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 Subcommittee on Audits
FROM:	Theresa E. Savo
SUBJECT:	Board of Regents Oversight – Financial Accountability
DATE:	December 16, 2005
STRATEGIC GOAL:	Goal 5
AUTHORIZATION(S):

 

Executive Summary

 

Issues for Discussion

 

            Three items are presented for discussion with the Members of the Subcommittee on Audits including:

 

1.                  Department Actions Regarding the Wyandanch Union Free School District

2.                  Status of School District Financial Accountability Regulations and Guidance

3.                  Completed Audits

 

Reason(s) for Consideration

 

            Update on Activities

 

Proposed Handling

 

            Discussion and Guidance

 

Procedural History

 

The information is provided to assist the Subcommittee in carrying out its oversight responsibilities related to audits of financial and reporting practices; performance audits or reviews; ethical conduct issues arising from audits; internal controls; and compliance with laws, regulations, and policies.

 

Background Information 

 

            Department Actions Regarding the Wyandanch Union Free School District – Department staff will brief the Subcommittee members on the actions taken to help the District address its fiscal and student performance issues.

 

            Status of School District Financial Accountability Regulations and Guidance – Guidance documents have been made available by the Department and OSC.  The draft regulations have been provided to various groups for discussion and comments.  The questions and answers are being worked on.

 

            Completed Audits – Reports are provided on one district’s administrative costs, an audit of the TAP awards at one school, and a private special education provider.

 

Recommendation

 

For items one (Actions Regarding Wyandanch UFSD) and two (School District Accountability), the advice and guidance of the Members of the Audit Subcommittee are sought.

 

For item three (completed audits), no further action is recommended.

 

Timetable for Implementation

 

            N/A

 

The following materials are attached:

·              Roadmap

·              Minutes of the December Meeting (Attachment I)

·              Audit Report Abstracts (Attachment II)

·              Audit Reports

 

 

Attachment I

 

MEETING OF THE REGENTS SUBCOMMITTEE ON AUDITS

December 8, 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 stating that she sees some encouragement in the school district audits that are being presented at today's meeting. The severity of the findings at some districts may be a reflection that the increased emphasis on school accountability is having an impact.

 

Follow-up From a Previous Meeting

 

On October 18, 2005, a VESID employee pleaded guilty to a felony for grand larceny in connection to the theft of more than 30 computers from the Manhattan District Office. This crime was originally identified though an internal audit of VESID procurement practices which was discussed at a previous meeting.  The employee has submitted his resignation.

 

Previous Meeting Minutes

 

The Subcommittee Members approved the minutes of the prior meeting.

 

New York State Financial Statement Audit

 

A partner and a senior staff member from KPMG were present to: provide an overview of the results of the audit of the financial statements of the State of New York, discuss the specific activities related to SED, and answer any questions. The audit resulted in the issuance of ten separate opinions on the various financial statements and the identification of three reportable conditions. None of the reportable conditions had anything to do with SED. Specific results related to SED were: adjustments were necessary to some Department account balances and improvements are needed in accounting for Capital Assets. The auditors also provided useful information on audit committees.  When asked for opportunities to improve the performance of the Subcommittee on Audits, the partner in charge suggested that the Subcommittee focus on the Department's financial reports and that the members need to become comfortable with the internal controls which lead to the development of internal financial reports.

 

Audits

 

Staff was available to answer questions on the following audits:

 

• East Bronx Day Care Center 2003-S-2
• Manhattan Center for Early Learning Compliance with Reimbursable Cost Manual for Year Ended June 30, 2002 2004-S-14
• The Archives Partnership Trust Internal Controls over Financial Operations 2005-S-24
• Lawrence Union Free School District - Independent Audit Services 2005M-29
• Buffalo City School District - Free and Reduced-Price Lunch Program Data Collection and Reporting 2005M-42
• East Islip Union Free School District S8-5-45
• Windham-Ashland-Jewett Central School District - Financial Accounting Operations 2005M-55
• Manhasset Union Free School District - Internal Controls 2005M-33
• Manhasset Union Free School District - Independent Audit Services 2004M-89
• Audited 2004-05 Financial Statements of the State of New York

 

Department Monitoring Efforts at Wyandanch Union Free School District

 

The Regents previously asked that staff from the Office of Elementary, Middle, Secondary and Continuing Education attend a meeting to brief the Subcommittee Members on efforts to improve performance in the Wyandanch Union Free School District. Staff were available and described efforts at Wyandanch, Roosevelt and Hempstead. Because of time constraints, the Regents requested the discussion be continued at the next Subcommittee meeting.

 

.

 

 

Attachment II

 

Audit Report Abstracts

Regents Subcommittee on Audits

January 2006

 

Office of the State Comptroller
Audit	Major Finding	Recommendations/Response
Rochester Business Institute Report 2004-T-6 7th Judicial District	$76,469 adjustment   Rochester Business Institute was overpaid $76,469 because school officials had incorrectly certified five students as eligible for TAP awards. Three students were not eligible for TAP because they were not meeting matriculation requirements. One student was not in good academic standing and one did not meet residency requirements.	1 recommendation to the Department, 2 recommendations to the Higher Education Services Corporation (HESC).   The recommendation to the Department was to ensure the School complies with require-ments related to good academic standing, matriculation, and residency.   The recommendations to HESC were to recover the funds plus interest and ensure School officials verify compliance with residency requirements for students they certify as eligible.
Wyandanch Union Free School District Report S8-5-46 10th Judicial District	$0 adjustment   The audit examined the School District's internal controls over expenses incurred on behalf of managers and members of the Board of Education (Board).   There are weaknesses in the District's controls over administrative expenses and in the structure and function of the Internal Claims Auditor and Treasurer. The audit also found a need for more policy guidance and an opportunity to strengthen the control environment by always following Board approved contracts, resolutions and policies, and by limiting compensation provided to managers to authorized amounts.   Among the specific observations made in the report are the District did not have a proper claims auditing function for eight months, there were outstanding cash advances, there was no policy on cell phone usage, the District provided compensation and fringe benefits to some managers without Board authorization, the Internal Claims Auditor was paid even though actions required in the Board resolution were never fulfilled, policies on travel and the provision of meals and refreshments were inade-quate, and there were  inadequate separation of duties in the business office.	8 recommendations   The report recommends the Board conduct a thorough review of claims in the absence of an internal claims auditor, pursue collection of past due cash advances, conduct a cost-benefit analysis of cell phone usage, ensure it authorizes all salaries and benefits in a public meeting, determine the appro-priateness of compensation provided without its formal authorization, consider maxi-mum travel per diem rates, and monitor compliance with the meal expense policy. The report also recommends that District officials discontinue the use of rubber facsimile signature stamps on checks.   School officials agree with the recommendations and in some cases have taken steps to implement them.
Office of Audit Services
Audit	Major Findings	Recommendations/Response
New York City Department of Education Audit of the Manhattan Center for Early Learning Report CA-0698-36 1st Judicial District	$166,407 adjustment   The audit by the New York City Office of the Auditor General found the School did not allocate fringe benefit expenses between the School and another school operating in the same building. The audit disallowed food costs that were related to a staff party. The audit also disallowed administrative expenses related to an out-of-state location.	2 recommendations   The report recommends the accounting books of the three related entities be segregated, and the school comply with SED guidelines and the Reimbursable Cost Manual for all reimbursable expenditures including maintaining adequate documentation.   School officials agree with the inaccurate allocation of fringe benefits but disagree with adjustments to administrative costs.   The Department's Rate Setting Unit is reviewing the audit in order to adjust the tuition rate and assess the effect on subsequent years' tuition rates.