Kendall Central School District

Internal Controls Over Financial Operations - EXECUTIVE SUMMARY

The Kendall Central School District (District) is governed by the Board of Education (Board) which comprises five 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.

Scope and Objective

The objective of our audit was to evaluate the District’s internal control system over claims processing and the extra-classroom activities fund to ensure that assets were properly safeguarded. Our audit addressed the following related questions for the period July 1, 2005 to June 22, 2007:

• Did District officials appropriately monitor compliance with their adopted Code of Ethics to effectively detect and prevent potential conflicts of interest?
• Are internal controls over purchasing and claims processing appropriately designed and operating effectively to adequately safeguard district assets?
• Are internal controls over the extra-classroom activities fund appropriately designed and operating effectively to adequately safeguard district assets?

Audit Results

The District paid over $41,000 for two mini-vans, parts and services to a vendor that is partly owned by a current Board member. The District’s Code of Ethics requires Board members to avoid being placed in situations in which they have a conflict of interest, and to refrain from using their Board position for personal or partisan gain. In addition, with certain exceptions not here relevant, the General Municipal Law prohibits school districts from entering into contracts in which their Board members have an interest. The District did not identify potential violations of its own Code of Ethics and the General Municipal Law, and allowed these transactions to occur.

The District did not implement sufficient internal controls nor did officials follow established policies concerning claims processing. The claims auditor did not consistently examine and review all claims before payment was made. Of the 43 claims examined, the claims auditor did not review 19 percent of them prior to payment. In addition, we found that the District does not consistently use purchase orders or claim forms with their voucher packets. Of the 43 claims examined, 56 percent did not have an attached purchase order or claim form. By not consistently using purchase orders the District is unable to ensure that it is not incurring liabilities in excess of approved appropriations.

In addition, the District has not established adequate policies, procedures, and controls governing the operations of the extra-classroom activity fund. Cash receipt and disbursement records, independent from the Central Treasurer, are not being maintained by student treasurers and the Board does not receive required quarterly reports. As a result, the yearbook account has accumulated a debt of over $26,000.

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 indicated that they are taking corrective action.