The Bethlehem Central School District (District) is governed by the Board of Education (Board), which comprises seven elected members. The Board is responsible for the general management and control of the District’s financial and educational affairs. The Superintendent of Schools (Superintendent) is the chief executive officer of the District and is responsible, along with other administrative staff, for the day-to-day management of the District under the direction of the Board.

The District has entered into an inter-municipal agreement with the Capital Region Board of Cooperative Educational Services (Capital Region BOCES) to perform the internal audit function as of January 2007.

The District processes both its cash disbursements and payroll through the business office, primarily by an accounts payable clerk and a payroll clerk, respectively. For the year ending June 30, 2006, cash disbursements totaled $117 million¹ and payroll disbursements totaled $39 million. The District processes its financial transaction on a computerized financial system.

Scope and Objective

The objective of our audit was to determine if controls over selected financial operations are appropriately designed and operating effectively. Our audit addressed the following related questions:

• Has the District appropriately established the internal audit function?



• Are internal controls over the computerized financial system appropriately designed and operating effectively to ensure that employees cannot perform incompatible duties and limit segregation of duties?



• Has the District established adequate segregation of duties over the cash disbursement processing function to safeguard District assets?



• Has the District established adequate segregation of duties over payroll to safeguard District assets?

Audit Results

We found that the Capital Region BOCES employee serving as the internal auditor is not independent in performing the internal audit function. The District’s current arrangement with the Capital Region BOCES may put this BOCES employee in the position of evaluating significant District services or programs that are provided by Capital Region BOCES, the individual’s employer.

We performed tests of the computerized financial system, cash disbursements (including claims processing) and payroll to determine whether controls over those functions worked as intended to safeguard District data and assets. Although we noted no exceptions in these areas, we did identify control weaknesses that District officials should correct to enhance the effectiveness of controls in these areas. Prior to the end of our fieldwork, the District had already acted to improve controls over the computerized financial system and had appointed a claims auditor.

Comments of District Officials

The results of our audit have been discussed with District officials and their comments, which appear in Appendix A, have been considered in preparing this report. District officials generally agree with our recommendations and indicate that they plan to initiate corrective action. Appendix B includes our comments to issues raised in the District’s response letter.

The Board has the responsibility to initiate corrective action. Pursuant to Section 35 of the General Municipal Law, Section 2116-a (3)(c) of the Education Law and Section 170.12 of the Regulations of the Commissioner of Education, the Board must approve a corrective action plan that addresses the findings in this report, forward the plan to our office within 90 days, forward a copy of the plan to the Commissioner of Education and make the plan available for public review in the District Clerk’s office. For guidance in preparing the plan of action, the Board should refer to applicable sections in the publication issued by the Office of the State Comptroller entitled Local Government Management Guide.
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¹ These numbers also include expenditures relating to the current capital projects which are over and above the approximate $72 million operating budget.