DiNapoli: Audit Finds Questionable Costs at Rochester CSD
Audit Identifies $164K in Undocumented Bonuses & Raises and
Poor Oversight of $36 Million in Capital Project Payments
Rochester City School District officials failed to develop sound policies and take an active role in monitoring district finances, according to an audit released today by State Comptroller Thomas P. DiNapoli. The lack of much-needed oversight allowed the former superintendent to grant $164,550 in undocumented bonuses and raises, and $36 million to be paid to contractors without the statutorily required review.
“Now more than ever, we have to protect taxpayer dollars,” DiNapoli said. “For years that protection wasn’t very strong at the Rochester City School District. Administrators should not be able to give bonuses and unlimited raises on a whim. And $36 million should not be paid out without sufficient review. Taxpayers shouldn’t have to worry how their tax dollars are being spent. Current school officials recognize that these are major problems and are taking steps to make sure this kind of disregard for fiscal prudence doesn’t happen again.”
The audit found the school board failed to establish a positive tone at the top and failed to implement effective safeguards over district money and assets. This resulted in questionable payments, some of which benefited the very group of top managers that was responsible for protecting taxpayer resources. The district’s weak internal controls allowed the welfare of a select group of upper management to take precedence over the taxpayers’ best interests.
DiNapoli’s audit found from July 2002 to December 2006, the former superintendent gave 137 administrators more than $550,000 in bonuses. Auditors reviewed 30 of these bonuses and found 27 bonuses, totaling $138,250 did not have supporting documentation, such as performance appraisals, for why they were awarded. In addition, the former superintendent granted $26,300 in undocumented raises.
The audit also found the district entered into $940,000 in contracts with a consultant who had an undisclosed personal relationship with the former chief executive officer of business services. This undisclosed personal relationship posed a conflict of interest and the former administrator should have refrained from approving any part of the work done or payments to be made to the consultant.
DiNapoli’s audit also found from July 2005 through June 2008 the district paid $35.9 million in claims for capital projects even though they were not reviewed by the district’s claims auditor as required by Education Law. As result, there is increased risk that the district will make payments for
purposes other than district expenses. The district asserted the City of Rochester should review the claims but the City did not do this. The district is in the best position to verify the payment is for received goods and services and should be responsible for auditing the claims.
Auditors also found the district:
- paid excessive travel reimbursements totaling $14,400 to the former superintendent and former CEO of business services;
- implemented 19 supplemental agreements to collective bargaining agreements without board approval;
- paid a consultant $390,000 even though staff continuingly raised concerns about the consultant’s activities which included attending conferences at an estimated cost of $13,000 even though the district did not approve the trips and conducting an estimated $11,000 of “faith-based meetings and outreach;”
- executed $366,772 in change orders on construction contracts, which increased the contracts’ costs by amounts ranging from 11 percent to 189 percent, when the district should have separately bid much of the work; and
- did not obtain competitive quotes for $2.5 million in professional service contracts and may have paid more than necessary for these services.
DiNapoli’s office recommends:
- board members take a more active role in the district’s financial operations;
- board members ensure that senior management’s compensation and benefits are provided in accordance with board policies;
- district officials not pay claims without prior audit and approval by the claims auditor;
- the district provide staff with guidance on how to manage and oversee contracts;
- the board oversee change orders for capital projects; and
- district officials develop procedures to procure professional services.
The district generally agreed with the audit’s findings and has begun to initiate corrective action in several areas. Specifically, the district has:
- created the office of auditor general to evaluate internal control effectiveness;
- created the office of claims auditor to ensure there is appropriate supporting documentation for all claims paid by the district;
- automated the district’s purchasing system; and
- updated the district’s business manual to include detailed purchasing procedures.
The district’s full response is included in the audit.
Click her for a copy of the audit.
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 731 school audits.