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August 25, 2009


DiNapoli's Office Completes School Audits

New York State Comptroller Thomas P. DiNapoli today announced his office completed audits of Depew Union Free School District, Erie 2-Chautauqua-Cattaraugus Board of Cooperative Educational Services, Half Hollow Hills Central School District, Hamilton-Fulton-Montgomery Board of Cooperative Educational Services and Lansing Central School District.

“My office’s audits of school districts and BOCES help schools improve their financial management practices,” DiNapoli said. “These audits are tools for schools to make sure proper policies and procedures are in place to protect taxpayer dollars and provide students with the best possible education.”

Depew UFSD – Financial Condition and Internal Controls Over Procurement (Erie County)
Auditors found the district accumulated more than $6 million that should be used to benefit taxpayers by paying one-time expenditures, funding necessary reserves, reducing debt or reducing the tax levy, in accordance with applicable statutory requirements. While the district appropriated approximately $2 million in fund balance each year, it did not actually use it because the district’s budgetary practices consistently resulted in operating surpluses. The district used these surpluses to increase various reserves. The district also did not use its Debt Reserve, which had a balance in June 2008 of $1.7 million. Instead, the district levied taxes each year for this purpose and paid debt service from the general fund. The district also overstated certain liabilities by $2 million and $1.7 million in June 2007 and June 2008, respectively.

Erie 2-Chautauqua-Cattaraugus BOCES – Internal Controls Over Reserves (Cattaraugus, Chautauqua and Erie counties)
The audit found BOCES’ audited financial statements reported five reserves with balances totaling $6.7 million in June 2008. Auditors found that while BOCES properly established and used three of these reserves, the board never established the EBALR and it improperly established and funded the workers compensation reserve. In addition, BOCES did not properly fund the liability and the technology equipment reserves, and overstated the current liability associated with the EBALR. As a result of these actions, at least $6.3 million was not properly refunded to the component school districts.

Half Hollow Hills CSD – Internal Controls Over Payroll (Suffolk County)
Auditors found the district established an adequate system of internal controls over payroll and operated effectively to safeguard district assets. Auditors’ testing revealed only minor discrepancies in the district’s adherence to its policies, which were discussed with district.

Hamilton-Fulton-Montgomery BOCES – Internal Controls Over the Central Business Office and Shared Services (Fulton, Hamilton and Montgomery counties)
The audit found BOCES officials did not establish a comprehensive business plan or written policies and procedures to properly segregate Central Business Office staff duties. Additionally, BOCES did not define the level of authorization required to process transactions or establish standard authorization forms to be used by the districts. Finally, the system did not adequately control access to district financial data. As a result, there is a likelihood that errors and irregularities could occur and go undetected. Another risk evolving from the failure to adequately control access to district financial data is that the office could unknowingly process improper or fraudulent district transactions.

Lansing Central School District – Internal Controls Over Selected Financial Operations (Tompkins County)
Auditors found the board and administrators placed too much reliance on their independent auditor’s recommended adjustments to the accounting records without fully understanding the impact of those adjustments. Therefore, incorrect adjustments were made, which resulted in the board and administrators believing that they had less than $20,000 in fund balance in the general fund in June 2008 when in fact, they had almost $1.7 million. This represents nearly twice the amount allowed by law. The board and district officials, who were unaware of this, instituted a spending freeze and planned to make significant budget cuts. The district’s fund balance was significantly understated because accrued liabilities, compensated absences and reserves for encumbrances were overstated and the EBALR was understated.

Click here to view the audits above. If you have any questions or would like a comment from the Comptroller’s office regarding the audits above, please call 518-474-4015.


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