State Audit Finds Past Internal Control Weaknesses at
Mineola School District, Many Problems Already Addressed
The Mineola Union Free School District has made many changes to strengthen internal controls and re-bid contracts after a former senior school district official was arrested for misusing school resources, according to an audit released today by New York State Comptroller Thomas P. DiNapoli. Auditors found that during the time when this theft occurred the district had serious internal control weaknesses that resulted in millions of dollars of undocumented and questionable spending.
Auditors found that, from July 2004 to June 2005 and in some instances prior to 2004, the district had not controlled or properly documented how taxpayer money was being spent or ensured that the district was getting the most for its money when purchasing goods and services. As a result, $95,275 in questionable payments was made to some contractors and more than $1.6 million in contracts were not properly awarded through a competitive bidding process. It was during this same time period that former Assistant Superintendent John Jackson stole $74,202 from the district. He later pleaded guilty to this theft.
The district has since made a number of changes to ensure that its fiscal operations are in order. One of the major changes was to improve policies for seeking competitive proposals, as well as re-bidding the contracts for insurance coverage and security services, ultimately decreasing insurance costs by $369,000 and the hourly rate for security services by more than half. The district also hired an outside independent auditor to review some of the questionable costs that were identified by state auditors, and hired several new financial staff.
“Our auditors found that past practices of the district allowed taxpayer funds to be used for questionable purposes,” DiNapoli said. “I am encouraged by the positive changes that auditors found at the district and by the board’s serious consideration of the auditors’ recommendations.”
Auditors discovered problems related to an account funded from lease agreements the district had with telecommunications companies for using the district’s educational television channels. Auditors found that the district could not account for $564,332 collected from this lease agreement, but the records were poor so auditors were unable to determine what exactly happened to this money. The district’s independent audit firm has accounted for $256,000 of this money and is currently working to identify for the remaining funds.
State auditors found that money was spent from this account with little or no oversight. Revenue from the lease agreements was treated as a separate fund and not included with the district’s general fund or reported in the district’s financial statements as it should have been. Nor were expenses reviewed by the district’s internal claims auditor.
Auditors determined that most of the money from this account was spent for technology purchases and construction projects that were approved by Jackson. When auditors examined 19 payments, totaling $522,383, made from the account they found that nearly a third of these transactions six payments totaling $95,275 were questionable and had no prior approval from the superintendent, the school board or any of the school principals.
The contracts for these projects, converting a janitorial closet into a handicapped-accessible bathroom and installing radiator covers, appear to have been deliberately split so they would be under the $20,000 legal threshold for competitive bidding. Auditors found that several of the companies awarded the work had the same owner and that district’s checks were cashed at the same time, at the same check cashing facility, and by the same person.
Auditors also found that $152,000 was paid for health insurance for independent contractors who were not entitled to this benefit because they were not actually district employees.
In addition to noting the changes the district has already made, the audit contains 25 recommendations to correct weaknesses in the district’s system of internal controls including:
- The school board should ensure that all general fund revenues and expenditures be appropriately budgeted, recorded and reported in the general fund. No special accounts that bypass the budget process should exist.
- The district should continue to investigate the unaccounted for amount and attempt to recover funds
- District officials should investigate the irregularities with contractors identified by auditors and ensure that all contracts awarded adhere to the district’s procurement policies and state law.
- All disbursements should be audited by the internal claims auditor and processed by the accounts payable department.
The district had some disagreements with the report. The district’s full response is included in the audit, as well as the response of auditors to the district’s concerns.
At the request of the district, the State Comptroller’s office has agreed to come back to the district within the next year to evaluate the progress the district has made in response to the audit recommendations.
The audit issued today is part of a statewide effort by the State Comptroller’s office to strengthen fiscal practices at schools. DiNapoli has asked for an additional $2.7 million to hire more staff to audit schools. The office must audit all of the State’s 832 school districts, Board of Cooperative Educational Services (BOCES) and charters schools by March 31, 2010 and is conducting follow up audits at districts that have faced fiscal and operational issues. Currently, the State Comptroller’s office has approximately 190 school audits underway and has completed more than 140 audits.
Click here for a copy of the audit or visit.