The Whitehall Central School District (District) is governed by the Board of Education (Board) which comprises nine 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.

Scope and Objective

The objective of our audit was to evaluate internal controls over cash receipts and disbursements, payroll and employee benefits for the period July 1, 2004 to June 19, 2006. Our audit addressed the following related questions:

• Are there controls in place to ensure that employees are only receiving benefits to which they are contractually entitled?
  
  
• Are there controls in place to ensure proper segregation of duties over the payroll process?
  
  
• Are internal controls over cash receipts and disbursements appropriately designed and operating effectively?

Audit Results

Internal controls establishing classification and levels of coverage over employee benefits were not adequate. As a result, the District made payments totaling $4,566 and provided benefits totaling $115,061 to employees which were not authorized by the Board. District officials contend that these payments were proper based on their understanding of the Board’s intent. However, expenditures of this type should be fully supported by and referenced to applicable written agreements, formal policies and Board resolutions.

We reviewed key controls over the payroll process to determine if they were appropriately designed and operating effectively and found that the District’s internal controls over payroll transactions were inadequate. In particular, there was a lack of segregation of duties in processing payrolls. One employee, the payroll clerk, handled most aspects of payroll processing with little managerial oversight. Furthermore, the District had not established any formal written policies for payroll processing.

We also found that the District’s internal controls over cash receipts and disbursements were inadequate. The Board had not established written policies governing cash receipts and disbursements. One employee, the District Treasurer, handles most aspects of the cash receipts and disbursement process with little managerial oversight. We also found that District employees did not always deposit moneys received on a timely basis. While the District had instituted additional controls over cash receipts and disbursements, such as having the Business Manager review the bank reconciliations and the District Clerk open the mail and mail out the checks, we did not feel these were sufficient to compensate for the overall lack of segregation of duties.

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.