Meeting of the Board of Regents | February 2003

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

TO:

The Honorable the Members of the Board of Regents

FROM:

Daniel Tworek

COMMITTEE:

Subcommittee on Audits

TITLE OF ITEM:

Audit Activities

DATE OF SUBMISSION:

May 19, 2003

PROPOSED HANDLING:

Discussion

RATIONALE FOR ITEM:

Enable the Board of Regents to review audits

STRATEGIC GOAL:

5

AUTHORIZATION(S):

REGENTS SUBCOMMITTEE

ON AUDITS

MEETING ROADMAP

TOPIC

OUTCOME

WHO

MINUTES

Opening Remarks

Greetings

Regent Chapey

2

Review Agenda/Minutes (Attachment I)

Approval

Sheldon

1

Audit Report Abstract (Attachment II)

Questions addressed

SED Staff

25

School Districts in Fiscal Stress

Update

OAS Staff

30

Next Session

Discussion

Sheldon

2

Office of Audit Services

Audit

Major Finding

Recommendations/

Response

ARISE, Inc.

RF-0802-1

5^th Judicial District

$84,994 adjustment

The objectives of the audit were to assess ARISE�s methods for allocating costs among different programs; control of equipment; purchasing practices; and the use of VESID funds for staff travel.

ARISE received funding for non-related Independent Living Center contract expenditures, employee-related items, interest expense and for unreasonable allocations. The report also identifies a need to comply with VESID contract provisions by improving inventory procedures and contracting for services from individuals and organizations. Finally the report identifies opportunities to improve management processes in the areas of travel, allocation methodologies and segregation of duties.

9 Recommendations

The recommendations relate to returning excess funds to the Department, developing contracting procedures, establishing an equipment list, establishing staff travel policies and allocation methodologies and ensuring segregation of duties.

ARISE officials concur with each of the recommendations.

Troy City School District School Lunch Fund

SD-0802-4

3^rd Judicial District

$34,504 adjustment

As a spin-off of the Troy City School District audit (Troy), a second audit was undertaken regarding the management of the School Lunch Fund. Since 1996 Troy has sub-contracted the management of its School Lunch Program to a food service management company (FSMC). The basic terms of the agreement are that the FSMC will operate the program for a management fee ($15,872 in the 99-00 school year) and will guarantee a $25,000 annual profit.

The FSMC did not meet its financial obligations to Troy. It submitted invoices for amounts in excess of actual documented costs and did not provide Troy with the full profit guarantee. Troy paid $33,304 in excess of actual documented costs and the FSMC underpaid the profit guarantee by $1,200. In addition, Troy did not implement adequate management controls over the School Lunch Fund or its agreement with the FSMC.

6 recommendations

The report recommends that Troy recoup the overpayments to the FSMC for the 2000-01 school year and determine if an overpayment was made for the 2001-02 school year. The report also recommends that Troy maintain documentation of the agreement with the FSMC and adhere to all of the contract requirements.

Troy did not formally respond to the audit in writing. District officials stated that they have shared the report with their independent auditor and are working with the FSMC to resolve the issues cited in the report.

Office of the State Comptroller

Audit of State Aid for Computer Technology

2003-MS-1

$0 adjustment

The audit examined State aid for computer technology in the 2000-01 school year. The purpose was to verify: that school districts have systems in place to properly identify, account for and report appropriate data to claim State aid for technology expenditures; that computer equipment is used for educational purposes only. The basis of the audit was data from ten school districts around the State.

The audit found several school districts did not have adequate systems in place to properly identify, account for and report appropriate data to the Department. The auditors reviewed $1.3 million in expenditures and found expenditures totaling $57,800 that did not meet program criteria as allowable expenditures. In other cases recording and reporting deficiencies actually prevented school districts from maximizing available aid. The report notes disparities among district�s interpretation of what constitutes State-aided computer equipment for educational purposes and instances where districts could not demonstrate the equipment was for educational purposes only. There were numerous instances where the equipment could not be found for inspection. Finally, many districts fail to meet a requirement that they demonstrate that expenditures for certain technology are more cost effective if procured through their BOCES.

9 recommendations

2 to SED

7 to school districts

The recommendations to the Department are to provide additional guidance to school districts regarding identifying aidable technology and using computer equipment for educational purposes.

The recommendations to the districts are to improve internal processes for identifying aid-eligible technology expenditures, ensure sufficient documentation exists regarding cost allocations and the cost effectiveness of BOCES services. Four of the recommendations address the establishment of controls over the computer equipment.

The Department agrees with one recommendation and in part with the recommendation regarding using the equipment for educational purposes. The Department�s response indicates general guidance will be provided, however notes that it is not practicable to determine that any given technology is being used exclusively for educational purposes.

The school districts� response call for the simplification of procedures for claiming State aid for eligible computer technology aid.