Norwich City School District

Cash Receipts and Disbursements and Claims Processing -
EXECUTIVE SUMMARY

The Norwich 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 Board also appoints an Assistant Superintendent who oversees the District’s daily financial operations. She supervises the Treasurer, accounts payable clerk, and the payroll clerk. In addition, the Director of Human Resources (Director) is responsible for retiree health insurance administration.

The District contracts with the Delaware-Chenango-Madison-Otsego (DCMO) BOCES for claims auditing services, as well as other educational and related support services. The District also contracts with the Broome-Tioga Regional Information Center for the accounting system software, storage space for electronic data, and technical support.

Scope and Objective

The objective of our audit was to determine if the Board has established internal controls over cash receipts and disbursements and claims processing, and whether the controls were appropriately designed and operating effectively for the period July 1, 2005 through June 13, 2007. Our audit addressed the following related questions:

• Have the duties of the District Treasurer in relation to cash disbursements been adequately segregated to ensure District assets are safeguarded?
• Are controls over retiree health insurance cash receipts adequate to ensure District assets are safeguarded?
• Did the Board appoint a claims auditor in accordance with New York State Education Department (SED) regulations?

Audit Results

We found that the duties of the District Treasurer were not adequately segregated. She maintains the accounting records, disburses cash and performs bank reconciliations. Additionally, we found that controls over the receipt of retiree health insurance payments are not adequate to ensure District assets are safeguarded. The Director of Human Resources is responsible for collecting, reconciling, and preparing for deposit all retiree health insurance payments. She is also responsible for retiree account maintenance in the District’s computer system and account enforcement.¹ The concentration of key duties with one individual weakens internal controls and significantly increases the risk that errors and/or irregularities might occur and go undetected and uncorrected.

Finally, we found that the District improperly appointed their BOCES as claims auditor. BOCES may only provide claims auditing services to the District if it has no other contracts with the District. Because the District paid the BOCES more than $8.7 million during the audit period, this arrangement is currently specifically prohibited by SED regulations.

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 taken, or plan to initiate, corrective action.
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¹ This includes collecting past dues balances and if necessary pursuing legal action to collect monies due from enrollees.