October 7, 2008
DiNapoli: Proper Oversight Could Have Prevented $500K in Overpayments to Employees at Niagara Falls CSD
Audit Identifies Significant Problems at the District
Inadequate controls over finances and failing to properly monitor operations led to significant problems at the Niagara Falls City School District including overpaying 272 employees more than $500,000 and inappropriately paying the superintendent a lump sum of $10,800, according to an audit released today by State Comptroller Thomas P. DiNapoli.
“The school district let taxpayers down,” DiNapoli said. “By failing to properly oversee financial operations, district officials excessively spent more than $500,000 of taxpayers’ money. District officials must take their financial responsibilities seriously to ensure they do not spend a dime more than is necessary.”
DiNapoli’s audit, covering the period July 2005 to December 2007, found the board did not provide critical internal control functions and did not monitor compliance with existing controls. For example, the district did not establish written policies and procedures for processing and disbursing payroll. As a result, the district overpaid 272 employees because it failed to recalculate their biweekly pay rates to account for the 2005-06 school year having 27 paydays. These overpayments totaled more than $500,000.
In addition, auditors found the superintendent failed to record when he used vacation time for 12 years, including several instances when he took trips to Florida. The district granted him 45 vacation days each year. The superintendent requested a lump sum payment for unused vacation days each year. Because he never recorded any vacation time, the district inappropriately paid him $10,800 for 21 vacation days during the 2004-05 school year alone. As such, there is a strong possibility the district made inappropriate lump sum payments to the superintendent for a number of other years.
Auditors also noted the superintendent’s contract was changed so he could receive lump sum payments for unused sick days. The superintendent received two checks totaling $147,532 since 2006 for unused sick leave and another payment is due in 2008. Additionally, the superintendent used his district credit card to pay for $2,200 in travel expenses that were related to his consulting work.
Auditors also discovered the district paid $543,000 to 12 individuals as independent contractors when they should have been treated and compensated as employees. Even though the district’s external auditors identified the error, the district did not correct it. When a district improperly classifies an individual as an independent contractor who is actually an employee, it could be held liable for employment taxes. In addition, the district incorrectly classified its assistant attorney as an employee when she was actually an independent contractor. This attorney has since had her Retirement System membership revoked by DiNapoli’s office.
Auditors also found the district:
The audit contains 33 recommendations for district officials, including to:
The district has committed to implementing corrective action to address some of the concerns in the audit and has already started to recoup overpayments made to 272 staff members and the superintendent. The district’s full response is included in the audit.
Click here to view the audit.
School District Accountability