DiNapoli Releases Audit of Enterprise Charter School
State Comptroller Thomas P. DiNapoli today released an audit of the Enterprise Charter School in Buffalo.
The audit, which covers the period July 1, 2005 through February 21, 2007, found:
- Enterprise paid $7,700 in costs incurred by the Niagara charter school, including paying health insurance premiums of Enterprise’s former CEO when he was employed as CEO of Niagara;
- Enterprise paid $70,300 to the former CEO from the accounts payable system even though these payments were back-pay and compensation advances that should have been paid through the payroll process. Because of this procedure, Enterprise neglected to withhold required taxes from these payments and inappropriately overpaid the former CEO by at least $34,000;
- Enterprise spent $84,610 without proper approvals or paperwork – and without ensuring it received the goods and services it paid for. These payments included tickets to a play in Toronto; payments to a liquor store, with the receipt indicating that $500 in change was returned to a school employee; a staff dinner party, with half the charges spent on alcoholic beverages; a $5,460 holiday party which included $2,285 spent on an “open bar;” and unauthorized payments to the former CEO for travel and lodging;
- Enterprise, under a two-year $60,000 consulting contract with the former CEO, paid him 25 percent of the total compensation in the first two weeks of the contract, even though there was no provision for this type of payment in the contract, and school officials could not document what services he provided; and
- Enterprise had weak internal controls that allowed the same school officials to handle all phases of transactions.
DiNapoli recommended that Enterprise charter school officials take the following corrective action:
- Recover overpayments and other improper payments from the former CEO;
- Immediately file a federal form 1099 to report consulting payments made to the former CEO and contact state and federal tax officials to determine what amended filing reports need to be submitted to address misreported payroll information;
- Establish strong internal controls over finances;
- Stipulate that employment contracts clearly state terms of separation, compensation and services to be provided;
- Stop making payments to the Niagara charter school and recover any outstanding loans;
- Require that bills have adequate backup documentation and receive appropriate approvals;
- Adopt a travel and meal expense policy to avoid abuse of school funds; and
- Stop gift card purchases, and refrain from using school funds to purchase alcohol.
DiNapoli noted that school officials have disputed the audit’s findings, and did not take advantage of the auditors’ invitations to discuss deficiencies noted in the audit. A full written response from the school is included in the audit report.
School District Accountability
In order to improve accountability of the state’s schools, State Comptroller Thomas P. DiNapoli’s office will audit all of New York’s 832 school districts, Board of Cooperative Educational Services (BOCES) and charter schools by 2010. The State Comptroller’s office has completed more than 290 school audits and approximately 235 audits are currently underway.
Click here for a copy of the audit.