The Homer 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.

The Board also appoints a Director of Business and Finance (Director) who oversees the daily financial operations of the District. He oversees a business office staff of four, who are responsible for accounts payable, payroll, receipts, deposits, and the financial records of District operations. In addition, one member of the staff, the Treasurer, is an employee of the Onondaga-Cortland-Madison BOCES (OCM BOCES). The District has a Co-Ser¹ with the OCM BOCES and the Central New York Regional Information Center (CNY RIC) for business services that includes the printing of checks, maintenance of the financial software, storage of critical data, and the services of a Treasurer. The District transitioned to a new software package at the start of the 2006-07 fiscal year. The CNY RIC provides the support for the users and any training that may be necessary.

Scope and Objective

The objective of our audit was to determine if the Board has established internal controls over selected financial activities and if those controls were appropriately designed, implemented and operating effectively, for the period July 1, 2005 through December 11, 2006. Our audit addressed the following related questions:

• Have the respective duties of the District Treasurer, accounts payable clerk and payroll clerk been adequately segregated to ensure District assets are safeguarded?
  
  
• Are controls over audit and processing of claims adequate to ensure District assets are safeguarded?
  
  
• Does the Treasurer maintain custody and control of her signature and facsimiles?
  

Audit Results

Three of four employees in the business office perform incompatible duties. The Treasurer performs duties including collecting cash, recording cash, depositing cash, transferring cash, disbursing cash, and reconciling cash. The accounts payable clerk performs duties including preparing check information for printing; transmitting the electronic file to the CNY RIC for printing; and receiving and disbursing the checks upon delivery from the CNY RIC. Similarly, the payroll clerk performs duties including preparing payroll check information for printing; transmitting the payroll file to the CNY RIC; and receiving and disbursing the payroll checks upon delivery from the CNY RIC, all without regular independent verification of her work. Although these control weaknesses increase the risk that errors or irregularities could occur and go undetected or uncorrected, our testing disclosed no material discrepancies.

The claims audit process for computer-generated checks was sufficient. However, the audit and approval process for manual checks was not designed properly. District employees processing manual checks did not follow the Board-established policy for all disbursements. As a result, funds were disbursed with little or no oversight; certain claims that were paid by manual check were not audited by the claims auditor; and in certain instances, claims could not be properly audited due to a lack of supporting documentation. We also found that the Treasurer does not maintain control over the electronic facsimile of her signature. Instead, another individual, off premises, uses the facsimile to print District checks. Although these control weaknesses increase the risk that errors or irregularities could occur and go undetected and uncorrected, our testing disclosed no 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
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¹ Co-Ser is an acronym for Cooperative Service. A Co-Ser is a regional educational support program housed at a BOCES in New York State. Under such a program, services are centralized in order to save money for participating school districts, or to allow smaller districts to have services which they might not be able to afford on their own.