Report of Regents Audits/Budget and Finance Committee to The Board of Regents

Your Committee on Audits/Budget and Finance had its scheduled meeting on April 3, 2017. Regent Josephine Finn, Chair of the Audits/Budget and Finance Committee, submitted the following written report. In attendance were committee members: Regent Finn, Chair, Regent Collins, Regent Hakanson, Regent Mead, and Regent Young.

Regents, in addition to Audits/Budget Committee Members, in attendance were: Chancellor Rosa,  Regents Cashin, Cea, Chen, Cottrell, Mittler and Tillis as well as, Commissioner Elia and Executive Deputy Commissioner Berlin.

ITEMS FOR DISCUSSION

Chair’s Remarks: Regent Finn welcomed everyone. She introduced Beth Berlin, Executive Deputy Commissioner, to present the March 2017 Fiscal Report and Sharon Cates-Williams, Deputy Commissioner, to present the Board of Regents Oversight of Financial Accountability Report.

2016 Fiscal Report

Our Executive Deputy Commissioner provided the Members with the March fiscal report that reflects actual expenditures through March 2017 and projected expenditures through the lapse period ending June 30, 2017.  Extensive spending controls continue for all funds.  General Fund spending plans reflect the amounts appropriated in the 2016-17 enacted budget. General Fund accounts are in structural balance. Special Revenue accounts are all in structural balance on a current year basis and the accumulated negative balance in the Cultural Education Account is projected to remain at a negative $3.6 million. Federal Funds reflect current year plans for two-year grant awards.

Completed Audits

The Department’s Internal Audit Workgroup reviewed thirty-two audits that are being presented to the Committee this month. One audit was issued by the Office of Audit Services, thirty audits were issued by the Office of the New York State Comptroller, and one was issued by the United States Department of Education. Eighteen audits were of school districts, seven of providers of special education services, three colleges, two of charter schools, one BOCES, and one audit report on the nationwide assessment of charter schools and education management organizations.

The findings were in the areas of budget/financial reporting, cafeteria operations, charter schools and their management organizations, information technology, payroll/leave accruals, procurement, Reimbursable Cost Manual compliance, reserve funds, tuition and fees, and the Tuition Assistance Program.

Deputy Commissioner, Sharon Cates-Williams, gave a brief overview of the following audit:

U.S. Department of Education- Office of Inspector General

Nationwide Assessment of Charter and Education Management Organizations

• New York was one of six states reviewed in audit.
• Audit focused on relationship between 33 charter schools with Charter Management Organizations (CMO).
• In New York, they reviewed three authorizers: SED - Board of Regents, NYC Department of Education, and SUNY
• Audit reviewed five charter schools: two New York City, two in Brooklyn and one in Yonkers.
• They identified a related party transaction between the charter school and the CMO as an internal control weakness. The charter school board leased facilities from the CMO. The authorizer was aware of the lease agreement and deemed it an acceptable risk.

The report’s recommendations focused on providing guidance to SEAs for performing a minimum level of monitoring, risk assessment, and mitigation procedures related to charter school contractual relationships with CMOs; and updating OMB Circulars to include procedures whether the SEA or LEA have internal controls to ensure charter schools with relationships with CMOs have effective controls to mitigate risk.

SED-Charter School Office (CSO) reviewed the findings and determined the NYSED Charter School Audit Guide (Audit Guide), as well as, the continued monitoring and oversight of all Board of Regents authorized charter schools provides guidance to charters and CMO’s in the future.  In addition, CSO will ensure the school and other authorizers know about the fiscal standards set forth in the Audit Guide.