Background

The Harrisville Central School District (District) is located in the Towns of Croghan and Diana in Lewis County and the Towns of Fowler and Pitcairn in St. Lawrence County. The District is governed by the Board of Education (Board) which comprises seven 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 is one school in operation within the District, with approximately 400 students and 80 employees. The District’s budgeted expenditures for the 2005-06 fiscal year were approximately $7.2 million, funded primarily with State aid, real property taxes and grants.

The District contracts with the St. Lawrence-Lewis BOCES (BOCES) for a variety of financial-related services through a shared services agreement. As part of the agreement, the BOCES provides the District with a Business Manager and business office personnel who process all of the District’s financial transactions. BOCES personnel generate payroll and other District checks and apply the Treasurer’s signature to the checks when the District’s disbursement records are processed. The District’s financial statements undergo an annual audit by a CPA firm.

Objective

The objective of our audit was to examine the District’s internal controls relating to the cash disbursement function and computer security. Our audit addressed the following related questions:

• Are internal controls over the District’s cash disbursement function appropriately designed and operating effectively?
  
  
• Has the District established adequate controls over its computer systems and data?

Scope and Methodology

Our overall goal was to assess the adequacy of the internal controls put in place by officials to safeguard District assets. To accomplish this, we performed an initial assessment of the internal controls so that we could design our audit to focus on those areas most at risk. Our initial assessment included evaluations of the following areas: cash receipts and disbursements, purchasing, payroll and personal services, and information technology. Based on that evaluation, we determined that controls appeared to be adequate and limited risk existed in most of the financial areas we reviewed. We did determine that risk existed in the cash disbursement area and, therefore, we examined internal controls over cash disbursements for the period July 1, 2005 to August 31, 2006. In addition, through inquiry of District personnel and observation of District data processes, we obtained an understanding of the design of information technology controls. We identified risk relating to general computer controls and examined those controls.

We conducted our audit in accordance with generally accepted government auditing standards (GAGAS). More information on such standards and the methodology used in performing this audit are included in Appendix C of this report.

Comments of District Officials and Corrective Action

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. Appendix B includes our comment on one issue contained in the District’s response.

The Board has the responsibility to initiate corrective action. Pursuant to Section 35 of the General Municipal Law, the Board should prepare a plan of action that addresses the recommendations in this report and forward the plan to our office within 90 days. For guidance in preparing the plan of action, the Board may refer to applicable sections in the publication issued by the Office of the State Comptroller entitled Local Government Management Guide. We encourage the Board to make this plan available for public review in the District Clerk’s office.