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October 15, 2009

DiNapoli Audit Finds Significant Deficiencies in Oversight at Lackawanna City SD

$169,000 in Separation Payments Improperly Paid Out

The Lackawanna City School District failed to properly safeguard taxpayers’ money and assets by not establishing proper financial controls and not fixing these weaknesses after they were identified separately by the district’s internal auditor and financial consultant, according to an audit released today by State Comptroller Thomas P. DiNapoli.

“School district budgets are funded by local property taxpayers and state taxpayers,” DiNapoli said. “These taxpayers should feel confident that their hard-earned money is being put to good use educating the district’s children and that the district is doing everything possible to safeguard the district’s assets. This did not happen at Lackawanna City School District. The district needs to better protect the taxpayers’ money.”

The audit, covering July 2006 to October 2008, identified significant deficiencies in how the board carried out its oversight and governance responsibilities. The board did not protect the interests of taxpayers because it failed to adequately monitor the district’s finances and implement corrective action when deficiencies in the district’s financial operations were pointed out.

In addition, a 2007 report prepared by the district’s internal auditor that detailed significant deficiencies in the district’s financial operations was ignored. The district also took no action after it received a $4,300 report prepared by an education consultant it hired to review the district’s administrative structure, roles and responsibilities in 2006.

During the audit period the board also:

  • allowed the district’s consultant to exercise broad financial authority, which led to $168,996 in questionable separation payments and up to $28,000 in overpayments for unused leave time to employees;
  • did not ensure the district’s audit committee properly performed its advisory and oversight duties; and
  • failed to establish and monitor payroll, procurement and claims processing policies.

DiNapoli’s audit also found the district did not comply with competitive bidding requirements for 15 purchases totaling $191,487. In addition, the district allowed 113 claims totaling $675,487 to be processed even though they lacked proper approvals for purchases and travel expenses, supporting documentation, a receipt or evidence of audit.

DiNapoli’s office recommends that district officials:

  • establish and maintain a control environment that complies with relevant laws and district policies;
  • ensure corrective action is taken to address control weaknesses identified by auditors and consultants;
  • adopt policies for processing payroll claims; and
  • ensure that collective bargaining agreements and employment contracts stipulate how various types of employee leave are to be accrued and used, and how separation payments are to be calculated.

The district generally agreed with the audit’s findings and has started to take corrective action. The district’s full response is included in the audit.

To view the audit, visit:

School District Accountability
In order to improve accountability of the state’s schools, DiNapoli’s office will audit all of New York’s school districts and Boards of Cooperative Educational Services by 2010. The State Comptroller’s office has completed 660 school audits and approximately 65 school audits are currently underway.


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