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 March 13, 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, Regent Ouderkirk, Regent Tallon and Regent Young.

Regents, in addition to Audits/Budget Committee Members, in attendance were: Chancellor Rosa, Vice Chancellor Brown, Regents Cashin, Cea, Cottrell and Johnson, 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 State Aid for Library Construction and Coordinator proposed amendments of Section 90.12 and 90.18 and February 2017 Fiscal Report and Sharon Cates-Williams, Deputy Commissioner, to present the Board of Regents Oversight of Financial Accountability Report.

State Aid for Library Construction and Coordinator

Our Executive Deputy Commissioner presented the proposed amendments of Section 90.12 and 90.18 of the Commissioner of Education.  Proposed amendments of 90.12 State Aid for Library Construction are necessary to conform the Commissioner's Regulations to changes made to Education Law section 273-a by Chapter 498 of the Laws of 2011, Chapter 148 of the Laws of 2014,and  Chapter 480 of the Laws of 2015.  Amendments to the regulation will address provisions in the law that enable the use of State funds to purchase vacant land, that enable approved projects serving economically disadvantaged communities to be funded up to seventy-five percent of eligible project costs, and that make the installation and infrastructure of broadband services an approved project cost. In addition, amendments will clarify wording related to eligible and ineligible project costs.  Proposed amendments of 90.18 School Library Systems are necessary to clarify certain terminology relating to school library systems in BOCES and the Big Five city school districts.  The proposed amendment conforms certain terms relating to school library systems to other, corresponding provisions of the Commissioner’s Regulations. 

2016 Fiscal Report

Our Executive Deputy Commissioner provided the Members with the February fiscal report that reflects actual expenditures through February 28, 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-five audits that are being presented to the Committee this month. Three audits were issued by the Office of Audit Services, one by the Office of the New York City Comptroller, and thirty–one by the Office of the New York State Comptroller (OSC). Twenty-five audits were of school districts, three of Boards of Cooperative Educational Services (BOCES), three of charter schools, three providers of special education services, and one audit of the State Education Department.

The findings were in the areas of banking, budget/financial reporting, claims processing, conflict of interest/internal controls, extra-classroom activity fund, information technology, payroll/leave accruals, procurement, Reimbursable Cost Manual compliance, segregation of duties, employment preparation education program, new hires, school lunch program, special education, and Universal Pre-Kindergarten program.

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

Office of Audit Services

East Ramapo Central School District School Lunch Fund

• $724,616 adjustment (3.4% of $21.5 million reported in costs).
• District officials charged $724,616 (or 13% of the sample) in expenditures to the school lunch program that should not have been reimbursed because they were not approved or were undocumented.

The report’s recommendations focused on District officials establishing communications with the Department's Child Nutrition Unit to obtain instructions for repaying the $724,616 that was overbilled and ensuring that adequate supporting documentation is maintained for all expenditures charged to the school lunch fund.

New York City Montessori Charter School Special Education Program

• Regents approved Charter.
• $87,134 adjustment (12.3% of $709,500 revenue directly related to special education).
• Officials did not ensure all special education students with an IEP received an annual review.
• Montessori overbilled NYCDOE $87,134 in special education services.
• Nine students received special education instruction from teachers who were not certified in special education by New York State.

The report’s recommendations focused on School officials following up to ensure that all special education students with an IEP have an annual review, providing reconciliations to NYCDOE, repaying $87,134 that was overbilled, and ensuring teachers who provide special education instruction are appropriately certified or licensed.

Office of NYC Comptroller Audit

Success Academy Charter School Oversight of Financial Operations

• SUNY approved Charter.
• $624,342 adjustment (3.4% of $18.3 million paid in management fees).
• Duplicative payments were made to the Network for services required by the Management Agreement in exchange for its 15% management fee.

The report’s recommendations focused on School officials recouping $624,342 paid to Network for expenses charged to the School that should have been included in the Network's management fee.  

Office of the New York State Comptroller

Aim High Children's Services

• $616,906 adjustment (6.4% of $9.7 million reported in reimbursable costs on the CFR).
• Ineligible costs included $501,085 payment for services that were unsupported.
• Lack of sufficient documentation.

The report’s recommendations focused on School officials ensuring that costs reported on future CFRs comply with Manual requirements and ensuring that costs charged to SED programs are appropriate and valid.

Hebrew Institute for the Deaf and Exceptional Children

• $774,122 adjustment (7% of $11 million reported in reimbursable costs on the CFR).
• Ineligible costs include $194,438 in bonuses, $132,377 excessive executive payments, and $22,024 in checks written to the Executive Director.

The report’s recommendations focused on Hebrew Institute's officials ensuring that costs reported on future CFRs comply with all Manual requirements.

State Education Department Universal Pre-Kindergarten Program

• The Department does not directly monitor UPK providers for health and safety.
• The Department relies on the school district operating the UPK program or the Office of Children and Family Services to ensure that UPK providers are complying with health and safety requirements.

The report’s recommendations focused on State Education Department officials developing requirements and issuing formal guidance for school districts to follow when performing health and safety inspections of UPK facilities and implementing a structured system to monitor school districts’ oversight and inspections of health and safety compliance of all UPK providers.

Vertus Charter School Conflict of Interest and Information Technology

• Regent approved Charter.
• The Board did not ensure that School officials and employees did not have a prohibited interest in the School’s contracts.
• Certain provisions of the School’s bylaws and code of ethics appear to be inconsistent with the Charter and General Municipal Law (GML).
• School officials have not implemented appropriate information technology (IT) policies and procedures.

The report’s recommendations focused on the Board and School officials consulting with the School’s legal counsel to address inconsistencies between the School’s bylaws, code of ethics and its charter and GML, and adopting comprehensive policies governing the School’s IT operations including, but not limited to, user access, acceptable use, and breach notification.