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January 7, 2009


DiNapoli’s Office Completes School Audits

New York State Comptroller Thomas P. DiNapoli today announced his office completed audits of Bellmore-Merrick Central High School District, Downsville Central School District, Sackets Harbor Central School District, Spackenkill Union Free School District and Valley 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.”

Bellmore-Merrick Central High School District – Internal Controls Over Financial Operations (Nassau County)
Auditors identified weaknesses in the district’s financial operations with regard to the Employee Benefits Accrued Liability Reserve (EBALR) fund, control over signature disks and rubber signature stamps, and bank reconciliations. The district reserved approximately $3.4 million more in its EBALR fund than its liability for compensated absences. The treasurer did not always accurately reconcile bank balances to district records. In addition, because the claims auditor did not perform a proper audit of claims, the district overpaid a rehabilitation facility and a bus company a total of $4,389. Auditors also found that the district’s purchasing policies did not require the use of competition for procuring professional services or obtaining written contracts for professional services. Finally, district officials did not effectively safeguard computer data.

Downsville Central School District – Financial Operations (Delaware County)
The audit found the board and treasurer did not adequately monitor the cafeteria fund’s financial condition or take appropriate action to maintain the fund’s financial stability, causing the fund’s financial condition to decline over the past five years. For four of the last five years the fund has experienced an operating deficit, and in June 2008 the fund had a negative fund balance of $18,713. District officials also did not properly manage cafeteria operations. Specifically, they did not develop policies and procedures to ensure that cafeteria transactions were authorized and recorded properly. Finally, the board did not appoint an independent claims auditor in accordance with State Education Department regulations. The board appointed the DCMO BOCES to serve as the district’s claims auditor for the 2006-07 and 2007-08 fiscal years.

Sackets Harbor Central School District – Internal Controls Over Claims Processing (Jefferson County)
The audit identified control weaknesses in the district claims auditing operations, which could lead to errors or irregularities occurring and not being detected. During the 2006-07 fiscal year, the claims auditor was a board member and as such, was ineligible to be the district’s claims auditor. She also had no formal training that would allow her to effectively execute her duties as the claims auditor. The audit also found that the treasurer paid 30 claims totaling $230,475 without approval from the claims auditor.

Spackenkill Union Free School District – Internal Controls Over Selected Financial Activities (Dutchess County)
Because the board did not communicate its expectations to the claims auditor and deputy claims auditor, the district’s claims audit process was deficient and applied inconsistently. In addition, the treasurer did not control her facsimile signature and her signature was affixed to district accounts payable and payroll checks without her involvement. Because district officials did not design appropriate controls over the payroll process, separation payments were made to two employees in excess of the amounts allowed by each individual’s contract. Auditors also found that the district could save taxpayers approximately $30,000 per year in check printing costs by printing checks in-house. Finally, the audit found that the district did not securely store its backed-up data files and did not have a formal disaster recovery plan for its information technology.

Valley Central School District – Internal Controls Over Selected Financial Operations (Orange and Ulster counties)
Auditors determined that district officials established a Property Loss and Liability (PL&L) Reserve at the end of the 2005-06 fiscal year and funded it with excess fund balance, totaling more than $2 million, to cover unanticipated shortfalls in state revenue. This is not a proper use for a PL&L reserve. The district’s unappropriated fund balance was already at the maximum permitted by law, which was 2 percent of the district’s 2006-07 budget. Auditors also found that the district did not obtain requests for proposals for professional service providers, as required by its policy for seven of the eight service providers we tested for an aggregate of $1,177,000. Additionally, district officials did not competitively bid eight of the 25 vendors tested for a total of approximately $146,000 in expenditures. Furthermore, the claims auditor was not independent of the business office function and did not perform a thorough review of all claims before approving them for payment.

If you have any questions or would like a comment from the Comptroller’s office regarding any of the audits above, please call Emily DeSantis at 518-474-4015.



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