Mechanicville City School District Internal Controls Over Payroll Procedures and Cash Transactions at the Elementary School - Executive Summary

The Mechanicville City 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 runs an elementary school and a junior/senior high school on one campus, with approximately 1,345 students and 370 employees as of June 30, 2006. The District’s total expenditures for the 2005-06 fiscal year were approximately $18.6 million, funded primarily with State aid, real property taxes and grants. The District’s elementary school office recorded over $30,000 in cash receipts and disbursements that were reported on the financial statements for the extra-classroom activity fund.

Scope and Objectives

The objective of our audit was to evaluate the District’s internal controls for payroll processing and the elementary school cash receipts and disbursements for the period July 1, 2005 to December 31, 2006. Our audit addressed the following related questions:

• Are internal controls over payroll processing appropriately designed and operating effectively to adequately safeguard district assets?
  
  
• Are internal controls over cash received and disbursed in the elementary school office appropriately designed and operating effectively to adequately safeguard District assets?

Audit Results

While the Board did not have a payroll policy in place, the internal controls over payroll processing were generally adequate, however many employees were not required to maintain timesheets. We found that the work hours reported to the payroll office by the transportation office exceeded the hours recorded by employees on bus reports maintained in the bus garage 61 percent of the time. There was also an absence of formal work rules governing overtime. The business manager did not pre-approve or review the overtime routinely reported by the transportation and maintenance supervisors.

The District did not have adequate policies and procedures in place to control cash receipts and disbursements recorded at the elementary school office totaling over $30,000. As a result, not all of these disbursements were supported by adequate documentation including original invoices, receiving documents, and justification or explanations for the disbursements.

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 have initiated corrective action.

Complete Audit in PDF