The Gouverneur Central School District (District) is governed by the Board of Education (Board) which comprises 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.

There are four schools in operation within the District, with approximately 1,769 students and 380 employees. The District’s budgeted expenditures for the 2004-05 fiscal year were $24 million, which were funded primarily with State aid, real property taxes, and grants.

Scope and Objective

The objective of our audit was to examine the District’s internal controls over cash disbursements and capital assets for the period July 1, 2004 to June 30, 2005. Our audit addressed the following related question:

• Are internal controls over cash disbursements and capital assets appropriately designed and operating effectively to adequately safeguard District assets?

Audit Results

We generally found that internal controls over the cash disbursements process were appropriately designed and operating effectively. However, we found a conflict of interest involving a Board member, and weaknesses in the District’s computer controls over cash disbursements. Board member Harry Smithers II (Smithers) had a prohibited conflict of interest in contracts with the District. Smithers has a 33 percent ownership interest in Smithers Tire Service Inc., a company that the District paid $3,957 for tires and related services. Smithers resigned from the Board on January 30, 2006.

We also found weaknesses in the District’s controls over its computerized financial accounting system. We found that the computer system allows District personnel to make changes — without supervisory review — to vendor files, such as changing the vendor’s name, after checks have been processed. While the computerized accounting system has the capability to track changes and create change reports, we found that District management did not use this internal control feature to monitor the accounts payable or payroll functions. This weakness results in an increased risk that inappropriate transactions could occur and not be detected.

In addition, District officials did not enforce the District’s capital assets policy and ensure that the District’s capital assets are protected from loss by conducting annual physical inventories, and by maintaining complete and accurate inventory records. We attempted to physically view 34 items listed in the District’s capital asset records. District officials could not find 15 of these items, which included computers, televisions, printers, a digital camera, and a VCR.

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.