Meeting of the Board of Regents | March 2010

Report of

REGENTS SUBCOMMITTEE ON AUDITS

to

The Board of Regents

March 8, 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 March 8, 2010.  Chancellor Tisch, Regents Tilles, Cohen, and Bendit were in attendance.

Items for Discussion

Chair’s Remarks:  Regent Chapey welcomed everyone and commented on the importance of audits in providing accountability and transparency to the Department and the public.  

Proposed Revision to the Statement on the Governance Role of a Trustee and Board Member

Staff proposed additional language to be included in the Statement. The language would provide guidance to Board’s in considering and/or adopting policies limiting or prohibiting the employment of relatives or other individuals with a personal relationship with board members. After some discussion the members asked that staff consider stronger language and asked that it be presented at the next meeting of the Subcommittee.

Results of the State of New York Single Audit

The Department administers in excess of $3 billion in federal funds annually. Auditors from Toski, Schaefer, and Co., presented the results of the single audit of the Department’s administration of federal grant funds. The single audit examines our control systems and control activities to determine if we have complied with federal regulations. For the 2008-09 state fiscal year, the auditors identified six findings. Four of the findings identified inadequate or insufficient sub-recipient monitoring. A discussion of the required amount of sub-recipient monitoring and available funding followed. It was requested that more specific information on the sub-recipient monitoring be provided at the next meeting.

Presentation of Audits

We reviewed the 68 audits that are being presented to the Subcommittee this month.  Sixty-six of the audits were issued by the Office of the State Comptroller (OSC) and two were issued by the Office of Audit Services (OAS).  Fifty-three of the audits were of school districts, nine of BOCES, one was of an institution of higher education, four were  of Special Act school districts (section 4201, provide educational services to disabled students ) and one was of a  New York City Department of Education program.  

The findings were in the areas of payroll, financial reporting, cash, procurement, information technology, extraclassroom activity fund, claims processing, segregation of duties, conflict of interest, fingerprinting, capital assets, and others such as Medicaid reimbursement, recycling paper program, energy conservation, use of American Recovery and Reinvestment Act funds, and administration of the Tuition Assistance Program.

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

 

Regents Subcommittee on Audits

February – March 2010

Review of Audits Presented

Department’s Internal Audit Workgroup

 

Newly Presented Audits

We reviewed the 68 audits that are being presented to the Subcommittee this month.  Sixty-six of the audits were issued by the Office of the State Comptroller (OSC) and two were issued by the Office of Audit Services (OAS).  Fifty-three of the audits were of school districts, nine of BOCES, one was of an institution of higher education, four were  of Special Act school districts (section 4201, provide educational services to disabled students ) and one was of a  New York City Department of Education program.  

The findings were in the areas of payroll, financial reporting, cash, procurement, information technology, extraclassroom activity fund, claims processing, segregation of duties, conflict of interest, fingerprinting, capital assets, and others such as Medicaid reimbursement, recycling paper program, energy conservation, use of American Recovery and Reinvestment Act funds, and administration of the Tuition Assistance Program.

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.

There are 24 follow-up audits that were conducted by OSC and are included in the material this month. Two districts, Brockport and Hauppauge had fully implemented all of the recommendations contained in the original audit.  Vestal had fully implemented all of the recommendations in one of the two audits conducted of that district.

The Department’s Internal Audit Workgroup identified categories of findings and audits for further review or follow-up as noted below:

 

• Fund Balance, Reserves and Budgeting Practices (Auburn, Balwinsville, Broome-Delaware-Tioga BOCES, Cato-Meridian, Delaware-Chenango-Madison-Otsego BOCES, Fairport, Monroe 2-Orleans BOCES, North Syracuse, Palmyra-Macedon, Rush-Henrietta, Ulster County BOCES, Valley Stream #13, Wayland-Cohocton, Williamson, and Williamsville)

 

Summary of Audits

The findings generally indicate that the districts’/BOCES’ fund balance exceeded the statutory limit and the districts/BOCES over funded some of the reserves.  These reserves were not used for the intended purpose and the district/BOCES made payments out of the General Fund instead.  Some of the districts/BOCES 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/BOCES that are exceeding such limit.  The workgroup will establish a course of action.

 

• Fingerprinting and Background Check (Delaware-Chenango-Madison-Otsego BOCES, New York Institute for Special Education)

 

Summary of Audits

The audits found instances of employees 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 school/BOCES aware of responsibilities related to criminal history background checks.

 

• Medicaid Reimbursement (Palmyra-Macedon)

 

Summary of Audit

The findings indicate that the district may have lost $175,000 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 plan to ensure all recommendations are implemented.

 

• Board Member Fiscal Oversight Training (Greater Southern Tier BOCES)

 

Summary of Audit

Audit finding indicates that seven of the eleven board members had not taken the required fiscal oversight training within the first year of being elected.

Follow-up Action

All of the board members have now received the required fiscal oversight training.

 

• Conflict of Interest (Kiryas Joel, Monroe #1 BOCES, Ulster County BOCES, and Williamson)

 

Summary of Audits

The audit findings indicate that there are board members or employees with prohibited or undisclosed interest in a vendor’s contract with the district/BOCES  due to family or business relations.

Follow-up Action

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

 

• Lack of Disaster Recovery Plan (Albany, Babylon, Cobleskill-Richmondville, Delaware-Chenago-Madison-Otsego BOCES, Long Beach, Monroe 2- Orleans BOCES, Ulster County BOCES, Valley Stream #13)

 

Summary of Audits

The audit findings indicate that the districts/BOCES do not have a disaster recovery plan in place to prevent the loss of equipment and data in the event of a disaster causing computer failure.

Follow-up Action

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

 

• Use of American Recovery and Reinvestment Act (ARRA) funds (Coxsackie-Athens and Mohonasen)

 

Summary of Audits

In one of the audits, it was found that the district’s claim was based on an estimated amount and not actual expenditures. It also included expenditures that were not included in the approved grant application. Expenditures were not posted directly into the ARRA account codes.

The second district did not comply with the federal requirements regarding time and effort documentation.

Follow-up Action

The districts have already implemented the recommendations.

 

• OSC Follow-up Audits (Brentwood, Brockport, Canajoharie, Clymer, Commack, Cortland, East Syracuse-Minoa, Germantown, Hauppauge, Haverstraw-Stony Point, Jericho, Lake Placid, Margaretville, Nanuet, Penn Yan, Schoharie, Schuylerville, Seaford, Sewanhaka, South Glens Falls, Valhalla, Vestal, Warrensburg, Warsaw)

 

Summary of Audits

OSC auditors revisited 24 districts that had been previously audited to follow-up on the progress of implementing the recommendations. Sixty-five percent of the recommendations have been fully implemented, 19 percent have been partially implemented, 13 percent have not been implemented and the remaining 3 percent are no longer applicable.

Follow-up Action

The Department will assess the significance of the unimplemented recommendations and follow-up where appropriate.

 

• Special Acts - 4201 schools (Lavelle School for the Blind, Lexington School for the Deaf, New York Institute for Special Education, and St. Joseph’s School for the Deaf)

 

Summary of Audits

One common audit finding among the schools pertains to procurement issue, particularly the failure to competitively bid certain purchases. Other findings generally relate to lack of board oversight.

Follow-up Action

OAS will request from OSC a copy the schools’ 90-day follow-up letter on the implementation of the recommendations.  OAS will review progress of implementation and contact the appropriate program office as necessary.

 

• Rochester City School District

 

Summary of Audit

The former superintendent provided undocumented bonuses and salary increases to employees belonging to a certain group (Superintendent’s Employee Group, consisting of employees appointed to their positions and primarily serve at the superintendent’s discretion).  In a sample of 30 bonuses, 27 ($164,550) did not have supporting documentation to support bonuses.  The claims auditor did not audit claims related to the $36 million capital project.  The audit also found weaknesses in procurement and contract management such as failure to use request for proposals for professional services, executing contracts prior to board approval and general lack of oversight.

Follow-up Action

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

       

• Monroe 2-Orleans BOCES

 

Summary of Audit

The BOCES entered agreements and used public funds for unauthorized purposes. A previous agreement wherein the BOCES provided service to an organization outside the country resulted in the BOCES accumulating $1.2 million.  These proceeds were later placed in the Monroe2-Orleans Educational Foundation, although the BOCES has no authority to use public funds for this purpose. This Foundation appears to have transferred the moneys to the Rochester Area Community Foundation to avoid the restrictions on investments of BOCES moneys.

Follow-up Action

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