Chateaugay Central School District

Internal Controls Over Selected Financial Activities - EXECUTIVE SUMMARY

The Chateaugay 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 recorded approximately $18 million in revenues during the period July 1, 2005 through May 31, 2007. During the same period, the District recorded approximately $29,850 from an after-school childcare program and approximately $33,250 from miscellaneous retail sales at the District office. Additionally, the extra-classroom activity fund recorded more than $456,000 in receipts and disbursements. The District has approximately 135 individual computers that are networked together. District employees use computers in day-to-day operations for instructional purposes and to process financial transactions. The Northeastern Regional Information Center (NERIC) provides information technology services to the District.

Scope and Objectives

The objective of our audit was to determine if the District had established effective internal controls over financial operations of the Business Office, extra-classroom activity funds, and information technology for the period July 1, 2005 through May 31, 2007. Our audit addressed the following related questions:

• Have adequate internal controls been established over the financial operations of the Business Office to ensure that District assets are properly safeguarded?
• Are internal controls over extra-classroom activity funds adequate?
• Are internal controls over the District’s information technology system appropriately designed to protect electronic data?

Audit Results

We found instances where the Board had either not established critical internal controls or controls that had been established were not implemented and operating effectively. As a result the District is vulnerable to the possibility of errors and/or irregularities occurring and not being detected in a timely manner.
There were weaknesses in the controls over the financial operations of the Business Office. The Board has not adopted comprehensive written policies and procedures to provide guidance and internal controls for payroll processing, cash receipts and disbursements, and claims processing. Specifically, there was inadequate segregation of duties over payroll and cash receipts and disbursements with minimal oversight. The payroll clerk applies the Treasurer’s signature to payroll checks and the Deputy Treasurer applies the Treasurer’s signature to accounts payable checks without any oversight or review by the Treasurer. Furthermore, the District’s blank check stock is not physically safeguarded. Cash receipts were not properly accounted for or deposited timely. As a result, checks could be issued for non-authorized purposes and cash receipts are susceptible to theft or loss. For example, $6,514 of after-school childcare program cash receipts were deposited at least 10 days after the date the monies were received, ranging from 11 to 52 days and $20,067 of miscellaneous sales receipts were deposited at least 10 days after the date the monies were received, ranging from 11 to 266 days. In addition, there were weaknesses in the review of claims because the District’s claims auditor was a full time employee in the District Business Office, which prevented her from providing an independent audit of claims. The District made payment on 103 claims totaling $83,745 without review by the claims auditor during our audit period. As a result, the District could be paying claims that are not authorized or legitimate District expenses.

The Board established a policy governing the operations of the extra-classroom activity fund, but fund monies were not maintained in accordance with the policy. Although the Board appointed the elementary school principal as the fund’s faculty auditor, there was no indication that transactions were adequately monitored. Blank check stock and fund monies were not physically safeguarded. Extra-classroom fund cash receipts, totaling $34,029, were deposited in the bank anywhere between 11 to 171 days from the date the funds were collected. District officials cannot be certain that extra-classroom fund monies are accounted for appropriately and deposited intact.

Finally, the District does not have adequate written policies and procedures providing guidance and internal controls as it relates to information technology (IT) and the protection of electronic data stored by the District. Although the District has established a Technology Acceptable Use policy, the policy does not adequately address procedures that establish controls to adequately safeguard the District’s IT system and the data that is stored on it.

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. District officials generally agreed with our recommendations and have initiated, or indicated they planned to initiate, corrective action.