The Haverstraw-Stony Point Central School District (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.

The District contracts with a professional firm to handle the bidding process. The Assistant Superintendent for Business acts as the purchasing agent. The Treasurer supervises payroll functions and maintains manual records for all capital projects.

Scope and Objective

The objective of our audit was to review the District’s internal controls over selected financial activities for the period July 1, 2004 through March 31, 2006. We extended the scope of the audit to review purchases/expenditures for the Grade 8-9 Center capital project through June 30, 2006 and payments for professional services through May 31, 2006. Our audit addressed the following related questions:

• Did the Board implement suitable purchasing practices to ensure that goods and services are acquired in the best interest of the District?
  
  
• Did District Officials properly account for and manage the Grade 8-9 Center capital project?
  
  
• Did the Board implement suitable internal controls to ensure that payroll processes were properly executed?

Audit Results

District Managers have not adequately monitored the system of internal controls to ensure that they worked effectively. As a result, we noted weaknesses in purchasing practices, the management of the Grade 8-9 Center capital project and payroll operations.

The District needs to improve controls over purchasing and claims auditing. District officials made professional service reimbursements, totaling $64,003, without supporting documentation — pursuant to a shared service contract for legal services, with two towns. District officials could therefore not have properly audited these payments and obtained reasonable assurance that they were legitimate The reimbursements included a single charge for postage of $7,244 (District portion $5,433). When we questioned the validity of the postage charge in particular and all other charges, District officials contacted the legal firm. Subsequently, the District and the two towns received a full credit for the postage. In addition, based on the approval of the Assistant Superintendent of Business, the internal claims auditor approved payments for public work contracts, totaling $524,535, without soliciting bids, as required. As a result, goods and services may not have been procured in the most prudent and economical manner.

The District also did not properly account for and manage the Grade 8-9 Center capital project. The Treasurer used manual ledgers to account for capital projects which did not clearly show expenditures. This created significant difficulty for District managers to trace transactions to supporting documentation and verify total expenditures for each project. Further, the Treasurer performs numerous incompatible duties such as maintaining manual cash receipt and disbursement records, preparing bank reconciliations for the capital fund, and making deposits. Due to this lack of segregation of duties, errors or irregularities could occur and remain undetected and uncorrected.

Finally, the District did not implement internal controls to ensure that payroll processes were properly executed. The District paid 14 employees a total of $343,244 for overtime in the 2004-05 and 2005-06 school years. Although supervisors generally signed overtime sheets for these payments, the overtime sheets and related time cards did not show the actual hours worked. Consequently, District officials were unable to determine if the employees were entitled to this compensation. In addition, BOCES employees use a signature plate to affix the Treasurer’s signature to payroll checks. The Treasurer does not supervise the use of the signature plate, nor does she verify that the payments are accurate. Although this internal control weakness exposes District assets to the risk of misappropriation, our payroll testing did not disclose any material discrepancies.

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. Except as specified in Appendix A, District officials generally agreed with our recommendations and indicated they planned to take corrective action. Appendix B includes our comments on the issues raised in the District’s response letter.