Background

The Marion Central School District (District) is located in the Town of Marion, Wayne County. The 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 for 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. During our audit period, the Board was responsible for authorizing payment for all District expenditures, including the audit and approval of claims for payment.

There are two schools in operation within the District, with approximately 1,100 students and 215 employees. The District’s budgeted expenditures for the 2005–06 fiscal year were approximately $16 million, funded primarily through State aid, real property taxes and grants. Because this was a small school District, some managers performed multiple functions within the District. For example, the Superintendent also acted as the Business Manager. In addition, because the Board had not established the position of claims auditor, the Board was itself responsible for the audit and approval of claims for payment during our audit period. Also of note, the District’s business office used a computerized financial management system to process financial transactions.¹

Objective

The objective of our audit was to examine the District’s internal controls relating to claims processing and the financial management system. Our audit addressed the following related question:

• Has the District established adequate internal controls over claims processing and the financial management system to protect against fraud, abuse and professional misconduct, and are those controls operating effectively?
  

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 internal controls such that we could design our audit to focus on the areas of greatest risk. Our initial assessment included evaluations in the areas of cash receipts, cash disbursements, purchasing, payroll, personal services, capital assets and consumable inventories. Based upon our initial assessment we determined that internal controls appeared to be adequate and that limited risk existed in these areas with the exception of claims processing and the financial management system. Accordingly, our audit procedures included an examination of internal controls over claims processing and the financial management system for the period February 1, 2005 to January 31, 2006. Due to internal control weaknesses identified, we extended our audit of claims paid against the District to include payments made from September 2004 to March 2006.

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 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 indicated that they agree with our findings and that corrective action has or will be taken on our recommendations.

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.
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¹District Officials informed us that effective January 1, 2007 the District will begin using a different computerized financial management system than the one used during our audit period.