STATE EDUCATION DEPARTMENT / THE UNIVERSITY
OF THE STATE OF NEW YORK / ALBANY, NY 12234
The Honorable the Members of the Board of Regents
Subcommittee on Audits
Theresa E. Savo
Board of Regents Oversight – Financial
Five items are presented for
discussion with the Members of the Subcommittee on Audits
Requirements for School Business
Key Positions in School
Annual Report of the Regents Subcommittee on
Status of Legislative Proposals to Improve
Fiscal Accountability (Five-Point Plan)
The information is provided to assist the Subcommittee in carrying out its oversight responsibilities related to audits of financial and reporting practices; performance audits or reviews; ethical conduct issues arising from audits; internal controls; and compliance with laws, regulations, and policies.
Audits – Reports are
provided on a district’s internal controls, two districts’ administrative costs,
and reviews of districts’ proposed budget.
for School Business Officials – Information will be presented on the
current and proposed requirements for school business officials for both civil
service appointments and school business official certification.
in School Districts –
Information will be presented on the key control positions for a school
district. These positions include
board members, superintendent, treasurer, board clerk, and the internal claims
of the Regents Subcommittee on Audits – The report presents the activities of the
Subcommittee and its accomplishments over the past year.
Legislative Proposals to Improve Fiscal Accountability (Five-Point
Plan) An update will be
provided on the status of the legislation.
For items one through five, no further action is recommended.
The following materials are
Minutes of May Meeting (Attachment
Audit Report Abstracts (Attachment
REGENTS SUBCOMMITTEE ON AUDITS
Date: June 21, 2005
Review Agenda/Minutes (Attachment I)
Audit Report Abstracts (Attachment II)
SED and OSC Staff
Requirements for School Business Officials
Key Positions in School Districts
Annual Report of the Regents Subcommittee on Audits
Legislative Proposal Five-Point Plan
Subcommittee Members in
Regent Geraldine D. Chapey,
Regent Arnold B. Gardner, Vice
Regent Joseph E.
Regent Harry Phillips, 3rd
Regent Chapey opened the meeting by welcoming
everyone and reminding them of the ripple effect that efforts to enhance
accountability are having across the globe. As an example, the European Union
recently adopted international accounting standards which will impact on
multi-national corporations operating in the United
The Members of the Subcommittee (Members)
approved the minutes of the prior meeting.
Staff was available to answer questions on
the following audits:
Staff was also available to answer questions
on the examination of proposed budgets of:
Roosevelt Union Free
Schenectady City School
Enlarged City School
District of Troy
During a discussion of the Interboro
Institute audit, it was learned that the Institute has already paid the Higher
Education Services Corporation for the overpayment of TAP funds. Regent Gardner
asked what the policy is on paying interest on an audit disallowance. An answer
will be provided at the next meeting.
It was also noted that the Herricks Union
Free School District audit was a special review based on a complaint. The
Department's web page now includes a phone and fax number, as well as an email
address, to receive allegations of fraud, waste, and abuse.
Financial Condition of School
The Members were provided with the list of
districts identified as experiencing fiscal difficulty. The Office of Audit
Services has analyzed 694 financial statements as of May 2005. Letters have been
sent to the districts experiencing fiscal difficulty asking for a plan to
address each district's financial condition. The Department will work with the
districts as needed.
A discussion followed regarding the selection
and appointment of superintendents, building principals, and business officials.
Regent Gardner mentioned that a new regulation creating a "leadership
certificate" is being proposed.
Staff described the common methods used by districts to appoint a
business official. Specifically, districts may use the county civil service
system to establish qualifications and a list for a business manager. Other
districts use the School Business Official (SBO) designation to hire a business
official. The SBO requires a master's degree with additional course work as well
as an internship. Regent Gardner asked that the Members be provided with all
material related to efforts to strengthen regulations regarding training for
business officials. Staff will provide the Members with current requirements for
business officials as well as any proposed changes.
A discussion then ensued regarding standards
for auditors of districts. Staff explained that auditors follow professional
standards for governmental audits and that there is a reference manual available
to guide CPAs in the audit of districts.
The professional standards include 22 separate standards that address
issues such as independence, continuing professional education, understanding
internal controls, and planning and supervision. The reference manual includes
topics specifically related to districts.
Regent Bowman expressed his concern that any
focus on district administrators has to flow from the schools of education
administration in the colleges and universities. He asked that the Members be
provided with a list of the schools of education administration as well as the
key control positions within a district.
Legislative Proposal Five-Point
Staff summarized the proposed legislation to
improve district accountability that is currently being considered by the
Legislature. There are three bills
being considered. Staff led a discussion of the key provisions of the proposals
and also added some points of disagreement as well as enhancements to the
legislation. The Members agreed to
review the document and provide any feedback they deem appropriate. Staff also
agreed to provide the Members with the sponsors of the various proposals and a
summary of the key issues.
Changes in Regulations and Legislation
Related to the Accounting Profession
Deputy Commissioner Duncan-Poitier briefed
the Members on activities related to the accounting profession. She indicated
that, by next month's Regents meeting, proposed regulations will be provided to
both the Subcommittee and the Higher Education Committee. Staff are meeting with
the New York State Society of CPAs on June 1, 2005 to discuss the regulations.
The future of legislative changes related to
the accounting profession is more uncertain. There is legislation in both the
Senate and Assembly. The Department cannot support the Senate version. Regent Phillips asked for copies of the
Deputy Commissioner Duncan-Poitier also
briefed the Members on the status of the investigation of the licensed CPAs
involved in the audit of the Roslyn Union Free School
The Regents were interested in any role they
could play in advocating for legislation. Deputy Commissioner Duncan-Poitier
said that she would reach out to them on an individual basis. Regent Bowman
asked for the names of the sponsors of the legislation and for talking points to
help assist in the advocacy.
Regents Subcommittee on
of Audit Services
Hempstead Union Free School District
The review found that the District has
some of the necessary management controls in place, but identified
opportunities for improvement including: the Board working together more
effectively by setting an appropriate tone at the top and focusing on
student performance issues, developing a long-term financial plan,
developing a plan to address the deficiencies in the school lunch
operations including the negative fund balance, developing a process to
bill for Medicaid eligible services on a timely basis, and improving
controls over cash receipts and the petty cash processes. The review also
identified opportunities to improve practices related to competitive
bidding, consultant contracts, use of temporary personnel, separation of
duties, and reimbursement of the costs of meals and travel. Finally, the
review identified a need to develop a plan to address the deficiencies in
school facilities, improve inventory controls, develop a process to assure
all temporary staff and consultants undergo fingerprinting and background
checks, and improve controls over reporting student data.
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 agree with the
findings and recommendations and have taken action to implement some of
of the State Comptroller
Riverhead Central School
This audit was one of 16 conducted to
determine whether district officials have established appropriate internal
controls over expenses incurred on behalf of administrators and members of
the Board. The audit found that the internal claims auditor reported to
the Assistant Superintendent for Business instead of the Board. In
addition, the internal claims auditor did not review claims for
appropriateness and referred questions to individuals involved in the cash
disbursement process. The District spent about $58,000 on cell phones
without written policy guidance. Some of the phones had usage greater than
the allotted minutes. The Board did not provide written guidance on travel
and conference expenditures and detail documentation was not always
available to support claims. The District spent about $9,800 for two
credit cards without a policy on acceptable use. In some cases, itemized
receipts or invoices did not support the credit card charges. Finally, the
District spent about $13,630 for meals and refreshments without a policy
defining when it is appropriate.
The recommendations are for the Board
to review the duties of the internal claims auditor and require that the
individual report to the Board. The report also recommends a new cell
phone policy be implemented and reimbursements sought for personal use.
The internal claims auditor should require sufficient documentation to
determine a claim complies with policy and is reasonable and
recommendation is to amend the old or adopt a new policy on travel related
expenses. Finally, the report recommends adopting a policy outlining when
meals and refreshments may be provided at meetings and
District officials agreed with the
recommendations and plan to have them fully implemented by July 1,
of the State Comptroller
Examination of Tentative Budgets
Greater Amsterdam School District, and
Liberty Central School District
1 recommendation to the Greater
Amsterdam School District