Meeting of the Board of Regents | January 2009
A Report on the January 12, 2009 Meeting
Of the Regents Subcommittee on Audits
Your Regents Subcommittee on Audits met yesterday morning.
Staff reported on a document being developed to provide summary information on audit trends arising from school district and BOCES audit findings. The subcommittee discussed the appropriate content of the document and the method of communication. It was agreed that staff would continue to work on the document and incorporate guidance on how to resolve the audit findings and avoid the control weaknesses identified. Staff were also asked to consider a web based presentation that could include links to key criteria and guidance.
The Subcommittee was presented with 26 audits this month. One was issued by the Office of Audit Services and 25 by the Office of the State Comptroller. The Department’s Internal Audit Workgroup identified eleven audits for additional attention. We were briefed on all of the eleven.
Perhaps the most significant of the audits was one that examined School Districts Compliance with Physical Education requirements. It found that 19 out of 20 districts were not in compliance, primarily at the elementary level. The Department is working with school districts, offering technical assistance to come into compliance and will be requesting corrective action plans from each of the districts.
The other audits involved findings in the areas of required board training, 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 Department’s Internal Control Officer briefed the Subcommittee on internal controls, improvements planned in that area, including the development of website, and the Department certification of compliance.
Finally, we were briefed on the Department follow-up process for school district and BOCES audits. Counsel’s Office, the Office of Education-P-16 and Audit Services are involved in communicating with districts on the adequacy of responses to the audit findings and other more urgent actions. Staff will provide the Subcommittee with quarterly updates on follow-up actions. We asked that staff make the follow-up process information available to the public to illustrate the Department’s commitment to enhance accountability in school districts.
I have attached the results of the full Review of Audits presented by the Department’s Internal Audit Workgroup for your information.
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.