Holland Central School District

Internal Controls Over Claims Processing - Introduction

Background

The Holland Central School District (District) is located in Erie County. The District is governed by the Board of Education (Board) which comprises seven 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 three schools in operation within the District, with approximately 1,200 students. The District’s reported 2006 operating expenditures totaled over $16 million in the general fund. These expenditures were funded with revenues from real property taxes and sales tax, as well as State and Federal aid.

A school district’s claims auditor assumes the powers and duties of the Board with regard to approving or disapproving claims against the district. As an agent of the Board, the claims auditor should provide an independent and objective audit of claim vouchers. The claims auditor should conduct a deliberate and thorough review of each claim to determine that the proposed payment is valid, legal and represents a necessary obligation incurred by an authorized district official.

Objective

The objective of our audit was to evaluate internal controls over the District’s claims processing function to ensure that District assets were properly safeguarded. Our audit addressed the following question:

• Are internal controls over the claims processing function appropriately designed and operating effectively to ensure that claims are adequately supported and that payments are made only for appropriate District purposes?

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: financial oversight, 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 claims processing area and, therefore, we examined internal controls over claims processing for the period July 1, 2005 to April 18, 2007.

We conducted our audit in accordance with generally accepted government auditing standards. More information on such standards and the methodology used in performing this audit are included in Appendix B 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 that they either have or plan to initiate corrective action.

The Board has the responsibility to initiate corrective action. Pursuant to Section 35 of the General Municipal Law, Section 2116-a (3) (c) of the Education Law and Section 170.12 of the Regulations of the Commissioner of Education, the Board must approve a corrective action plan that addresses the findings in this report, forward the plan to our office within 90 days, forward a copy of the plan to the Commissioner of Education, and make the plan available for public review in the District Clerk’s office. For guidance in preparing the plan of action, the Board should refer to applicable sections in the publication issued by the Office of the State Comptroller entitled Local Government Management Guide.