Menands Union Free School District

Internal Controls Over Selected Financial Activities -
EXECUTIVE SUMMARY

The Menands Union Free 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. The Treasurer is responsible for the District’s cash receipts and disbursements functions. The District has adopted policies and procedures for the procurement of goods and services that are not subject to competitive bidding requirements. The Board is responsible for determining salary and benefits for District employees. The District’s Technology Committee is responsible for ensuring that all District information technology (IT) and systems are protected. The Capital Region Board of Cooperative Educational Services (BOCES) provides the internal audit function for the District.

Scope and Objective

The objective of our audit was to review internal controls over cash receipts and disbursements, purchasing and claims processing, payroll and information technology (IT) for the period July 1, 2005 to May 1, 2007. Our audit addressed the following related questions:

• Has the District established adequate internal controls over cash receipts and disbursements to protect District assets against fraud, abuse, and professional misconduct, and are those controls operating effectively?
  
• Has the District established adequate internal controls over purchasing and claims processing to protect District assets against fraud, abuse, and professional misconduct, and are those controls operating effectively?
• Has the District established adequate internal controls over the non-instructional payroll to protect District assets against fraud, abuse, and professional misconduct, and are those controls operating effectively?
• Are the District’s controls over IT adequately designed to protect District IT resources from loss or misuse?
• Does the District’s internal auditor meet the independence requirements stated in the Education Law?
  

Audit Results

We found that the Board has not established adequate internal controls over cash receipts and disbursements. Our review disclosed that there is an insufficient segregation of duties within the Treasurer’s office and that the District is not depositing funds intact¹ or in a timely manner. For example, we found that eight out of 28 copies of deposit slips provided to us by the cafeteria cashier did not agree with the bank deposit slip copies. In two of the eight deposits, we found that the Treasurer substituted two personal checks for cash. For 82 deposits² examined, we found that in 15 cases the Treasurer did not deposit moneys until more than 100 days after receipt and did not deposit 10 others until more than 150 days after receipt. Failure to deposit money intact and in a timely manner increases the risk that cash can be lost or stolen.

We also found that the Board has not established adequate internal controls over purchasing and claims processing. The Board is not auditing claims, but is rather relying on an employee in the Business Office to audit District claims. This employee has not been appointed as the District’s claims auditor and would be ineligible for such a position given her current incompatible duties. We reviewed 30 purchase packets totaling $92,005 and found that the District paid 14 claims even though one or more items of required documentation were incomplete or missing. While the Board has adopted purchasing policies that require District personnel to obtain verbal and written quotes before making purchases, the policy does not state explicitly how many quotes are required.

The District also does not have adequate policies and procedures in place concerning annual compensation, leave time benefits, or health and dental benefits for 20 non-instructional employees who are not covered by collective bargaining agreements. As a result, the District made payments totaling $582,403 for employee compensation, $136,211 for health and dental benefits, and provided leave benefits totaling $36,228 that were not properly supported by contract provisions or a Board resolution.

The District did not protect its computer equipment from unauthorized access, adequately test its data backup, or have a formal disaster recovery plan. As a result, the District’s IT systems and electronic data are subject to increased risk of loss or misuse.

Finally, we found that the BOCES employee serving as the District’s internal auditor is not independent in performing the internal audit function. The District’s current arrangement with BOCES may put this BOCES employee in the position of evaluating significant District services or programs that are provided by BOCES.

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 they have already initiated corrective action.
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