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Lawrence School District Lacks Vital Financial Controls
The Lawrence Union Free School District lacked basic financial controls
to ensure that money was spent appropriately and that capital assets
were accounted for, New York State Comptroller Alan G. Hevesi said
today.
Although the audit did not identify any evidence of wrongdoing, it
noted significant weaknesses in the district’s fiscal management.
Comptroller auditors found that district personnel could override controls
in the district’s computerized accounting system designed to
prevent fraud, officials did not follow procurement policies to competitively
bid projects in some instances and no reconciliation of bank statements
occurred for an account that has millions of dollars in transactions
per month.
“The lack of internal controls at the Lawrence School District
puts the district at substantial risk for potential wrongdoing,” Hevesi
said. “Without strong systems in place and proper board oversight,
taxpayers have little assurance that the accounting records are correct
and that taxpayer money is being spent properly. I am encouraged by
the positive response of the Board of Education and district officials
to the audit findings and urge them to take decisive action to improve
their control environment.”
In response to the audit, Superintendent John Fitzsimons said “Our
administrative team is relatively new as are the majority of the Board
of Education members and we see this audit as a tool to assist us in
re-establishing confidence in how we manage our district resources.
Your findings and recommendations will enable us to improve policies,
procedures and internal controls.” His full response is included
in the audit, as well the auditors’ responses to 13 taxpayer
concerns that were investigated during the audit.
The audit released today examined the district’s control environment
for the period of July 1, 2002 to August 27, 2004. A separate audit
of the district’s annual financial audits will be completed soon.
This is the tenth audit that Comptroller Hevesi’s office has
completed of Long Island school districts.
Auditors found a range of problems with Lawrence’s internal
financial controls:
- Significant weaknesses in the computerized
accounting system. Auditors found that personnel could override the computer system
controls as well as change vendor names after checks had been processed.
Such controls are needed to prevent inappropriate transactions. Auditors
also found that a former employee still had rights to the system
and duplicate authorization rights existed for employees who changed
their name. In addition, the district’s independent auditor failed to test
the district’s computerized system to ensure that proper controls
were being utilized.
- Failed to competitively bid projects. The district
failed to follow its own procurement policy and competitively bid
out purchases. Auditors examined purchases from 23 vendors and found
six questionable purchases. For instance, the district purchased
books for a total of $229,486 from two different vendors that were
not competitively bid.
- No reconciliation of bank statements. The treasurer’s office
had not reconciled the general fund disbursement account which averages
millions of dollars in transactions each month. The unresolved monthly
differences from July through December 2004 between the adjusted
bank balance and the ending balance in the ledger account ranged
from $5,814 to $1,187,859. Auditors were informed that this was a
new account that had been opened because the district could not reconcile
the old account and that the district was considering closing the
current account because of the same problem.
- Lax controls over assets. The district did not
have a complete and accurate record of capital assets. For example,
the district paid $32,737 for 33 palm pilots. However, auditors
found that 27 of the palm pilots were not being used by anyone
and one could not be accounted for by staff. When auditors asked
about the palm pilots, they were informed that the palm pilots
were now essentially obsolete and that $7,225 was spent for software
that was never used and training that never happened.
- Improper oversight in the treasurer’s office. Duties
were not segregated to ensure that no single individual controlled
most or all phases of a transaction, and rubber stamps were improperly
used to affix the signature of the treasurer and deputy treasurer
on checks. District officials did not properly approve journal
entries which involved the electronic transfer of cash from one
account to another. Auditors noted that no oversight could result
in improper disbursement or use of district funds.
- Problems with claims processing. Auditors examined
67 claims and related purchase orders supposedly reviewed by
the internal claims auditor. Auditors found that some claims
lacked proper documentation and that two claims totaling $3,479
were paid twice. District officials obtained reimbursements
for these claims after auditors brought the matter to their attention.
- Lack of policies for payroll and administrative
expenses. The district
did not have policies to govern the payroll process, travel,
cell phones, credit cards and more. As a result, time records
were not maintained for some employees and expenses were not
properly verified.
The audit makes 20 recommendations to correct weaknesses in the district’s
system of internal controls, including:
- Conduct a comprehensive review of computer operations to address
internal control deficiencies.
- Require claim to be sufficiently detailed and verify that proper
procurement procedures were followed.
- Establish a comprehensive capital asset policy and appoint a property
control manager.
- Separate duties to reduce the possibility of fraud.
Since the initiation of the Comptroller’s audit, district officials
have enhanced controls over administrative spending and have started
to develop a corrective action plan to improve the district’s
control environment.
The Lawrence Union Free School District 2004-05 budget is approximately
$85 million. It has six schools, 3,600 students and a workforce of
about 800 employees.
Click here for a copy of the audit.
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Albany Phone: (518) 474-4015 Fax:(518)
473-8940
NYC Phone: (212) 681-4825 Fax:(212) 681-4468
Internet: http://www.osc.state.ny.us
E-Mail:press@osc.state.ny.us |
