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December 29, 2009

DiNapoli’s Office Completes School Audits

New York State Comptroller Thomas P. DiNapoli today announced his office completed audits of Babylon Union Free School District, Cato-Meridan Central School District, Dutchess County Board of Cooperative Educational Services, Lynbrook Union Free School District, Monroe-Woodbury Central School District, South Mountain Hickory Common School District and Williamson 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.”

Babylon UFSD – Internal Controls Over Selected Financial Operations (Suffolk County)
Auditors found the district contracted with five professional service providers, who were paid a total of $432,904 during the audit period, without soliciting requests for proposals. District officials also did not properly segregate the treasurer’s cash duties and did not comply with state regulations regarding printing duplicate pre-numbered receipts when collecting cash. The board did not ensure there were procedures to inform all district officers and employees of their obligation to disclose their “interest” in contracts with the district, or to monitor proposed procurements to prevent conflicts of interest.

Cato-Meridan CSD – Reserve Funds and the Treasurer’s Electronic Signature (Cayuga, Onondaga, Oswego and Wayne counties)
The audit found as of June 2008, the district accumulated $1.18 million in its insurance and liability reserve funds. The resolutions establishing these reserves included the titles of the reserves and the dollar amounts transferred to initially fund the reserves but did not document the reason for establishing each reserve. In addition, the treasurer did not supervise the use of her electronic signature or review printed checks and compare them to warrants and payrolls for accuracy.

Dutchess County BOCES – Internal Controls Over Selected Financial Activities
Auditors found BOCES contracted to pay approximately $1.4 million for salaries and associated expenses of a vendor’s employees without ensuring that the contract included sufficient payroll controls. BOCES personnel routinely acquired professional services without seeking competitive prices for those services. Also, the district’s professional service contracts lacked details of the services to be provided and how BOCES could measure the quality of the services. BOCES officials did not establish sufficient controls over electronic transfers of money, which averaged more than $7.4 million per month. Internal controls over revenues and cash receipts need improvement at both the Manufacturing and Technology Institute business office and the Career and Technical Institute student accounts office. Finally, BOCES did not effectively safeguard its information technology system by establishing appropriate controls.

Lynbrook UFSD – Internal Controls Over Selected Financial Operations (Nassau County)
The audit found the board appointed an independent contractor as treasurer even though statute and regulation clearly indicate that an independent contractor cannot be a school officer. The treasurer did not supervise and control the use of her facsimile signature as required by State Education Department regulations. The district paid health insurance buyouts to 16 employees in 2007 and 17 in 2008, $56,345 and $62,655 respectively, while also providing them with individual health insurance coverage. Although the district achieved a significant benefit by offering this option to its employees, the option of receiving individual coverage (as opposed to family coverage) and also receiving a payment in lieu of health insurance is not authorized in any of the district’s employment agreements. Finally, controls over computer access privileges were not effective because several individuals have user access rights that were incompatible with their job functions.

Monroe-Woodbury CSD – Internal Controls Over Selected Financial Operations (Orange County)
Auditors found the board did not adopt adequate procedures or a job description for the claims auditor. Consequently, the claims auditor did not report directly to the board and did not review purchase orders or printed checks to verify whether amounts paid to vendors did not exceed bid or quote thresholds and were in accordance with awarded bid prices or quotes. Due to a lack of guidance, the claims auditor also authorized payments to three vendors totaling $117,726 that were improperly itemized. District officials also did not obtain competitive bids for two purchases totaling $34,727 or competitive quotes for 14 purchases totaling $85,241. District officials awarded a bid to one vendor, who was paid $25,600, even though his bid response did not include costs for all items in the bid. Finally, internal controls over hiring practices need to be improved. If the district followed Education Law, board policy and past district hiring practices, the district could have saved approximately $190,000.

South Mountain Hickory Common SD – Internal Controls Over Financial Operations (Broome County)
The audit found the trustee did not properly monitor and oversee the work of the treasurer and controls were not established to ensure the treasurer properly accounted for all district moneys. Consequently, the treasurer did not maintain sufficient accounting records and did not keep a running balance of cash or perform bank reconciliations. In addition, the treasurer did not prepare financial reports for the trustee, and neither the trustee nor the treasurer could identify the source of one deposit totaling $1,428. In addition, all 46 checks issued during the audit period, totaling $804,440, had no indication that supporting documentation was audited properly and approved, nor did they have the dual signatures of the trustee and treasurer as required by the New York State Commissioner of Education.

Williamson CSD – Financial Condition and Interest in Contracts (Wayne County)
Auditors found district officials routinely overestimated appropriations and underestimated revenues. While the district appropriated at least $250,000 in fund balance each year, it was not needed or used because the district’s budgetary practices consistently resulted in operating surpluses totaling nearly $2.5 million over four years ending June 30, 2009. Despite these budgetary surpluses, the district also increased its real property tax levy by more than $1 million over the same four years. The district used these surpluses to increase various reserves and trust account balances. As of June 2009, the reported general fund and debt service reserves amounted to $5.1 million; however, there was limited or no use of the balances in four of the district’s reserves, which totaled more than $2.7 million in June 2009. The district also maintained an unauthorized retirement health trust in the trust and agency fund with a total reported balance of $782,086. Combined, more than $3.4 million held in these reserves was idle money that could have been used for district operations or to reduce the tax levy. Auditors also found district management did not have a system in place to make district officials and employees aware of statutory requirements concerning interests in contracts, to identify outside occupations or business interests of district officials and employees, or to monitor proposed procurements to prevent conflicts of interest.

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

School District Accountability
In order to improve accountability of the state’s schools, DiNapoli’s office will audit all of New York’s school districts and Boards of Cooperative Educational Services by 2010. The State Comptroller’s office has completed 720 school audits and approximately 10 school audits are currently underway.




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