Wainscott Common School District

Internal Controls Over Cash Disbursements and Conflicts of Interest -
EXECUTIVE SUMMARY

The Wainscott Common School District (District) is governed by the Board of Education (Board) which comprises three elected members. The Board is responsible for the general management and control of the District’s financial and educational affairs. The part-time 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.

All financial transactions of the District are processed by a part-time Business Official, who also is responsible for preparing the District’s financial reports. In addition, he presents a budget control report to the Board at its monthly meetings.

Scope and Objective

The objective of our audit was to determine if the District’s internal controls over cash receipts and disbursements and for identifying conflicts of interest were appropriately designed and operating effectively to adequately safeguard District assets. Our audit covered the period July 1, 2005 to January 31, 2007 and addressed the following related questions:

• Did the Board and District officials implement and monitor adequate internal controls relating to cash disbursements?
• Has the Board established a process for identifying potential conflicts of interest?

Audit Results

We found that the Board and District officials did not implement and monitor internal controls over cash disbursements to adequately safeguard District assets. As a result, a Board member was appointed as the District’s Treasurer, the Board did not audit claims prior to payment, and the part-time Business Official did not include bank reconciliations in his monthly reports to the Board. These internal control weaknesses increase the risk that errors and irregularities will occur and not be detected. We reviewed all 780 District claims totaling approximately $2.3 million paid during our audit period to determine if they were signed by the Treasurer and had a second signature as required, and to determine if the payees and dollar amounts were in agreement and if all claims were legitimate District expenditures. We found no significant exceptions during our review.

We also found that the District has no formal system in place to identify the outside occupations and/or business interests of District officers and employees. Because District officials cannot identify these interests, they also cannot determine whether the interests of District employees are prohibited or required to be disclosed. As a result, the District paid $6,836 to a company in which a District employee’s relative had an interest. The District clerk/secretary’s husband owned 50 percent of the company’s stock, but the District clerk/secretary did not disclose this interest in the District’s records.

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 take corrective action.