The Morrisville-Eaton 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.

The District employs a Business Administrator who also serves as the District’s purchasing agent, responsible for authorizing purchases, and as the District Treasurer, responsible for receiving, disbursing, and investing District money. On an annual basis, the Board appoints a claims auditor who assumes the Board’s powers and duties with regard to approving or denying District claims. Most of the District’s financial transactions are processed by the Madison-Oneida Board of Cooperative Educational Services (BOCES) in conjunction with a Regional Information Center.

Scope and Objective

The objective of our audit was to examine the District’s internal controls over financial operations for the period July 1, 2004 to June 30, 2005. Our audit addressed the following related question:

• Did the Board implement and monitor internal controls relating to the District’s treasury, accounting, claims auditing and procurement duties?

Audit Results

We found instances where the Board had either not established critical controls, or controls that had been established were not implemented and operating effectively. As a result, the District is vulnerable to the possibility of errors and/or improprieties occurring and not being detected.

The assignment of job duties at the District does not provide for adequate segregation of duties over financial operations. The District has vested virtually all control over its fiscal activities in one individual, the Business Administrator, without establishing appropriate checks and balances on her work. The Business Administrator controls all financial processes and serves as both the District’s purchasing agent and Treasure. Therefore, she can both initiate and approve each transaction leading up to a claim payment without an effective review of her actions.

Most of the District’s financial transactions are processed by a Madison-Oneida BOCES employee at the Regional Information Center. District personnel send financial information to BOCES which is then entered by a BOCES employee into the accounting system. The BOCES employee who enters the financial data into the system also occasionally prepares (but does not sign) manual checks, reconciles bank accounts, prepares journal entries, and has access to blank check stock. These duties are incompatible when performed by one person. In addition the cancelled checks are sent to BOCES with no District review of the checks being performed.

We found the Business Administrator/Treasurer’s oversight of this process to be deficient. The account clerk signs District accounts payable checks utilizing the Treasurer’s signature stamp. We observed that the signature stamp was not secured and could be accessed by other District personnel throughout the day. Education Law allows the Treasurer to sign checks with a facsimile signature, affixed by a check signer or other machine under the supervision of the person whose signature it represents. The use of a signature stamp does not allow the Treasurer to provide direct supervision of the check-signing process. As a result, she is not assured that all issued accounts payable checks are accounted for and are for legitimate business purposes. As a result, we examined 99 accounts payable payments, totaling $508,807, to determine if they were proper District expenditures. Except for certain deficiencies noted with respect to the audit of the related claims by the claims auditor, we did not find evidence of improper payments.

The Board did not provide sufficient written guidance to the claims auditor establishing in detail the Board’s expectations for what the claims audit process should determine. The claims auditor also does not report directly to the Board. As a result, the effectiveness of this process is diminished since the Board is not alerted to concerns identified during the claims audit.

Although the District’s procurement policies clearly outline when and how competitive bidding or the solicitation of quotes will be used to purchase goods and services, purchases were not always made following these guidelines. We found that for six of the 14 claims subject to competitive bidding and/or procurement policy requirements for quotes there was no documentation of competitive bids or quotes. As a result, goods and/or services may not be acquired at the lowest possible costs.

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 indicate they planned to take corrective action.

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Complete Audit in PDF