit taxpayers, and reviewing reserves.

Germantown Central School District

Internal Controls Over Purchasing and Capital Assets Follow Up

2007M-24-F

3rd Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in May 2007 identifying opportunities for District management’s review and consideration.

The District was revisited in September 2009 to determine the progress of implementing the recommendations contained in the previously issued report. It was found that the District has made minimal corrective action in the two year period since the release of the report. Of the five recommendations, one recommendation was implemented, and four were not implemented.

The recommendations that were not implemented were those pertaining to adherence to District policies when procuring goods and services, quotations required for purchases, a disaster recovery plan, and tracking capital assets.

The remaining recommendation has been fully implemented.

Greater Southern Tier BOCES

Internal Controls Over Selected Financial Operations

2009M-218

6th Judicial District

 

Seven of the eleven board of education members did not take the required fiscal training within the first year of election. The board and audit committee also failed to address all of the control weaknesses identified in previous audits by their external auditor and internal auditor. The board also failed to develop sound policies to manage District resources.

The BOCES’ general fund liabilities were overstated by $3.2 million, and liabilities in the special aid fund and trust and agency fund were overstated by over $1.5 million and $500,000, respectively.  This resulted in a total overstatement of liabilities, including deferred revenues, of approximately $5.2 million.

Further, the allocation of surplus money to the reserves was not reported to the component districts by BOCES officials as required, and the method of funding the unemployment insurance reserve is not consistent with historical cost and has resulted in an excessive balance. Finally, the BOCES annual report filed with the State Education Department did not include a cash account (totaling $48,812) that was incorrectly recorded as a reserve in the general fund by the external auditor instead of as a liability in the trust and agency fund.

Neither the board nor BOCES officials developed written payroll policies and operating procedures to guide the payroll office staff. There is also an inadequate segregation of duties because the two payroll office employees perform all aspects of payroll transactions, and several employees have access rights to the personnel and payroll system that are not compatible with their job duties.

Finally, BOCES officials have taken steps to more accurately report the BOCES’ liabilities and reserves for 2008-09. The resulting decrease in over-accrued liabilities was used to increase the employee benefit accrued liability reserve (EBALR).

8 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding fiscal training for board members, general fund liabilities, reserves, payroll policies, and the segregation of duties over payroll.

The BOCES agreed with the recommendations and has indicated that they plan to implement corrective action.

Hauppauge Union Free School District  Financial Condition and Internal Controls Over Financial Operations Follow Up

2007M-143-F

10th Judicial District

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in November 2007 identifying opportunities for District management’s review and consideration.

The District was revisited in June 2009 to assess the progress in implementing the recommendations, and it was found that the District had implemented all 16 of the recommendations.

All of the recommendations have been implemented.

Haverstraw-Stony Point Central School District Internal Controls Over Selected Financial and Capital Project Activities Follow Up

2007M-38-F

9th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in June 2007 identifying opportunities for District management’s review and consideration.

The District was revisited in August 2009 to assess the progress with implementing the recommendations, and it was found that of the eight recommendations, five were fully implemented, one recommendation was partially implemented, and one recommendation was not implemented. The remaining recommendation was not applicable under the present circumstances.

The recommendation which pertained to ensuring that transactions for capital projects are properly recorded was only partially recommended.

The recommendation regarding the proper use of the treasurer’s signature was not implemented.

The remainder of the recommendations have been implemented.

Jericho Union Free School District

Internal Controls Follow Up

2007M-114-F

10th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in August 2007, identifying opportunities for District management’s review and consideration.

The District was revisited in June 2009 to assess the progress with implementing the recommendations, and it was found that the District had made considerable progress. Of the 12 audit recommendations, 10 were fully implemented, and 2 recommendations were partially implemented.

The recommendations that were only partially implemented were those pertaining to competitive bidding when purchasing goods and services, and fuel purchase policies.

The remainder of the recommendations have been fully implemented.

Kiryas Joel Union Free School District

Internal Controls Over Selected Financial Activities

2009M-121

9th Judicial District

 

The District’s board of education president and vice president are also officers of the board of directors of a not-for-profit corporation that entered into a lease agreement with the District for a school building. As officers of the not-for-profit corporation, these board members are deemed to have an interest in the lease agreement. These two board members are also officers of another not-for-profit corporation with which the District has other contracts. During the audit period, the District paid $374,035 for the school building lease and a total of $1.26 million to the other two not-for-profit corporations with which the District has other contracts. The board members also did not provide written disclosures of their interest.

If the District continues to make payments over the 30-year lease period, District taxpayers will be burdened with rent payments totaling approximately $38 million, assuming a 3 percent annual inflation rate, and would not own the building at the end of the lease. If the District financed the construction with serial bonds at an annual interest of 6 percent, the total cost of the building to District taxpayers would have been $35 million, resulting in a savings of about $3 million over 30 years, and the District would own the building.

The board’s procurement policy does not provide proper and detailed guidance for District employees when procuring goods and services. District officials also do not always adhere to the board’s purchasing policy, making purchases in excess of the bidding thresholds without the benefit of a bidding process. Payments totaling $606,734 that were made to 26 vendors were reviewed, and it was found that District officials did not use competitive bidding for purchases totaling $272,355, made from 9 of the 26 vendors.

The District’s claims auditor also did not report to the board, as required by Law. He also did not meet independence requirements established by Education Law and Education Department guidance.

District officials did not prepare and file the District’s annual financial report (ST-3 report) and annual audit report for 2005-06, 2006-07, and 2007-08 fiscal years with the State Education Department and the Office of the State Comptroller  on a timely basis.

8 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the lease agreement for a school building, the procurement of goods and services, the purchasing policy, independence requirements, and the District’s annual financial report.

The District disagreed with the recommendations pertaining to the school building lease, competitive bidding, and professional contracts. The District is, however, revising its purchasing and claims policies and procedures to conform to the recommendations in the report.

 

 

 

 

 

 

 

 

Lake Placid Central School District

Internal Controls Over Selected Financial Activities Follow Up

2006M-213-F

4th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in April 2007 identifying opportunities for District management’s review and consideration.

The District was revisited in October 2009 to assess the progress of the District in implementing the recommendations. It was found that the District has made considerable progress in implementing corrective action. Of the 12 recommendations issued, 9 were fully implemented, 1 was partially implemented, and 2 were not implemented.

The recommendation to determine whether payments made with the pre-paid store card were appropriate was only partially implemented.

The recommendations regarding tax levies, and the extraclassroom activity fund were not implemented.

The remaining recommendations have been fully implemented.

Lavelle School for the Blind

Selected Financial Management Practices

2009-S-2

12th Judicial District

 

The board of trustees has not ensured implementation of recommendations by the School’s external auditor to provide staff with a written manual of accounting polices and procedures. The board also needs to establish a dollar threshold that would limit the School’s ability to make major purchases without prior board approval.

Seven out of ten transactions (totaling $310,919) showed no evidence of the School officials having requested bids or solicitations from other vendors. An example of this was when the School had paid a heating oil vendor $174,464 without obtaining bids from other vendors. The School also needs to strengthen its adherence to procedures for pre-approval of purchases and completion of purchase orders.

The New York State Employee Retirement System (ERS) requires that all full-time, permanent employees be enrolled in ERS. Enrollment is optional for part-time employees. The School is required to notify part-time employees, in writing, of their right to membership, and to enroll them if they elect to participate.

10 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the frequency of board meetings, limits on board members’ tenure, compliance with State Education Department guidance, competitive bidding requirements, board review of contracts, and the cash disbursements process. The School should also notify part-time employees of their right to membership in the retirement system.

The School agreed with the recommendations, and has indicated that they have since taken steps to implement corrective action.

Lexington School for the Deaf

Review of Procurement Practices

2008-S-129

11th Judicial District

 

According to guidance provided by the State Education Department (Department), the Lexington School should use competitive bidding when procuring goods and services over $10,000 and for public works projects which exceed $20,000. For procurements under these limits, the Department also recommends that schools develop procurement policies that incorporate competitive requirements into major purchases.

It was determined that the School did not comply with Department guidance for procurements over $10,000 and $20,000. In eight of the eleven instances tested, bids were not solicited. The School also did not comply with its own policy that all purchases over $5,000 be procured with competition in the form of at least two documented quotes from responsible vendors.

2 recommendations

The report’s recommendations focused on strengthening the policies and procedures regarding competitive procurements for goods, services, and public works contracts, and compliance with School procedures for purchases less than the limits set by the Department.

The School agreed with the recommendations, and has indicated that they have taken steps to implement corrective action.

Little Falls City School District

Internal Controls Over Cash Disbursements

2009M-122

5th Judicial District

 

Bank accounts were not being properly reconciled because the treasurer/payroll clerk was able to misrepresent the outstanding check lists for bank reconciliations without the knowledge of the board of education, District officials, or the external CPA. Supporting records for timesheets also were not required and were not used to verify the accuracy of the time reported as worked by substitute teachers and hourly employees. Further, these employees were paid based on time sheets that reported scheduled hours for the final three days of the payroll period, instead of actual hours worked, without a proper procedure in place to ensure that adjustments were made for subsequent absences or scheduled changes. Two employees were overpaid by $1,419.

6 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding bank reconciliations, timesheets, and overpayments to employees.

The District agreed with the recommendations and has indicated that they will implement corrective action as soon as possible.

Long Beach City School District

Internal Controls Over Selected Financial Operations

2009M-180

10th Judicial District

 

All seven administrators reviewed had inaccurate sick or vacation leave balances, which if converted into cash payments, would result in an overpayment $58,431 or the underpayment of $7,678 in benefits to administrators. Three separation payments were also incorrectly calculated, which resulted in overpayments of $8,477.

The District also paid $1,043,402 to 36 professionals whose services were procured without soliciting request for proposals (RFPs).

None of the 26 wire transfers received (totaling $30.4 million) were approved in writing before they were made. Nine bank transfers (totaling $12.4 million) were also only confirmed by the treasurer.

Finally, District officials have not effectively addressed the safeguarding of computerized financial data against unauthorized access or potential loss in the event of a disaster.

12 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding leave time overpayments, the use of RFPs, wire transfers, and the safeguarding of computerized financial data.

The District agreed with the recommendations and has indicated that they plan to implement corrective action as soon as possible.

Lynbrook Union Free School District

Internal Controls Over Selected Financial Operations

2009M-206

10th Judicial District

 

The board of education appointed an independent contractor as treasurer; even though statute and regulation clearly indicate that an independent contractor cannot be a school officer. The treasurer also did not supervise and control the use of her facsimile signature as required by the regulations of the New York State Commissioner of Education and District policy. Certain checks were also written outside of the normal accounts payable process and were issued prior to being audited by the District’s claims auditor. Also, District employees who receive cash did not issue press-numbered receipts which are also required.

The board did not authorize payments in lieu of health insurance to employees who opted out of family health insurance coverage but were still receiving individual health insurance coverage. Therefore, the District paid health insurance buyouts to 16 employees in 2007 and 17 in 2008, $56,345 and $62,655, respectively, while also providing them with individual health coverage.

Finally, several individuals have user access rights that are incompatible with their job functions.

11 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the appointment of an independent contractor, the check writing process, health insurance payments and buyouts, and user access rights.

The District agreed with the recommendations and is in the process of implementing corrective action.

Margaretville Central School District

Internal Controls Over Selected Financial Activities Follow Up

2008M-44-F

6th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in June 2008, identifying opportunities for District management’s review and consideration.

The District was revisited in September 2009 to assess the progress in implementing the recommendations, and it was determined that the District has made considerable progress. Of the eight audit recommendations, four were fully implemented, and four recommendations were partially implemented.

The recommendations that were partially implemented were those pertaining to the District’s purchasing policy, documentation of sufficient competition, enforcing the District’s claims audit procedures, and computerized data safeguards.

The remainder of the recommendations have been fully implemented.

Monroe #1 BOCES  Management Oversight and Internal Controls Over Selected Financial Operations

2009M-220

7th Judicial District

 

The BOCES has failed to adequately oversee the BOCES operations, setting a poor “tone at the top” that allowed numerous deficiencies in BOCES operations to develop and escalate. However, the new BOCES administration has taken positive steps to improve communication and address the concerns identified in the report.

Until October 2008, the board of education did not ensure the auditing of all claims prior to payment, as state law requires. A former superintendent established a policy that prohibited BOCES staff from communicating with board members.

Three BOCES board members did not publicly disclose their potential interest, as required by Education Law, in BOCES property lease with the Monroe #1 Educational Foundation.

BOCES leased a bus garage owned by the BOCES head bus mechanic, who also controlled BOCES parts inventory and equipment, supervised BOCES mechanics and ran a private used car dealership out of the facility. The new administration has since taken swift and effective action to amend this concern, and as a result, new inventory and purchasing controls have been implemented, and the head bus mechanic is no longer a BOCES employee.

Further, the board also failed to perform sufficient market value analysis prior to entering into leases on behalf of the BOCES, as required by Education Law. Officials had no documentation to justify the lease of four foundation buildings with annual payments of $1.25 million for the three fiscal years ending June 30, 2008. The lease with the Monroe #1 Educational Foundation was also approved by the BOCES board in an unauthorized executive session.

Finally, payroll policies and procedures for compensatory time, employee time sheets, or the monitoring of off-site work were not properly developed. As a result, 10 employees were paid $9,100 for 29 days they did not work. The failure to review employment agreement provisions, also resulted in $107,522 in incorrect separation payments to 53 employees, of 77 tested, over three fiscal years.

12 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the “tone at the top” of the BOCES administration, the auditing of claims, publicly disclosing interest, District inventory and equipment, purchasing controls, lease agreements, and compensatory time for employees.

The BOCES agreed with the recommendations, and has indicated that they plan to implement corrective action shortly.

Monroe 2-Orleans BOCES

Internal Controls Over Select Financial Activities

2009M-219

7th Judicial District

 

The BOCES entered into a service agreement without the authority to do so, and as a result, public funds were used for questionable overseas activities. The BOCES also placed $1.2 million in proceeds in the Monroe 2-Orleans Educational Foundation, Inc. (The Foundation) with no authority to use public funds for this purpose. The Foundation appears to have transferred the moneys to the Rochester Area Community Foundation, Inc. in order to avoid the restrictions on investments of BOCES moneys. As a result, there was a decline of approximately $300,000 as of March 2009.

Officials contributed $10 million to an other post-employment benefits (OPEB) trust, without the legal authority to maintain such a trust. The board of education also failed to properly establish two reserves or provide adequate oversight for five reserves (with a combined balance of $2.5 million).

The board failed to properly oversee and train the claims auditor, and did not receive or require monthly reports from the claims auditor. One hundred seven claims were tested (totaling $1,040,566), and exceptions were found with 63 of the claims (totaling $349,445).

Finally, there was a lack of entity-wide security assessment, an inappropriate assignment of user access rights, and a lack of a disaster recovery plan.

13 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding service agreements, reserves and adequate oversight, claims auditing, user access rights, and a disaster recovery plan.

The BOCES disagreed with the recommendations pertaining to reclaiming the money held by The Foundation, the adoption of a policy to determine how reserves will be funded, transferring back the money from the unauthorized OPEB reserve, the claims that were audited, and IT security. 

The BOCES has indicated that they have begun taking corrective action to certain issues and the board and BOCES will use the Comptroller’s findings, as appropriate, to focus efforts to improve the efficiency and effectiveness of their overall expectations.

Monroe-Woodbury Central School District  Internal Controls Over Selected Financial Activities

2009M-152

9th Judicial District

 

The claims auditor does not report directly to the board of education and does not review purchase orders or printed checks to verify whether amounts paid to vendors were appropriate. The claims auditor also authorized payments to three vendors totaling $117,726 that were improperly itemized. The District did not use competitive bidding for nine purchases reviewed (totaling $34,727) or competitive quotes for 14 of the 21 purchases reviewed (totaling $85,241). District officials also awarded a bid to one vendor, who was paid $25,600 even though his bid response did not include costs for all items in the bid.

In 2007, the board appointed the interim assistant superintendent of human resources to the position of deputy superintendent without a probationary term or a recommendation from the superintendent. If the District had followed Education Law, board policy, and past District hiring practices, the District could have saved $190,000.

11 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding purchase orders, check printing, competitive bidding, and the appointment of the interim assistant superintendent of human resources to the position of deputy superintendent.

District officials agreed with the recommendations and have indicated that they plan to implement corrective action as soon as possible.

Nanuet Union Free School District

Internal Controls Over Payroll and Selected Financial Activities Follow Up

2007M-223-F

9th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in December 2007 identifying opportunities for District management’s review and consideration.

The District was revisited in October 2009 to assess the progress in implementing the recommendations. The District has made considerable progress with implementing corrective action to address the recommendations. Of the 14 recommendations, 11 were fully implemented, one was partially implemented, one was not implemented, and one recommendation was no longer applicable.

The recommendation to update overtime policies to include the pre-approval of overtime, and to maintain an itemized log of all overtime worked, was only partially implemented.

The recommendation for the assistant superintendent to verify all electronic transfers with the bank was not implemented.

The remainder of the recommendations were either fully implemented, or no longer applicable.

New York City Department of Education (NYCDOE)

Student Participation in the Supplemental Education Services Program (Report 2006-N-11) Follow-Up Report

2009-F-24

1st, 2nd, 11th, 12th, 13th Judicial District

 

The Federal No Child Left Behind (NCLB) Act of 2001 requires states and local school districts to improve the academic performance of students so that they are proficient in reading and math by the year 2014. The performance of these schools is to be monitored by the appropriate Local Educational Agencies. In New York State, the State Educational Agency is the State Education Department.

The NYCDOE first implemented the Supplemental Educational Services program (SES) in the 2002-03 school year. SES provides tutoring and remediation programs that are offered to students before or after school or on weekends, and these services are provided by specially approved contractors and are supported by federal funding. The services are offered free of charge to low-income students at low-performing schools. The students are not required to enter in the program.

The initial report was issued in May 2008, and was to determined if these services were being offered and promoted in accordance with requirements in New York City public schools. It was found that in the 2008-09 school year, the NYCDOE received and spent approximately $108 million for vendor costs and another $1.3 million for its SES program.

It was found that NYCDOE officials have made significant progress in implementing the recommendations contained in the initial report. Of the 12 recommendations, 1 recommendation is no longer applicable, 6 recommendations have been implemented, 2 recommendations have been partially implemented, and 3 recommendations have not been implemented.

12 recommendations

The recommendations that were only partially implemented were those pertaining to the development of a system for formally evaluating the effectiveness of SES outreach efforts, and providing schools with specific guidance on coordinating the SES program with other after-school activities and monitoring the schools’ effectiveness in coordinating these activities.

The recommendations that were not implemented were those addressing the availability of SES enrollment forms, and requiring the schools in the SES program to provide the Office of Special Projects with advance notification of their parent information sessions and provider fairs. Also, the recommendations pertaining to advising school officials to begin contacting parents to discuss the SES programs at the end of the prior school year or during the summer months was also not implemented.

The remainder of the recommendations have been fully implemented, or were no longer applicable.

New York Institute for Special Education  Selected Financial and Management Practices

2008-S-157

12th Judicial District

 

The Institute for Special Education (The Institute) is a not-for-profit school located in the Bronx. It receives more than $21 million a year in state operating aid to provide educational services to disabled students.

The Institute was not always performing the required criminal background checks on new employees. Nine of the forty-three employees tested had not been checked for a history of child abuse, and 13 out of 25 employees tested had not been checked for criminal histories.

It was also found that 17 employees from a non-state program were enrolled in the Employee Retirement System, and some had been enrolled for as long as ten years. When this was brought to the attention of Institute officials, they began working with ERS to disenroll the employees.

In three years, the Institute earned at least $88,867 in interest on its short term investment of its state funding. There were instances where the interest was spent on non-state programs, which resulted in the costs of its state-funded programs not being offset to the extent they should have been.

Further, the Institute did not follow certain guidelines when accounting for the reimbursable expenses in its state-funded programs. The Institute did not always follow these guidelines, and as a result, they overstated the reimbursable expenses in certain financial transactions. A $200,000-plus consulting contract between the Institute and a recently retired Institute executive was not properly disclosed as a related-party contractual relationship in the Institute’s financial statements.

12 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the Employee Retirement System, the use of interest income earned on state funds, inventory records, properly disclosing contractual relationships, and conducting criminal background checks on employees.

The Institute agreed with the recommendations and has indicated that they will implement corrective action.

North Syracuse Central School District

Internal Controls Over Selected Financial Activities

2009M-165

5th Judicial District

 

The District’s general fund operations have resulted in operating surpluses totaling $2.9 million, primarily due to the overestimation of expenditures. District officials then transferred the remaining amounts in excess of fund balance limits into a capital reserve; however, the board of education did not properly establish the capital reserve pursuant to public notice and voter approval as required by Education Law.

Further, four business office employees and all three human resources office employees have unnecessary transaction rights to change pay rates, including their own.

The treasurer does not control the use of his facsimile signature, and business office staff members prepare some manual payroll checks that are signed using a rubber stamp of the treasurer’s signature. The treasurer does not control or supervise this use of his signature.

Finally, District management has not provided for an effective certification of payrolls, an independent review of cancelled checks, and periodic reviews of available audit logs for the payroll system.

9 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding reserves and fund balance, transaction rights, the treasurer’s signature, and the certification of payroll.

The District agreed with the recommendations and has indicated that they will implement corrective action.

Oceanside Union Free School District

Internal Controls Over Selected Financial Operations

2009M-222

10th Judicial District

 

There were internal control weaknesses in the operations of the District’s Department of Community Activities (DOCA) caused by the board’s failure to implement adequate policies and District officials’ failure to implement procedures to protect District assets. There was also noncompliance with District policies regarding the procurement of professional services and the use of vehicle fuel credit cards.

District records show that approximately $2 million in tuition and registration fees were collected and approximately $1.8 million was expended during the 2007-08 fiscal year. These revenues and expenditures were not properly reported within the District’s general fund. There was also a lack of segregation of duties within the cash disbursements process.

Further, District officials did not always properly solicit competition when procuring the services of nine professionals who received payments (totaling $663,457). Contract payments were also not always in accordance with contracts.

Fuel credit card purchases also totaled almost $60,000. District officials did not require employees to submit supporting documentation and did not have adequate procedures to monitor fuel use.

12 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding internal controls and the operations of the District’s Department of Community Activities, properly reporting revenues and expenditures within the general fund, segregation of duties, competitive bidding, and fuel credit cards.

The District agreed with the recommendations and has indicated that they will implement corrective action as soon as possible.

Palmyra-Macedon Central School District  Internal Controls Over Selected Financial Operations

2009M-108

7th Judicial District

 

District officials improperly established a reserve in the District’s trust and agency fund for other post-employment benefits (OPEB), totaling nearly $6.8 million. School districts currently have no legal authority to maintain such a reserve. Also, the District lacked a long-term plan for the use of seven of the 10 reserves held in the general fund. Five of these reserves were overfunded by $2.5 million as of June 2008. The district has as much as $9.3 million in excess or improper reserves that could have been used to benefit taxpayers.

The District potentially lost $174,993 in Medicaid reimbursements for the period July 1, 2006 to February 29, 2008 because it lacked policies and procedures to define the responsibilities for data collection and documentation when submitting Medicaid claims for reimbursement.

7 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding post-employment benefits, reserves and the general fund, and Medicaid reimbursement.

The District agreed with the recommendations and has indicated that they will implement corrective action as soon as possible.

Penn Yan Central School District  Safeguarding District Assets  Follow Up

2006M-49-F

7th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in August 2006 identifying opportunities for District management’s review and consideration.

The District was revisited in August 2009, to assess the District’s progress in implementing the recommendations. District officials have taken no corrective action, and none of the seven audit recommendations have been implemented.

The recommendations that were not implemented were those pertaining to the budget transfer policy, approval of purchase orders, compliance with the District’s credit card policies, the claims auditor, and physical inventory records.

Rochester City School District

Audit of Selected Financial Transactions

2009M-114

7th Judicial District

 

The former superintendent provided employees with $164,550 in undocumented bonuses and salary increases.

Further, the claims auditor failed to audit any of the claims for the $36 million in capital project payments. The former interim director of finance and the accounts payable supervisor had the ability to perform responsibilities that were not necessary for his position, and the claims auditor did not review the system’s audit log to investigate differences in supporting documentation before approving claims for payment.

There were also exceptions found with all 61 contracts with professional service providers (totaling $2,673,082), including that the District entered into 58 of these contracts (totaling $2,584,082) without issuing requests for proposals. Contracts in excess of $25,000 were executed before board of education approval. Some contracts also lacked oversight completely. Due to the board’s lack of guidance, change orders on capital projects increased base contract amounts anywhere from 11 percent to 189 percent.

10 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding compensation related to the superintendent’s employee group, the approval of claims, the request for proposal process, and oversight on contracts.

The District agreed with the recommendations and has indicated that they plan to implement corrective action as soon as possible.

Rush-Henrietta Central School District  Financial Condition and Internal Controls Over Payroll and Purchasing

2009M-212

7th Judicial District

 

The board of education and District officials consistently overestimated expenditures and underestimated revenues, which resulted in annual operating surpluses and increases to fund balance, totaling $19.5 million over the last five fiscal years. Reserve funds were also analyzed for reasonableness and adherence to statutory requirements and it was found that they contained $19 million in unsupported or unauthorized funds.

Twenty-one employees were granted an additional 1,266 days of sick leave without board approval. Three of the twenty-one employees have retired and were paid almost $16,000 for these additional days. The remaining 18 employees are still District employees. Depending on how the additional days are used, the potential current cost could be up to $392,000.

Finally, procurement procedures for four professional service providers who were paid over $1.9 million during the audit period were reviewed, and it was found that services of three of the providers were procured without the use of requests for proposals (RFPs) or any other form of competition.

10 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding expenditures and revenues, employee leave, the procurement policy and RFP process.

The District has implemented corrective action to address the recommendations.

St. John’s University  Tuition Assistance Program (TAP) Audit

2009-T-1

11th Judicial District

 

$134,031 adjustment

The records and procedures used in administering the Tuition Assistance Program (TAP) at St. John’s University for the 2005-06 through the 2007-08 academic years, were reviewed. It was determined that St. John’s was overpaid $134,031 because school officials incorrectly certified some students as eligible for TAP awards. The accuracy of the 35,932 TAP certifications the college awarded for the three-year period that ended in June 2008 was tested by reviewing a statistical sample of 200 randomly-selected awards. Four awards totaling $6,911 were disallowed. A statistical projection of these audit disallowances to the entire population, using a 95 percent single-sided confidence level, results in an audit disallowance of $124,302. Twelve awards were also disallowed, totaling $10,106. These awards were not projected to the population. St. John’s officials decertified one award for $377.

3 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding TAP for St. John’s University.

The recommendations for the Higher Education Services Corporation (HESC) were to recover the $134,031 from St. John’s University for its incorrect TAP certifications, as well as to ensure that St. John’s officials comply with HESC requirements relating to the crediting of TAP awards.

Further, it was recommended to the State Education Department to ensure that St. John’s officials comply with their requirements relating to full-time attendance and good academic standing.

There has since been no response to the recommendations.

St. Joseph’s School for the Deaf

Selected Financial Management Practices

2009-S-30

12th Judicial District

 

The board of trustees did not provide adequate oversight of the School’s financial operations with regard to procurement and cash disbursements, and in both of these areas there was non-compliance with established policies and procedures.

Further, for 11 out of 12 transactions (totaling $391,050), there was no evidence that School officials had requested bids or solicitations from other vendors. The School paid a plumbing company $102,784 for repairs without obtaining bids from other vendors. It also paid an electric contractor $39,373 for services without using competitive bidding. The School should also strengthen its adherence to procedures for completion of purchase orders.

9 recommendations

The report’s recommendations focused on strengthening the policies and procedures regarding board meetings and oversight of the contracting process, and competitive procurements involving goods and services.

The School agreed with the recommendations and has indicated that they plan to implement corrective action, if they have not already done so.

Schoharie Central School District

Internal Controls Over Selected Financial Activities Follow Up

2007M-245-F

3rd Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in February 2008 identifying opportunities for District management’s review and consideration.

The District was revisited in August 2009 to assess the progress with implementing the recommendations, and it was found that the District has made progress. Of the 12 recommendations, 3 recommendations were fully implemented, and 9 were partially implemented.

The recommendations that were partially implemented were those pertaining to the enforcement of the computer use policy, the proper authority to install software, the filing of computer usage agreements, user access accounts, the use of strong passwords, data backup storage, a disaster recovery plan, physical access to the server room, and user permissions in the payroll software.

The remainder of the recommendations have been implemented.

Schuylerville Central School District

Internal Controls Over Computer Equipment and Employee Expense Reimbursements Follow Up

2006M-67-F

4th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in September 2006 identifying opportunities for District management’s review and consideration.

The District was revisited in September 2009 to assess the District’s progress with implementing the recommendations, and it was found that out of the twelve recommendations, the District fully implemented 10 recommendations and did not implement two recommendations.

The two recommendations that were not implemented were those pertaining to the investigation of two missing computers and three missing palm pilots, as well as the investigation of the camera equipment and other reimbursements claimed by the District.

The remainder of the recommendations have been fully implemented.

Seaford Union Free School District  Financial Condition and Internal Controls Over Selected Financial Activities Follow Up

2006M-95-F

10th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in December 2006 identifying opportunities for District management’s review and consideration.

The District was revisited in June 2009 to assess the District’s progress with implementing the recommendations, and it was determined that the District has made progress in implementing corrective actions for the 17 audit recommendations. Of the 17 recommendations, 10 were fully implemented, 5 were partially implemented, and 2 were not implemented.

The recommendations that were only partially implemented, were those pertaining to the purchasing policy and contract provisions, recovering overpayments of at least $7,540 made to a therapy services firm, state contract procurement, and physical inventory records.

The recommendations that have not been implemented are those regarding the confirmation of purchase orders, and the transfer of fixed assets.

The remainder of the recommendations have been fully implemented.

Sewanhaka Central High School District  Internal Controls Over Financial Operations Follow Up

2007M-198-F

10th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in October 2007 identifying opportunities for District management’s review and consideration.

The District was revisited in July 2009 in order to assess the District’s progress in implementing the recommendations. It was found that four out of the eight recommendations were fully implemented, and four recommendations were partially implemented.

The recommendations that were only partially implemented included those pertaining to professional service contracts, written contracts, board approval, and server room security.

The remaining recommendations, including those with regard to computer security policies, the disaster recovery plan, the financial software administrator, and the disposition of land and building, have all been fully implemented.

South Glens Falls Central School District  Internal Controls Over Selected Financial Operations Follow Up

2007M-88-F

4th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in August 2009 identifying opportunities for District management’s review and consideration.

The District was revisited in September 2009 to assess the progress in implementing the recommendations. It was determined that the District has made significant progress. Of the nine audit recommendations, seven of them were fully implemented, one was partially implemented, and one was not implemented.

The recommendation stating that the business manager should review journal entries and bank reconciliations prepared by the treasurer and review tax collections entered into the financial system by the tax collector, was only partially implemented.

The recommendation to designate an employee outside of the business office as the District’s system administrator, has not been implemented.

The remainder of the recommendations have been fully implemented.

South Mountain-Hickory Common School District

Internal Controls Over Financial Operations

2009M-199

6th Judicial District

 

The trustee did not properly monitor and oversee the work of the treasurer, and controls were not established to ensure the treasurer properly accounted for all District moneys. The treasurer also did not maintain sufficient accounting records. The treasurer also did not prepare financial reports for the trustee, and neither the trustee nor the treasurer could identify the source of one deposit (totaling $1,428). Forty-six checks issued (totaling $804,440) did not have the proper supporting documentation, nor the proper required signatures. Checks totaling $17,990 were also not properly reviewed, and checks totaling $18,758 did not have the adequate supporting documentation, including four checks the treasurer issued to herself for tax collection services that resulted in her being overpaid by $2,793 due to a calculation error.

9 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the treasurer’s duties, maintaining account records, the issuance of checks, and adequate supporting documentation.

The District agreed with the recommendations and has indicated that they will implement corrective action as soon as possible.

Ulster County BOCES

Internal Controls Over Selected Financial Activities

2009M-166

3rd Judicial District

 

BOCES officials withheld amounts erroneously accrued and accumulated in the general fund as Other Post-Employment Benefits (OPEB) Payable ($12.8 million) from refunds due to the component districts. As of June 2008, the BOCES reported an approximate $12.1 million OPEB accrued liability. Workers compensation liability also reported $640,423 is not due and payable in the following year, nor is $45,183 of the amount reported for compensated absences payable in the following year. The BOCES should have returned approximately $12.8 million in surplus moneys to component districts.

The board of education also authorized the superintendent to hire incidental employees who are compensated at an annual salary of $20,000 or less. Three hundred five employees were appointed as incidental employees. The board has allowed the superintendent to pay selected employees salary amounts that exceed their board-approved wages.

Further, internal controls over cash receipts collection in the business office were not properly designed or working effectively. Seventeen receipts collected by the business office (totaling $878,296) were tested, and it was found that receipt forms were not issued, and postings to the cash receipts journal were not made until 7 to 11 days after receipt.

The BOCES entered into a professional services contract with a contractor that also identifies the wife of a BOCES official as the consultant for the contractor. The BOCES official did not disclose his interest in the professional services contract in writing, as required.

Finally, there was not a formal IT security plan, or a disaster recovery plan in place.

13 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding reserve funds, hiring incidental employees, the issuance of receipt forms, professional service contracts, and IT security.

The BOCES agreed with the recommendations and have indicated that they plan to implement corrective action as soon as possible.

Utica City School District

Internal Controls Over Selected Financial Operations

2009M-198

5th Judicial District

(Contract for Excellence

District)

District officials did not always update the terms and conditions of the transportation contract when they renewed it, resulting in a contract that, on its face, did not reflect several current practices. Because the District did not have a specific individual in charge of student transportation, it was difficult for the District to effectively monitor its contract. The District incurred up to $71,500 in expenses, which according to the contract, were the contractor’s responsibility.

The treasurer does not include the District’s payroll bank account in its general ledger, and had not recorded $11,581 in accumulated interest earnings on this account.

Employees did not always submit their time records to the payroll department in a timely manner because the District lacked a formal timekeeping procedure. There were also overstatements in leave balances valued at $2,643.

Finally, employees had access to the computerized payroll system, which was not necessary for their job duties.

8 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the transportation contract, and payroll and personal services.

The District disagreed with recommendations pertaining to time records, and transportation contract, and agreed with the recommendations regarding payroll and personal services, payroll bank account, leave records, and user access permissions.

The District has indicated that they will implement corrective action to address certain recommendations.

Valhalla Union Free School District

Internal Controls Over Selected Financial Operations Follow Up

2007M-270-F

9th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in March 2008 identifying opportunities for District management’s review and consideration.

The District was revisited in August 2009 to assess the progress of implementing the recommendations. It was found that the District has made some progress in implementing the recommendations. Of the 22 audit recommendations, 9 recommendations were implemented, 5 recommendations were partially implemented, 4 recommendations were not implemented, and 4 recommendations were no longer applicable.

The partially implemented recommendations were those regarding updating District policies for payroll, compliance with applicable bidding laws, developing policies for incompatible payroll duties, computer security, and user account access controls.

The recommendations that have not been implemented are those pertaining to wages to overpaid employees, employee leave records, audit logs, and the development of a disaster recovery plan.

The remainder of the recommendations have either been fully implemented, or were no longer applicable.

Valley Stream Union Free School District  #13

Internal Controls Over Selected Financial Operations

2009M-194

10th Judicial District

 

At June 30, 2008 the employee benefit accrued liability reserve (EBALR) had a balance of $4.2 million, which was more than four times the amount of the related liability. Therefore, EBALR was overfunded by $3.3 million. The District established this reserve without a board of education resolution. The District also used a total of more than $900,000 from this reserve in the 2003-04 and 2004-05 fiscal years for improper purposes. District officials also used a total of $263,000 from the District’s operating budgets for the 2003-04 through 2007-08 fiscal years rather than using the EBALR to pay compensated absences costs that this reserve is intended to pay for. The District also did not properly credit the EBALR with $162,000 in interest earnings during the audit period.

The board appointed a treasurer annually and referred to the treasurer being paid a “retainer” rather than a salary, as would be the case generally with an officer. The manner in which the treasurer has been compensated indicates that the District treated the treasurer as if she were an independent contractor. The treasurer also performs her duties from home, which prevents District officials from providing adequate oversight. Duties relating to payroll are also not segregated.

Payments (totaling $625,410) that were made to ten professional service providers were reviewed, and it was found that the District paid seven of these professionals $330,902 without first obtaining competition.

Finally, the District has not adopted a comprehensive IT policy, and there is no disaster recovery plan in place.

14 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the EBLAR fund, independent contractors, competition, and IT policies and procedures.

The District disagreed with the recommendation pertaining to the treasurer performing her duties at the District so that the District may provide adequate oversight over the fulfillment of those duties.

The District also disagrees with the recommendation that District officials should ensure that the individual being appointed as treasurer meets all qualifications of being a school officer.

The District also partially disagreed with the recommendations pertaining to the EBALR fund.

The District has agreed with the remainder of the recommendations and has indicated that they have already implemented, or plan to implement corrective action.

Vestal Central School District

Computer Equipment: Energy Conservation and Cost Savings Follow Up

2008M-118-F

6th Judicial District

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in October 2008 identifying opportunities for District management’s review and consideration.

The District was revisited in August 2009 to assess the progress with implementing the recommendations. It was determined that the District has implemented all three of the recommendations.

The recommendations pertaining to the monitoring of computer energy usage, environmental impact, and energy conservation settings have all been implemented.

Vestal Central School District

Internal Controls Over Selected Financial Activities and Computer Data Follow Up

2008M-125-F

6th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in October 2008 identifying opportunities for District management’s review and consideration.

The District was revisited in August 2009 to assess the District’s progress in implementing the recommendations. It was determined that the District has made significant progress implementing the recommendations. Of the seven recommendations, five recommendations were implemented and two recommendations were not implemented.

The recommendations that were not implemented were those regarding the recovery of overpayments made to employees for the extra year’s carry-over of Select Benefits balances, as well as the recommendation for the board to appoint the District’s claims auditor in accordance with State Education Department regulations.

The remainder of the recommendations have been implemented.

Warrensburg Central School District

Internal Controls Over Selected Financial Operations Follow Up

2007M-35-F

4th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in June 2007 identifying opportunities for District management’s review and consideration.

The District was revisited in August 2009 to assess the progress with implementing the recommendations, and it was found that the District has made considerable progress. Of the 11 audit recommendations, 8 recommendations were fully implemented, and 3 recommendations were partially implemented.

The recommendations that were only partially implemented were those pertaining to claims processing, the proper authorization of employee benefits, and the maintenance of the Benefit Pool participants.

The remainder of the recommendations have been fully implemented.

Warsaw Central School District

Internal Controls Over Financial Operations Follow Up

2006M-143-F

8th Judicial District

 

An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in December 2006 identifying opportunities for District management’s review and consideration.

The District was revisited in August 2009 to assess the District’s progress on implementing the recommendations. Of the 12 recommendations, 8 recommendations were fully implemented, 2 recommendations were partially implemented, and 1 recommendation was not implemented. One recommendation is also no longer relevant because the District redesigned its cash handling procedures.

The recommendations that were only partially implemented were those regarding the extraclassroom activity treasurer and the proper documentation of outstanding checks and deposits as well as the maintenance of records in an orderly manner.

The recommendation that was not implemented pertained to price quotations and the assurance that the required number of quotations is obtained for all purchases subject to the procurement policy adopted by the board.

The remainder of the relevant recommendations have been fully implemented.

Wayland-Cohocton Central School District  Financial Condition and Procurement

2009M-202

7th Judicial District

 

The District overestimated expenditures by $6.7 million for the past five years. As a result, there was an operating surplus of $2.8 million in four of the last five years. The District also increased its real property tax levy by more than $1.8 million over the last five years.

Further, as of June 2009, the District reported nine general fund reserves with balances totaling $4.6 million. The District also did not use, or overfunded, four reserves, which collectively totaled $2.4 million, and used $60,000 from another reserve for an unauthorized purpose. The District also maintained an unauthorized other post-employment benefits accrued liability reserve with a balance of $122,561 in the trust and agency fund.

The District did not properly use the competitive bidding process, and by financing a particular purchase, $7,000 was unnecessarily incurred in interest expenses.

Finally, the District did not seek competition for three professional service providers, who were paid $1,094,272, and for two purchases totaling $10,287, District officials did not obtain quotes, as required by policy.

12 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding reserves and the operating surplus, competitive bidding, and professional services providers.

The District disagreed with the recommendations pertaining to the fund balance and realistic expenditure estimates for the annual budget, the review of reserves to determine if the amounts reserved are necessary, as well as the recommendation regarding compliance with statutory requirements, and the use of surplus in ways that benefit taxpayers. The District also disagreed with the recommendations which discussed transferring moneys in the trust and agency fund back into the general fund, and monitoring employees for compliance with procedures.

The District agreed with the remainder of the recommendations and has indicated that they will implement the recommendations specified in the audit document.

West Babylon Union Free School District  Internal Controls Over Selected Financial Operations

2009M-224

10th Judicial District

 

The District paid 11 of the 14 employees tested a total of $58,415 upon separation for 300 vacation and personal days to which they were not entitled by contract. The former associate superintendent for personnel and administration was also overpaid $5,800 for 65 sick days that were not authorized by his individual employment agreement. Further, the accrual records of three chief and four head custodians had inaccurate vacation leave balances, which would total $20,546 in overpayments if converted into cash payments.

Thirty disbursement checks (totaling $154,773) were tested, and it was found that 13 of them were signed using the treasurer’s signature disk when she was absent. Seventeen  checks (totaling $105,815) were also issued before the claims auditor signed a warrant ordering the treasurer to pay the claims. Nine wire transfers were also not approved in writing before they were made.

It was also found that the amount of gasoline and diesel fuel  on hand was 137 gallons and 498 gallons less, respectively, than the amount of fuel that should have been on hand on August 1, 2008.  In addition, because the District’s tanks are located underground, and because District employees do not reconcile fuel inventory records that would allow them to identify whether the tanks are leaking, fuel leaks may go undetected and could result in substanital costs and Department of Environmental Conservation fines.

Finally, District managers have not effectively addressed the safeguarding of computerized financial data against unauthorized access.

10 recommendations

The report’s recommendations focused on strengthening the policies and procedures regarding employee leave and accrual records, cash and disbursements, wire transfers, accountability for gasoline and diesel fuel, and the safeguarding of computerized financial data.

The District agreed with the recommendations, and has indicated that they will implement corrective action.

Williamson Central School District  Financial Condition and Interest in Contracts

2009M-189

7th Judicial District

 

District officials routinely overestimated appropriations and underestimated revenues. The District appropriated at least $250,000 in fund balance each year, it has not been needed or used because the District’s budgetary practices have consistently resulted in operating surpluses totaling nearly $2.5 million over the four years ending June 30, 2009.

The district has used these surpluses to increase various reserves and trust account balances. As of June 30, 2009, the reported general fund and debt service reserves amounted to $5.1 million; however, there was limited or no use of the balances in four of the District’s reserves, which totaled more than $2.7 million. The District also maintained an unauthorized retirement health trust in the trust and agency fund with a total reported balance of $782,086. More than $3.4 million held in these reserves was idle money that could have been used for District operations to reduce the tax levy.

The District did not have a procedure in place to prevent conflict of interest. When this was brought to their attention, they took various corrective measures. A board of education  member with a prohibited conflict of interest resigned from the office, and another bd member disclosed his interest to the bard as required.

4 recommendations

The report’s recommendations focused on strengthening the policies and procedures regarding the operating surplus, District reserves, and conflict of interest.

The District disagreed with certain assertions pertaining to the financial condition, including the recommendation that the District should include an accurate budget provision for the amount the board intends to transfer to reserves or other funds. The District believes that building transfers into the budget to fund its reserves would only serve to increase the tax burden unnecessarily.

District officials also disagreed with the recommendation that the board should review all reserves and determine if amounts are reasonable and in compliance. The District stated that it has been their long-standing practice to review reserves on a regular basis.

The District has indicated that they will implement corrective action as soon as possible.

Williamsville Central School District  Financial Condition and Internal Controls Over Selected Financial Activities

2009M-144

8th Judicial District

 

The District has not ensured that budget estimates are reasonable. District officials routinely overestimated appropriations and underestimated revenues. This resulted in revenues exceeding expenditures by $30.1 million over the last four fiscal years, which is an average total budget of $136 million. District officials also could not provide adequate documentation to support the funding levels of two reserves and did not properly use another reserve. District officials also did not properly account for and report a current liability and reserve for encumbrances.

Further, the claims auditor does not audit claims prior to payment, as required, and only conducts a post-audit of a sample of claims after the checks have been mailed. Upon review of 100 claims (totaling $826,952), it was found that there were exceptions with 99 of those claims (totaling $823,617).

Finally, the District allows the departments to maintain receipts and does not ensure that appropriate documentation is entered into the purchase card system prior to payment. The claims auditor also does not review any purchase card transactions prior to payment and only reviews two transactions per purchase card billing statement after the payment had been made. The District also does not follow its own purchase card policies and procedures by ensuring that all cards have purchasing restrictions.

13 recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding appropriations and revenues, budgeting, adequate documentation to support reserves, the claims auditor, proper documentation for the purchase card system prior to payment, and reviewing all transactions on the purchase card billing statement.

The District agreed with the recommendations and has indicated that they will implement corrective action as soon as possible.