Background

The Canastota Central School District (District) is located in the Towns of Fenner, Lenox, Lincoln, Smithfield, and Sullivan in Madison County. The 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.

There are four schools in operation within the District, with approximately 1,623 students and 310 employees. The District’s budgeted expenditures for the 2005-06 fiscal year were approximately $19.7 million, which were funded primarily with State aid, real property taxes and grants.

Most of the District’s business functions are handled by a Business Manager and two account clerks. Check printing and accounts payable data entry are contracted out to an offsite Board of Cooperative Educational Services (BOCES)-operated facility that sends the printed checks to the Business Manager for signature and distribution.

Objective

The objective of our audit was to determine if the District’s internal controls over cash disbursements made by either manually prepared checks or payroll checks are appropriately designed and operating effectively. Our audit addressed the following related questions:

• Have the Board and District management established internal controls over manually prepared checks that are appropriately designed and operating effectively?
  
  
• Have the Board and District management established internal controls over payroll changes and the resulting paychecks that are appropriately designed and operating effectively?

Scope and Methodology

Our overall goal was to assess the adequacy of the internal controls put in place by officials to safeguard District assets. To accomplish this, we performed an initial assessment of the internal controls so that we could design our audit to focus on those areas most at risk. Our initial assessment included evaluations of the following areas: financial oversight, cash receipts and disbursements, purchasing, and payroll and personal services. Based on that evaluation, we determined that controls appeared to be adequate and limited risk existed in most of the financial areas we reviewed. We did determine that risk existed in the area of cash disbursements and, therefore, we examined internal controls related to selected types of cash disbursements for the period July 1, 2005 to December 31, 2006.

We conducted our audit in accordance with generally accepted government auditing standards (GAGAS). More information on such standards and the methodology used in performing this audit are included in Appendix B of this report.

Comments of District Officials and Corrective Action

The results of our audit and recommendations have been discussed with District officials and their comments, which appear in Appendix A, have been considered in preparing this report. District officials generally agreed with our recommendations and indicated they planned to take corrective action.

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.