THE STATE EDUCATION DEPARTMENT / THE UNIVERSITY OF THE STATE OF NEW YORK / ALBANY, NY 12234

 

TO:

The Honorable the Members of the Board of Regents

FROM:

Michael Abbott    

COMMITTEE:

Audits

TITLE OF ITEM:

Audit Activities

DATE OF SUBMISSION:

February 22, 2005

PROPOSED HANDLING:

Discussion

RATIONALE FOR ITEM:

Enable the Board of Regents to review audits

STRATEGIC GOAL:

5

AUTHORIZATION(S):

 

 

SUMMARY:

 

The following materials are attached.

 

·        Roadmap

·        Minutes of February Meeting (Attachment I)

·        Audit Report Abstracts (Attachment II)

·        Audit Reports

 

REGENTS SUBCOMMITTEE ON AUDITS

MEETING ROADMAP

 

Date:  March 15, 2005

Time:  8:00 – 9:00 am

Location:  Regents Room

Last Revised 2/28/05

TOPIC

OUTCOME

WHO

MINUTES

Opening Remarks

 

Chair

2

Review Agenda/Minutes (Attachment I)

Approval

Abbott

1

Audit Report Abstracts (Attachment II)

Questions Addressed

SED Staff

20

Department’s Monitoring of Federal Grants

Address Audit Findings

SED

15

Current Issues

Update

Abbott

15

Next Session

Preview

Staff

2

 

 

 

 

 

 

 

Attachment I

 

MEETING OF THE REGENTS SUBCOMMITTEE ON AUDITS

February 7, 2005

 

Subcommittee Members in Attendance:

 

Regent Geraldine D. Chapey, Chair

Regent Arnold B. Gardner, Vice Chair

Regent Joseph E. Bowman

 

 

Discussion Items

 

Regent Chapey opened the meeting by welcoming everyone and reminding them of the important changes occurring in the accounting and auditing professions as the effects of Sarbanes-Oxley Act (Act) and similar initiatives trickle down into the public sector. 

 

Follow-up on Previous Meeting

 

Staff responded to follow-up questions. A copy of a 1996 audit, "Annual Audits of School Districts and Related State Education Department Oversight" was provided to the members as requested. In response to a request for information on the Act, staff prepared a summary document for discussion.

 

Previous Meeting Minutes

 

The Subcommittee approved the minutes of the prior meeting.

 

Sarbanes-Oxley Act

 

Staff provided the members with a summary of the key provisions of the Act. The provisions of the Act only apply to publicly traded companies. However, some of the provisions are relevant to improved accountability in the government and nonprofit sector. In fact, it was pointed out that some key provisions in the Act already exist in other law, regulation, or guidance and are applicable to USNY institutions. An example cited was requiring auditor independence; this requirement already exists in government auditing standards and is applicable to all New York State school district audits. Another example cited was the need for a code of ethics. The Act requires disclosure regarding the existence of a code of ethics. New York State General Municipal Law currently requires school districts to adopt a code of ethics. 

 

A discussion occurred regarding the advisability of establishing some additional requirements for Certified Public Accountants to comply with prior to conducting audits of school districts. Among the possibilities discussed were required training or additional certification.

Fiscal Analysis Activities for the Office of Higher Education 

 

Staff provided the members with a summary of activities conducted by the Office of Audit Services (OAS) in support of the Office of Higher Education (OHE).  Assistant Commissioner Frey described the activities, which include the following.

 

 

The presentation resulted in a discussion of the proposed statewide master plan for higher education. The consensus of the Subcommittee was that the master plan should include language that emphasizes the importance of financial accountability over student financial aid programs, as well as overall operations.

 

Audits

 

Staff was available to answer questions on the following audits:

 

 

Audit Plan

 

The members asked staff to brief the Subcommittee on the results of the Department’s risk assessment when completed. There was also a discussion of the proposed scope of the audits of IDEA funds.  That will also be discussed at a future meeting.

 

Current Issues

 

Staff informed the members that OAS auditors have begun visiting other VESID district offices as a follow-up to the previously released internal audit. In addition, staff informed the members that an official of the William Floyd School District has been arrested.  A third issue described was the investigation of the activities of an organization, Suffolk County Organization for the Promotion of Education (SCOPE), which provides various services including the staffing of superintendents, business officials, and other personnel to school districts. The issues being examined are questionable expenditures and possible violations of the State Retirement Law.

 

 

 

 

 

 

 

 

 

 

Attachment II

 

Audit Report Abstracts

Regents Subcommittee on Audits

March 2005

 

Office of Audit Services

Audit

Major Finding

Recommendations/Response

Hebrew Academy for Special Children for the Year Ended
June 30, 1999

CA-0302-6

 

An audit conducted by Watson Rice LLP Certified Public Accountants, for the Office of the Auditor General, Department of Education of The City of New York and Approved by the State Education Department  Pursuant to Education Law Section 4410

$88,943 net adjustments

 

The audit found that the School had overstated staff compensation in excess of regional medians by $85,933.  In addition, certain vehicle expenses were reclassified as personal service prior to the application of the regional median. These items resulted in a net salary adjustment of $69,433.   The audit also found other adjustments related to undocumented travel expenses and a duplicate travel reimbursement.

 

The audit also found that the preschool program revenue was understated by $416,285 and units of service were not reported for the special education itinerant teacher (SEIT) program. The School over billed for SEIT services by $54,648.

4 recommendations

 

The report contained 4 recom-mendations related to internal control observations. The recommendations are to maintain formal written policy and procedures concerning pur-chasing, maintain travel logs, conduct periodic physical inventories, and accurately summarize and review student attendance.

 

School officials agree with the findings and recommendations and have taken action to implement the necessary procedures.

 

The results of this audit will be used to establish audited tuition rates.

KPMG LLP

New York State Federal Single Audit

 

Conducted by KPMG LLP

 

 

$0 adjustment

 

The Federal Single Audit is required of all federal programs that exceed a certain financial threshold or which are considered at risk for other reasons. The audit of the State Education Department identified seven findings some of which cut across programs. The audit found the Department had failed to ensure that required audits of subrecipients are monitored in a small number of cases. Six of the 576 subrecipients failed to submit an audit, and 5 were late.

 

The audit also found that in 2 of 30 VESID cases reviewed, eligibility was not determined within the timetable required. In addition, 26 of 30 VESID contracts reviewed did not contain the required suspension and debarment certification.  The audit also cited the Department for not monitoring subrecipients use of federal funds for four programs during the project periods either by site visits or other means.     

No specific recommendations, Corrective action plans required

 

Department Officials agree with the findings and have developed corrective action plans. Regarding the site visit monitoring, Department Officials indicate that they have begun to finalize a comprehensive monitoring plan that will include all programs funded under NCLB.

 

Office of the State Comptroller

Audit

Major Finding

Recommendations/Response

Westbury Union Free School District

For the Period July 1, 2002 through August 31,2004

S8-5-04

10th Judicial District

$0 adjustment

 

This was an examination of the District's internal controls over administrative expenses incurred on behalf of School District managers and members of the Board of Education. Specifically the audit focused on travel and conferences, meals, cell phones and credit cards. The audit found the Superintendent received compensation for sick days although it was not allowed in her employment contract, the internal claims auditor did not report to the Board, many credit card claims were paid without adequate supporting documentation, and the personal expenses of non-School District individuals were paid by the District and not reimbursed until the auditors identified them. The audit also found the district paid for the personal expenses of some employees attending conferences, has not assessed the need for the 73 cell phones used by employees and had not adopted a policy defining the circumstances under which meals and refreshments will be provided to employees attending meetings. 

10 recommendations

 

The recommendations are to adhere to employee contracts in providing benefits, ensure accurate employee attendance records are maintained, establish the proper reporting relationship for the internal claims auditor, and update the District's conference guidelines. The report also recommends updating the travel policy to prohibit the paying of personal expenses, monitor compliance with policies on travel, conference expenses and meal reimbursements, consider estab-lishing a maximum per diem travel reimbursement policy and conduct a cost benefit analysis of the use of the cell phones.

 

District officials responded that it is important to note that there was no finding of misappropriation of funds or wrongdoing. Further, officials believe some of the observations involved minor issues. District Officials have generally agreed with the specific recommendations and have taken actions to implement. However they continue to disagree with some of the conditions identified in the audit.

 

OSC comments to the District response indicate that they disagree with the District’s assertion of the significance of the findings. They state that reimbursement beyond that allowed by employee contracts as well as personal expenses is a serious problem. The comments also indicate they do not believe the new policy on conference prohibits the payment of non-employee expenses and billing of personal expenses.