Sauquoit Valley Central School District

Internal Controls Over Non-Payroll Disbursements - EXECUTIVE SUMMARY

The Sauquoit Valley Central 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 District employs a Business Manager, two account clerks, and a part-time claims auditor to carry out its business operations. The Business Manager also serves as the District’s Treasurer. The District disbursed approximately 3,600 non-payroll checks totaling $17.6 million during the period July 1, 2005 to December 31, 2006.

Scope and Objectives

The objective of our audit was to examine the District’s internal controls over selected financial activities for the period July 1, 2005 to December 31, 2006 to determine if they are appropriately designed and operating effectively. Our audit addressed the following related questions:

• Are internal controls over non-payroll cash disbursements appropriately designed and operating effectively to safeguard District assets?
• Are internal controls over the audit and approval of claims appropriately designed and operating effectively to safeguard District assets?

Audit Results

Our audit disclosed weaknesses in the District’s control over non-payroll disbursement transactions. The Business Manager/Treasurer has unchecked control over the accounting records for non-payroll cash disbursements, has check writing and wire transfer authority, and controls the bank reconciliations. Furthermore, she has full transaction authority and administrator rights to the District’s computerized accounting system. As a result, the District is vulnerable to undetected losses from misappropriations of cash and/or the payment of improper claims.

Although the Board appointed a claims auditor, it did not implement an adequate internal control system over the auditing, approval, and payment of claims. As a result, claims against District funds were not consistently audited and approved before being paid. We found that the Business Manager/Treasurer improperly paid many claims without written authorization from the claims auditor, many claims were audited by employees who were not sufficiently independent of the transactions, and the claims auditor had not received guidance or training concerning her duties and responsibilities. Without a proper audit of claims, the District is at risk of paying for unauthorized or improper purchases.

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.