The Hannibal School District (District) is located in the Towns of Granby, Hannibal, and Oswego in Oswego County and the Town of Sterling in Cayuga County. There are three schools in operation within the District, with approximately 1,750 students and 260 full and part time employees.

The District is governed by the Board of Education (Board) which is comprised of 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. The Board annually appoints a claims auditor who assumes the Board’s powers and duties in regard to approving or denying claims against the District. Responsibilities relating to the District’s finances, accounting records and reports are largely those of the Business Administrator and the Treasurer.

The District is a component district of the Oswego County Board of Cooperative Education Services (BOCES). However, under a cross-contract agreement between the Oswego County BOCES and the Onondaga-Cortland-Madison (OCM) BOCES, the District’s financial transactions are processed by the OCM BOCES’s Regional Information Center, the Central New York Regional Information Center (CNYRIC).

Scope and Objectives

One of the objectives of our audit was to examine the effectiveness of the District’s fiscal monitoring and budgeting practices for the period July 1, 2002 to June 30, 2005. We also examined the District’s internal controls over selected financial activities for the period July 1, 2004 to June 30, 2005. Our audit addressed the following related questions:

• Has the Board been provided with the financial information it needs to effectively monitor and control District finances?

• Has the Board adopted realistic budgets, and utilized long-term planning to identify and manage future operating and capital asset requirements?

• Have District officials designed and implemented effective internal controls over payroll and cash disbursements?

Audit Results

Our examination into the financial management practices of the District disclosed that the District’s annual budgets for the three years of our audit period contained accurate estimates of revenues and expenditures.  In the 2004-05 budget, more fund balance was appropriated than was available resulting in a negative fund balance at June 30, 2004 of more than $75,000. However, the District finished 2004-05 with a general fund unreserved fund balance of $544,351 of which $200,000 was appropriated in the 2005-06 budget.

The Board has received and effectively utilized budgetary and other financial information to oversee District operations. We concluded that the monthly reports received by the Board were adequate for purposes of monitoring cash position, the annual budget and financial condition.

However, the financial records used to account for the District’s building construction project were incomplete in that the “change orders” approved by the Board during the course of the project were not recorded in the appropriate accounting records. As a result, the records did not reflect the various changes that had been made to the project budget and to the amounts payable under contracts that were awarded for the project. In addition, the Board did not receive regular reports on the financial status of the project.

District officials have not utilized multi-year planning to identify and help manage future operating requirements. Multi-year financial plans spread budgeting decisions over a number of years and help avoid the sharp rise in property taxes and the cost-cutting measures that the District experienced in 2005-06.

We found that the District’s payroll controls were generally adequately designed and working properly; however, controls over the payment of separation payments to retiring District employees were not adequate. A former Superintendent, his Administrative Assistant/District Clerk and a stenographer received payments, in excess of $18,900, for benefits upon retirement that were not provided for under District policies or in applicable employment contracts.

We identified internal control weaknesses in the District’s cash disbursement operations that could lead to errors or irregularities occurring and not being detected. The Treasurer’s electronic signature is not properly controlled and checks prepared by BOCES for the District are not properly reviewed before they are distributed.  We also found that the District Treasurer was responsible for incompatible duties which could present opportunities to initiate improper payments or divert cash from deposits and then conceal such transactions through a false reconciliation.

Finally, we identified a number of internal control problems with the District’s claims auditor process.  For example, the claims auditor has not received a written job description relating to her duties and does not report to the Board as required. Neither the claims auditor nor her predecessor audited any claims relating to the District’s building construction capital project (over $25 million in total).  The lack of an audit and approval of claims by an independent claims auditor increases the risk that improper payments could be made.

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 indicate they planned to take corrective action.

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Complete Audit in PDF