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February 26, 2007

 

State Audit Finds Problems at Newfane School District

Comptroller’s Audit Details Oversight Weaknesses,
Inappropriate Use of Computers and Missing Equipment

District Agrees to Make Improvements to Internal Controls and Policies

The Newfane Central School District has agreed to strengthen internal controls after a State Comptroller’s audit found that district equipment had been used for improper and personal purposes and that a former board president, while serving as an intern under the former superintendent, voted for a salary agreement that increased superintendent’s compensation by $44,000 in one year.

Auditors found that laptop computers assigned to two Newfane Central School District board members were used to access pornographic web sites, movies and other inappropriate materials. Given the nature of the web sites visited, the findings of the audit were referred to the Niagara County District Attorney’s Office, which has seized the computers. Laptops assigned to board members and district staff were used for other personal purposes, such as online dating, online auctions, travel and more. None of the laptops inspected were password protected and auditors did not attempt to determine who actually used the computers.

The school board had adopted a computer policy that stated that “users may not obtain, view, download, send, print, display, or otherwise gain access to or transmit materials that are unlawful, obscene, pornographic, or abusive.” However, auditors noted several problems with the district’s policy, including that it does not limit the use of computers for personal purposes, nor did it clearly state that it applies to board members.

“School boards have a responsibility to ensure that internal controls are strong and that district resources are protected and used for appropriate school business,” said State Comptroller Thomas P. DiNapoli.

Newfane School Board President James E. Reineke in response to the audit said the board “is diligently working to implement the recommendations provided” by the auditors. He indicated that the school board is fully cooperating with authorities related to the investigation. His full response is included in the audit.

In total, auditors reviewed 12 of the district’s 200 laptops. Auditors found that eight of 12 laptop computers were used for personal purposes, such as online dating, personal profit, online auctions, shopping, travel, games, music and more. Unauthorized software programs had also been installed on some of these computers. In one case, a laptop issued to a board member was also used to run a personal online business.

Auditors found more than 2,000 pornographic web pages listed on the history report on one of the laptops assigned to a board member from May 2003 to December 2005. Another laptop assigned to a different board member was used to access pornographic web sites more than 150 times during 2002.

Auditors also found that a former board president, while serving as an intern under the former superintendent, voted for a salary agreement that increased the superintendent’s compensation by $44,000 (34 percent) in one year. Auditors believe that it was “highly inadvisable” for the former board president to serve as an intern under the superintendent and questioned how she could act in the best interests of the district when dealing with matters relating to the superintendent.

Auditors found that the former superintendent also received a life insurance policy that will accumulate a cash value of $600,000. Even though the superintendent resigned from the district in December 2006, the district will be required to pay for this policy for the next 12 years, for a total cost of $415,000. Other leave time that was not part of the superintendent’s contract was approved for him by the former board president.

The district had not established adequate controls to protect fuel inventories. Auditors found that a contractor who provides student transportation during the school year owes the district 1,903 gallons of diesel fuel, worth about $4,000. Auditors also found that the district had not conducted inventories of capital assets, and auditors could not locate equipment worth $5,517.

Auditors made 15 recommendations to improve district operations including:

  • The district’s policy and procedures related to the use of district computers should be overhauled, including revising the policy to clearly address personal use of computers, prohibiting users from loading personal software, and conducting routine inspections of district computers to include compliance with policies.
  • No one on the board should be appointed or approved to serve in the district in any other capacity without first seeking legal advice as to the propriety of the appointment. Even if the appointment or approval is permissible, the board should avoid appointing or approving any of its members to serve in a capacity that would compromise the board member’s ability to act in the district’s best interest.
  • All inventory records should be kept up to date, and disposal of any assets should be authorized by the school board.
  • The transportation contractor should reimburse the district for fuel costs, and fuel use should be monitored closely.

“New Yorkers spend tens of billions on education every year, and we need to ensure that this money is being spent responsibly and for its intended purpose,” DiNapoli said. “As the new State Comptroller, I am committed to continuing our efforts to audit school districts statewide and help school districts operate more effectively and efficiently.”

The audit issued today is part of a statewide effort by the State Comptroller’s office to strengthen fiscal practices at schools after problems were found at several Long Island school districts. Currently, the State Comptroller’s office has approximately 190 school audits underway.

The Newfane school district, which is located in Niagara County, has approximately 2,100 students and 300 employees, operates five schools and spent approximately $25 million in fiscal year 2004-05.

Click here for a copy of the audit.

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