FOR RELEASE:

Audit Finds Internal Control Weaknesses at
Plainedge School District, but No Wrongdoings

The Plainedge Union Free School District said it will strengthen its internal controls and policies over district spending after a State Comptroller’s audit of two years of administrative expenses found significant weaknesses, but no evidence of wrongdoing.

The District did not adequately review expense claims to determine that spending was done for legitimate purposes, lacked written policies and documentation for expenses, and failed to provide independent oversight of spending, according to the audit released today by State Comptroller Alan G. Hevesi. The audit also noted that District officials had recently improved some procedures, including requiring the review of all expense claims, hiring an internal claims auditor and hiring an external CPA firm to conduct a more in-depth audit.

“While the weak financial controls and processes found at the Plainedge School District should be improved to better protect public monies, auditors found no instances of wrongdoing or misuse of funds,” Hevesi said. “I commend the District’s efforts to improve its financial procedures and urge it to adopt the remaining recommendations from the audit.”

The audit examined administrative expenses, such as credit card usage, meals and travel, from July 1, 2002 through August 31, 2004. Auditors found:

• The District did not have proper checks and balances over financial transactions or properly segregate staff duties within the treasurer’s office. For example, with little oversight, the treasurer prepared deposits, logged entries, signed checks and performed bank reconciliations. The internal claims auditor reported directly to District officials, rather than to the Board of Education. In addition, reimbursement claims were not thoroughly reviewed, and many claims expenses lacked supporting documentation.
• In July and August 2004, the District paid $8.1 million in expense claims that the Board of Education did not review and approve, while the District searched for an internal claims auditor.
• Charges for $16,400 were paid for two credits cards assigned to the superintendent and the deputy superintendent — $10,300 of these charges did have not itemized invoices or receipts, as required by existing policy.
• $23,000 was spent on travel-related expenses for managers and members of the Board of Education, but about $7,100 of conference-related expenses did not have supporting documentation or conference approval forms, as required by existing policy.
• $20,000 was expended for meals and refreshments at more than 200 meetings. The documentation supporting these expenses generally did not show who attended the meetings or why attendees required food and refreshments to conduct school business. The District has no written policy outlining when it is appropriate to provide meals to employees.
• $4,429 was paid to the former Board of Education president in 2000 for conference-related expenses and other items. Auditors found limited documentation to support how she calculated some amounts charged to the District. For instance, the District reimbursed her $1,060 for four nights of lodging in Orlando, Fla. ($265 per night), when her credit card statement contained a larger hotel charge. Her reimbursement claim did not show how she determined the District’s portion, nor was a hotel receipt attached. A similar situation occurred with a rental car.
• The District reimbursed five Board of Education members and the superintendent almost $2,700 for the cost of high-speed internet service in their homes. No policy has been adopted that presents a business rationale for providing internet services in the homes of certain District officials.
• $7,100 was spent on 10 cell phones. Auditors did find that the District monitored cell phone usage, but had no written policy outlining which District officials need cell phones to conduct business or how they should use them.

The audit did not find that any of these specific expenses were inappropriate. However, the lack of documentation in some cases or a written policy in others makes it impossible to ensure that money is being spent according to Board policies and in the interest of the School District.

Auditors found that District officials had taken action in recent months to strengthen policies and oversight of District spending. For example, District officials appointed a new internal claims auditor, who reviews all expense claims for reasonableness and adequate supporting documentation and reports directly to the Board of Education. In addition, an external CPA firm was hired to conduct an audit of administrative expenses from 1991 to 2002.

Auditors also recommended that the District:

• Review the claims paid in July and August 2004 to ensure they were actual and necessary expenses and take action to recover funds if they are not.
• Develop written policies concerning District credit cards that outline when and how officials can use the credit cards and specify the required documentation to support the charges.
• Evaluate the former President of the Board of Educations’ claim for travel expenses to Orlando, Fla. and take action to recover funds if they are not appropriate.
• Comply with the Board of Education’s policies regarding travel and conference attendance by submitting travel vouchers, itemized receipts and approved conference attendance forms.
• Require that every claim contain enough supporting documentation to determine that is complies with District policies, and that the amount claimed represents actual and necessary expenses.
• Develop written policies outlining when the District may provide meals and refreshments to employees at meetings, when it is appropriate to provide internet services in the homes of District officials and the use of cell phones.
• Segregate the duties of currently performed by the Treasurer.

In a written response to the audit, the District generally agreed with the audit findings, detailed additional efforts to safeguard resources, and noted that many of the recommendations from the auditors were not required by law but rather were best practices. The full response from the District is included in the audit. The audit also contains a response to taxpayer complaints sent to the Comptroller’s Office that were investigated as part of the audit.

This is the second of the 21 Long Island school district audits to be completed.

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