The Franklinville Central 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.

The District’s budgeted expenditures for the 2006-07 fiscal year were approximately $15 million, funded primarily with real property taxes, State Aid and grants. The Superintendent and Business Executive are both appointed as purchasing agents, responsible for authorizing purchases. The Board has overall responsibility for District operations. The Board is also responsible for establishing a good internal control environment. An effective tool in establishing a strong control environment is to adopt effective policies that guide the overall direction of the District, including policies and procedures for the processing of claims, including credit card bills. The Board should also ensure that regulations (i.e., procedures) established by the Superintendent are effectively implemented.

Scope and Objective

The objective of our audit was to evaluate internal controls over claims processing and credit card usage to ensure that District assets were properly safeguarded. Our audit addressed the following related question for the period July 1, 2004 through May 31, 2006:

• Are internal controls over claims processing and credit card usage appropriately designed and operating effectively?

Audit Results

The Board has not adequately designed internal controls over the auditing, processing and payment of claims. The District has not segregated incompatible duties or taken the necessary steps to ensure an adequate audit of claims before they are paid. Furthermore, the Board and the Superintendent did not properly monitor compliance with their credit card policy, and were not aware that the Business Executive had established a credit limit of $400,000 and that the cards were used to purchase over $900,000 in goods and services during the 2004-05 fiscal year.

We identified deficiencies in 49 of the 78 claims reviewed, including the lack of departmental approval, itemization and documentation. In reviewing an additional 38 credit card purchases, we found one or more of the same deficiencies in virtually all 38 purchases. For example, 35 of 38 credit card purchases, totaling $136,035, did not have prior departmental approval.

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.