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Audit Finds Management Problems At Manhasset Schools
Cites Concerns about Poor Controls, Improper Expense Reimbursements
and Missing Equipment; District Pledges Action on Audit Recommendations
A state comptroller audit of the Manhasset school district has found
lax internal controls, including missing equipment, and reimbursements
to district officials that appeared to be excessive, New York State
Comptroller Alan G. Hevesi said today.
“The best defense against fraud, waste and mismanagement is
strong internal controls. In too many areas, our auditors identified
instances where the Manhasset school district failed to do what needed
to be done,” Hevesi said. “Strong oversight and controls
are used to prevent serious errors from occurring, such as the missing
equipment auditors identified. I am encouraged by the positive response
of the district to the audit findings and urge them to take further
action to improve its control environment.”
In responding to the audit, the board of education president said
that the district had taken action on several of the auditors’ recommendations,
including revising policies regarding reimbursement of expenses to
the superintendent, contacting the Department of Education to determine
if they were eligible for additional state aid related to the capital
project, and improving oversight and controls in a number of areas.
The audit looked at the district’s control environment for the
period of July 1, 2002 to August 10, 2004.
Among the findings of the report released today:
- Lax controls over assets. The district did not have a
complete and accurate record of capital assets. For example, 34 pieces
of equipment including computers, cameras, a refrigerator and other
equipment totaling $25,453 could not be found when auditors attempted
to locate a test sample of 165 assets. The district said after the
audit that it was able to locate most of this equipment.
- Excessive spending on travel and meals. Auditors found some
reimbursements to district officials appeared to be excessive. The
former superintendent submitted claims for conference expenses totaling
$5,313.85, which exceeded the federal reimbursement rates by a total
of $1,285. He was also reimbursed $2,382 for five days of expenses
for attending a conference in California, even though his expense
claim indicated that he was at the conference for only two days. One of the
meals claimed by him on this trip was for dinner at a restaurant
for $165. A former board member also received reimbursement of $1,444 for
a conference in Albany without adequate receipts.
- Improper reimbursement to the former superintendent. The former
superintendent was reimbursed more than $1,300, including $920 for
donations, dinners and advertisements for the Tower Foundation, a non-profit
organization created to help solicit money for the district.
- Poor controls over cash assets and accounting
records. Auditors
found that 28 checks totaling more than $321,000 did not have a required
second signature, while another 12 checks totaling $29,590 cleared
the bank before they were properly signed off by the internal claims
auditor. Checks were written out of sequence, and 324 checks totaling
$4,228,798 had slightly different vendor names than those listed in
the district’s accounting records. The ability to make changes
of any kind to vendor names, without appropriate oversight, represents
a significant control risk.
- Circumvented approval process for purchase
orders. Auditors
tested 128 expense claims and could not find purchase orders for 29
of them totaling $132,000, even though board policy required that every
purchase have a pre-approved purchase order. During the audit period,
more than half of all purchases totaling more than $40 million were
made using master purchase orders, which allowed the district to make
multiple purchases from individual vendors using only one purchase
order. This practice limited competition and should only be used for
routine transactions such as utility bills or contract payments.
- Significant weaknesses in computer controls. The district
utilizes a software package called Finance Manager. Auditors found
that accounting records could be completely deleted without any record
of such deletions or the names of employees who made adjustments or
deletions of the records. The district did not properly restrict access
to its computer system and did not have policies and procedures to
manage who can perform various functions. Given that virtually all
the district’s accounting records and reports were computer generated,
the dollars at risk were substantial.
- Duties not properly overseen in the Treasurer’s
office. Duties were not segregated to ensure that no single individual controlled
most or all phases of a transaction. For instance, the treasurer had
the ability to perform all financial duties including receiving and
depositing money, signing checks, reconciling cash balances to bank
balances and recording transactions with little or no oversight by
high level district management. In addition, bank signature cards were
not up to date, and bonding insurance for those who handle cash was
too low.
- Concerns relating to management of a capital
project. The
Comptroller received several complaints from residents regarding a
$21 million capital project that had begun in 1996 to improve the district’s
three school buildings. While many records for the project were unavailable,
auditors did not find documentation that all contracts were competitively
bid, concluded that the project was not monitored accurately, and questioned
whether the district had tapped into all available state funds for
the project.
Auditors made 28 recommendations to correct the management issues
identified in the audit, including:
- Conduct a comprehensive review of computer operations to
address problems.
- Thoroughly review duties in the Treasurer’s office
to ensure proper segregation of duties.
- Improve controls over cash disbursements to verify that
signature cards are up to date and that checks of more than $2,000
have the required second signature.
- Establish a maximum per diem rate for lodging and a maximum
meal rate allowance.
- Eliminate the improper use of master purchase orders and
obtain a greater number of quotes from various vendors in order to
lower costs for the district.
- Maintain a total value of fixed assets, periodically inventory
these assets and properly tag assets as district property.
The Manhasset Union Free School District spent $64 million, had approximately
2,600 students, and employed 407 staff during the 2003-04 fiscal year.
The district has four schools, including two elementary schools, a
middle school and a high school.
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 |
