Central Square Central School District Internal Controls Over Selected Financial Operations - Executive Summary The Central Square Central School District (District) is governed by the Board of Education (Board) which is comprised of nine 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. On an annual basis, the Board appoints a claims auditor. The claims auditor is responsible for auditing claims and recommends either approving or denying payment of these claims. Responsibilities relating to the District’s finances, accounting records and reports are largely those of the Business Administrator and the Treasurer. The Business Administrator also serves as the purchasing agent. The District utilizes the Central New York Regional Information Center (CNYRIC) to process its warrant and payroll check payments. Scope and Objective The objective of our audit was to examine internal controls over selected financial operations for the period July 1, 2005 to June 30, 2006. Our audit addressed the following related questions:
Audit Results We found that the Board had either not established important internal controls related to cash disbursements and the claims audit function or controls that had been established were not implemented and operating effectively. Our examination of the claims audit function disclosed that the claims auditor has not received any written procedures or a written job description related to her claims audit duties. In addition, the claims auditor does not report directly to the Board and is unaware of District policies relating to procurement, meals and refreshments, credit cards and expense reimbursements. The claims auditor also does not compare actual audited claims to the warrants of audited and approved claims and does not certify the warrant, directing the Treasurer to pay the related claims. Although our examination of 146 claims totaling $1,037,725 for the 2005-06 fiscal year disclosed no inconsistencies between warrants, claims and cancelled checks, we found several deficiencies which demonstrate that the District has not established effective internal controls over the claims audit process. Among these deficiencies were a lack of itemization or supporting detail for nine claims totaling $11,093; missing department head or purchasing agent approval on 18 claims totaling $46,788; a lack of required written vendor quotes and/or requests for proposals for eight purchase and public works contracts totaling $30,961; and no audit of $7,863 in lunch fund catering requests for May 2006 as required by the District’s meals and refreshment policy. We also identified deficiencies in the Treasurer’s oversight of the check signing function. The District processes and prints all computerized warrant and payroll checks at the CNYRIC using a computer imprinted signature of the District Treasurer with no direct supervision of the District Treasurer. The District also has all flexible spending account1 reimbursement checks processed and printed at the third party administrator’s office with a computer imprinted signature of the School Business Administrator and there is no direct supervision by the District Treasurer. Individuals at the District or the third party administrator’s office who are involved in the check preparation process mail all District checks. Although our audit tests disclosed no improper check payments, the weak controls over the check signing and distribution process increase the risk that unauthorized or improper checks could be issued. The District’s payroll clerk is involved in several key areas of the payroll process with limited management oversight of the work she performs. The payroll clerk’s ability to add new employees to the computer system, update salary information, and process and distribute payroll checks puts the District at risk for unauthorized payroll disbursements. The District’s financial system provides for data change reports to be generated for the purchasing, accounts payable and payroll functions, however, the District does not utilize this function and does not generate or review the data change reports available to them on a regular basis. Our audit tests of vendor additions, vendor information changes, and employee additions and employee information changes made by the payroll clerk, per reports generated at the time of fieldwork, disclosed that all the changes were appropriate, and that the salary changes were authorized by labor agreements. Our review of payroll payments made to selected administrators and Business Office employees for the 2005-06 fiscal year disclosed that their compensation payments were authorized and accurate, with the exception of payments made to the former Superintendent and Business Administrator. As part of the former Superintendent’s retirement payment, the District paid $4,800 for 120 unused, accumulated sick leave days as of the date of his retirement on June 30, 2006, to which he was not entitled. In addition, the memorandum of understanding addressing the Business Administrator’s salary and benefits was not kept up to date and we found no indication the Board authorized her salary amount or the $1,500 performance stipend she received during the 2005-06 fiscal year. Comments of District Officials 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. Except as specified in Appendix A, District officials generally agreed with our audit recommendations and indicated that they planned to initiate corrective action. Appendix B includes our comments on the issues raised in the District’s response letter. |