Meeting of the Board of Regents | June 2010

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:	June 10, 2010
STRATEGIC GOAL:	Goal 5
AUTHORIZATION(S):

 

SUMMARY

 

Issues for Discussion

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

 

 

Reason(s) for Consideration

 

              Update on Activities

Proposed Handling

              Discussion and Guidance

Procedural History

The information is provided to assist the Subcommittee in carrying out its oversight responsibilities.

 

Background Information 

 

1.           Analysis of School District Financial Statements

              The Office of Audit Services reviews the annual independent audits of all school districts in the State.  Information will be presented on the results of the review of the July 1, 2008 to June 30, 2009 financial statements. (Attachment I)

2.           Report on the Activities of the Regents Subcommittee on Audits September 2009 through June 2010

              Staff will provide an overview of the key activities of the Subcommittee during the 2009-2010 year.  These activities assist the Board of Regents in carrying out its oversight responsibilities. (Attachment II)

3.           Office of Audit Services Annual Report

              Staff will provide an overview of the results of the Office’s first year of the 2009-2011 Audit Plan. (Attachment III)

4.           Completed Audits

The Subcommittee is being presented with 20 audits this month.  The audits have been reviewed by the Department’s Internal Audit Workgroup.  Their report is attached.  (Attachment IV)

              Audits are provided as follows:

              Office of Audit Services

New York State Archives Inventory Control Systems

New York State Library Manuscript and Special Collection

SED Procurement Practices

Office of the State Comptroller

Amsterdam (Greater) School District

Beacon City School District

Campbell-Savona Central School District

Chatham Central School District

Chenango Valley Central School District

East Moriches Union Free School District

Fabius-Pompey Central School District

Kingston City School District

Liberty Central School District

Monroe-Woodbury Central School District

New York City Department of Education James Monroe Educational

     Campus Management of General School Funds

North Babylon Union Free School District

Patchogue-Medford Union Free School District

Schenectady City School District

South Country Central School District

Troy (Enlarged) City School District

New York City Office of the Comptroller

Compliance of Vanguard High School with Department of Education

    Procurement Guidelines for Small Dollar Purchases

 

Recommendation

 

For items one (Analysis of School District Financial Statements), two (Report on the Activities of the Regents Subcommittee on Audits September 2009 through June 2010), three (Office of Audit Services Annual Report) and four (Completed Audits) no further action is recommended.

 

Timetable for Implementation

 

              N/A

The following materials are attached:

• Roadmap
• Analysis of School District Financial Statements (Attachment I)
• Report on the Activities of the Regents Subcommittee on Audits (Attachment II)
• Office of Audit Services Annual Report (Attachment III)
• Review of Audits Presented – Department’s Internal Audit Workgroup (Attachment IV)
• Summary of Audit Findings (Attachment V)
• Audit Report Abstracts (Attachment VI)

 

REGENTS SUBCOMMITTEE ON AUDITS MEETING ROADMAP	Date:  June 2010 Time:  TBD Location:  TBD
TOPIC	OUTCOME	WHO	MINUTES
Opening Remarks		Chair	3
Review Agenda	Information	Conway	2
Analysis of School District Financial Statements (Attachment I)	Information - Questions answered	Audit Staff	15
Report on the Activities of the Regents Subcommittee on Audits (Attachment II)	Questions answered	Audit Staff	15
Office of Audit Services Annual Report  (Attachment III)	Questions answered	Audit Staff	15
Completed Audits – Including a Summary of the Department’s Internal Audit Workgroup (Attachment IV), Summary of Audit Findings (Attachment V), and Audit Report Abstracts (Attachment VI)	Questions answered	Department and OSC Audit Staff	10

 

 

 

Attachment I

 

 

Regents Subcommittee on Audits

June 2010

Analysis of School District Financial Statements

School districts and BOCES are required to submit independently audited financial statements and, where applicable, audits required by the federal Single Audit Act (OMB Circular A-133) to the Department. In addition certain nonprofit organizations are required to submit single audit reports to the Department. The Office of Audit Services (OAS) received 687 financial statements between July 2009 and June 2010 from school districts, 37 from BOCES, 108 from charter schools, and 105 from nonprofit organizations. OAS receives, processes, and reviews the financial statements and single audit reports.

Financial Statements

Each report is reviewed to assess:

• financial condition of the institution;
• quality, accuracy, and completeness of the audit reports;
• significance of any reported management control weaknesses; and
• accuracy of key ST-3 data used for State aid and reporting purposes for districts.

 

In addition, the financial statements are evaluated to assess compliance with Government Auditing Standards and the Department’s reference manual.  Districts with indicators of fiscal stress and fiscal concern are identified and notified by a letter, along with graphical illustration of the trend of its fund balance, revenue, and expenditures, etc.  The districts are asked to prepare a plan to address their financial condition. Based on the review of the 2008-2009 financial statements, we have identified two school districts as being in fiscal stress and seven as having indicators of fiscal concern.

If significant issues or missing information are identified in review of a district’s independently audited financial statement, OAS will send a letter to a district requesting additional information. Results of the preliminary review are communicated in writing to both the board of education and the independent CPA.  A total of 362 letters were sent related to our review of the financial statements.

Single Audit (OMB Circular A-133)

We received 539 A-133 audit reports from school districts, 31 from BOCES, 16 from charter schools, and 104 from nonprofits between July 2009 and June 2010.

As a pass-through entity for federal awards, the Department is required to issue a determination either sustaining or not sustaining all audit findings identified by the districts’ independent public accountant through the single audit.  A determination issued by the Department is required for each single audit finding and states whether it sustains the finding or not, reasons for the decision, and identifies any expected action by the auditee.

We issued 97 determinations between July 2009 and June 2010. When complete it is anticipated that OAS will issue determination to more than 100 school districts and BOCES for the 2008-2009 financial statements.

Where appropriate, compliance with the requirements of OMB Circular A-133 and the adequacy of management's action related to any single audit findings are also reviewed.  This often results in further communication with the district and the independent auditor. 

 

 

 

Attachment II

Report on the Activities of the Regents Subcommittee on Audits

September 2009 – June 2010

In accordance with its written charge, the Regents Subcommittee on Audits (Subcommittee) assisted the Board of Regents in carrying out its oversight responsibilities for audits, ethical issues arising from audits, internal controls, and compliance with laws and regulations. The Subcommittee met eight times during the year. A summary of key items presented at the meetings follows.

 

• The need for strengthened internal controls and fiscal accountability dominated the discussions in the Subcommittee meetings.
• Members were informed of the various types of audits that are presented to the Subcommittee. During this year, the Subcommittee has received audits conducted by the Office of Audit Services (OAS), Office of the State Comptroller (OSC), and the New York City Comptroller.
• A total of 283 audit reports were presented to the Subcommittee members for their review and comments. These reports on school districts, BOCES, and Department programs identified 1,775 recommendations for improvements. In almost all cases, the auditees agreed to implement the recommendations.
• Staff discussed in depth the results of the New York State Single Audit for the Department and the New York State Financial Statement Audit as it relates to the Department.
• The results of many audits of school districts conducted by the OSC and others have been tracked over several months to target areas of need. Three of the trends noted were:  board training, conflict of interest on boards, and fund balances. Over the course of this year, staff briefed the Subcommittee about these audit trends in depth and outlined possible policy changes. 
• Staff briefed the Subcommittee on activities related to the American Recovery and Reinvestment Act of 2009 (ARRA) and audits being performed as a result of ARRA. There were 10 schools for which ARRA audits have been started and six are final.
• The Subcommittee reviewed and approved a modified Statement on the Governance Role of  a Board Member or Trustee. The modification reflected a more specific discussion of issues concerning nepotism.
• The Subcommittee was briefed on a proposal to require the phase-in of scanning for correcting certain exams by school districts. This proposal was in response to a Comptroller’s audit and was subsequently approved by the Regent’s Committee on Elementary, Middle, Secondary and Continuing Education.

 

Through these activities, the Subcommittee sets the standard for high quality financial reporting, effective internal controls, safeguarding assets, compliance with laws and regulations, and effective use of resources.

Attachment III

 

Office of Audit Services

Annual Report

 July 1, 2009- June 30, 2010

Introduction

A.  Mission of the Office of Audit Services

Mission

Our mission is to provide quality audit and related financial services for Department leadership and staff to enhance accountability with the provision of educational, cultural, professional, and vocational services.

Vision

Our vision is to be recognized as a leader by the education community in providing audit and related financial services.

B.  Organizational Placement

The Office of Audit Services (OAS) operates under the general supervision of the Office of the Commissioner of Education.  OAS reports to the Deputy Commissioner for Operations and Management Services (OMS).  An Audit Plan is prepared every two years that defines the audit priorities for OAS.  The plan is reviewed by the Board of Regents Subcommittee on Audits and approved by the Commissioner of Education.  Plan approval also provides unrestricted access to all Department records, property, and personnel.

The Subcommittee on Audits provides oversight with the fiscal and management controls maintained by the Department.  It reviews audits prepared by OAS, the Office of the State Comptroller (OSC), and any other external audit entity that may have a bearing on the education community.  It also reviews the OAS Audit Plan and provides input. 

OAS is headed by the Director and is assisted by two audit managers.  Audit team members consist of associate and senior auditors and auditor trainees.  Associate auditors serve as auditors-in-charge (AIC) of individual audit assignments.  Senior auditors and auditor trainees assist in the completion of audits.  A senior auditor may serve as an AIC with the Director’s approval.

Summaries of Projects Completed and in Process

A.  Completed Audits by OAS (July 2009-May 2010):

OAS issued 12 audit reports this year.

  

Internal Audits: There were three internal audits completed.

New York State Education Department - Procurement Practices For the Period April 1, 2007 through March 31, 2008

Report AI-0808-2

It was found that the Department has adequate internal controls over the issuance and use of p-cards. Controls consist of an application process, mandatory training for all cardholders and their supervisors, written guidelines on appropriate use, spending/vendor limits, transaction reviews and revocation criteria.

With regard to the implementation of these controls, some deficiencies were found. Invoices and receipts were not consistently signed or dated when purchased goods were received and some of the monthly procurement log of transactions had not been signed.

Further, reports detailing aspects of individual cardholder transaction information were not readily available, and a risk assessment for the p-card program had not been established.

New York State Education Department - New York State Library Manuscript and Special Collection - For the Period July 1, 2004 through June 30, 2007

Report AI-0208-04

OAS conducted an audit of the inventory control systems within the Manuscript and Special Collections (MSC), which is located in the Cultural Education Center in Albany. The systems of inventory control, standards and practices for archives and manuscripts were examined during this audit, in order to determine if controls are adequate and effective in accounting for and safeguarding records.

MSC has some control systems in place; however, improvements are needed in certain areas such as with establishing adequate control over the physical inventory of the collection, and properly monitoring the items kept in the vault, rare books room, and in the secure stacks. There were also inconsistencies in the descriptions of the collections, and weaknesses found in the procedures designed to physically secure the records. Finally, there is a lack of separation of duties among the staff.

New York State Education Department - New York State Archives Inventory Control Systems - For the Period July 1, 2004 through June 30, 2007

Report AI-0208-03

OAS conducted an audit of the inventory control systems within the Archives, as a result of a request made by the Office of Cultural Education management. OAS examined the systems of inventory control, reviewed practices for archives and manuscript repositories; and reviewed the current policies and procedures in place to determine whether or not controls are adequate and effective in accounting for and safeguarding the records from loss or diversion.

It was determined that the Archives should develop a risk assessment process for identifying series that they consider the greatest value, whether from a monetary loss or intrinsic basis. The entire contents of those series should be specifically identified, documented, and periodically physically inventoried.

The Archives have some control systems in place, however, improvement opportunities exist in the following areas: there are multiple systems with some inconsistencies for controlling the records, descriptions on the contents of some series may be insufficient to allow full identification, control of items in the vault are insufficient, the May 2008 vault inventory was not completely accurate, and there were weaknesses found in record security procedures.

Special Projects:  One special project was completed.

Rochester Surround Care Community Corporation For the Period October 1, 2007 through June 30, 2009

Report SP-0908-2

7th Judicial District

Rochester Surround Care Community Corporation (RSCC) is a not-for-profit social service organization that promotes youth and financial literacy, nurturing young children, health care, and community safety for residents within a poverty-stricken area of Rochester’s inner city.  RSCC partners and coordinates with 21 local agencies that provide the services.

For the contract period October 1, 2007 to June 30, 2008, it was found that RSCC had formal agreements with all its partners.  It was found that during this contract period, $2.1 million of the $2.4 million claimed by RSCC in its quarterly expenditure report is not reimbursable.

For the contract period July 1, 2008 to June 30, 2009, all administrative expenditures, except an erroneous double billing that amounted to $4,385, were found to be documented, supported, and reimbursable.

Seven of RSCC’s partners submitted expenditure reports and supporting documentation which substantiates reimbursement of $288,876 of the $400,358 in claimed expenses.  The total reimbursable amount for claimed partner expenses for 2008-2009 is $183,876.  One of the partners had an unspent grant balance of $3,614 that was refunded back to RSCC.  RSCC did not account for the refund.

RSCC also provided an invoice for reimbursement from an information technology services company totaling $387,000 for the design and development of a database to track the progress of children. The request for proposal was not issued until seven months after work on the database had begun.  In addition, the RSCC personnel did not know how to operate this database and had not received training on how to use the system.  An expenditure claim was also not submitted associated with this database.  The audit recommended that the Department not reimburse RSCC for any portion of the invoice.

The audit substantiated $960,947 of total expenditures for the 2 year contract period.  The Department has paid RSCC $852,942, leaving an unreimbursed balance for payment of $109,005.

BOCES: One BOCES audit was completed.

Erie I BOCES - For the Period July 1, 2004 through June 30, 2007

Report BOC-1207-2

8th Judicial District

$22,116

Reimbursement for indirect costs was claimed using an incorrect rate in one year, applying the rates to budgeted rather than actual costs, and using a direct cost base that included ineligible costs. As a result, Western RSSC was over-reimbursed by $22,116.

Additionally, one person was incorrectly categorized as an employee who should have been treated as a consultant, and some hourly employees did not sign time work records to ensure correctness or note work start and end times.

Supporting documentation for expenditures did not always include lists of participants and agendas where appropriate, and the method used to allocate expenditures between programs was not always documented.

Finally, Western RSSC was not in compliance with some provisions of the contract.  Support from New York State was not always acknowledged where appropriate, contracts were not always in place when needed and before services were rendered, and travel guidelines in effect for New York State Management/Confidential employees were not always followed.

School Districts:  Seven school district audits were completed.

Coxsackie-Athens Central School District - Use of American Recovery and Reinvestment Act (ARRA) Funds Awarded for the July 1, 2009 - June 30, 2010 School Year

Report ARRA-1009-04

3rd Judicial District

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

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

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

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

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

Eden Central School District - Eden Central School District's Use of American Recovery and Reinvestment Act (ARRA) Funds Awarded for July 1, 2009 - June 30, 2010

Report ARRA-1109-07

8th Judicial District

The amount of funds requested at any one time for ARRA-ESF may only include actual expenditures to date. The District included in its claim an amount of $80,000 for anticipated expenditures for the following month.

For ARRA-IDEA 611, the District’s initial FS-25 reported actual project cash expenditures of $24,482. The review of documentation supporting the claim identified an expenditure of $2,445 for a 19" LCD with camera that was not included in the budget approved by the Department.

Further, the District’s personnel activity reports for employees whose salaries are paid by multiple cost objectives were not prepared at least monthly to coincide with one or more pay periods as required by A-87.

The District was unaware of federal cash management requirements, and did not have a process for ensuring compliance which included minimizing time elapsed between receipt and disbursement of funds, and remitting interest earned on federal funds in excess of $100 annually.

Based on the analysis of revenue received and expenditures incurred for all federal funds during a 5-month period, it was determined that there were ending deficit balances which have been covered by transfers from the general fund. It was found that the District did not earn interest exceeding $100 during the 5-month period.

Hamburg Central School District - Hamburg Central School District's Use of American Recovery and Reinvestment Act (ARRA) Funds Awarded for July 1, 2009 - June 30, 2010

Report ARRA-1109-05

8th Judicial District

The amount of funds requested at any one time for ARRA-ESF may only include actual expenditures to date. The amount reported was based on an estimate and not actual expenditures. The amount of the actual expenditures as of October 2009 could not be determined. The District also included $30,148 in costs for custodial staff and $2,464 for maintenance staff in their expenditures. These costs were not included in the approved grant application.

The District did not start accounting for ARRA revenues and expenditures separately from other funding until the middle of November.

Further, the District had no process in place to certify time and efforts for employees who are paid from federal grants other than ARRA-ESF.

The District was unaware of federal cash management requirements, and did not have a process for ensuring compliance which included minimizing time elapsed between receipt and disbursement of funds, and remitting interest earned on federal funds in excess of $100 annually.

Malone Central School District - Malone Central School District's Use of American Recovery and Reinvestment Act (ARRA) Funds Awarded for July 1, 2009 - June 30, 2010

Report ARRA-1109-09

4th Judicial District

The amount of funds requested at any one time for ARRA-ESF may only include actual expenditures to date. The District included in its claim an amount of $100,000 for anticipated expenditures.

Further, for the reporting period ending September 2009, the District reported 25 jobs saved for ARRA-ESF. Based on the supporting documentation, the District actually funded 24 jobs with ARRA-ESF.

The District was unaware of federal cash management requirements, and did not have a process for ensuring compliance which included minimizing time elapsed between receipt and disbursement of funds, and remitting interest earned on federal funds in excess of $100 annually.

Based on the analysis of revenue received and expenditures incurred for all federal funds during a 5-month period, it was determined that there were ending deficit balances which have been covered by transfers from the general fund. It was also concluded that the District did not earn interest exceeding $100 during the 5-month period.

Mohonasen Central School District - Use of American Recovery and Reinvestment Act (ARRA) Funds Awarded for the July 1, 2009 - June 30, 2010 School Year

Report ARRA-1009-03

4th Judicial District

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

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

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

Niagara Falls City School District – Employment Preparation Education (EPE) Program For the School Years July 1, 2004 through June 30, 2008

Report EPE-0808-1

8th Judicial District

$4,167,602

It was found that the District had vastly over-reported allowable contact hours. The District did not have control systems to provide assurance that only allowable hours were reported to the Department. As a result, the District received $4,167,602 in excess EPE Aid during the audit period. There were numerous instances where contact hours were claimed for students under twenty-one, or at least had a high school diploma. Student folders were also not maintained in a manner consistent with the EPE Manual (Manual), and many folders lacked date of birth and diploma status information. Further, the District did not properly maintain attendance for all classes, and in some cases, the entire class was disallowed because logs were not provided for students selected for those classes. The Manual also states that EPE programs must pretest students, as well as test in intervals to determine status and progress; however, many student folders did not contain copies of the testing, and many tests were missing information. Two teachers were also found to be uncertified.

Also the District used EPE Aid to subsidize other District activities and some EPE allowable expenditures were not claimed. Budgeted fringe benefits were claimed as opposed to actual costs, the District claimed two expenditures for personal service costs more than once, and not all allowable expenditures were claimed.

Finally, the Adult Student Information System and Technical Support computer program data was not reliable, and the Adult Literacy Information and Evaluation System computer program showed summary reports that were not in agreement with what was claimed.

Saranac Central School District - Saranac Central School District's Use of American Recovery and Reinvestment Act (ARRA) Funds Awarded for the Period July 1, 2009 - June 30, 2010

Report ARRA-1109-08

4th Judicial District

It was found that the District’s personnel activity reports for employees whose salaries are paid by multiple cost objectives were not prepared at least monthly to coincide with one or more pay periods, did not account for the entire activity for which employees were compensated, and in some cases, certification was not after the fact as required by A-87.

For the period ending September 2009, the District reported 19.8 jobs saved for ARRA-ESF. Based on the supporting documentation, the District actually funded 21.3 jobs with ARRA-ESF.

The District was unaware of federal cash management requirements, and did not have a process for ensuring compliance which included minimizing time elapsed between receipt and disbursement of funds, and remitting interest earned on federal funds in excess of $100 annually.

Analysis of revenue received and expenditures incurred for all federal funds during a 5-month period showed ending deficit balances which have been covered by transfers from the general fund, and it was concluded that the District did not earn interest exceeding $100 during the 5-month period.

B.  Financial Statements Received:

Education Law and the Regulations of the Commissioner (Regulations) require each board of education to secure an annual audit by a certified public accountant.  Guidance regarding the audit is provided in a document prepared by the Public School Accounting Committee of the NYS Society of Certified Public Accountants in conjunction with the Department and OSC.  The document is presently called the Reference Manual for Audits of Financial Statements of New York State School Districts (Manual) and is revised annually to reflect any changes in requirements resulting from changes in laws, regulations, or American Institute of Certified Public Accountants (AICPA) and Generally Accepted Accounting Standards (GAAS), and Governmental Accounting Standards Board (GASB) statements.

Beginning in August 2000, the OAS was assigned the responsibility to coordinate the processing and review of annual financial audit reports of all school districts and BOCES and the federal single audit reports for school districts, BOCES, charter schools, and other non-profit schools. 

1.           Analysis of School Districts’ Fiscal Condition

Certain fiscal data relating to school districts’ general fund is captured and analyzed.  Using certain fiscal indicators, OAS determines the districts that are in fiscal stress (which we identify as stress districts) and the districts that may be in fiscal stress in the future (which we identify as concern districts).  Each stress and concern district receives a letter indicating that OAS believes the district is in fiscal stress or may be headed for fiscal stress.  In these letters, we describe the factors that support our assessment and request a corrective action plan. We identified two stress districts and seven concern districts based on information contained in the July 1, 2008 to June 30, 2009 financial statements.

2.           Review of Financial Statements and Federal Single Audit

OAS reviews financial statements and federal single audits for all stress and concern school districts and other school districts and BOCES on a sample basis.  For the financial statements, OAS assesses if the financial statements conform to the major reporting provisions of the Manual, GAAS, and GASB statements.  In addition, the OAS assesses if the federal single audit conforms to Circular A-133.

Results of the preliminary review are communicated in writing to both the board of education and the independent CPA. We received 687 school districts financial statements between July 2009 and June 2010, 37 for BOCES, 108 for charter schools, and 105 for nonprofits. A total of 362 letters were sent requesting missing items from the financial statements.

3.           Federal Single Audit Findings

We received 539 A-133 single audit reports from school districts, 31 from BOCES, 16 from charter Schools, and 104 from nonprofits duning the period from July 2009 to June 2010. We sent 171 letters requesting missing corrective actions plans.

On a sample basis, federal single audits that contain findings will be reviewed using the Uniform Guide for Initial Review of A-133 Audit Reports issued by the President’s Council on Integrity & Effectiveness (PCIE).

Corrective action plans are obtained and reviewed for any findings related to federal awards passed through the Department.  The Federal Office of Management and Budget’s Circular A-133 requires the auditee to issue a corrective action plans within 90 days of receipt of the audit.  OAS follows up with the auditee on every federal single audit that contains a finding for receipt of the corrective action plan.

Our office accounts for these federal single audit findings in a database that is shared with the Department’s program offices.  This increases the program office’s oversight of single audit findings for all programs.  The database contains three years of historical data on federal single audit findings in detail that is shared with program offices.

A management decision is issued within six months of receipt of the report.

Management decisions issued: We issued 97 management decisions between July 2009 and June 2010.

C.  Corrective Action Plans

Section 170.12 of the Regulations became effective on February 28, 2007.  The regulation requires that a corrective action plan be developed within ninety days of receipt of such report or management letter, each school district superintendent and BOCES district superintendent shall prepare a corrective action plan, approved by the board, in response to any findings contained in:

• the annual external audit report or management letter;
• a final audit report issued by the district’s internal auditor;
• a final audit report issued by OSC;
• a final audit report issued by SED; or
• a final audit report issued by the United States or an office, agency, or department thereof.

 

Requirements

The corrective action plan shall include the expected date(s) of implementation where appropriate.  A school district or BOCES shall, to the extent practicable, begin implementation of its corrective action plan no later than the end of the next fiscal year. 

Each school district and BOCES shall file its corrective action plan with the State Education Department.

The Department implemented this regulation effective with the receipt of the 2006 audit reports.  OAS accounts for the receipt and expectation of corrective action plans for subreceipents in an access database.

We received 1,197 corrective action plans received between July 2009 and June 2010.

D.  Analysis of Charter Schools:

Education Law Article 56 requires that charter schools obtain annual independent financial audits by a licensed certified public accountant or public accountant as set forth in their charter. These independent audits must be conducted in accordance with generally accepted accounting and auditing standards.

Data from the financial statements is entered into the charter school section of the financial statement database. Since the charter schools are treated as not-for-profits, per Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements of Not-for-Profit Organizations, the extent of the financial statement analysis is not as in-depth as for the school district financial statements.

Analysis completed: For the 2008-2009 fiscal year, 108 charter schools submitted financial statements. Of the 108 schools, 21 schools had a decrease in unrestricted net assets from the prior year and 9 schools had total liabilities exceeding total assets. Overall, net assets increased by $40.6 million to a net total of $165.3 million for all schools. Revenue and support increased by $102.6 million from the prior year to $517.8 million, with government contracts and grants accounting for 88.6 percent of the total. Expenses increased by $92.2 million from the prior year to $477.5 million, with program expenses accounting for 79.6 percent of the total.

E.  Analysis of Colleges, Universities and Proprietary Schools:

OAS reviews private college and university independent financial statements for degree granting 2- and 4-year institutions. They also grant masters and Doctorates degrees.  The statements are due 100 days after the end of the schools’ fiscal year. These fiscal years vary; and examples of their ending dates are 5/31, 6/30, 8/31, and 12/31. This review process is required by Regulations Sect. 52.2 (a) (1) which states “The institution shall: possess the financial resources to accomplish its mission and the purpose of each registered curriculum.” Our office receives annually about 141 nonprofit and 37 proprietary college financial statements.  In addition, our office receives occasional requests to analyze institutions which are applying to offer new programs.

OAS uses a formula to calculate a combined ratio for each college. Three separate raw ratios (Primary Reserve Ratio, Equity Reserve Ratio, and Net Income Ratio) are weighted and added together to arrive at a composite ratio. This composite ratio must be at least 1.5 out of a possible maximum score of 3.0. If the score is below 1.5, additional analyses are required using 13 more individual ratios of student enrollment trends, operating ratios, and balance sheet ratios. This information is transmitted to the Office of College and University Evaluation; this office will initiate corrective action plans or even a face-to-face meeting with the respective college’s administration.

In March 2004, analyses of financial information for trade or certificate schools were added to our workload. Only the schools showing potential fiscal distress, new license applications, or those adding new types of curriculum are sent to OAS by the Bureau of Proprietary School Supervision (BPSS), which oversees and monitors non-degree granting proprietary schools in New York State. Another program office, within the Office of the Professions sends a smaller number of review requests for fiscal stability. 

For the trade and certificate schools, we sometimes use the federal composite score if adequate information (balance sheet and income statement) is included. However, more often these requests for analysis have limited data and simpler ratios and analytics must be used. New schools that are applying for Department approval are required to submit pro-forma income statements, attestation statements by the corporate owners, and descriptions of their banking locations.

Analysis completed: We completed 125 College and University analysis, and 167 Trade and Certificate School analysis completed between July 2009 and June 2010.

Memos Sent: We sent 56 College and University memos, and 167 Trade and Certificate School memos sent between July 2009 and June 2010.

F.  Fraud Waste and Abuse Contacts:

In response to Regents goal #5 “Resources under our care will be used or maintained in the public interest”, SED’s Fraud, Waste, and Abuse (FWA) hotline was established in March 2005. 

Through this hotline, which is maintained by OAS, information pertaining to the fraud, waste, abuse, or mismanagement of local, state or federal education funds can be reported to the Department. 

Information on and links to the FWA site have been made available throughout the Department and steps have been taken to develop a variety of reporting methods including written, electronic, and voice mail.

In addition, a database to record the information received, and allow for easy access and retrieval of the information has been developed.    

Resolutions: There were 283 reported cases between July 2009 and June 2010.  Of the total reported cases, 110 were resolved, 140 were referred to other offices or departments, and 33 cases remain open and are under review.

G.  Special Projects:

The ARRA of 2009 required OAS to begin two internal audits of the Department’s internal controls over ARRA funds received and disbursed, and timeliness of ARRA reporting to the federal government.  OAS has also issued preliminary audit findings of Furniture Procurement.

 

             Regents Subcommittee on Audits

 

The primary responsibility of the Audit Subcommittee is to assist the Board in carrying out its oversight responsibilities for 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.  This is accomplished through the review of audits of educational entities conducted by the Department, OSC’s office, and other federal and local agencies.  The Audit Subcommittee is also charged with setting a tone at the top for quality financial reporting with effective internal controls; understanding and assessing financial reporting, underlying risks, and issues; understanding and assessing management, quality and financial controls, and regulatory issues.

H.  Number of Meetings: Eight meetings were held between July 2009 and June 2010.

I.        Number of Audits Presented: There were 283 audit reports with 1,175 recommendations presented to the Subcommittee between July of 2009 and June of 2010.

OAS compiled and summarized 283 reports on audits it conducted and also by the OSC and the New York City Comptroller; and presented to the Subcommittee Members for their review and comments.  These reports are audits of school districts, BOCES, and Department programs.  OAS highlighted the finding trends across audits.   As a result of the audits presented and input from the Subcommittee Members, the Department has developed a process to review each of the audits for possible action or further follow-up. The review involves staff from Counsel’s Office, Office for P-12 Education, Deputy’s Office for OMS, and OAS.  Emphasis is given on current training offered for board members and business officials and the possibility of reaching out and partnering with various school district organizations to offer more courses or training that addresses audit finding trends, highlighting on fiscal issues and accountability.  Another area that may also be explored is the available sanctions to certified district personnel.

OAS revised the Statement on the Governance Role of a Trustee or Board Member to include updates addressing conflict of interest as well as other internal control issues as a result of concerns expressed by Subcommittee Members. 

Members of the Subcommittee were also briefed on the New York State Single Audit of the Department and the New York State Financial Audit of the Department.

Statistics - Number of Audits: There were 12 audits completed by OAS, 266 audits completed by OSC, and 5 audits completed by the New York City Comptroller between July of 2009 and June of 2010.

J.  Deployment of Resources

 

         OAS based its deployment of resources on 13 audit staff allotted 2,600 audit days per year as follows:

 

Office of Audit Services

Allocation of FTE Auditors/Audit Days

For the Two Years July 1, 2009 through June 30, 2011

Audit Initiative	Positions	Total Actual Audit Days Available*	Estimated Number of Audits
Available Days	13.0	5,200
Days Needed to Complete Audits from Prior Plan		600
Days Available for 2009-11 Plan		4,600
School  Districts		700	4
Audits of ARRA Sub-recipients		750	30
Internal Audits of Department Operations		400	2
Internal Audits of Department ARRA		750	4
Audits of Other Institutions		400	3
Fraud, Waste and Abuse Hotline Follow-up		200
Review of Financial Statements, Single Audit Reports, and other Fiscal data		1,400	**
Technical Assistance and Training
Total Positions/Audit Days	13.0	5,200	43
Management Support Staff and Paraprofessional	3.0 2.0
Total FTE Positions	18.0

*               One FTE auditor equates to 200 audit days per year.

**           This initiative results in the analysis of the financial statements of all school districts,    BOCES, charter schools, private colleges, and universities. It also includes collecting      required corrective action plans related to any audits of school districts and BOCES.

                                                                                                                                                                                                                    

OAS is on target with its plan.  ARRA and financial statements are very close to their allocations.  Internal audit is slightly over its allocated days.

 

Audit Function	Criteria	Result
Internal audit function	required by Executive Law 952	3 audits
BOCES audits	required by Education Law (EL) 305 (25).	1 audit
School district audits	management expectation and general oversight responsibilities (EL 305(2)).	7 audit
Reviews of  BOCES; and public, charter and nonpublic school               financial statements	management expectation and general oversight responsibilities (EL 305(2)) and A-133	937 financial statements received 64 letters sent
Reviews of Single Audits	management expectation and general oversight responsibilities (EL 305(2)) and A-133	245 management decisions issued
Reviews of Colleges, Universities, and Proprietary Schools	management expectation and general oversight responsibilities (EL 305(2)) and Regulations Sect. 52.2 (a) (1)	125 College and University analysis completed and 167 Proprietary School analysis completed 56 College and University memos sent, and 167 Proprietary School memos sent
Review of county preschool audits	required by CR 200.18	1 audit approved
Fraud, Waste and Abuse Hotline	management expectation and general oversight responsibilities in response to Regents goal #5.	250 resolved fraud, waste and abuse cases
Charter School Reviews	management expectation and general oversight responsibilities (EL 2853(2)).	108 reviews
Corrective Action Plans	section 170.12 of the Regulations	1,197 corrective action plans received
Special projects	management general oversight responsibilities (EL 305 (2)).	ARRA– 6 audits completed
Audit Coordination	management expectation and general oversight	Performs ongoing liaison activities with the Office of the State Comptroller, U.S. Government Accountability Office and the U.S. Department of Education

 

 

 

Attachment IV

Regents Subcommittee on Audits

June 2010

Review of Audits Presented

Department’s Internal Audit Workgroup

 

Newly Presented Audits

We reviewed the 20 audits that are being presented to the Subcommittee this month.  Sixteen of the audits were issued by the Office of the State Comptroller (OSC), three were issued by the Office of Audit Services (OAS), and one was issued by the New York City Office of the Comptroller.  Fifteen of the audits were of school districts, three were of the Department’s inventory control systems and two were of New York City school programs.  

The findings were in the areas of budgeting, procurement, payroll, extraclassroom activity fund, fingerprinting, and others such as inventory controls and computer equipment disposal.

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 audits and categories of findings for further review or follow-up as noted below.

 

• State Education Department – New York State Archives Inventory Control Systems

 

Summary of Audits

The Archives should develop a risk assessment process for identifying series that are the greatest value, whether from a monetary loss or intrinsic basis. The entire contents of those series should be specifically identified, documented, and periodically physically inventoried.  Although the Archives have some control systems in place, improvement opportunities exist in the following areas:  there are multiple systems with some inconsistencies for controlling the records, insufficient descriptions on the contents of some series to allow full identification, insufficient control of items in the vault, inaccurate May 2008 vault inventory, and weaknesses in record security procedures.

 

 

Follow-up Action

 

Ninety days from the issuance of the audit report, Department officials are required to submit a report on the actions taken as a result of the audit.  The report will be in the format of a recommendation implementation plan and must specifically address what actions have been taken to address each recommendation.

 

• State Education Department – New York State Library Manuscript and Special Collections

 

Summary of Audits

The Manuscript and Special Collections has some control systems in place; however, improvements are needed in establishing adequate control over the physical inventory of the collection, and properly monitoring the items kept in the vault, rare books room, and in the secure stacks. There were also inconsistencies in the descriptions of the collections, and weaknesses found in the procedures designed to physically secure the records. Finally, there is a lack of separation of duties among the staff.

Follow-up Action

Ninety days from the issuance of the audit report, Department officials are required to submit a report on the actions taken as a result of the audit.  The report will be in the format of a recommendation implementation plan and must specifically address what actions have been taken to address each recommendation.

 

• Budget Review

 

Summary of Audit

OSC reviewed the significant revenue and expenditure projections in 12 school districts’ 2010-2011 budgets.  Half of the districts’ proposed budgets were reasonable.  The remainder of the districts either has budget projections that would result in the fund balance exceeding the statutory limit or over-budgeted certain expenditure categories, or the budget did not provide for future contingencies such as contract negotiation, salary reductions, or layoffs.

Follow-up Action

No follow-up action needed.

 

Audit	Procurement	Payroll	Extraclassroom Activity Fund	Budgeting	Fingerprinting	Other
Office of Audit Services
* New York State Education Department - New York State Archives Inventory Control Systems  (footnote 2)						√
* New York State Education Department - New York State Library Manuscript and Special Collection (footnote 2)						√
New York State Education Department - Procurement Practices	√
Office of the State Comptroller
** Amsterdam (Greater ) School District
Beacon City School District				√
** Campbell-Savona Central School District
* Chatham Central School District (footnote 1)						√
Chenango Valley Central School District				√
East Moriches Union Free School District				√
** Fabius-Pompey Central School District
* Kingston City School District (footnote 1)						√
Liberty Central School District				√
Monroe-Woodbury Central School District				√
New York City Department of Education James Monroe Educational Campus Management of General School Funds			√
North Babylon Union Free School District	√	√			√
Patchogue-Medford Union Free School District				√
** Schenectady City School District
South Country Central School District				√
Troy (Enlarged) City School District				√

New York City Office of the Comptroller
New York City Department of Education - Compliance of Vanguard High School with Department of Education Procurement Guidelines for Small Dollar Purchases	√
June 2010	3	1	1	8	1	4

* Other:
1	Computer Equipment Disposal
2	Inventory Controls
**	No recommendations

Summary of Current and Prior Audit Findings

	May 2007 - December 2008	January 2009	February 2009	March 2009	April 2009	June 2009	September 2009	November 2009	January 2010	March 2010	April 2010	June 2010	Running Total
Procurement	163	13	16	7	4	8	26	21	11	34	5	3	311
Capital Assets	19	0	0	0	0	0	0	1	0	6	1	0	27
Claims Processing	151	3	8	2	1	3	9	9	7	13	2	0	208
Payroll	168	12	11	1	1	4	16	20	10	30	2	1	276
Cash	130	5	13	2	1	3	14	17	10	25	2	0	222
Financial Reporting	101	8	11	5	2	7	17	13	15	22	2	0	203
Information Technology	162	10	12	6	3	5	24	16	13	24	2	0	277
Capital Construction	5	0	0	0	0	0	0	0	0	0	0	0	5
Extraclassroom Activity Fund	16	1	0	0	1	0	3	1	3	3	0	1	29
Segregation of Duties	65	1	2	1	0	0	6	12	7	6	0	0	100
Budgeting	19	1	0	1	0	6	1	4	3	0	2	8	45
Conflict of Interest	21	1	3	0	0	0	5	4	1	3	0	0	38
Fingerprinting	9	2	0	2	0	0	3	1	3	2	1	1	24
Other	55	23	5	1	3	6	21	27	7	15	8	4	175
Total	1,084	80	81	28	16	42	145	146	90	183	27	18	1,940

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
New York State Education Department  New York State Archives Inventory Control Systems For the Period July 1, 2004 through June 30, 2007 AI-0208-03	The Office of Audit Services (OAS) conducted an audit of the inventory control systems within the Archives, subsequent to a theft by a Department employee. OAS examined the systems of inventory control, reviewed practices for archives and manuscript repositories; and reviewed the current policies and procedures in place to determine whether or not controls are adequate and effective in accounting for and safeguarding the records from loss or diversion. It was determined that the Archives should develop a risk assessment process for identifying series that they consider the greatest value, whether from a monetary loss or intrinsic basis. The entire contents of those series should be specifically identified, documented, and periodically physically inventoried. The Archives have some control systems in place. However, improvement opportunities exist in the following areas:  there are multiple systems with some inconsistencies for controlling the records, descriptions on the contents of some series may be insufficient to allow full identification, control of items in the vault are insufficient, the May 2008 vault inventory was not completely accurate, and there were weaknesses found in record security procedures.	12 recommendations Recommendations for the Archives’ officials pertained to the development of a risk assessment, ensuring the accuracy of data maintained, documenting changes made to records, item storage, a review of all records, vault inventory, access to the stacks, removal of storage items in the vault, separation of duties, and the electronic system for the location of items. The Archives’ officials agreed with the recommendations and have indicated that they will implement corrective action.
New York State Education Department  New York State Library Manuscript and Special Collection For the Period July 1, 2004 through June 30, 2007 AI-0208-04	The Office of Audit Services (OAS) conducted an audit of the inventory control systems within the Manuscript and Special Collections (MSC), which is located in the Cultural Education Center in Albany. The audit was subsequent to a theft by a Department employee. The systems of inventory control, standards and practices for archives and manuscripts were examined during this audit, in order to determine if controls are adequate and effective in accounting for and safeguarding records. MSC has some control systems in place; however, improvements are needed in certain areas such as with establishing adequate control over the physical inventory of the collection, and properly monitoring the items kept in the vault, rare books room, and in the secure stacks. There were also inconsistencies in the descriptions of the collections, and weaknesses found in the procedures designed to physically secure the records. Finally, there is a lack of separation of duties among the staff.	9 recommendations It was recommended that MSC management take the appropriate steps to ensure the accuracy and consistency of the information maintained for items in the collections, as well as to develop policies to ensure the accuracy of the inventory. It was also recommended to investigate any missing items, establish guidelines for the removal of items from secure locations, and to keep a list of missing or misplaced collections. Finally, MSC management should review the “out cards” to ensure items are properly accounted for, and to conduct periodic physical and sample inventories. Library officials agreed with all of the recommendations. However, they also believe that the level of inventory control suggested by the audit is not feasible nor recommended by national standards for manuscripts and special collections. Officials have agreed to implement corrective action to address the recommendations.
New York State Education Department  Procurement Practices For the Period April 1, 2007 through March 31, 2008 AI-0808-2	It was found that the Department has adequate internal controls over the issuance and use of p-cards. Controls consist of an application process, mandatory training for all cardholders and their supervisors, written guidelines on appropriate use, spending/vendor limits, transaction reviews and revocation criteria. With regard to the implementation of these controls, some deficiencies were found. Invoices and receipts were not consistently signed or dated when purchased goods were received and some of the monthly procurement log of transactions had not been signed. Further, reports detailing aspects of individual cardholder transaction information were not readily available, and a risk assessment for the p-card program had not been established.	7 recommendations The report’s recommendations focused on strengthening the policies and procedures regarding invoices and receipts, monthly procurement logs, transaction information, and risk assessment for the p-card program. The Department agreed with all recommendations and has indicated that they will implement corrective action as soon as possible.
Office of the State Comptroller
Audit	Major Finding(s)	Recommendation/Response
Amsterdam (Greater) School District 2010-2011 Budget Review B5-10-15 4th Judicial District	The State Comptroller’s Office recently completed a review of the significant revenue and expenditure projections in the District’s 2010-2011 budget. Upon review, it was determined that the budgeted estimated revenues and appropriations appear reasonable.	There were no recommendations.
Beacon City School District 2010-2011 Budget Review B6-10-5 9th Judicial District	Significant revenue and expenditure projections in the proposed budget were found to be reasonable. However, the board of education needs to ensure that the District’s retained fund balance does not exceed the limit allowed by law. Currently, the proposed plan would still result in a fund balance of approximately $2.71 million, which exceeds the 4 percent limit by approximately $373,000.	1 recommendation It is recommended that the District develop a plan to reduce the unappropriated fund balance to the statutory 4 percent limit. It is also required that the District submit a corrective action plan to address the findings in the report.
Campbell-Savona Central School District  2010-2011 Budget Review B2-10-7 7th Judicial District	Upon review of the 2010-2011 tentative budget for the Campbell-Savona Central School District, the budgeted estimated revenues and appropriations appear reasonable.	There were no recommendations.
Chatham Central School District  Computer Equipment Disposal P6-9-18 3rd Judicial District	The District does not have a complete and accurate inventory record or property record file of its computer equipment and the monitors are not recorded in the District’s inventory records. Fifty-five desktop and laptop computers were selected for a sample, and three computers could not be located. According to the Network Administrator, two of the computers were probably disposed of, but just not removed from the Information Administrator Department’s inventory record. The third computer, according to the Network Administrator, was a duplicate record in the inventory system, and only one of the two computers actually existed. The District does not have full accountability over its computer equipment. Further, the District disposes of its e-waste through both sales and recycling methods. The District recycled 208 monitors at a total cost of $1,348 and sold four laptop computers and three desktop computers, for a total of $10. The District also used two recycling companies to dispose of computer equipment, and the Network Administrator also stated that the recycling companies that are employed by the District do not charge for the recycling of CPUs, and therefore the vendor invoices do not include information on the number of CPUs recycled. The District also does not request or receive documentation from recycling companies affirming that computer equipment disposals are made in an environmentally safe manner. Further, while the disposal of CPUs is being approved by the board of education, the disposal of computer monitors is not. District policy only requires that computers, not monitors, require board approval for disposal. The District’s policy also does not include a board approval exclusion for the disposal of computer monitors.	6 recommendations It is recommended that the District maintain a comprehensive inventory or property record of all computer equipment, and request and obtain itemized invoices for computer equipment picked up by recycling companies. Further, the board of education should approve all computer equipment disposals, amend the disposal policy, and count and number all pieces of equipment sent for recycling. The District agreed with the recommendations and has indicated that they will implement corrective action.
Chenango Valley Central School District  2010-2011 Budget Review B4-10-8 6th Judicial District	It was found that the significant revenue and expenditure projections in the proposed budget are reasonable. As of March 25, 2010, District officials project their unappropriated fund balance to be approximately $3.3 million as of June 30, 2010. District officials have proposed a plan to the board of education to reduce this amount to approximately $1 million.	1 recommendation It is recommended that if the board rejects the District's proposed plan to reduce the unappropriated fund balance, that the board develop a plan to reduce the balance to stay within the statutory 4 percent limit. In addition, the board has the responsibility to initiate corrective action and submit a corrective action plan to address the findings in the report.
East Moriches Union Free School District  2010-2011 Budget Review B7-10-2 10th Judicial District	It was found that the budget estimated revenues and appropriations appeared reasonable. The District generally implemented the recommendations made in the prior budget review audit report, issued in April 2009, regarding appropriating adequate funds for the cost of termination payments paid to employees for their unused leave time upon retirement. Upon review, it was found that the District’s 2010-2011 tentative budget does not provide for any other salary increases as a result of the contract currently in negotiation, and if the board of education does not approve the salary reductions and layoffs, the amount the District has budgeted for instructional salaries will not be sufficient.	2 recommendations Although the District has enough money in its retirement contribution reserve to pay for this expenditure, it is recommended that the District ensure that the tentative budget reflect the full amount of $116,130 due to the retirement system rather than $15,000, and then identify the reserve as a source of funding. The District is also required to submit a corrective action plan to address the findings in the report.
Fabius-Pompey Central School District 2010-2011 Budget Review B3-10-3 5th Judicial District	The 2010 tentative budget for the District and budgeted estimated revenues and appropriations appear reasonable.	There were no recommendations.
Kingston City School District - Computer Equipment Disposal P6-9-17 3rd Judicial District	The District recycled 98 computer monitors and 130 CPUs, at a cost of $1,143. Twenty-five units of computer equipment and examining methods used by the District to dispose of each unit were selected as a sample. It was found that all 25 units of computer equipment were picked up by the recycling company and recycled in a safe manner. It is estimated that approximately 372 pounds of lead, and 10 pounds of mercury did not enter the environment because of the District properly recycling its computer equipment. In addition, it is estimated that the recycling company could have recovered about 412 pounds of copper, 10 pounds of gold, and 833 pounds of aluminum by recycling computer equipment. Further, the District was unable to provide board of education  resolutions pertaining to computer equipment disposals, and there was no indication in the board minutes that computer equipment disposals had been approved. Board policy also does not specifically state that all computer equipment should be disposed of in an environmentally safe manner.	3 recommendations It is recommended that the District continue to dispose of its computer equipment in an environmentally safe manner, as well as to amend its board policy to include requirements regarding the proper recycling of computer equipment. It is also recommended that the board approve all computer equipment disposals and document them in the board minutes. The District agreed with the recommendations and has indicated that they will implement corrective action.
Liberty Central School District 2010-2011 Budget Review B4-10-9 3rd Judicial District	It was found that significant revenue and expenditure projections in the proposed budget were reasonable. District officials are projecting an unappropriated fund balance in excess of legal limits by approximately $850,000 as of June 30, 2010. District officials also over-budgeted their debt service appropriations by $243,000.	2 recommendations It is recommended that District officials use the surplus fund balance in a manner that benefits District taxpayers, and amend the proposed budget accordingly. The board of education is also required to submit a corrective action plan to address the findings in the report.
Monroe-Woodbury Central School District  2010-2011 Budget Review B8-10-14 9th Judicial District	The State Comptroller’s Office recently completed a review of the significant revenue and expenditure projections in the District’s 2010-2011 budget. While significant revenue and expenditure projections in the proposed budget were considered to be reasonable, it was found that District officials over-budgeted employee benefit appropriations by approximately $2.6 million to maintain and accumulate their fund balance. The District also receives estimates for retirement system contributions for the upcoming fiscal year prior to budget adoption. The District also appropriated fund balance of approximately $2.1 million in each of the preceding fiscal years to reduce the tax levy, but because of over-budgeting for expenditures, the District did not use fund balance during any of those fiscal years to fund operations.	2 recommendations It is recommended that District officials exclude amounts in excess of the estimated figures and amend the tentative budget accordingly. It is also requested that the District submit a copy of the adopted budget.
New York City Department of Education (NYCDOE) James Monroe Educational Campus Management of General School Funds 2009-N-1 1st, 2nd, 11th, 12th Judicial District	General School Fund (GSF) bank accounts are accumulated funds donated to or raised by students or school organizations to support extracurricular and co-curricular activities. It was found that there was significant non-compliance with the NYCDOE’s procedures related to GSF funds. DOE also did not provide adequate oversight and training, and Monroe Campus officials did not exercise due diligence and care over GSF accounts. Thirty expenditures (totaling $5,444) were paid for items that were not student-related. It was also found that two of the schools on the Monroe Campus did not maintain a cash journal documenting GSF receipts and expenditures, while another school maintained a cash journal for only one of the four GSF accounts they maintained. Complete and accurate records of student collections were not maintained by the Monroe Campus student coordinator, and there was no accountability over any aspect of the financial management of the school store. Finally, three schools did not notify NYCDOE’s Banking Unit of their GSF accounts, and did not have the appropriate number of signatories for their GSF checking accounts.	11 recommendations The recommendations focused primarily on strengthening the policies and procedures regarding providing adequate oversight and training for the GSF funds, making appropriate student-related purchases with GSF expenditures, adequate documentation, financial management of the school store and proper notification of GSF accounts. NYCDOE officials agreed with the recommendations and have indicated that they plan to implement corrective action.
North Babylon Union Free School District  Financial Condition and Internal Controls Follow Up Report 2007M-44-F 10th Judicial District	An audit was conducted by the State Comptroller’s office to assess the financial operations of the District. A report was issued in June 2007, identifying opportunities for District management’s review and consideration. The District was revisited in July 2009 to review the progress of the District in implementing the recommendations. It was found that the District had made partial progress in implementing corrective action. Of the 14 recommendations issued, 5 were fully implemented, 7 were partially implemented, and 2 recommendations were not implemented.	14 recommendations The recommendations that were only partially implemented were those pertaining to awarding contracts to professional service providers, confirming purchase orders, approval of invoices, timecards, background checks, personnel files, and keeping daily logs of hours worked and absences for District employees. The recommendations that were not implemented were those regarding the establishment of written procedures for those employees responsible for the distribution of District payrolls, and the recommendation stating that payroll be reviewed by an independent individual to ensure accuracy. The remainder of the recommendations have been fully implemented.
Patchogue-Medford Union Free School District 2010-2011 Budget Review B7-10-4 10th Judicial District	It was found that the significant revenue and expenditure projections in the proposed budget are reasonable. The District projects that its undesignated fund balance at June 30, 2010, will be approximately $17.5 million, which is $11.0 million more than the legal limit. District officials stated that they are planning to appropriate $2.5 million of fund balance to help finance 2010-2011 operations. This would leave an unappropriated fund balance of approximately $15 million as of June 30, 2010, which exceeds the 4 percent limit by approximately $8.5 million.	1 recommendation If the District's fund balance at June 30, 2010, is $17.5 million as the District expects, it is recommended that District officials develop a plan to reduce the unappropriated fund balance to the statutory 4 percent limit. The District is also required to submit a corrective action plan to address the recommendations.
Schenectady City School District 2010-2011 Budget Review B6-10-13 4th Judicial District	The District’s significant revenue and expenditure projections in the tentative budget were found to be reasonable. Upon review, it was determined that the budgeted estimated revenues and appropriations appear reasonable.	There were no recommendations.
South Country Central School District 2010-2011 Budget Review B7-10-6 10th Judicial District	The District’s significant revenue and expenditure projections in the tentative budget were found to be reasonable. However, the District budgeted $401,087 and $954,944 more than will be needed to satisfy the costs for Teachers Retirement System contributions and utilities, respectively. The District’s tentative budget did not include any information as to actual year-to-date revenue, expenditure data, projected revenues, and expenditures for the current fiscal year to make the budget a more useful document. District officials also did not take appropriate action to resolve two of the five recommendations contained in the budget review audit report issued in April 2009.	3 recommendations It is recommended that the board of education review and consider amending the budget to better reflect projected utility costs. It is also recommended that the board revise the budget format to include the actual revenues and expenditures for the current year-to-date, and revenue estimates and appropriations for the current fiscal year as amended to date.
Troy (Enlarged) City School District 2010-2011 Budget Review B5-10-16 3rd Judicial District	Budgeted estimated revenues and appropriations appear reasonable for the District’s 2010-2011 proposed budget. In the prior budget review issued in April 2009, it was predicted that the District would exceed the 4 percent limit in their unreserved fund balance. In response, the District was able to reduce the unreserved portion of its fund balance to a level below the 4 percent statutory limit.	1 recommendation The District should submit a copy of the adopted budget.
New York City Office of the Comptroller
Audit	Major Finding(s)	Recommendation/Response
New York City Department of Education (NYCDOE) Compliance of Vanguard High School with Department of Education Procurement Guidelines for Small Dollar Purchases FM08-113A 1st, 2nd, 11th, 12th Judicial District	$18,431 adjustment The purpose of this audit was to determine whether or not the NYCDOE officials properly administered the small dollar purchases made through the Small Item Payment Process (SIPP) for Vanguard High School and whether Vanguard made purchases in accordance with NYCDOE regulations. Vanguard expended $131,452 through SIPP that consisted of 381 payments. The audit would not determine whether Vanguard complied with the NYCDOE’s Standard Operating Procedures because Vanguard failed to provide adequate documentation. Based on the documents that were provided, it was determined that Vanguard officials circumvented the procedures set forth in the Standard Operating Procedures. Vanguard officials paid a minimum of $18,431 in questionable expenditures and processed payments without the proper authorization. Vanguard also circumvented the $500 expenditure threshold, failed to maintain supporting documentation, paid for prior year purchases, as well as used incorrect object codes to record the SIPP expenditures. Further, Vanguard officials improperly processed SIPP transactions by using a former school secretary’s user ID for the NYCDOE Financial Accounting Management Information System (FAMIS). Finally, Vanguard’s principal did not safeguard his user ID and passwords for access to FAMIS and approve SIPP transactions.	6 recommendations It was recommended that the District investigate the validity of questionable expenditures, and recover the duplicate payments and other misused funds. It is also recommended that NYCDOE provide additional training for Standard Operating Procedures; require the Integrated Service Center to perform periodic reviews of Vanguard’s SIPP expenditures; deactivate FAMIS user IDs for staff members who no longer work for the school; and educate staff on the proper safeguarding of user IDs, passwords, and approval codes. The NYCDOE agreed with the recommendations and has implemented corrective action.