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March 28, 2008

DiNapoli: Increased Oversight Needed on Valhalla Grant Funds

The Valhalla Union Free School District did not provide sufficient oversight over the district’s financial operations, which led to the district spending $456,400 contrary to grant requirements and $38,500 more than necessary in life insurance premiums, according to an audit released today by State Comptroller Thomas P. DiNapoli.

“School officials have a responsibility to make sure that tax money is spent appropriately and prudently,” DiNapoli said. “They’re also supposed to protect school assets by establishing proper internal controls. Valhalla needs to provide more effective oversight.”

DiNapoli’s audit, covering July 2005 to June 2007, found the board did not establish adequate internal controls over several areas to fulfill its oversight responsibility. Areas lacking proper policies and procedures included maintaining grant records and monitoring grant activity, fringe benefits, payroll, leave time records, the treasurer’s office and security over financial information.

The district received an educational grant from the Town of Greenburgh to alleviate some of the perceived financial burden on the district of having the Westchester Housing Enterprise for the Less Privileged (WestHELP) located in the district. The grant agreement requires that grant funds be used to provide educational benefits that would not otherwise be available to the district.

Auditors discovered the district failed to maintain timely, accurate and complete accounting records and failed to report financial activity to allow for proper and timely monitoring of grant activities. Of approximately $1.7 million in grant spending, $191,400 was not spent in accordance with the grant requirements. An additional $205,000 in spending did not follow competitive bidding requirements.

The audit determined:

  • $205,000 was spent on laptop computers and to construct a physics lab without going through the legally mandated process of publicly advertising for bids and selecting the lowest responsible bidder;
  • $140,900 paid for programs that were designed to enrich the life experiences of all members of the Valhalla community, including individuals who were not students;
  • $60,000 in grant funds were paid to Valhalla Foundation, a private entity, even though state law prohibits gifts and loans of public funds to private organizations;
  • $40,900 in budget transfers were made even though there is no record that the town approved the transfers;
  • $9,600 paid for expenses unrelated to grant programs including printing brochures and advertising for two positions not covered by grant funds.

Auditors also uncovered several other areas of concern.

  • The district paid a significantly higher premium for the business administrator’s life insurance policy than necessary by about $38,500. In addition, the district paid the premium directly to the vendor rather than through the business administrator’s paycheck so taxes were not withheld, which the district may be liable for.
  • The district allowed a retired New York City employee to be paid as an independent contractor so the individual could continue collecting his pension benefit while performing work at the district. Because of this, the district may be liable for tax penalties.
  • The district did not appropriately segregate payroll and recordkeeping duties among employees. Failing to do this, put the district at risk for errors or irregularities that could go undetected.

The audit recommends that school officials:

  • update district policies and adopt written procedures for monitoring grant activity and records, fringe benefits, payroll, leave time records, the treasurer’s office and security over financial information;
  • comply with bidding laws when purchasing goods and services;
  • consider recovering any outstanding money given to the Valhalla Foundation;
  • prepare financial reports for the grant;
  • review purchases to ensure they are within budgeted amounts and in accordance with grant requirements;
  • ensure budget transfers follow required procedures;
  • recover any unintended payments for the business administrator’s life insurance policy;
  • verify that appropriate waivers are granted for any NYC retirees employed at the district; and
  • properly segregate payroll and recordkeeping duties so one person does not control all the phases of a transaction.

The district’s full response is included in 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 834 school districts, Board of Cooperative Educational Services (BOCES) and charter schools by 2010. Auditors review the school districts’ internal controls and make recommendations on how internal controls can be improved. The State Comptroller’s office has completed 390 school audits and approximately 200 school audits are currently underway.

Click here for a copy of the audit.



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