Meeting of the Board of Regents | January 2008

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:

December 28, 2007

STRATEGIC GOAL:

Goal 5

AUTHORIZATION(S):

REGENTS SUBCOMMITTEE ON AUDITS

MEETING ROADMAP

Date:  January 2007

Time:  TBD

Location:  TBD

TOPIC

OUTCOME

WHO

MINUTES

Opening Remarks

Chair

3

Review Agenda/Minutes (Attachment I)

Approval

Conway

2

Follow-up on Previous Meetings

Information

Conway

5

Audit Trends – Claims Processing

Information

OAS Staff

15

William Floyd Union Free School District

Information

OAS Staff

10

Summary of Audit Findings (Attachment II) and Audit Report Abstracts (Attachment III)

Questions answered

OSC and Department Audit Staff

5

Next Session

Preview

Staff

5

Executive Session

Information

Department Staff

15

Office of Audit Services

William Floyd Union Free School District

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Office of the State Comptroller

Alden Central School District

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Bloomfield Central School District

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Bradford Central School District

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Brushton-Moira Central School District

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Burnt Hills-Ballston Lake Central School District

Canastota Central School District

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Cazenovia Central School District

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Chateaugay Central School District

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Clinton Central School District

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Dover Union Free School District

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Fallsburg Central School District

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Fort Ann Central School District

Fort Edward Union Free School District

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Gananda Central School District

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Guilderland Central School District

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Hauppauge Union Free School District

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Holland Central School District

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Holley Central School District

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Hudson Falls Central School District

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Kendall Central School District

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Lansingburgh Central School District

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Monticello Central School District

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Mount Markham Central School District

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Mount Sinai Union Free School District

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New York Mills Union Free School District

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Norwich City School District

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Oakfield-Alabama Central School District

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Pelham Union Free School District

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Pine Valley Central School District

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Pinnacle Charter School

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Pulaski (Academy) Central School District

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Sauquoit Valley Central School District

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Southern Cayuga Central School District

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Starpoint Central School District

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Sullivan County BOCES

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Wainscott Common School District

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Weedsport Central School District

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January Total

11

18

14

15

11

15

1

2

19

3

1

May 2007

June 2007

July 2007

October 2007

December 2007

January 2008

Running Total

Procurement

9

11

12

20

12

11

75

Capital Assets

10

1

2

4

0

0

17

Claims Processing

13

3

12

17

17

18

80

Payroll

12

3

11

20

18

14

78

Cash

6

2

8

15

14

15

60

Financial Reporting

12

3

2

16

6

11

50

Information Technology

10

10

9

14

15

15

73

Capital Construction

2

1

1

0

0

1

5

Extra-Classroom Activity Fund

1

1

0

1

1

2

6

Segregation of Duties

0

0

3

0

15

19

37

Budgeting

2

3

0

1

1

0

7

Conflict of Interest

0

0

0

4

3

3

10

Other

0

2

0

0

0

1

3

Total

77

40

60

112

102

110

501

Office of Audit Services

Audit

Major Finding(s)

Recommendation/Response

William Floyd Union Free School District

For the Period July 1, 2000 through June 30, 2005

SD-0107-2

10th Judicial District

$548,162


adjustment

The District's Title I grant audit resulted in disallowances of $471,368 in salary-related expenditures and $76,793 in non-salary related expenditures.

There was inadequate documentation to support the expenditures. Moreover, some non-salary related expenditures were not allowable based on the provisions of the grant.

A comprehensive list of the District's Title I eligible students was not maintained by the District.

30


recommendations

The report's recommendations focused primarily on strengthening policies and procedures regarding payroll, financial documentation and procurement.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action shortly.

Office of the State Comptroller

Audit

Major Finding(s)

Recommendation/Response

Alden


Central School District

Internal Controls Over Selected Financial Operations

2007M-200

8th Judicial District

$ 0


adjustment

A board member has a prohibited conflict of interest in that the individual owns a daycare corporation which operates year round on the District campus. The program had gross receipts of approximately $95,000 and $106,000. This is prohibited because this individual had the power to approve the contract between the corporation and the District.

Twenty employees were paid salaries totaling $941,778, five employees were paid stipends of $24,899, and four employees were paid health-reimbursement arrangement (HRA) cash out payments of $15,292, all without contractual authorization, and frequently without board approval. Three employees were also paid $34,153 for unused leave time without contractual authorization.  Finally, the gross wages on the former Superintendent’s W-2 form were understated by $9,649 due to a payment for unused HRA funds that was not included.

The 54 claims that were reviewed had numerous deficiencies including a lack of proper documentation, supervisory approval for purchases, and credit card purchases totaling $1,201 were not reviewed by the claims auditor.

Lastly, the District does not have board-approved contracts on file for 16 vendors who received approximately $2.1 million during the fiscal year.

16


recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding conflict of interest, board oversight, claims processing and contractual payments.

District officials generally agreed with the recommendations and have indicated that they are currently taking corrective action.

Bloomfield


Central School District

Internal Controls Over Financial Activities

2007M-166

7th Judicial District

$ 0


adjustment

The District claims auditor was appointed to the position in July 2005, and then in February of 2007 was appointed to secretary to the interim superintendent. She is supervised by the interim superintendent; therefore, is ineligible to be the claims auditor.

The process for reporting on results by the claims auditor is not in conformance with SED regulations. Rather than consulting with and reporting directly to the board regarding questions about claims, the claims auditor works under the direction of the business administrator whose main financial related duties include supervising the accounting function.

The board has not established formal policies and District management has not developed procedures describing employee responsibilities for the processing of payroll.

3


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding internal controls over financial activities.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Bradford


Central School District

Internal Controls Over Selected Financial Operations

2007M-189

7th Judicial District

$ 0


adjustment

The District overpaid two employees $2,000 for graduate credits and underpaid four employees $800 for graduate credits due to improper oversight of the district treasurer’s duties.

The District’s purchasing policy was inadequate because there were insufficient provisions regarding goods and services and it did not provide guidance for purchases that fell below the dollar thresholds for competitive bidding.

The board also appointed a claims auditor that performed incompatible duties as a cafeteria cashier and transportation clerk. Sixty-five of the 91 purchases reviewed lacked purchase orders and 41 of the 65 were cafeteria purchases. The District also purchased fuel and aluminum bleachers without soliciting bids required by law. The District used a credit card for 88 purchases, and 55 of those purchases did not have purchase orders.

Finally, there were weaknesses in internal controls over the computerized financial system. There were discrepancies with network passwords, and there was no contingency plan in place in case of an emergency.

15


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding financial operations; procurement and claims processing; and information technology.

The District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Brushton-Moira


Central School District

Internal Controls Over Cash Receipts and Disbursements

2007M-214

4th Judicial District

$ 0


adjustment

There were weaknesses in the District’s system of controls over cash receipt and disbursement transactions. The deputy treasurer prepared deposits for miscellaneous receipts; recorded receipts in the financial software; received and reconciled bank statements; initiated wire transfers; and prepared journal entries.

There were also internal control weaknesses in the deputy treasurer’s oversight of the check signing function. Checks are generated, printed, and mailed by a clerk without the deputy treasurer’s final review.

4


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding cash receipts and disbursements.

The District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Burnt Hills-Ballston Lake Central School District

Internal Controls Over Payroll Processing

2007M-226

4th Judicial District

$ 0


adjustment

The internal control structure over payroll processing was reviewed and no significant control deficiencies were noted.

Also reviewed were employee timesheets, individual earnings, leave time records, and payroll registers. Except for a few minor issues (which were addressed previously with District officials), there were no significant payroll deficiencies.

0


recommendation

There were no recommendations.

Canastota


Central School District

Internal Controls Over Selected Types of Cash Disbursements

2007M-210

6th Judicial District

$ 0


adjustment

The business manager controlled 130 manual checks ($51,467) to various vendors and individuals without effective oversight. All 130 manual checks were examined and there were no improper disbursements.

District management also had not established adequate internal controls over payroll disbursements. This is because the business manager can control the entire payroll process without any effective oversight and has unchecked access to the resulting paychecks.

3


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding manual disbursement and payroll checks.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Cazenovia


Central School District

Internal Controls Over the District Treasurer's Operations

2007M-234

6th Judicial District

$ 0


adjustment

There is no independent review of bank reconciliations, bank statements, cancelled checks, journal entries, and there is no approval for wire transfers for most of the audit period. Additionally, the same individual maintains the accounting records, has cash custody, and performs cash reconciliations.

1


recommendation

The report's recommendation focused primarily on strengthening the policies and procedures regarding the district treasurer's operations.

District officials generally agreed with the recommendation and have indicated that they plan to initiate corrective action.

Chateaugay


Central School District

Internal Controls Over Selected Financial Activities

2007M-239

4th Judicial District

$ 0


adjustment

The Board failed to implement effective internal controls over financial operations in the business office. There was inadequate segregation of duties over payroll and cash receipts and disbursements with minimal oversight. The District’s blank check supply is also not properly safeguarded and cash receipts were not properly accounted for or deposited in a timely manner. Furthermore, there were weaknesses in the review of claims because the District’s claims auditor was a full-time employee in the District business office.

The Board established a policy governing the operations of the extra-classroom activity fund, but fund monies were not sufficiently maintained in accordance with the policy. Extra- classroom fund cash receipts ($34,029) were deposited in the bank anywhere between 11 to 171 days from the date the funds were collected.

The District also did not have adequate written policies and procedures concerning information technology.

19


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding financial operations, extra-classroom activity funds and information technology.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Clinton


Central School District

Financial Condition and Controls Over Selected Financial Activities

2007M-215

5th Judicial District

$ 0


adjustment

The District has experienced six consecutive years of operating deficits that reduced the unreserved fund balance in its general fund from $960,226 to $696,975, six years later. However, the report of District finances determined that this reported deficit was significantly understated.

The treasurer’s duties are not properly segregated and the treasurer does not supervise the application of her signature on payroll checks. Additionally, nine claims ($16,507) paid by the treasurer did not contain evidence of the claims auditor’s review and approval.

District officials were unable to locate four laptop computers ($8,660) and this was because of a failure to establish policies which clearly assign responsibility for inventory control.

The District’s computer access controls were also deficient, in that the Director of Business is able to create a new user, update user access rights, and perform other administrative functions. The Director of Business is also the purchasing agent for the District and has the authority to conduct certain duties such as the preparation and execution of wire transfers.

15


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding financial condition, cash disbursements, claims processing, capital assets, and the system administrator.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Dover


Union Free School District

Internal Controls Over Information Technology and Payroll and Personal Services

2007M-201

9th Judicial District

$ 0


adjustment

District controls over information technology are inadequate. There is no comprehensive IT policy to adequately address all major areas of IT operations and BOCES staff can remotely access the District’s servers at any time. BOCES employees also have full administrative rights and there is no formal written agreement with BOCES to outline remote access policy and rules. Additionally, there is no formal disaster recovery plan in place in case of an emergency.

There were also weaknesses involving internal controls over payroll and personal services because there were no policies or procedures developed.

11


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding information technology, payroll, and personal services.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Fallsburg


Central School District

Management of School District Operations

2007M-82

3rd Judicial District

$ 0


adjustment

There were extensive problems with District operations including not properly screening independent contractors who come into contact with students; overpayments to senior administrators and contractors; payments for personal expenses of employees; and poor controls over the District financial systems.

District personnel did not comply with New York State statute regarding the fingerprint-driven background check, and as a result, a contractor was hired by the District who had been previously convicted of sexual battery and child molestation.

The Board overpaid the former superintendent $44,457 and various other employees were also overpaid by more than $10,000. 

The District’s security over their IT system lacked essential controls. Several users had unauthorized access to sensitive directories and files in the District’s system.

The duties of staff in the business office were not properly segregated, and the biggest concern was that the treasurer has the sole ability to authorize, approve, and initiate wire transfers for the District without independent oversight. Additionally, there is a general lack of specific policies in place regarding claims auditor duties.

13


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding Education Law and the District fingerprinting policy; inappropriate actions and payments; information technology; segregation of duties; and the processing and payment of claims.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action shortly.

Fort


Ann Central School District

Internal Controls Over Payroll and Personal Services

2007M-209

4th Judicial District

$ 0


adjustment

Payroll records of 13 employees were reviewed to ensure that individuals on payroll were bona fide employees and that their pay was appropriate. Additionally, the leave records of five employees were also reviewed to determine accuracy. No deficiencies were detected.

0


recommendation

There are no recommendations.

Fort Edward Union Free School District

Internal Controls Over Financial Activities

2007M-203

4th Judicial District

$ 0


adjustment

The District does not have an adequate segregation of duties over the cash receipts, payroll, and purchasing processes to ensure that one person does not control all phases of a transaction. For example, the superintendent did not directly oversee employees’ use of his own signature on purchase orders. The superintendent also acted as the purchasing agent, approving his own requisitions and purchase orders.

There were also significant discrepancies with internal controls over the claims process. The Board did not perform a proper audit of claims. One hundred sixty-five claims totaling $2,727,064 were improperly paid before the audit was performed, and various other purchases were not properly supported or authorized in advance.

Additionally, there were not adequate internal controls over information technology. There were discrepancies with passwords, remote access, and physical security.

8


recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the segregation of duties.

The District officials generally agreed with the recommendations, and have indicated that they plan to initiate corrective action shortly.

Gananda


Central School District

Internal Controls Over Payroll, Claims Processing and Information Technology

2007M-154

7th Judicial District

$ 0


adjustment

The recordkeeping and processing functions for payroll are under the control of a single individual and no one reviews that individual’s work for accuracy. In addition, the claims auditor does not audit each claim, and the Board is not effectively safeguarding computerized data.

8


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding payroll, claims processing, and information technology.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action shortly.

Guilderland


Central School District

Internal Controls Over Financial Activities

2007M-170

3rd Judicial District

$ 0


adjustment

There is insufficient segregation of duties in the internal controls over cash receipts and disbursements.

District officials have not established policies and procedures to ensure that leave buyout payments are made in accordance with collective bargaining agreements. The District paid 16 employees a total of $32,368 for unused vacation leave upon separation from the District, even though these payments were unauthorized.

The District spent approximately $16,700 to provide meals and refreshments at various District events, and $7,300 of it was not spent in compliance with District policy. 

The District was also lacking a formal disaster recovery program for computerized data.

4


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding cash receipts and disbursements; payroll; purchasing; and computerized data.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Hauppauge Union Free School District Financial Condition and Internal Controls Over Financial Operations

2007M-143

10th Judicial District

$ 0


adjustment

The Board did not properly ensure that policies and procedures were in place to ensure the accuracy of financial reports, or that there was adequate protection of District assets. Additionally, District programs were unnecessarily cut because the assistant superintendent for business prepared the 2005-2006 budget based on incomplete fund balance projections.

District officials also overstated the amount of fund balance needed to cover the cost of encumbrances. As a result, District officials were able to conceal the fact that the District’s unreserved fund balance exceeded the Real Property Tax Law.

There was also an absence of policies and procedures concerning payroll, purchasing processes, disbursements, and cash receipts.

Several weaknesses were found in the District’s financial computer operations concerning user access and the District’s vendor master file. Additionally, there is no disaster recovery plan in case of an emergency.

16


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding financial condition, board oversight, segregation of duties, professional service contracts, and information technology.

The District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Holland


Central School District

Internal Controls Over Claims Processing

2007M-163

8th Judicial District

$ 0


adjustment

The Board has not developed written policies or procedures for the claims audit function that provide for a comprehensive audit of claims, or a job description for the claims auditor position. The claims audit function is also not independent of other District business operations. Thirty District claims were examined, and there were discrepancies with 15 of them. In one instance, the District made two payments ($10,000) to a vendor for special education services. After the District made these payments, it was found that the actual costs exceeded the amount of the blanket purchase order by $12,189. Additionally, the District paid $13,718 to a transportation vendor and there was no evidence that the transportation supervisor reviewed the bill to ensure its accuracy before it was paid.

Additionally, purchase orders for five claims were dated after the purchases occurred.

5


recommendations

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

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action shortly.

Holley


Central School District

Internal Controls Over Cafetertia Operations

2007M-123

8th Judicial District

$ 0


adjustment

District officials did not establish proper internal controls over cafeteria operations. Reports from the Point of Sale (POS) system were not generated or requested from the food services vendor.  The District also failed to conduct the quarterly and annual audits of cafeteria operations as provided for in the contract with the food services vendor. Additionally, the POS software user list had 19 individuals and one administrator on it, showing that all users have more software permission than necessary to perform their job duties. Cafeteria staff also used the names and passwords of terminated employees to gain access to the system.

Bank deposits were also greater than deposits recorded on the cafeteria reports by $10,552, while over the same period, POS cash exceeded total deposits listed on the reports by $11,838.

Additionally, no one was monitoring cashier activity and as a result, there were four questionable refunds totaling $51.

7


recommendations

The report's recommendations focused primarily on strengthening the policies and procedures regarding cafeteria operations.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action.

Hudson


Falls Central School District

Internal Controls Over Selected Financial Operations

2007M-207

4th Judicial District

$ 0


adjustment

The District treasurer, senior payroll clerk, and the business office staff were able to perform functions outside those required for their job duties because of deficiencies in the user rights software system.

The segregation of duties in the payroll and purchasing process were not adequate because of the improper security over the treasurer’s accounts payable signature.

Additionally, claims were not properly audited and there were no written policies for the audit of claims.

7


recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding information technology, segregation of duties, and claims processing.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Kendall


Central School District

Internal Controls Over Financial Operations

2007M-180

8th Judicial District

$ 0


adjustment

The District paid over $41,000 for two mini-vans, parts and services to a vendor that is partly owned by a current board member. The District’s Code of Ethics requires board members to avoid being placed in situations in which they have a conflict of interest. The District did not identify potential violations of its own Code of Ethics and allowed these transactions to occur.

Additionally, internal controls concerning claims processing were not sufficient because the claims auditor did not consistently examine and review all claims before payment was made. Forty-three claims were examined and 19 percent of them were not reviewed prior to payment. The District also does not consistently use purchase orders or claim forms with their voucher packets. Fifty-six percent of the 43 claims examined did not have an attached purchase order or claim form.

Lastly, adequate policies were not established concerning the extra-classroom activity fund because the Board does not receive quarterly reports, and records are not being maintained by student treasurers.  As a result, the yearbook has accumulated a debt of over $26,000.

9


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding purchasing and claims processing; conflict of interests; and the extra-classroom activity fund.

District officials generally agreed with the recommendations and have agreed to initiate corrective action as soon as possible.

Lansingburgh


Central School District

Internal Controls Over Payroll

2007M-249

3rd Judicial District

$ 0


adjustment

The collective bargaining agreements or the individual employment contracts were tested for 52 employees. For ten managerial employees, the board passed resolutions setting their annual salaries; however, the board did not address fringe benefits to seven of the ten managerial employees.

1


recommendation

The report's recommendation focused primarily on strengthening the policies and procedures regarding internal controls over payroll.

District officials generally agreed with the recommendation and have indicated that they plan to initiate corrective action.

Monticello


Central School District


  Physical Controls for Information Technology

2007M-171

3rd Judicial District

$ 0


adjustment

Many computers were improperly stored in conditions that may cause damage to them. Conditions included a leaking air conditioning unit which was stored directly above a computer monitor and one of the servers, large amounts of dust on the equipment, and storage temperatures reaching critical levels.

2


recommendations

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

District officials generally agreed with the recommendations and have indicated that they have taken immediate action to correct the problem.

Mount Markham


Central School District

Internal Controls Over Cash Disbursements

2007M-233

5th Judicial District

$ 0


adjustment

District officials did not effectively address the treasurer’s duties and responsibilities to ensure that the duties were properly segregated. Additionally, the District did not properly review audit logs or use staff that were independent of the cash receipts process to verify bank reconciliations.

The treasurer did not review warrant checks before they were distributed, nor directly supervise the signature process. Audit logs also had not been reviewed by any District personnel and the board had not designated any District personnel to perform such reviews.

Finally, the software that the District uses to print checks allows the production of duplicate checks.  These duplicate checks are not recorded in the District’s accounting records.

4


recommendations

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

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Mount Sinai Union Free School District

Internal Controls Over Financial Operations

2007M-188

10th Judicial District

$ 0


adjustment

A comprehensive information technology policy has not been adopted, and the District does not adequately restrict access to its financial accounting software. There is also no formal disaster recovery plan. District officials have not implemented procedures to produce and review audit logs to identify users who accessed the system and the transactions they processed.

The District did not solicit competitive proposals for a professional service provider who was paid a total of $319,399 for therapy and special education services. The District also did not enter into a written agreement with a provider that was paid a total of $23,050 for tutoring services.

8


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding information technology; procurement and professional services; and cash disbursements.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

New York


Mills Union Free School District

Internal Controls Over Selected Financial Activities

2007M-236

5th Judicial District

$ 0


adjustment

There was a lack of proper internal controls which could result in significant irregularities concerning payments from District funds.

The treasurer does not properly oversee the use of her electronic signature by Madison-Oneida BOCES Mohawk Regional Information Center (MORIC) personnel.  The treasurer does not actually examine checks containing her signature or verify that the checks are approved for payment. The accounts payable clerk also processes claims, initiates the printing of the related checks, and receives the checks before they are delivered to the District.

The claims auditor did not audit the District’s claims paid by manual checks and those associated with online credit card payments. The District also overpaid $1,000 on an original $2,000 bill to a vendor for a presentation given to District staff.

6


recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the treasurer’s signature on District checks and the audit of claims.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Norwich


City School District

Cash Receipts and Disbursements and Claims Processing

2007M-238

6th Judicial District

$ 0


adjustment

The duties of the District treasurer were not properly segregated. She maintains the accounting records, disburses cash, and performs bank reconciliations. Controls over the receipt of retiree health insurance payments are not adequate to ensure District assets are safeguarded.

The District also improperly appointed their BOCES as claims auditor. BOCES may only provide claims auditing services to the District if it has no other contracts with the District. Because the District paid the BOCES more than $8.7 million during the audit period, this arrangement is prohibited.

3


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding segregation of duties and the claims auditor.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as possible.

Oakfield-Alabama


Central School District

Internal Controls Over Financial Operations

2007M-184

8th Judicial District

$ 0


adjustment

The District’s written policies governing the cash receipt and disbursement process were not specific to certain job duties and did not properly segregate critical duties. Access rights to the financial software program were also not appropriately limited.

Additionally, District accounting records indicated a significant number of errors and a lack of procedures to verify the accuracy of financial data.

10


recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures of cash receipts and disbursements, accounting records, and user access.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Pelham Union Free School District

Internal Controls Over Access to the Computerized Financial System

2007M-235

9th Judicial District

$ 0


adjustment

The District’s assistant superintendent of business has administrative rights to the computerized financial system and is significantly involved in financial transactions. Thus, he should not have the ability to control access to the system and should only have the rights he needs to perform his own job duties.

1


recommendation

The report’s recommendation focused primarily on strengthening policies and procedures regarding computerized financial system access.

District officials generally agreed with the recommendation and have indicated that they plan to initiate corrective action as soon as possible.

Pine


Valley Central School District

Internal Controls Over Claims Processing

2007M-225

8th Judicial District

$ 0


adjustment

The claims auditor revealed that he may not be aware of pertinent policies and that he relies on the person authorizing the claim to determine if it is in accordance with policy requirements.

Fifteen ($47,405) of the 63 claims reviewed had no indication that the required number of quotes were obtained. Twenty-one claims ($27,187) had purchase orders that were not authorized by the purchasing agent until after the items were purchased. Five claims ($5,426) for travel lacked detail and evidence of authorization.

An additional 13 claims were tested; additional deficiencies included improper documentation and/or authorization.

4


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding claims processing.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action shortly.

Pinnacle


Charter School


Internal Controls Over Selected Financial Activities

2007M-183

8th Judicial District

$ 0


adjustment

The Board has not adequately segregated incompatible duties with regard to purchasing and the processing of claims. The Board does not review all claims paid by the School and has not yet established an independent claims audit function. Officials in the administrative office initiate, authorize, and approve all claims.

Seventy claims ($391,470) were reviewed to determine whether they were properly approved and documented.  The purchase of computer equipment ($92,000) was made without seeking quotes from different vendors to ensure the best prices.

Additionally, of the 70 claims tested, there was no original supporting documentation for three of the monthly credit payments ($16,626). Because there were discrepancies, 370 credit card transactions were reviewed, 93 of them ($21,012) did not have adequate documentation.

9


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding claims processing and credit card usage.

The District officials generally agreed with the recommendations and have agreed to initiate corrective action as soon as possible.

Pulaski


Academy and Central School District Internal Controls Over Financial Operations

2007M-232

5th Judicial District

$ 0


adjustment

There were internal control weaknesses in the District’s operations relating to cash disbursements. Duties of the treasurer include entering information into the accounting system, preparing deposit slips, initiating wire transfers, reconciling bank accounts, as well as preparing and posting journal entries. The treasurer’s signature is also applied to District checks without her direct supervision.

Additionally, the duties of the payroll clerk were not properly segregated, in that all salary entries and changes made to payroll; payment processes; and printing and distributing payroll checks are all part of the payroll clerk’s duties.

6


recommendations

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

The District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Sauquoit


Valley Central School District

Internal Controls Over Non-Payroll Disbursements

2007M-222

5th Judicial District

$ 0


adjustment

There were weaknesses in the District’s control over non-payroll disbursement transactions. The business manager/treasurer has unchecked control over the accounting records for non-payroll cash disbursements; has check writing and wire transfer authority; and controls the bank reconciliations. Furthermore, she has administrative rights to the District’s computerized accounting system.

Additionally, the District has not implemented an adequate internal control system over the auditing, approval, and payment of claims. The treasurer paid many claims without written authorization from the claims auditor.

5


recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding non-payroll cash disbursements and claims processing.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Southern Cayuga Central School District

Internal Controls Over Selected Financial Activities

2007M-172

7th Judicial District

$ 0


adjustment

District assets were not protected because it was unknown if the administration of the computerized business management system was properly assigned to someone outside of the business office. Three of nine users tested had inappropriate levels of access and the system did not have the capability to produce desired monitoring report.

7


recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding the computerized business management system and treasury and accounting duties.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action shortly.

Starpoint


Central School District

Internal Controls Over Cash Receipts and Electronic Fund Transfers

2007M-229

8th Judicial District

$ 0


adjustment

District management has not established adequate internal controls over the District’s cash receipts and electronic fund transfers. The treasurer has control over the cash receipt and wire transfer functions with little oversight. The treasurer also authorizes internal and external wire transfers without review.

Three months of cash receipts ($3.3 million), and two months of electronic fund transfers ($3 million) were reviewed. All cash receipts tested were properly recorded and deposited and all electronic fund transfers were properly recorded and transferred to authorized district accounts.

3


recommendations

The report’s recommendations focused primarily on strengthening policies and procedures regarding cash receipts and electronic fund transfers.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Sullivan County BOCES

Cash Collections and Claims Audit Process

2007M-204

3rd Judicial District

$ 0


adjustment

There was a lack of segregation of duties in the treasurer’s office because the treasurer is responsible for cash receipts, data entry, preparing deposits, making electronic transfers, and preparing journal entries.

The assistant superintendent’s secretary also maintains a cash receipt’s log for all off-site cash collections, which are couriered directly to her, but no one else reviews. Additionally, the cosmetology department does not have set prices for the services they provide and cash sheets are not utilized in various other departments.

2


recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding departmental cash collections and the claims audit process.

BOCES officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Wainscott


Common School District

Internal Controls Over Cash Disbursements and Conflicts of Interest

2007M-211

10th Judicial District

$ 0


adjustment

The board and District officials did not implement and monitor internal controls over cash disbursements to adequately safeguard District assets. A board member was appointed as the District’s treasurer, the board did not audit claims prior to payment, and the part-time business official did not include bank reconciliations in his monthly reports to the board.

The District also failed to implement a system to properly identify outside occupations or business interests of District officers and employees. As a result, the District paid $6,836 to a company which a District employee’s relative had an interest in.  The District clerk/secretary’s husband owned 50 percent of the company’s stock, but the District clerk/secretary did not disclose this interest in the District’s records.

5


recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding cash disbursements and conflicts of interest.

District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.

Weedsport


Central School District

Internal Controls Over Segregation of Duties and Claims Auditing

2007M-217

7th Judicial District

$ 0


adjustment

The treasurer’s duties are not properly segregated. The treasurer also serves as backup for the accounts payable clerk; however, for the treasurer full access to the purchasing and payroll modules is not required to perform his or her duties.

The board was not aware of its responsibility to audit and approve each claim for payment and only reviewed the summary warrants.

4


recommendations

The report’s recommendations focused primarily on strengthening the policies and procedures regarding segregation of duties and claims.

The District officials generally agreed with the recommendations and have indicated that they plan to initiate corrective action as soon as possible.