The Honorable the Members of the Board of Regents


Michael Abbott




Audit Activities


April 26, 2004




Enable the Board of Regents to review audits








The following materials are attached.


·        Roadmap

·        Minutes of March Meeting (Attachment I)

·        Audit Report Abstracts (Attachment II)

·        Audit Coverage (Attachment III)

·        Audit Reports






Date:   May  2004

Time:  TBD

Location:  TBD  





Opening Remarks




Review Agenda/Minutes (Attachment I)




Audit Report Abstracts (Attachment II)

Questions Addressed

SED and OSC Staff


NYC Department of Education

   Audit Coverage (Attachment III)

Questions Addressed



2004-06 Audit Plan




Next Session











Attachment I



March 22, 2004


Subcommittee Members in Attendance:


Regent Geraldine D. Chapey, Chair

Regent Arnold B. Gardner, Vice Chair

Regent Joseph E. Bowman

Regent Harry Phillips, 3rd


Discussion Items


Regent Chapey opened the meeting by welcoming everyone and reminding them of the importance of accountability in the public sector. She also mentioned that each Regent received a copy of Fiscal Fitness and should use that document in reaching out to school superintendents and others in the education community.


Previous Meeting Minutes


The Subcommittee approved the minutes of the prior meeting.


New York State Financial Audit

A partner from the accounting firm KPMG briefed the Subcommittee on the financial audit of New York State. He explained the process used in planning for and completing the audit. Because of the volume of local assistance dollars that flow through the Department, testing is always conducted on a sample of transactions. KPMG expressed no specific concerns with the Department’s financial processes.


The partner also emphasized the important role audit committees should be playing in both the public and private sectors. He indicated that although Sarbanes-Oxley directly affects private sector businesses, it has heightened awareness of audit committees in the public sector. He reminded the members of the Subcommittee that they should have an understanding of major Department processes. He invited the members to participate in KPMG's "Audit Institute" which provides resources to audit committees in carrying out their responsibilities.




OAS staff were available to answer the Regents questions on the following audits:


Old Business


Staff informed the members that Kevin McGuire from the Center on School Leadership is meeting with the deans of schools of education and is sharing the Fiscal Fitness document with them. Staff will provide the members of the Subcommittee with a document that describes audit coverage over the New York City Department of Education. Time will be made available at the May 2004 Subcommittee meeting to answer any questions on that topic.

Attachment II


Audit Report Abstracts

Regents Subcommittee on Audits

May 2004


Office of Audit Services


Major Finding


Washington-Saratoga-Warren-Hamilton-Essex BOCES



4th Judicial District

$0 adjustment


The audit found the BOCES’ systems and processes for tracking and claiming EPE contact hours were generally adequate, but the report identified some improvement opportunities for documenting contact hours and obtaining program approvals. The report also identified opportunities to improve management processes related to reporting financial data, providing monthly bank reconciliations and quarterly extraclassroom activity funds reports to the Board, and billing for adult education courses.


The BOCES has implemented or otherwise satisfied all 14 of the recommendations contained in the prior audit report.

8 recommendations


The report recommends the BOCES improve documentation of EPE contact hours, verify that ST-3 data agree with the audited financial statements, ensure the Board receives all required fiscal reports, and recover all expenses of the adult education programs from course fees.


BOCES officials agree with the recommendations.

Edgemont Union Free School District



9th Judicial District



$0 adjustment


The review found that the District has many of the necessary management controls in place, but identified opportunities for improvement. Opportunities identified include: developing formal policies related to budget objectives, development, preparation and administration; preparing a long-term financial plan; routinely providing the Board with budget status reports and fund balance projections; monitoring revenue and expenditures; and managing the fund balance. 



29 recommendations


The report contains specific recommendations for improvements in governance and planning, accounting and reporting, revenue and cash management, purchasing and expenditures, facilities and equipment, and student related data.


District officials generally agree with the recommendations. They disagree with the recommendation to change indirect costs to federal grants. They also disagree with the recommendation to use pre-numbered purchase orders.


It is the District’s prerogative to use all grant funds for direct services for students. The auditors believe that the use of pre-numbered purchase orders improves internal controls and establishes better accountability over purchases. 

Office of the State Comptroller

New York City Board of Education: Space Leasing Practices - Follow up


$0 adjustment


The prior audit, issued in April 2001, found that the New York City Board of Education now known as the New York City Department of Education (NYCDOE), generally complied with the process for leasing decisions. However, the audit identified six sites where the Board paid about $2.4 million annually, despite significant safety and cleanliness deficiencies.


The follow-up review found that the NYCDOE has made progress in implementing the recommendations contained in the prior report. However, it also notes uncorrected problems at five of the six previously identified sites.

6 recommendations


The NYCDOE has implemented four of the prior recommendations and partially implemented the remaining two.


The NYCDOE needs to improve on the follow-up process to ensure corrective actions are taken in a timely manner. The report also characterizes a recommendation to use financial remedies when problems with landlords are not resolved as partially implemented. The NYCDOE points out that none of the conditions were hazardous.

School District Transportation Costs - Follow up



$0 adjustment


The prior audit issued in February 2002 found that the Department did not analyze transportation costs for the purpose of identifying improvement opportunities. The report also identified a number of districts with unusually high costs as well as practices that might help other districts reduce their costs. The report found that the results of studies funded by a Department grant could help districts make significant improvement in their transportation services. The report also found the Department could be more thorough in its review of transportation contracts.


The follow-up review found the Department has made progress in implementing the recommendations.

9 recommendations


Of the nine prior audit recommendations, the Department has implemented four, partially implemented four, and has not implemented one recommendation.


The one recommendation not implemented was to follow-up with districts that have received grants for efficiency studies. The Department was not able to obtain funding for a position to gather and review the data.


The partially implemented recommendations relate to the study of school district transportation costs, the approval of transportation contracts, and the review of payments of some contracts that were missing at the time of the original audit.



Attachment III


Regents Subcommittee on Audits

Briefing - New York City Department of Education

Audit Coverage


The Office of Audit Services (OAS) does not routinely conduct audits of the New York City Department of Education (NYCDOE). Although we currently have two auditors assigned to 55 Hanson Place in Brooklyn, they are providing support to audits of school districts on Long Island as well as participating in the reviews of school districts’ financial statements.  The NYCDOE is audited by various entities.


1.            The Annual Audit of the Financial Statements of the NYCDOE - Section 2116-a of the Education Law requires boards of education to obtain an annual audit of their financial statements.  The State Education Department (Department) requires that the audit be conducted in accordance with American Institute of Certified Public Accountants and government auditing standards.  All school districts must file their financial statements with the State. An independent accounting firm (Deloitte & Touche) has audited the NYCDOE’s financial statements for last year. 


2.      Single Audit of the City of New York  - The Single Audit Act of 1984 required an annual audit of the City of New York’s (City) federal award programs for compliance with the requirements described in the U. S. Office of Budget and Management (OMR) Circular A-133.  The NYCDOE is a component of the Citywide audit and there are 18 programs for which funds flow from the Department to the NYCDOE. They include programs such as Title I, Special Education, School Lunch, Reading Excellence, etc.  Findings were reported for School Breakfast, School Lunch, Title I, IDEA Part B, and Improving Teacher Audits.  The NYCDOE has prepared corrective action plans to address the deficiencies.


3.      Fiscal Performance and Fraud, Waste, and Mismanagement Audits of NYCDOE - These audits were conducted by Ernst & Young LLP in 2003, in conjunction with staff from the Office of the Auditor General.  Topics reviewed include:

o       Personal Services

§         Per diem activities

§         Per session activities

§         District organizational structure


o     Other than Personal Services

§         Procurement and payment for goods and services

§         Payments to non-contracted vendors and imprest expenditures

§         Professional services

§         Travel and conference expenditures


o       Other Areas

§            Equipment and textbook inventory

§            High school fundraising

§            School building safety

§            Universal Pre-kindergarten


4.            Performance Audits - The Office of the State Comptroller (OSC) has authority to conduct audits of State agencies and municipalities.  OSC continues to maintain an audit presence with the NYCDOE. Recent performance audits have included Early Grade Class Size Reduction, compliance with NCLB requirements, and others.


5.      Department Oversight - While the OAS does not routinely conduct audits of the NYCDOE, we audited the NYCDOE’s preschool special education claims and also studied SURR funding in the past.  Department and OAS staff routinely review the results of audits of the NYCDOE and follow-up as appropriate.