The East Aurora Union Free School District (District) is governed by the Board of Education (Board), which comprises seven 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 business administrator plays a key role in the financial activities of the District. He is directly responsible for overseeing the business operations that include the purchasing and payroll functions. In addition, the District annually appoints the business administrator as its purchasing agent.

The District’s general fund operating expenditures for the 2004-05 fiscal year totaled $22.3 million. The District spent approximately $1 million in the 2004-05 fiscal year on a contract for student transportation and spent $167,874 for fuel. During our audit period, the District made $182,667 in separation payments.

Scope and Objective

The objective of our audit was to evaluate internal controls over separation payments, claims processing and a transportation contract to determine if District assets are properly safeguarded. Our audit addressed the following questions for the period July 1, 2004 to April 5, 2006:

• Are internal controls over the claims processing function appropriately designed and operating effectively to adequately safeguard District assets?
  
  
• Are payments for fuel associated with a District transportation contract proper, accurate and supported?
  
  
• Are internal controls over separation payments designed and operating effectively to ensure compliance with the District’s policies and employment contracts?

Audit Results

The Board has not established adequately designed internal controls over certain financial transactions. We found deficiencies with respect to claims processing, a transportation contract and separation payments.

Our claims testing noted that one individual was receiving payments for services without a written contract or agreement stipulating the terms and conditions for the services to be provided. The District paid this individual $49,103 and $48,592, respectively, for the 2004-05 and 2005-06 fiscal years. In addition, we found that 19 claims totaling $20,024 had no or insufficient documentation; six claims totaling $12,034 did not have properly approved requisitions; 11 claims totaling $10,954 did not have appropriate departmental approval; and seven claims totaling $15,035 were for improper or questionable purposes.

For the 2004-05 fiscal year, the District spent $167,874 on fuel to provide student transportation. However, its portion was only $46,982 (28 percent) of the total cost. Our review showed that the District could be providing a significant benefit to its contractor by purchasing excess amounts of fuel and allowing the contractor to “purchase” this excess fuel from the District. In addition, the District does not monitor the actual fuel used by the contractor and does not receive adequate documentation to verify the accuracy of the amounts used, as reported by the contractor.

We reviewed 14 separation payments made during our audit period totaling $182,667 and found that six payments, totaling $18,000, were not made in accordance with the applicable employment contracts. The District made these payments to employees as retirement incentives. We also noted that four of the 14 payments were calculated incorrectly, resulting in $835 in overpayments to two employees and a $1,580 underpayment to a third employee. These payments were for unused vacation and sick leave.

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 indicated they planned to initiate corrective action.