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Meeting of the Board of Regents | January 2009

Monday, January 5, 2009 - 11:00pm

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:

January 5, 2009

 

STRATEGIC GOAL:

Goal 5

 

AUTHORIZATION(S):

 

 

Executive Summary

 

Issues for Discussion

 

              Three items are presented for discussion with the Members of the Subcommittee on Audits including:

 

  • Completed Audits – Including a Summary of the Department’s Internal Audit Workgroup (Attachment II)
  • Department’s Internal Control Process and Annual Certification
  • Audit Follow-up Process (Attachment V)

 

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.            Completed Audits

              The Subcommittee is being presented with 26 audits this month.  The audits have been reviewed by the Department’s Internal Audit Workgroup.  Their report is attached.  (Attachment II)

 

              Audits are provided as follows:

 

Office of Audit Services

 

Migrant Education Program-Diversity Project

 

Office of the State Comptroller

 

Amityville Union Free School District

Ardsley Union Free School District

Chittenango Central School District

Florida Union Free School District

Geneseo Central School District

Hicksville Union Free School District

Hyde Park Central School District

Islip Union Free School District

Katonah-Lewisboro Union Free School District

Kingston City School District

Lockport City School District

Minisink Valley Central School District

New York City Department of Education Environmentally Sensitive Cleaning and

     Maintenance in New York City Public Schools

Northport-East Northport Union Free School District

Pawling Central School District

Rensselaer City School District

Richfield Springs Central School District

Rockland BOCES

School Districts’ Compliance with Physical Education Regulations (Akron

    CSD, Amsterdam SD (Greater), Bolivar-Richburg CSD, Burnt Hills-Ballston

    Lake CSD, Candor CSD, Clarkstown CSD, Commack UFSD, Elmira Heights

    CSD, Evans-Brant (Lake Shore) CSD, Harpursville CSD, Hinsdale CSD,

    Homer CSD, Ilion CSD, Lake Placid CSD, Mineola UFSD, Ravena-

    Coeymans-Selkirk CSD, Saranac Lake CSD. Smithtown CSD, Solvay

    UFSD, and Waterville CSD)

Schroon Lake Central School District

Shenendehowa Central School District

Tri-Valley Central School District

West Islip Union Free School District

Whitesville Central School District

Windsor Central School District

 

2.           Department’s Internal Control Process and Annual 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 the Budget that the Department has complied with certain provisions related to internal controls.

 

  • Audit Follow-up Process – Over 600 audits have been presented to the Subcommittee since the passage of the accountability legislation.  Staff will brief the Subcommittee members on the methods used to follow-up on audits. (Attachment V)

 

Recommendation

 

For item one (Completed Audits), item two (Internal Control Process and Annual Certification), and item three (Audit Follow-up Process), no further action is recommended. 

 

Timetable for Implementation

 

              N/A

 

The following materials are attached:

  • Roadmap
  • Minutes of the December Meeting (Attachment I)
  • Review of Audits Presented – Department’s Internal Audit Workgroup (Attachment II)
  • Summary of Audit Findings (Attachment III)
  • Audit Report Abstracts (Attachment IV)
  • Audit Follow-up Process (Attachment V)

 


 

REGENTS SUBCOMMITTEE ON AUDITS

MEETING ROADMAP

 

Date:  January 2009

Time:  TBD

Location:  TBD

TOPIC

OUTCOME

WHO

MINUTES

Opening Remarks

 

Chair

3

Review Agenda/Minutes (Attachment I)

Approval

Conway

7

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

Questions answered

OSC and Department Audit Staff

20

Internal Control Process and Annual Certification

Information

Rivers

10

Audit Follow-up Process (Attachment V)

Information

Staff

20



 

Your Subcommittee on Audits held its scheduled meeting on December 15, 2008.

 

Subcommittee Members in Attendance:

 

Geraldine D. Chapey, Chair

Regent Arnold B. Gardner

Regent Joseph Bowman Jr.

 

Other Members of the Board of Regents in Attendance:

 

Regent Roger Tilles

 

Discussion Items

 

 

  • Regent Chapey discussed the impact of audits both internally and outside the Department. 

 

  • As a follow up to the November 2008 meeting, staff informed the Subcommittee that the certified financial statements for the Wyandanch Union Free School District have been received and the numbers confirmed those previously provided by the District.  Based on the statements, they will be designated as a district under fiscal stress by the Office of Audit Services (OAS). 

 

  • Staff from the Offices of Education - P-16 and OAS have had preliminary discussions with the New York State Council of School Superintendents, the New York State School Boards Association, and the New York Association of School Business Officials about mandated training for internal claims auditors.  The feedback was positive although there are concerns it will be viewed by some as another unfunded mandate.  Online training is being considered.

 

  • Regent Gardner moved to accept the minutes of the November meeting and Regent Bowman seconded the motion.

 

  • A brief discussion of Wyandanch led to a discussion of corrective action plans.  Districts are required to respond to all audit findings within 90 days with a corrective action plan.  OAS reviews corrective action plans and sends dunning letters for those that are not received.  Staff were asked to provide quarterly status updates on the receipt of corrective action plans. 

 

  • An audit manager from the Office of the State Comptroller (OSC) reported that there are close to 500 audits completed.  The deadline for the completion of all districts is March 31, 2010, and they plan to have all audits complete at that time.  From that point, audits of school districts will be conducted on a risk based approach. 

 

  • An engagement manager from KPMG did a presentation on the New York State Financial Statement Audit and its relationship to the Department.

 

  • No adjustments were necessary to Department balances and no Department specific control deficiencies were noted in internal control.
  • It was noted that the auditors received full cooperation and requests were always met with timely responses.

 

  • OSC completed 19 audits this month:

 

Bay Shore Union Free School District

Brookfield Central School District

Connetquot Central School District

Crown Point Central School District

Ellicottville Central School District

Farmingdale Union Free School District

Honeoye Central School District

Medina Central School District

New Hartford Central School District

Newark Valley Central School District

North Bellmore Union Free School District

North Merrick Union Free School District

Peru Central School District

Pocantico Hills Central School District

Port Washington Union Free School District

Queensbury Union Free School District

Roosevelt Union Free School District

South Lewis Central School District

West Canada Valley Central School District

 

  • Ellicottville’s fund balance was found to exceed the legal limit.  They were aware of the problem, which has been ongoing for several years.  This is an example of the confusion in districts regarding retaining funds for employee benefits and accrued liabilities.  Health care for retirees is becoming an issue for districts and they are not allowed by law to set aside funds to cover this expense.  There will be a presentation to cover this issue in the future.

 

  • Roosevelt’s spending was found to be within limits, but they are still not fully using the encumbrance process.

 

  • The Members of the Subcommittee were told the OSC audit of the provision of physical education requirements was just released. The audit found 19 out of 20 districts not in compliance with physical education requirements.  Schools are asking how they can achieve compliance. 

 

  • OAS staff made an audit trend presentation on payroll findings.  Some of the recurring issues are:

 

  • Overpayment and underpayments
  • Unauthorized and improper payments for former employees
  • Misclassification of independent contractors as employees
  • Lack of segregation of duties
  • Lack of oversight
  • Lack of policies and procedures

     

Current training does not address the findings.  The Department will outline a training curriculum to address issues and work with school staff. 

 

  • Staff were told school boards appreciate the trend data and want to know what problems are identified in audits.  A document will be developed that will summarize specific issues of concern.

 

  • This month 19 school district audits were presented to the Subcommittee.  The Department’s Internal Audit Workgroup identified some aspect of seven school district audits for further review and follow-up.

 

  • Bay Shore Union Free School District, Connetquot Central School District, Ellicottville Central School District, Farmingdale Union Free School District, North Merrick Union Free School District, and the Queensbury Union Free School District

 

One aspect of these audits was the districts’ use of the Employee Benefit Accrued Liability Reserve (EBALR) fund.  These reserve funds are created under various laws which determine how the reserves can be established, funded, expended or discontinued. School districts can establish an EBALR fund under Section 6-p of General Municipal Law (GML) and use EBALR fund monies to pay employees for accrued leave time due to them when they leave district employment. Interest earned on money in the EBALR fund must become part of the reserve fund. The audits found that these districts reserved more than was necessary to meet their liabilities.

 

  • Ellicottville Central School District

 

As of June 30, 2006, the unreserved and unappropriated general fund balance totaled $1.67 million, which represented 17 percent of the $9.7 million budgeted for the 2006-07 fiscal year. This amount is in excess of the 2 percent limit that Real Property Tax Law authorized a school district to retain. The District also had reserves in amounts that are not necessary or reasonable.

 

  • Roosevelt Union Free School District

 

At the completion of the first quarter of the 2008-09 fiscal year, the District's spending has generally been within the limits established by the board of education in its enacted budget. There were, however, several areas of concern which should be addressed by District officials. The District is not making adequate use of its encumbrance system to control expenditures. Many known expenditures have not been encumbered and some budgetary accounts have not been accurately established.

 

  

 


Attachment II

 

Regents Subcommittee on Audits

January 2009

Review of Audits Presented

Department’s Internal Audit Workgroup

 

 

Newly Presented Audits

 

We reviewed 26 audits that are being presented to the Subcommittee this month.  One audit was issued by the Office of Audit Services (OAS); the remaining 25 were issued by the Office of the State Comptroller (OSC). One of the audits examined 20 school districts’ compliance with physical education requirements; one looked at the use of Title I migrant education funds. The remaining findings were in the areas of procurement, claims processing, payroll, cash, financial reporting, information technology, extraclassroom activity fund, segregation of duties, budgeting, conflict of interest, fingerprinting, use of environmentally sensitive cleaning material, and transportation. The audit of Shenendehowa Central School District on its Internal Controls over Purchasing had no recommendations.

 

The Department has issued letters to the auditees, reminding them of the requirement to submit corrective action plans to the Department and OSC within 90 days of their receipt of the audit report.

 

The Department’s Internal Audit Workgroup identified some aspect of eleven audits for further review and follow-up.

 

  • School Districts’ Compliance with Physical Education Regulations – (Akron, Amsterdam, Bolivar-Richburg, Burnt Hills-Ballston Lake, Candor, Clarkstown, Commack, Elmira Heights, Evans-Brant, Harpursville, Hinsdale, Homer, Ilion, Lake Placid, Mineola, Ravena-Coeymans-Selkirk, Saranac Lake, Smithtown, Solvay, and Waterville.)  

 

Summary of Audits

 

Districts are generally not providing physical education classes consistent with Department regulations. Only one district reviewed (Homer) is in compliance with regulations. Students in 19 out of 20 school districts that were reviewed are not meeting the minimum physical education requirements. Districts typically did not provide enough physical education classes or class time to younger students in grades kindergarten through 6.

 


Follow-up Action

 

The Department is reviewing the findings for consideration of actions to be taken. Staff from the Office of Education - P-16 will brief the Subcommittee on the status of action. Upon the districts’ submission of the corrective action plan for this audit, OAS staff will review to ensure all findings have been addressed.

 

  • Amityville Union Free School District

 

Summary of Audit

 

Three out of seven board members failed to obtain the required six-hour training of financial oversight, accountability, and fiduciary responsibilities within the first year of their election. Additionally, 27 budget transfers (totaling $456,464) were made without proper board approval in March and April of 2007. Twenty-two of those transfers were not presented to the board until two or three months after they were processed by the District.

 

Follow-up Action

 

Counsel’s Office has written to the superintendent and the president of the board of education requiring them to provide proof that the three members have received the required training.

 

  • Ardsley Union Free School District

 

Summary of Audit

 

The District did not have the appropriate documentation to show that two contracts for day and night cleaning of the school and landscaping (totaling over $1.4 million over a two-year period) were procured using the competitive bidding process as required by General Municipal Law and District Policy. A signed copy of the contract for night cleaning could not be located, even though it was mentioned in the meeting minutes.

 

The board did not periodically review employment contract terms to ensure that benefit provisions were clearly defined. It was also not ensured that benefit provisions were clearly defined, and the District did not ensure that benefits were properly authorized for reimbursement. Six administrative employees received reimbursement for personal automobile and homeowner’s insurance premiums totaling $6,755, even though the board may have only intended that medical insurance was eligible for reimbursement.

 

 

 

 

Follow-up Action

 

Staff from the Office of Education - P-16 will contact the District and identify training opportunities available in the area of procurement. Counsel’s office has contacted the District’s counsel to clarify the provisions of the collective bargaining agreement related to employee benefits. Upon the District’s submission of the corrective action plan for this audit, OAS staff will review to ensure all findings have been addressed.

 

  • Hyde Park Central School District

 

Summary of Audit

 

The District’s unreserved, unappropriated fund balance in the general fund was reported at $6.4 million as of June 30, 2007, which is over $4 million more than the limit allowed by law. According to the assistant superintendent for business, the $6.4 million fund balance resulted in part from special aid forms being filed, that had not been filed in the past.

 

Follow-up Action

 

The OAS will analyze the fund balance history, and the current financial statements to better understand the cause of the excess fund balance. The OAS will review the corrective action plan to ensure timely compliance with the law.

 

  • Islip Union Free School District

 

Summary of Audit

 

A BOCES employee served as the purchasing agent to approve District purchases, which is not a good internal control for fiscal governance. This could put the BOCES employee in the position of approving purchase orders related to his employer. The board also did not formally approve the contract for this BOCES employee. The District issued 19 confirming purchases totaling $61,995, with no indication that they were for emergency purchases. Further, the District did not effectively procure goods and services, and, therefore, paid three vendors a total of $66,355 for goods without soliciting competitive bids or quotations, and eight professionals a total of $198,019 without soliciting competitive proposals.

 

Follow-up Action

 

Staff from the Office of Education - P-16 will review the appropriateness of the use of a BOCES employee as a purchasing agent.

 

 


  • Lockport City School District

 

Summary of Audit

 

The District has experienced an operating surplus in four of the last five completed fiscal years. The District also used about 40 percent of the amount appropriated for the 2004-05 fiscal year. Inaccurate budget estimates resulted in revenues exceeding expenditures by more than $9 million over the course of the last five fiscal years.

 

The District was unable to show a need for six of the seven reported general fund reserves totaling over $8 million.

 

Follow-up Action

 

Office of Education - P-16 staff will contact the District Superintendent to discuss findings and corrective action. Upon the District’s submission of the corrective action plan for this audit, OAS staff will review to ensure all findings have been addressed.

 

  • Minisink Valley Central School District

 

Summary of Audit

 

The District consistently overestimated appropriations for payroll and employee benefits. During a six-year period, appropriations for payroll and employee benefits exceeded expenditures by a total of $31.1 million.

 

Follow-up Action

 

Staff from the Office of Education - P-16 will follow-up with the District.  Upon the District’s submission of the corrective action plan for this audit, OAS staff will review to ensure all findings have been addressed.

 

  •  Northport-East Northport Union Free School District

 

Summary of Audit

 

The board did not have written policies governing the cash disbursement process and duties were not properly segregated. Six wire transfers totaling $1,046,018 had not been reviewed, approved, or confirmed by a District official who is independent of the wire transfer process.

 

The treasurer also does not comply with a board-adopted policy requiring two signatures for checks of amounts that exceed $50,000.

 

Follow-up Action

 

The OAS will review the financial statements and management letters to identify the extent of the findings. Upon the District’s submission of the corrective action plan for this audit, OAS staff will review to ensure all findings have been addressed.

 

  • Pawling Central School District

 

              Summary of Audit

 

The District’s general and school lunch fund balances are not sufficient to fund current operations. The District’s reported general fund balance has declined from $2.9 million on July 1, 2004, to $1.34 million as of June 30, 2007. Of the $1.34 million, $1.27 million was reserved, leaving only $70,000 available for appropriation. The adopted general fund budget for the 2007-08 fiscal year had a financing shortfall of $530,000. The school food service fund also had a reported accumulated deficit fund balance of $272,970 over the past two years.

 

Work practices have allowed certain employees to accumulate overtime pay totaling $140,242 and $179,108. Further, in the 2005-06 fiscal year, 44 percent of the 70 personal service accounts reviewed, exceeded the adopted budget by $796,656, and in the 2006-07 year, 47 percent of the salary line-items for the same 70 accounts exceeded that budget by $907,667.

 

Follow-up Action

 

Office of Education - P-16 staff, including staff from the Child Nutrition office, will discuss these findings with the District.

 

  • Rockland BOCES

 

Summary of Audit

 

The BOCES does not have a procedure in place to ensure that fingerprint-supported background criminal history checks are performed on independent contractors/consultants that are in direct contact with students. Twenty-one of 22 consultants serving the BOCES had not undergone fingerprint clearance checks.

 

Eight out of ten professional services providers tested were procured without the benefit of request for proposals or quotes.

 

Follow-up Action

 

The response to the draft audit report indicated that the BOCES has implemented procedures to ensure contractors having direct contact with students undergo criminal background checks and fingerprinting as prescribed by law. In addition, the Department’s Office of School Personnel Review and Accountability (OSPRA) will provide annual guidance to remind BOCES officials  about their obligations under the SAVE law and to inform interested parties about new technology advancements for the processing and management of fingerprint applications and information. OSPRA staff will continue to provide technical assistance.

 

  • Tri-Valley Central School District

 

Summary of Audit

 

The District did not always request the required criminal history background checks for employees and independent contractors, and when the District did request these checks, it did not submit them to the State Education Department in a timely manner. One hundred percent of teachers and 70 percent of independent contractors tested did not have a fingerprint-supported criminal history background check before beginning work at the school.

 

              Follow-up Action

 

The response to the draft audit report indicated that the District has implemented procedures to ensure all employees and contractors having direct contact with students undergo criminal history background checks and fingerprinting as prescribed by law. In addition, the Department’s Office of School Personnel Review and Accountability (OSPRA) will provide annual guidance to remind school district officials about their obligations under the SAVE law and to inform interested parties about new technology advancements for the processing and management of fingerprint applications and information. OSPRA staff will continue to provide technical assistance.

 


 

 

 

Audit

Procurement

Claims Processing

Payroll

Cash

Financial Reporting

Information Technology

Extraclassroom Activity Fund

Segregation of Duties

Budgeting

Conflict of Interest

Fingerprinting

Other

 

Office of Audit Services

Migrant Education Program- Diversity Project

 

 

 

 

 

 

 

 

 

 

 

Office of the State Comptroller

* Akron Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

* Amityville Union Free School District (footnote 1)

 

 

 

 

 

 

 

 

* Amsterdam School District (Greater) (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

Ardsley Union Free School District

 

 

 

 

 

 

 

 

 

 

* Bolivar-Richburg Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

* Burnt Hills-Ballston Lake Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

* Candor Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

Chittenango Central School District

 

 

 

 

 

 

 

 

 

 

* Clarkstown Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

* Commack Union Free School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

* Elmira Heights Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

* Evans-Brant (Lake Shore) Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

Florida Union Free School District

 

 

 

 

 

 

 

 

 

Geneseo Central School District

 

 

 

 

 

 

 

 

 

 

 

* Harpursville Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

Hicksville Union Free School District

 

 

 

 

 

 

 

 

 

 

 

* Hinsdale Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

* Homer Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

Hyde Park Central School District

 

 

 

 

 

 

 

 

* Ilion Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

Islip Union Free School District

 

 

 

 

 

 

 

 

 

Katonah-Lewisboro Union Free School District

 

 

 

 

 

 

 

 

 

 

Kingston City School District

 

 

 

 

 

 

 

 

 

* Lake Placid Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

* Lockport City School District (footnote 4)

 

 

 

 

 

 

 

 

 

* Mineola Union Free School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

Minisink Valley Central School District

 

 

 

 

 

 

 

 

 

 

 

* New York City Department of Education (footnote 3)

 

 

 

 

 

 

 

 

 

 

 

Northport-East Northport Union Free School District

 

 

 

 

 

 

 

 

 

Pawling Central School District

 

 

 

 

 

 

 

* Ravena-Coeymans-Selkirk Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

Rensselaer City School District

 

 

 

 

 

 

 

 

Richfield Springs Central School District

 

 

 

 

 

 

 

 

 

 

 

Rockland BOCES

 

 

 

 

 

 

 

 

 

 

* Saranac Lake Central School District  (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

Schroon Lake Central School District

 

 

 

 

 

 

 

 

 

 

 

Shenendehowa Central School District

 

 

 

 

 

 

 

 

 

 

 

 

* Smithtown Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

* Solvay Union Free School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

Tri-Valley Central School District

 

 

 

 

 

 

 

 

 

* Waterville Central School District (footnote 2)

 

 

 

 

 

 

 

 

 

 

 

West Islip Union Free School District

 

 

 

 

 

 

 

 

 

Whitesville Central School District

 

 

 

 

 

 

 

 

 

Windsor Central School District

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 2009 Total

13

3

12

5

8

10

1

1

1

1

2

23

 

* Other:

1

Board Fiscal Oversight

2

Physical Education Regulations

3

Purchase and Use of Environmentally Sensitive Cleaning Materials

4

Transportation

 

 

 

 


 

Summary of Current and Prior Audit Findings

 

 

May 2007 - April 2008

May 2008

June 2008

September 2008

October 2008

November 2008

December 2008

January 2009

Running Total

Procurement

97

9

2

35

6

6

8

13

176

Capital Assets

18

0

0

1

0

0

0

0

19

Claims Processing

108

9

3

16

3

7

5

3

154

Payroll

107

13

2

24

5

7

10

12

180

Cash

80

13

3

21

4

4

5

5

135

Financial Reporting

64

5

1

15

3

8

5

8

109

Information Technology

100

8

1

25

6

11

11

10

172

Capital Construction

5

0

0

0

0

0

0

0

5

Extraclassroom Activity Fund

7

0

0

6

1

1

1

1

17

Segregation of Duties

47

4

3

6

2

2

1

1

66

Budgeting

9

1

6

1

1

0

1

1

20

Conflict of Interest

10

2

0

4

1

1

3

1

22

Fingerprinting

0

5

1

0

1

1

1

2

11

Other

7

2

5

19

4

17

1

23

78

Total

659

71

27

173

37

65

52

80

1,164

 


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

Migrant Education Program - Diversity Project September 1, 2004 through August 31, 2006

FW-1007-3

 

 

$19,054 adjustment

 

The State University of New York Research Foundation  could not adequately substantiate $17,432 in salary, salary relationship expenditures, and $1,622 in non-salary related expenditures that were charged to Title I for the 2004-05 and 2005-06 program years. As a result, the Foundation should refund the amount to the Department.

 

The disallowance resulted from inadequate documentation to support $16,141 in salary and fringe benefit expenditures for three project staff. It was also caused by ineligible non-salary expenditures in the amount of $1,502. Lastly, another contributing factor was indirect costs associated with the disallowances, amounting to $1,291 for salary expenditures and $120 for non-salary expenditures.

5 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding accounting for Opening Doors Program income, salary and salary-related expenditures, and non-salary expenditures.

 

The Foundation officials agreed with the recommendations and have agreed to implement corrective action.

Office of the State Comptroller

Audit

Major Finding(s)

Recommendation/Response

Amityville Union Free School District

Internal Controls Over Selected Financial Operations

2008M-176

10th Judicial District

 

 

Three out of seven board members failed to obtain the required six-hour training of financial oversight, accountability, and fiduciary responsibilities within the first year of their election. Additionally, 27 budget transfers (totaling $456,464) were made without proper board approval in March and April of 2007. Twenty-two of those transfers were not presented to the board until two or three months after they were processed by the District.

 

The claims auditor did not have any guidance on the board’s expectations for auditing the District’s claims and did not conduct a thorough audit of the claims.

 

The District also did not always adhere to the requirements of General Municipal Law or board-adopted procurement policies, because it did not obtain competitive bids for two purchases (totaling $115,860). The District did not use competitive proposals to obtain services from nine professional services providers (totaling $894,262). Five vendors were paid a total of $27,091, without obtaining written, faxed, or telephone quotes as required by the board’s policies.

 

Finally, service equipment is not protected from unauthorized access, and passwords to the District’s network are not periodically changed. Duties are not properly segregated, and there is no formal disaster recovery plan.

13 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding board fiscal oversight, claims auditing, procurement, and information technology.

 

The District agreed with the recommendations pertaining to board fiscal oversight training, the approval of budget transfers, procedures or guidelines for claims auditing, bidding and purchase orders, the purchase of textbooks, and professional services providers. The District also agreed with recommendations regarding competitive quotations, the IT policy, restricted access to servers, password changes, audit logs, system controls, and disaster recovery. The District has agreed to implement corrective action as soon as possible to address the recommendations.

Ardsley Union Free School District

Internal Controls Over Competitive Bidding and Employee Benefits

2008M-191

9th Judicial District

 

 

The District did not have the appropriate documentation to show that two contracts for day and night cleaning of the school and landscaping, totaling over $1.4 million over a two-year period, were procured using the competitive bidding process as required by General Municipal Law and District policy. A signed copy of the contract for night cleaning could not be located, even though it was mentioned in the meeting minutes.

 

The board did not periodically review employment contract terms to ensure that benefit provisions were clearly defined. The District did not ensure that benefits were properly authorized for reimbursement. Six administrative employees received reimbursement for personal automobile and homeowner’s insurance premiums totaling $6,755, even though the board may have only intended that medical insurance was eligible for reimbursement.

 

6 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding competitive bidding and employee benefits.

 

The District agreed with the recommendations pertaining to providing appropriate documentation to substantiate claims regarding building maintenance contracts, as well as the inability to provide copies of board minutes. The District has also agreed with the recommendations regarding employee benefits. They have agreed to implement corrective action to address the findings.

Chittenango Central School District

Internal Controls Over Cash Disbursements

2008M-187

6th Judicial District

 

 

The treasurer did not affix or directly supervise the application of his electronic signature to District checks. Another weakness noted was within internal controls over the District’s process for classifying workers whom the District enrolls in Employees’ Retirement System (ERS).

 

4 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding cash disbursements, and the classification of employees.

 

The District agreed with the overall recommendations and has already begun the process of implementing changes. They will submit their corrective action plan in accordance with the 90-day requirement.

Florida Union Free School District

Internal Controls Over Selected Financial Activities

2008M-170

9th Judicial District

 

 

District officials paid $140,740 for professional services without written agreements or the necessary documentation. District officials made five purchases totaling $49,031 without obtaining written quotes.

 

District taxes are collected by the Town of Warwick Receiver of Taxes for those District taxpayers residing within the Town, which delays the deposit of funds into the District’s bank account. As a result, the District lost revenue of $15,387.

 

Further, the District did not establish adequate policies to effectively safeguard computer data and assets. When the District disposes of its old computers and servers, it removes the hard drives and stores them in the basement without sanitizing them. There is also no disaster recovery plan.

 

Finally, password and log-in security requirements were inadequate, and user rights for the financial software were not consistent with employees’ job duties.

11 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding purchasing, tax receipts, and information technology.

 

The District does not dispute any of the findings, and they have indicated that they expect to improve their operations and maximize revenue by implementing corrective action to address the recommendations.

 

Geneseo Central School District

Information Technology

2008M-153

7th Judicial District

 

 

District officials have not developed a written security plan to document the processes that are followed or the policies and procedures that are followed or the policies and procedures that were put into place.

 

The District’s disaster recovery plan has not been updated since it was created. The plan also does not contain written guidelines for staff to follow during or immediately after a disaster.

 

Finally, policies and procedures have not been implemented to monitor the information stored and transported on mobile storage devices.

 

3 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding information technology.

 

The District agreed with the recommendations pertaining to a district-wide security plan, updating the disaster recovery plan, and acceptable usage of flash drives. The District has indicated that they will establish corrective action as soon as possible, if they have not done so already, in order to further enhance security regarding information technology.

Hicksville Union Free School District

Internal Controls Over Procurement

2008M-198

10th Judicial District

 

 

Policies relating to the District’s procurement of professional services were not adequately designed or operating effectively, and as a result, District personnel acquired professional services totaling $2,720,134 without using a competitive process and paid one firm a total of $217,311 without the benefit of a written contract.

 

Eighty-one gasoline purchases (totaling $4,864) were reviewed, and several deficiencies were found. The deficiencies included vehicle identification numbers not corresponding with the identification numbers in fuel logs, a lack of fuel receipts, discrepancies with invoices, improper odometer readings and inappropriate fuel purchases. There were also inappropriate purchases made with store-specific purchase cards, and unauthorized usage.

 

5 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding procurement.

 

The District has accepted the recommendations pertaining to the procurement of professional services, the gasoline purchases, and the store-specific credit cards. They have committed to taking the necessary steps to continue to perfect district internal controls and operations.

Hyde Park Central School District Financial Condition and Internal Controls Over Selected Financial Activities

2008M-139

9th Judicial District

 

(Contract for Excellence District)

 

The District did not have adequate recordkeeping procedures to account for and monitor capital project expenditures in the early phases of the District’s facilities renovation project. Complete bidding documents for the first two phases of the project were not maintained by the District. There was no evidence of competitive bids for payments totaling $160,163.

 

The District’s unreserved, unappropriated fund balance in the general fund was reported at $6.4 million as of June 30, 2007, which is over $4 million more than the limit allowed by law. According to the assistant superintendent for business, the $6.4 million fund balance resulted in part from special aid forms being filed, that had not been filed in the past.

 

The District made separation payments totaling $63,178 without documented board approval. Further, the District paid $5,561 for the additional cost of health insurance for one of the principals over a two-year period, also without board approval.

 

Officials also have not ensured that access to the District’s financial software is restricted to only those functions required by individual employees’ job duties and have not maintained inventory records to help protect and safeguard computer and technology equipment. Audit logs are also not being maintained to track user changes, and backup tapes are not stored off-site. There is also no disaster recovery plan to ensure the safety and protection of data.

14 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding capital projects, fund balance, payroll, and information technology.

 

District officials generally agreed with recommendations pertaining to maintaining records for capital projects, monthly updates regarding the capital fund, bid and payment documentation, and the fund balance. The District has also agreed with the recommendations regarding employment contracts, system user access, inventory control, audit logs, and a data backup system. They have indicated that they have already partially or immediately implemented corrective action for a majority of the recommendations.

 

Islip Union Free School District

Internal Controls Over Selected Financial Activities

2008M-177

10th Judicial District

 

 

A BOCES employee served as the purchasing agent to approve District purchases, which is not a good internal control for fiscal governance. This could also put the BOCES employee in the position of approving purchase orders related to his employer. The board also did not formally approve the contract for this BOCES employee. The District issued 19 confirming purchases totaling $61,995, with no indication that they were for emergency purchases. Further, the District did not effectively procure goods and services, and, therefore, paid three vendors a total of $66,355 for goods without soliciting competitive bids or quotations and eight professionals a total of $198,019 without soliciting competitive proposals.

 

The treasurer performed duties that were not properly segregated, resulting in the risk of District funds being misappropriated or lost, errors going undetected, or transactions being concealed; the treasurer deposited 89 receipts totaling $771,262 between 4 and 18 days after receipt; and the business administrator used a signature disk with the treasurer’s signature instead of his own.

 

Finally, there was not a disaster recovery plan in place and employees had access to parts of the financial system that was not necessary for their jobs.

13 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding procurement, the business office, and computer data.

 

District officials agreed with the recommendations pertaining to the appointment of a purchasing agent, the confirmation of purchase orders, the solicitation of competitive bids, requests for proposals, the segregation of duties for the treasurer, the collection of cash, signature disks, and disaster recovery. The District has indicated that they will implement corrective action shortly, if they have not already done so.

 

Katonah-Lewisboro Union Free School District

Internal Controls Over Selected Financial Operations

2008M-155

9th Judicial District

 

 

District officials incorrectly encumbered approximately $2 million of fund balance at the end of the 2006-07 fiscal year for potential retroactive salary increases associated with contracts that had not been finalized.

 

The District also incurred unnecessary payroll cost because District officials did not establish an internal control system that provided adequate oversight of payroll expenditures. There were 57 instances where the hours on transportation employees’ timecards did not match the hours claimed on time sheets; these employees were overpaid $9,160. Three transportation workers received overtime payments of $41,714, even though the District did not ensure that overtime was needed.

 

The District also spent more on administrative salaries than the average spending of other districts statewide and in Westchester County. The District’s average cost per student was $1,072 for administrative salaries which is higher than other similar districts in Westchester County which averages $776.

5 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding encumbrances and payroll.

 

The District agreed with the recommendations pertaining to the encumbrance of funds for District commitments, retroactive pay and the classification of liabilities, collective bargaining agreements, overtime policies and procedures, the consistency of timecards, and the cost of administrative staff. The District has indicated that it plans to initiate corrective action, if it has not already done so.

 

Kingston City School District

Internal Controls Over Selected Financial Operations

2008M-162

3rd Judicial District

 

 

District officials have not implemented the appropriate policies to guide financial operations and employees’ duties were not properly segregated.

 

The District also did not properly segregate the payroll supervisor’s duties, and payroll transactions totaling $28,235 were not authorized by the board, and time records lacked the necessary information and signatures.

 

There were also weaknesses in the controls over users’ access to financial information and student data applications. The District had no formal procedures for the assignment of user access rights. The District also has not established a disaster recovery program.

 

The District also showed weaknesses in internal controls over the process for classifying workers who the District enrolls in the Employees’ Retirement System.

 

19 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding cash receipts and disbursements, payroll, information technology, and the classification of employees.

 

District officials agreed with the recommendations pertaining to general fund cash receipts, policies for financial operations, payroll report oversight, the segregation of duties in the payroll office, the revision of payroll forms, information technology security plans, and written policies and procedures on classifying employees. The District has indicated that they will implement corrective action, if they have not done so already.

Lockport City School District

Internal Controls Over Selected Financial Operations

2008M-159

8th Judicial District

 

 

The District has experienced an operating surplus in four of the last five completed fiscal years. The District also used about 40 percent of the amount appropriated for the 2004-05 fiscal year. Inaccurate budget estimates resulted in revenues exceeding expenditures by more than $9 million, over the course of the last five fiscal years.

 

The District was unable to show a need for six of the seven reported general fund reserves, totaling over $8 million.

 

The District’s transportation consultant is the “sister company” of the primary transportation vendor, shares its headquarters and uses the same letterhead and billing remittance address as the primary transportation vendor. The individual assigned by the consultant to be the District’s representative formally worked as general manager for the primary transportation vendor for at least 20 years.

 

The recordkeeping and cash custody duties also were not separated, and the duties of the treasurer were not segregated.

 

16 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding financial condition, transportation, and the Trust and Agency fund.

 

District officials agreed with the recommendations pertaining to the operating surplus and revisiting reserves for appropriateness, the transportation consultant and possible conflicts of interest, and the creation of accounting procedures and district policies in relation to Trust and Agency funds. The District has indicated that they have already begun to put into place the appropriate recommendations.

Minisink Valley Central School District

Internal Controls Over Budget Estimates

2008M-221

9th Judicial District

 

 

The District consistently overestimated appropriations for payroll and employee benefits. During a six-year period, appropriations for payroll and employee benefits exceeded expenditures by a total of $31.1 million.

 

2 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding budget estimates.

 

The District disagrees with the characterization that payroll and employee benefits exceeded expenditures by a total of $31.1 million. They state that in the auditor’s report the annual overestimated appropriations were totaled, when the appropriations were actually rolled over annually. The District did indicate, however, that they will take steps to reduce the unreserved, appropriated fund balance over a period of three or more years through continued budget management.

New York City Department of Education Environmentally Sensitive Cleaning and Maintenance in New York City Public Schools

2007-N-21

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

 

(Contract for Excellence District)

 

As of September 1, 2006, all schools were required to purchase and use cleaning products that minimize the potential impact on human health and the environment. The New York City Department of Education (DOE) is responsible for about 1.1 million students, operates 1,236 schools and related facilities. A total of 1,104 of the facilities are cleaned by DOE; 84 are cleaned by contractors; and 48 are leased and cleaned by the landlord.

 

The DOE was a year late in complying with the law requiring the purchase and use of green cleaning products because they were not informed by the Chancellor’s Office of required actions. Later, the DOE had begun to purchase and use green cleaning products.

 

The facilities cleaned by contractors were not always purchasing and using green cleaning products, and the leased facilities generally were not purchasing and using such products because none of the landlords for DOE facilities had been informed about the new requirements.

 

Further, 42 of the 191 cleaning products listed in the new catalog do not qualify as green cleaning products. Thirty-four of the 163 products ordered and received at the school facilities were not green products.

 

6 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the use of sensitive cleaning and maintenance products in schools.

 

The DOE agreed with the recommendations pertaining to the notification to employees of new green cleaning requirements, deleting the items from the catalog that do not meet green criteria, and the issuance of written instructions to custodial engineers as to the status of non-green cleaning products. The DOE also agreed with the recommendations pertaining to the monitoring of cleaning practices at all facilities, and requiring the deputy directors of facilities to submit written documentation of any problems.

 

The DOE did not agree with the recommendation regarding periodic meetings for the custodial engineers to review compliance with the new requirements. They have agreed to an alternate solution which they believe is satisfactory.

Northport-East Northport Union Free School District

Internal Controls Over Selected Financial Operations

2008M-129

10th Judicial District

 

 

The board did not have written policies governing the cash disbursement process and duties were not properly segregated. Six wire transfers totaling $1,046,018 had not been reviewed, approved, or confirmed by a District official who is independent of the wire transfer process.

 

The treasurer also does not comply with a board-adopted policy requiring two signatures for checks of amounts that exceed $50,000.

 

The claims auditor did not audit payments made with hand-written checks, and none of the documentation and support for hand-written checks is ever provided to the claims auditor for the audit of claims. There were gaps in the check-numbering sequence recorded in the District’s computerized financial application, creating what appeared to be missing transactions within the system. Eight out of 16 missing checks reviewed were recorded in the accounting system through the use of journal entries instead of being recorded through the computerized accounting system as cash disbursements. The District also failed to locate four of eight voided checks.

 

Internal controls over payroll processing were not properly designed or operating effectively. The superintendents had not certified any of the payrolls as required by the board and had not formally designated anyone to certify the payrolls in their absence. The District paid four employees $6,451 for separation payments that were not in compliance with applicable employee contracts or board policy.

 

Finally, a formal disaster recovery plan was not established in order to protect data, and the security of the District’s IT resources was not sufficient.

19 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding cash disbursements, payroll, and information technology.

 

District officials generally agreed with the recommendations pertaining to the cash disbursement process, wire transfers and hand-written checks, the segregation of duties over the treasurer, supporting documen-    tation for claims, posting transactions, blank checks, journal entries, and the certification of payroll. The District also agreed with amending their fringe benefit and IT policies and they have indicated they plan to initiate corrective action shortly to amend all concerns.

 

Pawling Central School District

Financial Condition and Internal Controls Over Selected Financial Activities

2008M-140

9th Judicial District

 

 

The District’s general and school lunch fund balances are not sufficient to fund current operations. The District’s reported general fund balance has declined from $2.9 million on July 1, 2004, to $1.34 million as of June 30, 2007. Of the $1.34 million, $1.27 million was reserved, leaving only $70,000 available for appropriation. The adopted general fund budget for the 2007-08 fiscal year had a financing shortfall of $530,000. The school food service fund also had a reported accumulated deficit fund balance of $272,970 over the past two years.

 

Work practices have allowed certain employees to accumulate overtime pay totaling $140,242 and $179,108. Further, In the 2005-06 fiscal year, 44 percent of the 70 personal service accounts reviewed, exceeded the adopted budget by $796,656, and in the 2006-07 year, 47 percent of the salary line-items for the same 70 accounts exceeded that budget by $907,667.

 

Two purchases (totaling $52,439), were not competitively bid, and while the purchasing agent identified these vendors as sole sources for these items, there was no evidence to support that. There was also a lack of proper documentation for purchases from six vendors.

 

District officials have not effectively restricted access to computer assets and data, and back-up tapes have not been secured in an off-site location.

 

19 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding financial condition, overtime, purchasing, claims processing, information technology, and the classification of employees.

 

District officials generally agreed with the recommendations pertaining to the preparation of accurate budget estimates, monitoring the general fund balance, monitoring cash flow, establishing a pre-approval process for overtime, reviewing payroll practices, purchasing and price quotes. The District has also agreed with the recommendations regarding the claims auditor reporting directly to the board, the payment of claims, the restriction of computer access, and the security of computer data and back-up tapes. They have agreed to implement corrective action as soon as possible.

Rensselaer City School District

Internal Controls Over Selected Financial Operations

2008M-143

3rd Judicial District

 

 

District officials misinterpreted the requirement that the internal auditor be independent and unimpaired in performing his or her duties. There were also questionable charges to two grants, untimely deposits from extraclassroom activity funds and over $300,000 in purchases for which the District did not obtain the required quotes or bids.

 

The District uses the Rensselaer-Columbia-Greene BOCES for its internal auditor services, which is not in accordance with professional auditing standards for independence based on the material relationship that exists between the BOCES and the District. The District’s budgeted expenditures during 2006-07 were approximately $16 million, of which $661,000 were expended on BOCES services during the same period.

 

The board also did not adopt policies and procedures regarding the management of grant funds and certain grant fund moneys were not spend in accordance with the State Education Department’s regulations. There were $23,886 of questionable expenditures and $19,357 of tutoring expenses that were charged to the District’s Homeless Children and Youth grant for which the District could not provide sufficient documentation. There was also $4,147 in questionable expenditures found pertaining to the District’s Universal Pre-Kindergarten Grant fund, and $11,043 was charged to the grant for expenditures for which sufficient documentation was not provided.

 

The board also had not adopted policies and procedures governing extraclassroom activities as required by the Regulations of the Commissioner of Education. The records were not adequately maintained and there were instances of insufficient documentation. There were also $7,869 in deposits that were not submitted in a timely manner.

 

Thirty-eight purchases (totaling $716,950) were tested, and 18 of them were either not competitively bid, or the District did not obtain the required written or verbal quotes.

 

Finally, the board did not have policies and procedures in place for determining whether certain individuals should be classified as independent contractors or employees.

7 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding internal audit function, grants, extraclassroom activities, purchasing, and classification of employees.

 

The District agreed with the recommendations pertaining to a lack of appropriate record keeping in regard to the STAC 202 and tutoring records, however, feels that the District has followed procedures regarding FS10 definitions. The District also agreed with the findings related to the internal controls auditor, and questionable cafeteria table purchases. The District disagreed with the recommendations regarding the conflict of interest of the use of BOCES for internal audit services, but have hired an internal controls auditor independent of the BOCES services. The District also feels that the resources spent on the children were well within the acceptable range for the grants, and that transportation was provided for every Pre-K student. Finally, the District has indicated that they do not have an on-site storage capacity for bus fuel, so, as a result, the District must purchase fuel at the pump.

 

The District stated that they will initiate corrective action for the recommendations.

Richfield Springs Central School District Internal Controls Over Purchasing

2008M-195

6th Judicial District

 

 

The purchasing agent did not always ensure that goods and services were purchased in accordance with the District’s procurement policy. Fifty-seven purchases were reviewed (totaling $1.6 million) and it was found that District officials did not seek competition for 31 of those purchases (totaling $607,000).

 

Additionally, it was found that for 4 ($110,388) of the 57 purchases, the District did not competitively bid or participate in a contract awarded by another governmental entity.

 

Thirty-eight purchases were reviewed (totaling $417,001) and it was found that the District did not comply with the procurement policy. Quotes were not always obtained or documented, and copies of the procurement policy were not always available.

 

Further, the superintendent did not solicit requests for proposals or require any other form of competition when procuring certain professional services. There were $191,876 in purchases made without the use of RFP’s.

 

4 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding procurement.

 

The District agrees with the recommendation regarding the purchasing agent, but disagrees with the comment that they burdened the taxpayers with additional costs. The District also agreed with the recommendations pertaining to the purchasing agent obtaining quotes, and providing District officials with copies of the purchasing policy. Finally, the District was in agreement with the recommendations pertaining to requiring request for proposals. They have agreed to implement corrective action to address all findings.

Rockland BOCES Internal Controls Over Selected Operations

2008M-241

9th Judicial District

 

 

The BOCES does not have a procedure in place to ensure that fingerprint-supported background criminal history checks are performed on independent contractors/consultants that are in direct contact with students. Twenty-one of 22 consultants serving BOCES had not undergone fingerprint clearance checks.

 

Eight out of ten professional services providers tested, were procured without the benefit of request for proposals or quotes.

 

Finally, BOCES policy for meals and refreshments does not require supporting documentation detailing the purpose or list of attendees at meetings or functions where refreshments are provided. Fifty-three percent of the meal and refreshment invoices reviewed (totaling $19,000) did not have sufficient supporting documentation to prove that expenditures were valid and necessary.

 

3 recommendations

 

The report’s recommendations focused primarily on strengthening the polices and procedures regarding criminal background checks, and purchasing

 

The BOCES has agreed with the recommendations pertaining to fingerprinting consultants that have direct student contact, however, they have indicated that those consultants that have worked with students have always done so in the presence of administrators or teachers. The BOCES has also agreed with recommendations pertaining to purchasing policies and providing appropriate documentation. The BOCES has indicated that they will present a corrective action plan to their board for approval.

School Districts' Compliance with Physical Education Regulations

2008-MS-6

 

(Akron Central School District (S9-8-27), Amsterdam School District (Greater) (S9-8-13), Bolivar-Richburg Central School District (S9-8-24), Burnt Hills-Ballston Lake Central School District (S9-8-8), Candor Central School District (S9-8-10), Clarkstown Central School District (S9-8-23), Commack Union Free School District (S9-8-17), Elmira Heights Central School District (S9-8-20), Evans-Brant (Lake Shore) Central School District (S9-8-26), Harpursville Central School District (S9-8-11), Hinsdale Central School District (S9-8-25), Homer Central School District (S9-8-9), Ilion Central School District (S9-8-15), Lake Placid Central School District (S9-8-22), Mineola Union Free School District (S9-8-19), Ravena-Coeymans-Selkirk Central School District (S9-8-12), Saranac Lake Central School District (S9-8-21), Smithtown Central School District (S9-8-18), Solvay Union Free School District (S9-8-16), Waterville Central School District (S9-8-14))

 

3rd, 4th, 5th, 6th, 7th, 8th, 9th, and 10th Judicial Districts

 

Amsterdam City School District - Contract for Excellence District

 

Lake Placid Central School District - Fiscal Concern

 

Over the past 30 years, the obesity rate has nearly tripled for children ages 2 to 5 years and youth ages 12 to 19 years, and it has quadrupled for children ages 6 to 11 years. Chapter 11 of the Regulations of the Commissioner of the State Education Department stipulates the minimum physical education classes and the number of minutes that students in schools must be offered each week by grade level. The Department also directs school districts to monitor their physical education programs.

 

Districts are generally not providing physical education classes consistent with Department regulations. Only one district reviewed (Homer) is in compliance with regulations. Students in 19 out of 20 school districts that were reviewed are not meeting the minimum physical education requirements.

 

Districts typically did not provide enough physical education classes or class time to younger students in grades kindergarten (K) through 6. Eighteen of the 20 districts did not meet the minimum requirements for grades K through 3; on average, students in these grades were offered only 48 percent of the required classes, and only 72 percent of required class time. Sixteen of the 20 districts did not meet the minimum regulations for grades 4 and 5; on average, these students were offered only 74 percent of the required classes, and 77 percent of the required class time.  Seventeen districts also were not meeting the minimum regulations for grade 6; these students were offered about 85 percent of the required classes and class time.

 

Three districts inappropriately offered students in grades 10 through 12 elective classes in place of traditional physical education classes. According to the Department, this is not acceptable.

 

According to the Department, only 19 districts statewide have submitted appropriate written physical education plans. Of the 20 districts reviewed, seven did not have physical education plans as required. And none of the 13 districts that had a plan, filed it with the Department. Of the 13 districts with physical education plans, only two districts had plans that complied with regulations.

4 recommendations in main report

 

56 total recommendations for the 20 districts’ individual reports

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding physical education regulations.

 

Ravena-Coeymans-Selkirk Central School District has indicated that changes to comply with the Department’s regulations will be fully implemented by second semester 2009. Solvay Union Free School District responded by saying that while they do currently face time and facility constraints, they have established a plan to bring physical education requirements to an acceptable level according to Department standards. The 15 districts that responded generally agreed with the findings and recommendations, and have indicated that they plan to initiate some corrective action.

 

The Candor, Waterville, Ilion, Smithtown and Commack school districts chose not to respond to the report.

 

Schroon Lake Central School District

Internal Controls Over Financial Operations

2008M-190

4th Judicial District

 

 

The board has not effectively addressed the business office operations to ensure that incompatible duties are adequately segregated or that the board had established sufficient compensating controls to address the lack of segregation of duties. The District did not have comprehensive written policies or procedures in place to provide adequate guidance and internal controls over cash disbursements, payroll processing, and bank reconciliations.

 

3 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding financial operations.

 

The District accepts and supports the findings pertaining to financial policies and procedures and they are working to resolve them.

Shenendehowa Central School District

Internal Controls Over Purchasing

2008M-207

4th Judicial District

 

 

Fourteen out of 106 purchases (totaling $11,108) lacked purchase orders, and the claims auditor routinely audited and approved the payment of vendor claims for purchases.

 

During the 2007-08 fiscal year, the District’s new chief financial officer revised the purchasing manual and strengthened the existing controls over purchasing, which has had a positive impact on the District’s policies and procedures.

There were no recommendations.

 

Tri-Valley Central School District

Internal Controls Over Selected District Operations

2008M-142

3rd Judicial District

 

 

The District did not always request the required criminal history background checks for employees and independent contractors, and when the District did request these checks, it did not submit them to the State Education Department in a timely manner. One hundred percent of teachers and 70 percent of independent contractors tested did not have a fingerprint-supported criminal history background check before beginning work at the school.

 

The District also did not obtain quotes for purchases when required. Twenty claims (totaling $67,000) were all paid without evidence that District officials obtained the required verbal or written quotations.

 

Finally, the District did not adequately segregate duties over the payroll process for the majority of the test period.

 

5 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding criminal history background checks, purchasing, and payroll.

 

The District agreed with the recommendations pertaining to requesting background checks for all employees who have direct student contact, and monitoring the superintendent’s secretary to ensure that she performs her background check duties properly. Also, the District agreed with recommendations to ensure that the department heads obtain the required quotes for the purchases of goods, and they’ve also agreed to continue to keep the payroll duties segregated. The District has implemented corrective action to amend all concerns.

West Islip Union Free School District

Internal Controls Over Selected Financial Activities

2008M-180

10th Judicial District

 

 

The board president and a board member had interests that were not publicly disclosed as a result of the District’s failure to comply with the code of ethics.

 

The District paid the assistant superintendent for business a total of $6,276 for waiving the right to participate in the District’s medical insurance plan. However, her employment contract did not contain a provision for this benefit.

 

The District has not established formal policies and procedures to add and delete employees from the system and did not disable two former employees’ access. The District allowed two employees full system user maintenance rights, although their job responsibilities did not require full maintenance rights. Additionally, 15 vendors in the District’s master list were assigned multiple identification numbers and the District had not conducted a test or the restoration of backup data. Finally, the District has not established a disaster recovery program.

 

7 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding conflicts of interest, employee fringe benefits, and information technology.

 

The District agreed with the recommendations pertaining to a revised code of ethics, the conflict of interest form, District official disclosure, and reviewing disbursements to employees. The District also agreed with recommendations pertaining to the computer use policy, user access accounts and permissions, remote access, audit logs, duplicate vendor identification numbers, system back up, and disaster recovery. The District has indicated that they will be reviewing the three areas in question in order to improve internal controls.

Whitesville Central School District

Internal Controls Over Selected Financial Operations

2008M-137

8th Judicial District

 

 

The District has not taken adequate action to address the excessive general fund balance, even thought their external auditors have brought this matter to their attention for the last three fiscal years. Two reserve funds were also used to lower the excessive general fund balance at the recommendation of the District’s external auditors. The propriety of $305,000 in the reserve fund are in question.

 

The board and District officials have not properly segregated incompatible duties in the business office. The District clerk/secretary maintained leave time records, including her own, without appropriate oversight. The treasurer paid the superintendent $4,500 in salary that was not provided for in his contract. Additionally, the District clerk/secretary received 18 compensatory days off each year, valued at $6,770 over the last four years, that the board had not formally approved.

 

Internal controls over information technology assets are not appropriately designed or operating effectively. There are not requirements to change passwords or complexity requirements for passwords. Three individuals also have the ability to change accounting data and the access rights of others without oversight, which resulted in a junior accountant changing his direct deposit payroll deductions without the knowledge of the treasurer. Further, four network and five e-mail accounts were not deleted for individuals that are no longer employed by the District. The District has also neglected to establish an appropriate disaster recovery program.

 

Finally, the BOCES employee serving as the internal auditor is not independent in performing the internal audit function.

11 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding financial condition, segregation of duties, information technology, and the internal audit function.

 

District officials stated they will be adjusting the budget development process to reduce the amount of the undesignated fund balance, appropriate monies into established reserves, reducing the amount allocated to the Employee Benefit Reserve, and monitor adjusting spending. The District has also indicated that all wire transfers will now be signed by the junior accountant, and the oversights regarding the superintendent’s pay raise have also been amended. The appropriate information technology policies will also be put into place during the 2008-09 school year.

 

Windsor Central School District

Internal Controls Over Selected Financial Activities

2008M-149

6th Judicial District

 

 

There were weaknesses in the District’s appointment of its claims auditor and classification of employees, as a result of District management neglecting to establish adequate policies and procedures or ensuring that employees were adhering to existing ones. The board appointed an employee of BOCES as the District’s claims auditor, which is against the Department’s guidance on interpreting regulations.

 

There were also internal controls weaknesses over the District’s process for classifying workers whom the District enrolls in the Employees’ Retirement System (ERS).

 

2 recommendations

 

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the appointment of a claims auditor, the classification of employees, and the use of competition.

 

District officials generally agreed with the recommendations pertaining to the appointment of a BOCES employee to perform claims auditor duties, and strengthening controls over the process for classifying workers for the ERS. They have indicated that they will implement corrective action if they have not done so already.

 


Attachment V

 

Regents Subcommittee on Audits

January 2009 Meeting

Follow-up Process to OSC Audits

 

The Regents Subcommittee on Audits has been presented with over 600 audit reports since January 2007. The reports were of school districts (some districts had multiple audits), BOCES, charter schools, special education preschool providers, and Department programs and activities.  The vast majority of the audits have been issued by the Office of the State Comptroller (OSC).  The accountability legislation, passed in 2005, requires OSC to audit all school districts and BOCES before March 31, 2010. It also requires that the districts and BOCES submit a corrective action plan (CAP) within 90 days to both OSC and the Commissioner of Education. The Office of Audit Services (OAS) administers the follow-up process for the Department.

 

School District Notification

 

The OSC audit report contains language directing the district or BOCES to submit a corrective action plan to both the Comptroller’s Office and the Commissioner of Education. The report also identifies a site where information on the elements of a CAP can be found.  The following steps are taken:

 

  • The Department notifies the auditee that the audit is being presented and reminds them of the requirement to submit their CAP both to the Department and OSC within 90 days of their receipt of audit report.
  • OAS and OSC do a periodic reconciliation to ensure both agencies received all the CAPs submitted. 
  • OAS continues to send delinquent auditees dunning letters until the CAP is submitted.
  • Follow-up actions vary and sometimes include correspondence to the district requesting further information and/or requiring actions, is also possible on-site verification of corrective actions may be taken, and in some cases more formal sanctions. 

 

There are a few different processes used in following up on school district and BOCES audits depending on the severity of the findings.

 

Review of Audits by the Department’s Internal Audit Workgroup

 

Prior to the Subcommittee meeting, the Department’s Internal Audit Workgroup (staff from OMS, Counsel, P-16 and OAS) meets and identifies specific audits with either significant audit concerns or findings of a nature that require the Subcommittee’s attention.  The Department’s course of action is also planned in the meeting which could either be:

 

  • To focus on the adequacy of the CAP, and/or

 

  • Take immediate and specific action. 

 

SPECIFIC EXAMPLES

 

  1. Focus on the adequacy of the CAP:

 

Adequate Response

 

Example: Greece Central School District (Internal Controls Over Selected Financial Transactions 4/08, Presented to the Subcommittee in 6/08) -  OSC audit findings included Capital Improvement Project exceeded authorized funding by $2.5 million; a $1 million pay increase to the construction manager that was not board-approved, and capital project expenditures being paid from the general fund; and the  District failed to bill Medicaid by at least $110,000 and could be up to $2.2 million which could cost the District up to $560,000 in lost revenue.

 

Action taken: The District submitted a comprehensive CAP that addressed all the findings and recommendations of the audit.  For example, the CAP indicated that the board of education will require periodic financial reports from both the construction management firm and the District’s business office.  The District has already purchased software specific to capital projects to effectively track all pertinent financial information. This software allows the District to monitor budgets, bid results, change orders, and all applicable Department documents, such as project budgets and final cost reports.  The board of education will establish a board policy directing the administration to develop comprehensive regulations and procedures to ensure that all claims are in compliance with Medicaid regulations and are submitted in a timely manner.

 

Future Resolution

 

If the CAP submitted indicates actions with future outcomes or resolutions, a series of communication is sent to the auditee or responsible party in order to keep the Department informed of the progress and final resolution of the corrective actions. 

 

Example: Poughkeepsie City School District (Circumvention of Internal Controls and Fiscal Oversight 8/07, Presented to the Subcommittee in 10/07) - OSC audit questioned the selection and hiring process for four individuals in administrative positions created by the former superintendent. The individuals were paid a total of $730,000, relying solely on the former superintendent’s recommendation.  The former superintendent override controls resulting in over $539,000 in questionable expenditures made by the District. Such questionable expenditures include extra compensation payments resulting in $46,742 paid to 10 administrators; $16,000 for longevity to an administrator who was not entitled to it; and two employees, including the former superintendent, that received over $15,000 in payments for personal business days when their contracts did not provide this benefit.

 

Action taken: The District’s CAP indicated that among other corrective actions, the Dutchess County District Attorney (DA) convened a Grand Jury to investigate the affairs of the District.  The board of education is awaiting the outcome of the Grand Jury decision before determining how best to proceed. The Department then sent a letter to the Dutchess County DA requesting that it be notified of the outcome of the Grand Jury proceeding.  The Dutchess County DA replied informing the Department that the Grand Jury investigation has been completed and submitted its report to the Dutchess County Court. The report has been temporarily sealed from the public as it waits for the Court to review the Grand Jury minutes.  In the meantime, the Grand Jury has filed seven counts of indictment against the former superintendent of the District.

 

Seek Recovery of Overpayments

 

If the audit outlines a recommendation to recoup overpayments or terminate inappropriate contractual relationship, a series of communication is sent to the auditee or responsible party and asks that the Department be informed of the progress and final resolution of the corrective actions. 

 

Example: Frontier Central School District (Internal Control Over Personal Service Compensation and Benefits 12/28/07, Presented to the Subcommittee in 2/08) - The board did not authorize or review a “merit pay” salary increase for a former superintendent, which caused the District to overpay him by $3,111. The District paid the interim superintendent at a weekly rate even when he did not work the minimum number of days per week stipulated in his contract resulting in an overpayment of $2,725. The District paid $1,932 to a former assistant superintendent for unused sick leave that he had not earned. The board also paid an employee $2,222 for unused leave time. The District did not follow applicable collective bargaining agreements and other employment contracts when it made $875 in unauthorized credits for future health insurance coverage to a teacher.

 

Action taken: OAS reviewed the District’s CAP and sent a follow-up letter requesting  the status of the corrective action.  The District has sent status updates indicating that it sent notices demanding payment to the individuals mentioned in the audit report.  The most recent update stated that some recoupments have already been made and another case was further reviewed, found to be incorrect and no overpayment was made.  The other recovery attempt was legally challenged and the District’s attorney advised that further legal action from the District will not be cost effective.

 

  1. Take immediate and specific action:

 

Communicate with the auditee and/or refer to the program office concerned

 

Example: Highland Central School District (Internal Controls Over Selected Financial Operations 10/10/08, Presented to the Subcommittee on 11/08) - The board failed to meet the training requirements for board members on financial oversight responsibilities.  Five of nine board members required to have training on their financial oversight, accountability, and fiduciary responsibilities chose not to receive the training.  Two members indicated the training offered was not convenient, and did not believe it was necessary for them to attend.

 

Action taken: On November 10, 2008, the Department’s Counsel sent a letter to the superintendent and the board president identifying five board members who did not have the mandatory training and directing them to submit proof of training to the Department in writing by December 10, 2008.  Four completed the training and supplied documentation; one did not.  An Order to Show Cause to remove that board member was issued and a hearing will be held before the Commissioner on January 28, 2009.

 

Recommend a Policy Change

 

Example: Cortland City School District (Internal Control Over Selected Financial Operations 3/21/08, Presented to the Subcommittee on 5/08) - The board did not provide for proper audit of claims.  No effective system was in place prior to May 2007 to ensure that 7,211 claims amounting to $57.2 million were properly authorized, documented, and approved.  The claims auditor did not perform a complete and thorough audit of claims or approve warrants.

 

Action taken: The frequency and severity of audit findings related to internal claims auditing led to the recommendation by the Internal Audit Workgroup to present to the Subcommittee a conceptual proposal to require a mandatory training for internal claims auditors to ensure a uniform and comprehensive review of claims occurs in school districts that utilize the claims auditor function.  The Subcommittee voted to approve the conceptual proposal and directed staff to reach out to the Office of the State Comptroller, the New York State School Boards Association, the New York State Council of School Superintendents and the New York State Association of School Business Officials for comment. Staff have done that and the proposal will be brought to the Committee on Elementary, Middle, Secondary and Continuing Education for further review.

 

 


 

Total No. of Audits Presented to the Subcommittee

Total CAPs Received

Total CAPs Due

Total Follow-up Letters Sent

 

 

 

 

615

334

211

281

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total No. of Audits Identified by the Internal Audit Workgroup

Total CAPs Received

Total No. of CAPs Adequately Addressing Findings and Recommendations

Total No. of CAPs Needing Further Actions or Follow-ups

 

 

 

 

110

55

39

16