New York Mills Union Free School District

Internal Controls Over Selected Financial Activities -
EXECUTIVE SUMMARY

The New York Mills Union Free 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 annually appoints a claims auditor who assumes the Board’s powers and duties with regard to approving or denying claims against the District. Responsibilities relating to the District’s finances and accounting records and reports are largely those of the District’s Treasurer.

The District contracts with the Oneida-Herkimer-Madison Board of Cooperative Educational Services (BOCES) to provide various financial services for the District through its Central Business Office (CBO). The District’s financial transactions are processed by the BOCES in conjunction with the Madison-Oneida BOCES’s Mohawk Regional Information Center (MORIC).

Scope and Objective

The objective of our audit was to examine the internal controls over selected financial activities for the period July 1, 2006 to June 30, 2007. Our audit addressed the following related questions:

• Did the Treasurer control the use of her electronic signature?
• Did the Board develop policies and procedures to ensure that all claims against the District are audited by the claims auditor?

Audit Results

We found that the District could improve internal controls to ensure that payments from District funds are properly reviewed and authorized. Although our testing did not identify any material discrepancies, the lack of proper controls could lead to significant errors or irregularities occurring that are not detected.

First, we found that the Treasurer does not properly oversee the use of her electronic signature by MORIC personnel. While the Treasurer reviews payroll reports and warrants, she does not actually examine the checks containing her signature or verify that the checks are approved for payment by comparing them to certified warrants or payrolls. Furthermore, for most of our audit period, neither the Treasurer nor anyone else examined canceled checks returned with the bank statements each month and compared them with certified warrants or payroll registers to verify that the checks were authorized and appropriate. The weak controls in place over the Treasurer’s signature on computerized checks increases the risk that unauthorized payments could be made and go undetected.

In addition, we found that the accounts payable clerk at the CBO processes claims, initiates the printing of the related checks, and receives the checks before they are delivered to the District. This combination of incompatible duties creates the possibility that the accounts payable clerk could initiate and issue an improper check without being detected. Our review of payroll and claim checks paid during the 2006-07 fiscal year found no material irregularities or inconsistencies.

We also found that the claims auditor did not audit the District’s claims paid by manual checks and those associated with online credit card payments. The lack of an audit and approval of all claims by the claims auditor increases the risk that improper payments could be made and go undetected. Our review of claims and credit card bills showed that the District overpaid $1,000 on an original $2,000 bill to a vendor for a presentation given to District staff. After we brought this to the attention of the Treasurer, the District obtained a refund from the vendor for the overpayment.

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 planned to initiate corrective action.