The Whitney Point 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.

Throughout our audit period, the Board had an appointed claims auditor to audit and approve claims for payment. Business Office staff processes all financial transactions. The accounts payable clerk prepares cash disbursements transactions and sends out checks to the appropriate vendors. The Superintendent is the District’s purchasing agent and is responsible for approving all purchases. The District Treasurer (Treasurer) is responsible for all aspects of payroll processing.

Scope and Objective

The objective of our audit was to determine if the Board had implemented appropriately designed internal controls over selected financial operations and if they were operating effectively to adequately safeguard District assets for the period July 1, 2004 to February 9, 2006. Our audit addressed the following related questions:

• Did the Board establish adequate internal control policies and procedures to prevent conflicts of interest?
  
  
• Did the Board implement adequate internal controls over the auditing and payment of claims and the procurement process to protect District assets?
  
  
• Did the Board implement adequate internal controls over payroll processing to protect District assets?

Audit Results

Although the Board adopted a Code of Ethics, which covers conflicts of interest, they did not establish internal control procedures to detect when potential conflicts of interest may exist. Therefore, Marlene Smith, a member of the Board from February 1, 2005 to December 12, 2006, had interests in contracts with the District totaling $13,784, that were not identified by the Board.

The Board did not implement an adequate internal control system over the auditing, approval and payment of claims. In addition, the Board has not implemented adequate internal controls over the procurement of goods and services nor has it monitored compliance with the few District procurement policies and procedures that were in place. Finally, the Board did not implement adequate application controls over the District’s computer system. As a result, numerous errors occurred in the claims auditing and procurement processes which otherwise should have been detected and corrected in a timely manner.

Internal controls over the payroll process were not appropriately designed and resulted in undetected errors. There was a lack of segregation of duties and managerial oversight. We also found that the Board has not developed procedures for verifying the accuracy of processed payrolls. No District staff member reviews or approves any of the Treasurer’s payroll processing work. The Treasurer can make changes in the payroll application system without any supervisory approval. In addition, the payroll application system does not create an “audit trail” to capture who has entered the data or made changes to the data. Finally, management does not routinely require staff to generate exception reports outlining changes made to the payroll data nor does any District employee certify the final processed payrolls.

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.