Meeting of the Board of Regents | January 2010

Report of

REGENTS SUBCOMMITTEE ON AUDITS

to

The Board of Regents

January 12, 2010

 

Regent Geraldine Chapey, Chair of the Regents Subcommittee on Audits submitted the following report.

 

Your Regents Subcommittee on Audits had its scheduled meeting on January 12, 2010. The members of the Subcommittee in attendance were Regent Chapey, Regent Cofield, and Regent Bowman.  Chancellor Tisch, Chancellor Emeritus Bennett, Regents Tilles and Bendit were also in attendance.

Items for Discussion

Chair’s Remarks:  Regent Chapey welcomed everyone and commented on the importance of audits in providing the Board of Regents with information needed to carry out their responsibilities.

 

Update on ARRA Audit Activities  

Audit staff briefed the Subcommittee on audit activities related to the appropriate administration of ARRA funds. The Office of Audit Services has initiated six audits of school districts and two internal audits of the Department processes related to ARRA.  One of the audits of a school district has been issued as a final and one as a draft. It is anticipated that the two will be included in the material of the next Subcommittee meeting.

Presentation of Audits

Staff briefed the Subcommittee on the Office of the State Comptroller’s (OSC) audit of the Buffalo City School District.  

In addition, we were presented with the 32 audits this month.  Thirty audits were issued by the OSC, one by the City of New York’s Office of the Comptroller, and one by the Office of Audit Services (OAS).  Twenty-three of the audits were of school districts, one was of the Department’s administration of a higher education program, one of the New York City Department of Education, six of BOCES, and one institution of higher education.

We were briefed on the results of some of the audits including a $4.1 million disallowance of aid to the Niagara Falls City School District.

The result of the full review of audits presented by the Department’s Internal Audit Workgroup is attached.

 

Regents Subcommittee on Audits

December 2009 – January 2010

Review of Audits Presented

Department’s Internal Audit Workgroup

 

Newly Presented Audits

We reviewed the 32 audits that are being presented to the Subcommittee this month.  Thirty audits were issued by the Office of the State Comptroller (OSC), one by the City of New York’s Office of the Comptroller, and one by the Office of Audit Services (OAS).  Twenty-three of the audits were of school districts, one was of the Department’s administration of a higher education program, one of the New York City Department of Education, six of BOCES, and one institution of higher education.  

The findings were in the areas of financial reporting, procurement, information technology, payroll, cash, segregation of duties, claims processing, fingerprinting, accounting for extraclassroom activity funds, budgeting, conflict of interest and others such as employment preparation education program contact hours, Medicaid reimbursement, administration of the Higher Education Opportunity Program and compliance with Reading First spending guidelines.

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 21 of the audits for further review or follow-up as noted below.  The St. Lawrence-Lewis BOCES audit of purchasing controls found no discrepancies.

 

• Fund Balance, Reserves and Budgeting Practices (Chautauqua Lake, Island Park, Jasper-Troupsburg, Maine-Endwell, Valley Stream 24, Batavia, Cattaraugus-Allegany-Erie-Wyoming BOCES, Malverne, Middle Country, Oneida-Herkimer-Madison BOCES, and Rondout Valley)

 

Summary of Audits

The findings generally indicate that the districts’ fund balance exceeded the statutory limit and the districts over funded some of the reserves.  These reserves were not used for the intended purpose and the districts made payments out of the General Fund instead.  Some of the districts also established reserves when they did not have legal authority to do so (i.e. Reserve for Other than Post Employment Benefit (OPEB)).

Follow-up Action

 

OAS will continue to follow-up on the corrective action plans until all significant recommendations are fully implemented or no longer applicable. OSC will also begin a process to assess the validity of balances in the Employee Benefit  Accrued Liability Reserves (EBALR). The Department will monitor legislative actions relative to fund balance and reserves.  A small workgroup has been formed to evaluate the issue of fund balance limitations and the current list of districts that are exceeding such limit.  The workgroup will establish a course of action.

 

• Fingerprinting and Background Check (Middleburgh, Otsego Northern Catskills BOCES, and Valley Stream 30)

 

Summary of Audits

The audits found instances of employees and independent contractors that did not have the required fingerprinting and criminal history backgroud check conducted.

Follow-up Action

The audits have been referred to the Office of School Personnel Review and Accountability (OSPRA) for follow up and to make the districts aware of responsibilities related to criminal history background checks.

 

• Medicaid Reimbursement (Canandaigua and Jasper-Troupsburg)

 

Summary of Audits

The findings indicate that the districts did not receive hundreds of thousands of dollars in Medicaid reimbursement due to lack of policies and procedures identifying appropriate responsibilities in the claiming and reimbursement process.

Follow-up Action

OAS will review the corrective action plans to ensure all recommendations are implemented.

 

 

 

• Board Member Fiscal Oversight Training (Jasper-Troupsburg and Rondout Valley)

 

Summary of Audits

Audit findings indicate that some board members have not taken any of the required fiscal oversight training, despite holding the position for a number of years. 

Follow-up Action

The Office of Counsel is reviewing the audit findings to assess the need for action.

 

• Niagara Falls City School District

 

Summary of Audit

The District over-reported the allowable contact hours to the Department resulting in $4,167,602 in excess Employment Preparation Education (EPE) Aid payment.  The District’s EPE program claimed contact hours for ineligible students, failed to maintain necessary documentation, and employed uncertified teachers. 

Follow-up Action

Staff from OAS will contact the State Aid unit to confirm that a payment plan has been established.

 

• Roosevelt Union Free School District

 

Summary of Audit

The District encumbered 90 percent of unexpended personal service cost appropriations and 83 percent of other than personal service appropriations as of September 30, 2009.  However, the District continues to over-expend various budget line codes and, in the first quarter, has over-expended budget codes by a significantly larger amount than in the previous fiscal year.  District employees also processed three budget transfers, totaling $2.8 million, without board approval.

Follow-up Action

Staff from the Office of Education - P-12 will contact the District to follow-up and ask for the corrective action plan.

 

• Franklin-Essex-Hamilton BOCES

 

Summary of Audit

Six administrative staff members received compensation not authorized by the board.  In addition, administrative staff did not use BOCES vehicles and cellular phones according to policies and procedures.  Leave time was not credited or used in accordance with terms of employment contracts or collective bargaining agreements.  BOCES also withheld payment to a retired administrator in 2007 in order to circumvent the law which limits the amount a retired public employee can earn.

Follow-up Action

Staff from the Office of Education - P-12 will discuss the findings with the District Superintendent.

 

• Higher Education Opportunity Program (HEOP) Follow-up

 

Summary of Audit

The Department made little progress in correcting problems identified by the prior audit.  Only one out of four recommendations has been implemented.  The Department still has to: implement the recommendation regarding the follow-up with Long Island University-Brooklyn to comply with HEOP recordkeeping guidelines; use a risk-based approach during site visits to examine the schools’ accounting records; and publish the HEOP annual report on time.

Follow-up Action

OAS will follow-up with the program office on the status of these recommendations.

 

• Payroll Overpayments (Batavia and Middle Country)

 

Summary of Audits

The findings indicate that employees and former employees received compensation and separation payments they were not entitled to, insufficiently documented, or not provided for by their collective bargaining agreement.

Follow-up Action

OAS will review the corrective action plans to ensure all recommendations are implemented.

 

• Malverne Union Free School District

 

Summary of Audit

The District paid the treasurer $19,350 as an independent contractor although Statute and regulation clearly indicate that a school officer could not be an independent contractor.

Follow-up Action

OAS will review the corrective action plan to ensure all recommendations are implemented.

 

• Schenectady City School District

 

Summary of Audit

 

The former head utility worker received over $50,000 in overtime compensation for facilities and energy management duties; however, documentation was inadequate to support all the overtime hours paid.

 

The District hired an internal auditor a year after the requirement under the accountability legislation took effect.  In addition, the internal auditor has been late in providing the District with the result of risk assessment.

 

Follow-up Action

OAS will review the corrective action plan to ensure all recommendations are implemented.

 

• Syracuse City School District

 

Summary of Audit

The District’s accounts receivable records are unreliable and at one point (December 2, 2008), was overstated by at least $1.24 million or 40 percent.  The District also has a School Account (from fundraising and donations) which had about $107,000 as of June 30, 2008.  This account was controlled by the principal and other staff members.  The District had no authority to set up this account.

Follow-up Action

Staff from the Office of Education - P-12 and OAS will contact the chief fiscal officer of the District to follow-up on the findings.