Red Hook Central School District Internal Controls Over Selected Financial Activities - Executive SummaryThe Red Hook 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. There are four schools in operation within the District, with approximately 2,306 students and 382 employees. The District’s budgeted expenditures for the 2006-07 fiscal year were $38,230,502, which were funded primarily with State aid, real property taxes, and grants. The Treasurer is responsible for all cash receipt and disbursement activities in the District. When auditing claims, the claims auditor is charged with ensuring that District personnel provide proper documentation and itemization for each claim, the payment is for a legal purpose, and the transaction was properly authorized. The Board reviewed and readopted its purchasing policy in February 2005. Board members designated the Business Administrator as the District’s purchasing agent for the 2005-06 and 2006-07 fiscal years. The purchasing agent is responsible for administering all purchase activities. Scope and Objective The objective of our audit was to determine if the District’s controls over cash receipts and disbursements, purchasing and claims processing were appropriately designed and operating effectively for the period July 1, 2005 to November 2, 2006. Our audit addressed the following related questions:
Audit Results We found that the Board has not established adequate internal controls over the District’s cash receipts and disbursements. Because the Board did not adopt written policies and procedures that would require the many duties related to cash receipts and disbursements to be segregated among District staff, the Treasurer performs many incompatible duties within his office. In addition, we found that the Treasurer had not obtained the written authorization of the Business Administrator before making six interfund transfers totaling $2,767,936. The Treasurer also did not issue receipts for 40 health insurance reimbursement payments totaling $9,472 to the personnel office staff member who remitted the moneys. We also found that the Board has not established adequate internal controls over purchasing and claims processing. The District had a lack of budgetary control which allowed District officials to over-expend or over-encumber 20 accounts by $48,269. The Business Administrator told us that District officials sometimes issued purchase orders when there were no available appropriations. In May 2006, when the Board discovered that District officials had over-expended accounts during the 2005-06 fiscal year, it amended the budget at the end of the fiscal year and transferred appropriations totaling $82,900 to the over-expended accounts to rectify the deficiencies. While the Board has adopted policies that require verbal and written quotes, District officials did not always enforce compliance with the policies. As a result, District personnel failed to obtain verbal quotes for three purchases (totaling $4,729) of 10 purchases that we reviewed. Because District personnel were not required to use purchase requisitions when purchasing from blanket purchase orders, District personnel over-expended two blanket purchase orders by $1,910. The Board’s appointment of the District’s accounts payable clerk as the claims auditor for the 2005-06 and 2006-07 fiscal years violated Education Law. As a result, the necessary independent and ethical standards required for this position are compromised. District officials had not established adequate controls to protect the District’s fuel inventory. Also, the Board’s adopted cellular phone policy requires that employees reimburse the District for personal use, but it did not require employees who had District-owned cellular phones to indicate which calls they made were for personal needs. In addition, the Board did not monitor employees’ compliance with the District’s cellular phone usage policy. Finally, we found that the Board President had a financial interest in a contract with the District that he had not disclosed. 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. Except as indicated in Appendix A, District officials generally agreed with our recommendations and indicated they planned to initiate corrective action. OSC comments concerning the District’s response can be found in Appendix B. |