Meeting of the Board of Regents | June 2007
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THE STATE EDUCATION DEPARTMENT / THE UNIVERSITY OF THE STATE OF NEW YORK / ALBANY, NY 12234 |
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The Honorable the Members of the Board of Regents Subcommittee on Audits
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Theresa E. Savo
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Board of Regents Oversight – Financial Accountability
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June 13, 2007
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Goal 5
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Executive Summary
Issues for Discussion
Two items are presented for discussion with the Members of the Subcommittee on Audits including:
- Department’s Internal Control Process and Certification
- Completed Audits
Reason(s) for Consideration
Update on Activities
Proposed Handling
Discussion and Guidance
Procedural History
The information is provided to assist the Subcommittee in carrying out its oversight responsibilities related to audits of financial and reporting practices; performance audits or reviews; ethical conduct issues arising from audits; internal controls; and compliance with laws, regulations, and policies.
Background Information
1. Department’s Internal Control Process and Certification – Staff will brief the Subcommittee members on the Department’s process to help ensure key risks are identified and adequate internal controls are in place. Staff will also brief the Subcommittee members on the requirement to annually certify to the Division of Budget that the Department has complied with certain provisions related to internal controls.
2. Completed Audits
Reports are provided as follows:
Office of the State Comptroller
State Education Department Security Over Regents Examinations
Reimbursement to Nonpublic Schools for State Mandated Services
Broome-Tioga BOCES
Madison-Oneida BOCES
Roslyn Union Free School District
Whitney Point Central School District
Southold Union Free School District
Wynantskill Union Free School District
East Moriches Union Free School District
Elba Central School District
Edinburg Common School District
Gilboa-Conesville Central School District
Oriskany Central School District
Germantown Central School District
Penfield Central School District
Newark Central School District
Smithtown Central School District
Warwick Valley Central School District
Warrensburg Central School District
Berne-Knox-Westerlo Central School District
Commack Union Free School District
Cheektowaga-Sloan Union Free School District
Malone Central School District
South Seneca Central School District
Northern Adirondack Central School District
Stillwater Central School District
Campbell-Savona Central School District
Fabius-Pompey Central School District
Greater Amsterdam School District
Recommendation
For item one (Department’s Internal Control Process and Certification), and item two (Completed Audits), the advice and guidance of the Members of the Subcommittee is sought.
Timetable for Implementation
N/A
The following materials are attached:
- Roadmap
- Minutes of the May Meeting (Attachment I)
- Summary of Findings (Attachment II)
- Audit Report Abstracts (Attachment III)
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REGENTS SUBCOMMITTEE ON AUDITS
MEETING ROADMAP
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Opening Remarks |
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Chair |
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Review Agenda/Minutes (Attachment I) |
Approval |
Conway |
5 |
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Follow-up on Previous Meetings |
Information |
Conway |
15 |
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Department’s Internal Control Process and Certification |
Information |
Conway and Rivers |
10 |
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Audit Report Abstracts (Attachment III) |
Questions Addressed |
SED and OSC Staff |
25 |
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Next Session |
Preview |
Staff |
3 |
May 21, 2007
Subcommittee Members in Attendance:
Regent Geraldine D. Chapey, Chair
Regent Arnold Gardner
Regent Joseph Bowman Jr.
Regent Milton L. Cofield
Other Members of the Board of Regents in Attendance:
Regent Roger B. Tilles
Discussion Items
Regent Chapey opened the meeting, and noted with the increased volume of audits, certain patterns of findings are being identified. While some districts are exemplary, some are in need of assistance. She is hoping for analysis in the future including follow-up measures taken to assist districts with audit issues.
Follow-up items
Regent Cofield moved to accept the minutes of the previous meeting and Regent Gardner seconded the motion.
Staff informed the members of a new initiative that has begun to address audit findings. Participants are from the Office of Management Services, Office of Counsel and the Office for P-16. The goals of the group are to:
- Use the information from audits to identify trends, and working with partners, create training programs to assist districts in avoiding identified audit issues.
- Do additional follow-up on the required 90-day, board approved, corrective action plan provided by the districts.
Regent Chapey feels that training improvements are needed. There is a high turnover of school business officials. Superintendents need to have business knowledge as well as academic training.
Regent Cofield feels the certification areas need to be reviewed for both superintendents and school business officials. While school business officials may have educational training, they need to have business training as well. Superintendents need formal accounting training. People who are responsible need valid credentials. General training is inadequate.
Staff discussed the 175 hours of training now required for certification. The requirements should include specific training in areas where common problems emerge, with more required subjects.
Regent Bowman suggested this should be discussed with the higher education community. Training for faculty who are teaching the classes may also be needed. In the end the Regents will be held accountable so they should be proactive.
Agenda items
Two topics were introduced:
- Department measurement of accountability is school districts – school districts under stress and concern.
- 46 audits were issued:
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- 2 Office of Audit Services (OAS)
- 1 Office of the Inspector General
- 43 Office of the State Comptroller
Districts in Fiscal Stress
OAS tracks districts under fiscal stress or concern. Documents provided:
- List of districts under stress and concern for 2005-2006.
- List of districts under stress and concern for the past six years.
- Charts available to be sent with the letters.
When a school district is identified as being under stress or concern they receive:
- A letter identifying the condition.
- A list of the problems existing in the financial statements.
- Charts of data of the last six years showing information such as fund balance and surplus.
The information is sent to the president of the school board.
Regent Cofield felt the notification should be broader to include newspapers and legislators. Regent Tilles agreed. Regent Cofield feels this is a leverage point and the public should be informed. He stated this is a risk given the new accountability and new funding. If a district has shown an inability to handle funds, they will need strategies to assist them.
David Miller the Chief of Staff and Deputy Commissioner for Innovation offered to develop a standard process to communicate these issues to the public. He will have something available to share by the next meeting.
Audits
The Regents expressed concerns that the volume of audit reports is becoming too much. Regent Cofield stated he was particularly interested in receiving the audit reports for his judicial district. The information is valuable to share when meeting with school boards. Regent Gardner felt they receive too much information and a categorized system would be more beneficial.
It was agreed that a checklist would be provided to the Members of the Subcommittee to summarize the critical audit findings within the audit reports.
Regent Bowman requested definitions of terms and categories used. He also asked to revisit the list of higher education institutions each Regent is responsible for.
Regent Cofield is concerned that we need to communicate with legislators. Since the Contract for Excellence will provide significant additional funding, they need to know if there are problems existing in the districts.
June 2007 Regents Audit Subcommittee Meeting
Summary of the Office of the State Comptroller’s (OSC) Findings
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Audit |
Procurement |
Capital Assets |
Claims Processing |
Payroll |
Cash |
Financial Reporting |
Information Technology |
Capital Construction |
Extra Classroom Activity Fund |
Budgeting |
Other |
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Security Over Regents Examinations |
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√ #1 |
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Reimbursement to Nonpublic Schools for State Mandated Services - Follow-up |
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√ #2 |
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Broome-Tioga BOCES |
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Madison-Oneida BOCES |
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Roslyn Union Free School District |
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Whitney Point Central School District |
√ |
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Southold Union Free School District |
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Wynantskill Union Free School District |
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East Moriches Union Free School District |
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Audit |
Procurement |
Capital Assets |
Claims Processing |
Payroll |
Cash |
Financial Reporting |
Information Technology |
Capital Construction |
Extra Classroom Activity Fund |
Budgeting |
Other |
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Elba Central School District |
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Edinburg Common School District |
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Gilboa-Conesville Central School District |
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Oriskany Central School District |
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Germantown Central School District |
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Penfield Central School District |
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Newark Central School District |
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Smithtown Central School District |
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Warwick Valley Central School District |
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Audit |
Procurement |
Capital Assets |
Claims Processing |
Payroll |
Cash |
Financial Reporting |
Information Technology |
Capital Construction |
Extra Classroom Activity Fund |
Budgeting |
Other |
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Warrensburg Central School District |
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Berne-Knox- Westerlo Central School District |
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Commack Union Free School District |
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Cheektowaga- Sloan Union Free School District |
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Malone Central School District |
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South Seneca Central School District |
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Northern Adirondack Central School District |
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Stillwater Central School District |
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Audit |
Procurement |
Capital Assets |
Claims Processing |
Payroll |
Cash |
Financial Reporting |
Information Technology |
Capital Construction |
Extra Classroom Activity Fund |
Budgeting |
Other |
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Campbell-Savona Central School District |
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Fabius-Pompey Central School District |
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Greater Amsterdam School District |
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June 2007 Regents Audit Subcommittee Meeting
Summary of the Office of the State Comptroller’s (OSC) Findings
Additional Information
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 and inappropriate disposal.
Claims Processing – includes claims being paid without adequate documentation, failure to audit the claim and an untrained claims auditor.
Payroll – includes a lack of segregation of duties in the payroll process, no policy and procedures and inappropriate payments to district administrators.
Cash – includes poor control of cash and failure to prepare bank reconciliations.
Financial Reporting – includes inaccurate accounting, such as, an overstated fund balance and general fund transfers without voter approval.
Information Technology – includes lack of a disaster recovery plan, failure to back up information, inappropriate or undocumented user rights, inappropriate or missing password protection, and no policy and procedures.
Capital Construction – includes undocumented expenses, inappropriate and unapproved change orders.
Extra Classroom Activity Funds – includes poor accounting over funds and no documentation of expenses.
Budgeting – includes poor revenue projections and use of fund balance.
Other – #1: Security Over Regents Examinations: non-compliance with SED requirements, insufficient training provided and lack of monitoring.
#2: Reimbursement to Nonpublic Schools for State Mandated Services – Follow-up: lack of monitoring and reimbursement of all mandated costs.
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The report evaluated 235 schools, and 41 of them were not fully complying with the requirements for the storage and unsealing of the examination materials. It was found that 16 of those schools were storing their examination materials in unapproved locations, some of which were clearly not secure and 11 schools had opened sealed packages of examination materials before the allowed time.
Since 1992, SED had only visited 57 of the 235 schools sampled to ensure that the examination materials are adequately secured. It is recommended that SED increase their number of visits in the future.
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The report’s recommendations focused primarily on strengthening policies and procedures regarding the storage and security of Regents examination material.
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The 2005 report found that SED has not reimbursed the nonpublic schools for the costs they incurred for implementing a Comprehensive Attendance Policy (CAP) since it went into effect for the 2003-2004 school year.
The follow-up audit found that the Department had made considerable progress in addressing the matters contained in the original audit. Of the five prior audit recommendations, two had been implemented, two had been partially implemented, and one had not been implemented.
The one unimplemented recommendation involves the full funding of the CAP. State appropriation for nonpublic mandated services have not included funding for full reimbursement of the costs identified in the original audit. |
2 implemented 2 partially implemented 1 not implemented
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Officials have not developed a written Disaster Recovery Plan. A plan should be implemented in order to ensure that the effects of a disaster will be minimized and the organization will be able to either maintain or quickly resume mission-critical functions.
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The report’s recommendations focused primarily on strengthening policies and procedures regarding the maintenance of computer systems and software.
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The report found that backup tapes are maintained on-site Monday through Friday. On Friday they are moved next door to the RIC administration building. After one week, they are moved off-site for a week, and then returned and reused. This system leaves two weeks of backups at risk of loss. The failure to maintain daily backup off-site could lead to the loss of data.
The RIC has also not tested the performance of its disaster recovery plan. At least four personnel had the ability to access district’s financial accounting systems and related servers using a common account with “super user rights” to modify user accounts and change passwords. An audit trail was not in operation. The RIC also prints checks for several school districts using signature disks stored at the RIC. |
The report’s recommendations focused primarily on strengthening policies and procedures regarding financial software management.
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The report found that $200,072 of capital construction project payments were not available for examination, while $1,188,740 was not certified by the architect prior to payment.
In 2004 the Board hired a new construction consultant to review work that was overseen by the prior consultant. The new consultant received $128,000 for his review work which the District would not have had to pay if the former architect had provided proper oversight and followed contractual guidelines. The new consultant found that construction deficiencies would cost $862,000 to rectify.
District officials approved change orders totaling $1,7466,226 related to three projects. It was found that $137,477 of these change orders were signed only by the former Assistant Superintendent for Business in 2001. The orders were not approved by the Board, and were not signed by the Board President. No money was retained for two change orders totaling $435,750 even though it was required to retain 5 percent from each application. |
The report’s recommendations focused primarily on strengthening the policies and procedures regarding the project approval process.
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The report found that although the Board has a conflict of interest policy, they did not establish a control procedure to detect when potential conflicts of interest may exist. There were also weaknesses involving internal controls within auditing, approval and payment of claims, procurement of goods and services and payment processes.
There were also inadequate application controls with the District computer system.
Lastly, there was a lack of segregation of duties involving the payroll process and no review of the treasurer’s payroll processing. Also, no audit trail is available to see who is entering and/or changing data within the system.
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The report’s recommendations focused on strengthening policies and procedures regarding internal controls and the segregation of duties.
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The District’s 2004-2005 budget was inaccurate, which resulted in the over-expenditure of $746,326. The District’s financial position had also been overstated for at least 6 years and the fund balance was overstated by $762,000, this issue has gone unaddressed since June 30, 2005. The District’s true fund balance is actually closer to $600,000 than the reported $1.36 million.
There was a $126,396 operating surplus at the end of the fiscal year, on June 30, 2006.
The internal controls over the purchasing function were weak, and the District did not publicly advertise for repairs in heating, ventilation or air conditioning, totaling $30,188; cleaning supplies totaling $27,726; pavement repairs costing $23,000.00; and computer software and licensing totaling $18,805. Three of six professionals also did not enter into written agreements.
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The report’s recommendations focused primarily on strengthening the policies and procedures regarding financial condition and purchasing.
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The Board has not adopted written policies and procedures to provide guidance and internal controls for payroll processing and leave time accruals, cash disbursements and the extraclassroom activity fund.
No one independent of the payroll process reviews either the payroll information that is electronically submitted to the payroll processing firm or the payroll audit trail report that is transmitted back to the District.
There was a lack of proper oversight over the payroll process, as evidenced by the absence of compensating controls, which further increases the potential for fraud and abuse.
Lastly, the District’s Computer Network for Education Policy does not effectively address the procedures to properly monitor and safeguard the District’s IT system. Passwords are also overly basic and access rights are not revoked upon a set number of logins. |
The report’s recommendations focused primarily on strengthening policies and procedures regarding financial operations and the information technology system.
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District officials did not accurately report and record the financial activities of the District to allow the Board to monitor and evaluate the District’s financial condition in a timely manor. The fund balance deteriorated from a positive balance to a deficit of $3.2 million.
Officials also did not regularly provide the Board with reliable financial data. The District has poor accountability over its cash disbursements because there is not supervisory oversight over the process or its internal controls. The District made a duplicate payment of $4,530, which has since been recovered, due to its practice of not issuing stop payment orders for voided checks that are not in possession. The District also made a duplicate payment of $228 to an architectural firm.
Ten percent of the checks (351) issued by the District were handwritten. There were discrepancies between vendor names written on 30 checks and the vendor names entered in the accounting records.
Lastly, District personnel do not regularly use approved purchase orders when procuring goods and services. |
The report’s recommendations focused primarily on strengthening the policies and procedures regarding financial condition, financial operations, claims processing, and procurement.
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Internal controls were not adequate over procurement and claims processing and there were also a variety of weaknesses in the adopted procurement policy. The review of vendor claims found that the accounts payable clerk performed incompatible duties without compensating controls.
It is recommended that the Board annually review and update the District’s procurement policy.
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The report’s recommendations focused primarily on strengthening policies and procedures regarding procurement.
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The Board has not sufficiently addressed the safeguarding of computer data to ensure proper protection. The District also has no formal disaster plan.
It was found that passwords are unsophisticated, and five workstations did not have passwords at all. A majority of the District’s network components are maintained in an unlocked and unattended computer lab and access to the computer lab is not tracked or monitored.
Lastly, District officials do not periodically back up all components of the business office software so they can restore programs, if necessary. |
The report’s recommendations focused primarily on strengthening procedures and policies regarding the internal controls over computer data.
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District officials have not adopted policies and procedures to address the assignment of user privileges for specific applications to District staff. The IT coordinator did not assign rights based upon each individual’s’ specific job functions. The Board has not adopted comprehensive policies and procedures to address the use of passwords and establish limits for login attempts. Passwords are also not changed on a daily basis and the passwords that are in use are not complex enough.
District officials should also establish policies and procedures which address proper data backup in order to prevent a loss of data or equipment in the future. |
The report’s recommendations focused primarily on strengthening policies and procedures regarding security of computerized data.
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The audit found instances that the Board had either not established internal controls, or the controls which had been implemented were extremely weak. The officials do not provide sufficient management oversight through bank reconciliations and they do not receive or review the bank statements and cancelled checks; thus, they are unable to verify the accuracy.
It was found that the accounts payable clerk uses the check-signing machine to apply the treasurer’s signature to the District’s computer-generated checks and the treasurer does not exercise direct supervision over the process. Unauthorized individuals also have access to the District’s blank check stock and check signing machine.
The claims auditor also has no formal training and did not follow the Board-adopted claims policy when examining District claims. Several claims did not contain proper authorization or documentation to indicate the District had received the services. There were $850 in un-receipted meals, $637 for mileage reimbursements that were not itemized sufficiently, and $4,347 in credit card charges with no proof whether or not the claims were valid.
Lastly, officials did not ensure whether or not the capital assets are being protected from loss by maintaining complete and accurate inventory records. |
The report’s recommendations focused primarily on strengthening policies and procedures regarding treasury and accounting duties, claims processing, and capital assets.
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Internal controls over purchasing practices to safeguard against fraud, abuse, and professional misconduct were operating ineffectively. The report found that the District did not comply with the General Municipal Law or its procurement policy for four out of nine contracts reviewed. For example, they did not competitively bid on the purchase of playground equipment ($44,902) and a tractor ($15,845).
In terms of fuel purchasing, when District credit cards were used, the employees did not identify each vehicle for which the fuel was purchased.
Lastly, the District had not established a disaster recovery plan for its computer operations. |
The report’s recommendations focus primarily on strengthening policies and procedures regarding purchasing, computerized data and capital assets.
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The District officials had not developed comprehensive internal control policies that described the duties that District personnel must follow. District personnel do not reconcile records for 12,000-gallon storage tanks, to ensure that measurements of deliveries, usage, inventory on hand, and losses or gains of fuel, are accurate.
In addition, the Transportation Department has a lack of internal controls because its secretary performed many incompatible duties with regard to the fuel inventory function. |
The report’s recommendations focused primarily on strengthening policies and procedures regarding internal controls over fuel inventories.
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The District is not following its policy regarding the use of District credit cards, which refers to safeguards and procedures for general-purpose credit cards, gas cards, and specific business charges. Controls over store-issued credit card purchases are weak and 4 of the 18 supermarket cards were not being kept in the administrative office as required by the policy.
It was found that purchases totaling almost $1,300 were made without a purchase order at all; thus, these purchases were not reviewed and approved.
Finally, the claims auditor paid the store credit card invoices for 377 credit card purchases without verifying that the claims were supported by approved purchase orders. |
The report’s recommendations focused primarily on strengthening policies and procedures regarding the safeguarding of district assets.
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The report found that the District paid 12 professional service providers a total of $661,368 without the benefit of competition. The District’s policies and procedures are silent on who authorizes and signs contracts. It was found that the District’s purchasing agent authorized, and the Board vice president signed a $683,235 contract that the Board did not formally approve until approximately two months later. The District also incurred expenses totaling $92,000 for work performed on this contract before the Board formally authorized the services. |
The report’s recommendations focused primarily on strengthening the policies and procedures regarding procurement.
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The Board transferred approximately $10.2 million from the general fund to an unauthorized health and safety account without required voter approval. Of that $10.2 million, management spent $7 million on capital expenditures, again without voter approval. The District also overpaid the life insurance benefit for the former superintendent by $96,373.
The District paid a total of $12,617 to 10 employees for workers’ compensation reimbursements when they had already been compensated for their absence by using their sick days.
Additionally, four individuals have unauthorized access to payroll functions, and a clerk had access to payroll data that was not compatible with job duties. |
The report’s recommendations focused primarily on strengthening the policies and procedures regarding compliance with budget regulations, the overpayment of fringe benefits, and the internal controls over payroll.
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Adequate controls have been established but are not always followed for large purchases. District officials did not solicit written proposals for independent auditing services totaling $8,050 and insurance totaling $179,642. The District also failed to obtain competitive bids for fuel oil totaling $179,642, which could have been purchased for $3,000 less using State contract price.
Controls were not in place to segregate duties over the processing of claims and cash disbursements. The District treasurer handled all phases of the payroll process. The business manager received $3,115 a year over and above his regular salary, five days of family leave, and $2,500 paid into his tax annuity account, all without documented Board authorization. Internal controls over the Benefit Pool were essentially non-existent, and as a result three administrators received $4,851.00 in improper payments.
Also, the failure to enforce procedures for determining student residency resulted in the loss of over $144,800 in tuition payments the District was entitled to.
Lastly, there was no oversight by the Board or other District officials to ensure that internal controls were in place over the “School to Work” program. |
The report’s recommendations focused primarily on strengthening the policies and procedures regarding cash disbursements, purchasing, payroll and personnel contracts, residency and tuition and School to Work program.
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The District’s internal controls over its capital assets were not sufficient to protect against loss or misuse. Officials could not locate 11 of 38 assets that were tested which were valued at over $11,000. Items were not properly documented and there was no explanation as to why these items weren’t found.
The District’s capital asset policy is deficient because it does not provide a property control manager or address asset disposal.
There was also no formal capital asset policy established to address the disposal of District assets. Additionally, the review of the Asset Inventory Listing report showed that it was inaccurate and lacked serial numbers and manufacturer information for over 95 percent of the capital assets recorded. |
The report’s recommendations focused primarily on strengthening policies and procedures regarding capital assets.
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The Board did not properly monitor disbursements to the former superintendent and former associate superintendent for operations. Both individuals received annual expense allowances of $9,000 each and the Board did not require these individuals to keep track of their expenses or seek reimbursement.
Payments to 10 vendors, totaling $459,663, were examined. Seven out of ten made references to contracts that were incorrect, expired, or unauthorized. The athletic director also purchased goods totaling $6,417 without obtaining required quotes, and one vendor was paid $1,951 more than contracted amounts.
Additionally, the Board did not sufficiently address the safeguarding of computer-generated data. Equipment was not adequately protected from environmental factors, and the District did not have a formal disaster recovery plan in place. |
The report’s recommendations focused primarily on strengthening polices and procedures regarding administrative expenses, procurement and computer data safeguards.
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The internal controls over the District’s claims processing function are not appropriately designed or operating effectively. Board members do not review each claim to ensure that proper original documentation, such as quotes and purchase orders, are adequate for payment.
Additionally, claims totaling $103,910 lacked documentation. Athletic uniforms, totaling $3,540 were also being purchased from a business that is operated by a District employee and the employee did not file a disclosure with the purchasing office, as required in the District’s purchasing manual.
Finally, the claims totaling $22,869 for cafeteria food also lacked proper documentation, and the District paid a claim of $16,500 to a vendor for long-distance classroom learning before the services were provided, and there was no written contract on file. |
The report’s recommendations focused primarily on strengthening policies and procedures regarding claims processing.
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The internal controls over the District’s financial management system were inadequate, in that computer equipment was not protected from unauthorized access, and data was not backed up routinely. The District’s payroll software applications do not require passwords for access. Also, the District’s payroll and leave accrual financial software applications do not have access controls and several employees have access to payroll software, which allows them the ability to add and change any and all information.
Payroll software also does not currently have the ability to generate the reports needed to properly monitor financial activity. The District also has no formal disaster plan to prevent the loss of computer equipment and data. |
The report’s recommendations focused primarily on strengthening the policies and procedures regarding the internal controls over information technology.
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There were five users identified for the payroll-processing module. Of the five users, two were granted full access and the remaining three were given “read only” access. Only two users had the new version of the payroll processing module on their desktops and the rest did not have access from their own desktop. The users who were granted “read only” access actually had full access to the system.
Upon interviewing personnel, concerns were expressed that they did not feel they were adequately trained on the use of different modules, nor the application of access controls.
Additionally, the system did not have the ability to produce desired monitoring reports or payroll exception reports for each payroll. The system also does not currently have an audit log.
Claims packets, warrants and cancelled checks were reviewed and of the 606 reviewed on 6 warrants, there were no exceptions noted. Also, of the 107 journal entries we reviewed, there were no exceptions noted. Finally, two consecutive payrolls were reviewed ($344,971 and $342,283), and again no exceptions were noted. |
The report’s recommendations focused primarily on the computerized financial management system.
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The report found that the District had not established policies and procedures governing the operations of the extraclassroom activity fund. The Board receives a statement of each fund’s activity twice a year, however, there is no indication they are compared to reconciled bank statements. Certain individual club records were not complete, and an independent comparison was not performed between the club records and the central treasurer’s records. Only 7 of the 33 extraclassroom clubs were maintaining accounting records and none of those seven clubs agreed with the central treasurer’s records for 2005-2006, and no independent oversight was provided to ensure any of the records were accurate. Thirteen checks were written, totaling $2,561, and were not recorded in the club’s records.
Forty-two cash receipts were also tested, and only one of the receipts was accompanied by supporting documentation detailing how the funds were raised and from whom they were collected. Twenty-seven of the remaining 42 receipts still did not contain a description of the source of the funds and none were numbered.
There were also weaknesses in controls over extra-classroom clubs accounting records in that District personnel did not provide proper accounting for cash receipts. |
The report’s recommendations focused primarily on strengthening policies and procedures regarding the extra-classroom activity fund.
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The Board had not formally created and appointed anyone to the position of claims auditor, but it did assign the duties of auditing claims to the District treasurer. There is a lack of segregation of duties, in that the District treasurer also has a role in the processing and payment of claims.
It was also found that the BOCES claims did not always contain sufficient information and documentation to allow the District to perform a proper audit. For example, in the purchasing of computers, the total purchase price was paid in ten equal payments over a ten-month period. No detail is included regarding the items the District had purchased. The District was overcharged $4,662. BOCES has since made the appropriate refund to the District.
Lastly, the District paid BOCES over $1 million for special education services between 2004-2005. These expenditures were paid on monthly claims that did not contain adequate information to allow for a proper audit. The District did not properly document the monthly reconciliations. |
The report’s recommendations focused primarily on strengthening policies and procedures regarding claims processing.
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The District’s significant revenue and expenditure projections in the tentative budget are not reasonable, because the District has not made a provision to repay the outstanding Revenue Anticipation Note (RAN). The District issued a $5.78 million RAN to continue District operations and the District does not have cash available to repay this debt. The Board intends to repay a majority of the debt ($3.25 million), using the deficit-financing bond, and they will have to make amendments to the adopted budget to provide an appropriation for repayment.
In addition, the District’s audited financial statements indicated that the general fund had a deficit of $3,203,794. The report indicated, however, that the deficit was actually $513,000 greater, as a result of inter-fund loans. The District also generally makes expenditures upfront, and then receives its federal aid in the summer and repays the general fund. However, the cycle repeats itself once the school year begins again. In neither case are the amounts due from these funds readily available to finance operations.
It is also estimated that the State aid revenue could be overestimated by $51,500. |
The report’s recommendations focused primarily on strengthening policies and procedures regarding the Revenue Anticipation Note, Inter-fund loans, and State aid revenue.
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The report reviewed the 2007-2008 tentative budget for the District, and the budgeted estimated revenues and appropriations appear reasonable.
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There were no recommendations at this time.
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The report found that the $1,533,000 appropriation of fund balance in the tentative budget includes $318,000 of “planned balance” as a funding source for the estimated expenditures. The “deferred revenue-planned” balance account should not be considered part of the District’s fund balance available for reduction of the tax levy. |
The report’s recommendations focused primarily on strengthening polices and procedures regarding the tentative budget.
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