The Cleveland Hill Union Free School District (District) is governed by the Board of Education (Board) which comprises five 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.

Scope and Objective

The objective of our audit was to evaluate internal controls over the District’s claim processing function and the Treasurer’s duties for the period July 1, 2005 to June 26, 2007. Our audit addressed the following related questions:

• Are internal controls over the claims processing function and related purchasing activities appropriately designed and operating effectively?
  
  
• Are internal controls over the District Treasurer’s duties appropriately designed and operating effectively?

Audit Results

Internal controls over the District’s claims processing function and related purchasing activities are not appropriately designed and operating effectively. The Board’s audit of claims consists only of reviewing and approving a listing of claims (warrant) prepared by the Business Office. Board members do not review each claim to ensure that proper original documentation, such as quotes, purchase orders, receiving slips, or invoices, are attached to the claim and are adequate to approve the claim for payment.

Of the 50 claims tested, 11 claims, totaling $129,564, lacked documentation that the District is complying with its procurement policies and procedures as they relate to obtaining competitive bids and written quotations. In addition, the District’s purchasing policies and procedures contain inconsistencies which make them unclear with respect to the process and dollar amounts for obtaining written quotations.

Internal controls over the District Treasurer’s (Treasurer) duties are not appropriately designed and operating effectively. The Treasurer is responsible for recording receipts; making daily deposits; transferring funds between and from District accounts; signing checks; and preparing, entering, and approving journal entries, all without any oversight or review. In addition, the Treasurer receives bank statements and cancelled checks and reconciles each of the District’s 16 bank accounts without any oversight or review.

Although our testing revealed no discrepancies for cash transactions, and all tested cash was accounted for and documented, we did note that the Treasurer’s Reports, which are provided to the Board monthly, do not include complete bank reconciliations and that the Board-approved bank reconciliations incorporate a number of inconsistencies, errors and improperly labeled amounts.

Comments of School 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 indicated that they are taking corrective action.