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Hevesi Audit Finds
Nearly $5.1 Million in Questionable, Wasteful Expenses at Hempstead
School District
Infighting and Irresponsible Behavior by Board, Poor Management, No
Financial Controls Contributed to Uncontrolled Spending, Deteriorating
Buildings, No Bid Contracts
Severe mismanagement, irresponsible behavior by the board of education
and a lack of central oversight of finances led to nearly $5.1 million
in uncontrolled, inappropriate and wasteful spending at the Hempstead
school district during the audit period of July 2002 through September
2004, according to an audit released today by New York State Comptroller
Alan G. Hevesi. The audit findings have been referred to the office
of Nassau County District Attorney Denis Dillon.
Among the nearly $5.1 million in expenses identified:
- Avoidable Expenses. About $2.3 million in payments to relocate,
install and lease portable classrooms because the district allowed
buildings to fall into significant disrepair and the board failed to act on a
bond resolution for school construction.
- Lack of a Competitive Process. $1.3 million of contracts awarded
without a competitive process. Some contracts contained little
or no information on what services were provided, and payments were made that
were more than those contracts specified.
- Payments to Temporary Employment Agencies. $1.1 million paid
to temporary employment agencies, without any evidence that it
was cost effective and without board or business office approval.
- Questionable and Inappropriate Expenses. $298,000 for unused
leave time that employees were paid but were not entitled to, undocumented
meals and refreshments, and unsupported credit card charges.
- Payments to the Superintendents. For a period, the district inappropriately
paid two superintendents because the board broke State Education
Department (SED) rules when it hired Superintendent Susan Johnson
and attempted to fire Clay.
- Missing Computer Equipment. About $27,000 in recently purchased
equipment was missing, including laptops, desktop computers and
printers.
“Nearly $5.1 million of public funds were spent inappropriately
at a time when school buildings were falling apart, classrooms were
overcrowded and students were being housed in inadequate, temporary
classroom space,” Hevesi said. “The board’s irresponsible
behavior and failure to meet its basic duties shortchanged the taxpayers
and students of the district over and over again. The management has
been awful and the children are paying a terrible price.”
“This district is facing major problems, and the board and school
officials must take decisive action to drastically improve management
and properly safeguard taxpayer money,” Hevesi said. “The
board says it is taking action and that a ‘new day has dawned’ in
Hempstead. However, since the new superintendent that board members appointed
to lead the district was the same one at the helm when the problems identified
in this audit occurred, I remain greatly concerned as to whether this
administration can fulfill its obligations.”
In response to the audit, the district indicated that it generally
accepted the audit findings and it has taken action to address some
of the deficiencies identified by the audit. The district argued that
the audit reflects historic circumstances and is not indicative of
the current board’s management. However, auditors noted that
the district is currently operating with a reinstated superintendent
and three out of five board members who were in office when the poor
practices identified in the report occurred. The district’s full
response is included in the audit.
The audit covered the period of July 1, 2002 through September 30,
2004 with a portion of the investigation extending into July 2005.
The audit examined the district’s control environment as well
as internal controls over cash receipts and disbursements, payroll,
purchasing and capital assets. Auditors also reviewed 23 complaints
from area residents. These complaints and the auditors’ response
to these complaints are included in the audit.
Among the $298,000 identified in questionable expenses:
- Improper Payments for Unused Leave Time. Five employees who
resigned or were fired were paid a total of $117,145 for unused
sick, vacation and personal time to which they were not entitled.
- No Policy for Meals. $104,188 was spent for meals and refreshments.
The district did not have a policy governing spending on meals,
and generally no supporting information was provided to indicate why these expenses
should be paid by the district.
- Unsupported Credit Card Expenses. $40,589 in credit card charges
did not have itemized receipts. Even though the district’s policy
requires that proper documentation be submitted, district officials said
they signed-off on credit card claims without any supporting information
because they feared possible late fees. Auditors determined that board
and district officials charged $1,582 in personal expenses to the district — $1,485
was eventually reimbursed to the district.
Other findings:
- No Oversight of Capital Assets. The district did not maintain
accurate and current inventory records of capital assets and equipment
valued at nearly $30 million. Auditors could not locate nearly
half of a sample of recently purchased equipment valued at about $27,000, including
laptops, desktops and printers.
- Excessive Cell Phone Use. $73,000 in cell phone bills, some
of it for personal calls, including a monthly cell phone bill of
$1,184 for one board member who used her cell phone an average of 2.5 hours
a day in July 2003. Even after the board instituted a new cell
phone policy, three board members accounted for $425 in excess minute charges.
- Discrepancies for Cash Receipts and Disbursements. Cash register
tapes for the school cafeteria sales did not match bank deposits
for 43 of 46 days tested by auditors. For 23 days tested, register tapes
exceed the amount deposited by a total of $2,912, while deposit
tickets exceeded register tapes by a total of $2,228 for the other 20 days. For
example, on February 3, 2003, cash register tapes totaled $2,036,
but only $1,484 was deposited to the to the school lunch fund bank account.
- No Policy for Cash Transfers. 96 cash transfers were made between
July 2002 and November 2004 between two accounts, totaling $618,021,
but there were no records to indicate that these transfers were authorized
by appropriate personnel.
- Poor Attendance Records. Records only noted full day absences,
not when employees are absent part of the day.
Auditors determined that the inappropriate use of district funds was
largely attributable to the board’s irresponsible behavior, including:
- Infighting. During the audit period, board meetings were often
disrupted and turned into name-calling and finger pointing sessions.
On several occasions, board members threatened other board members
and members of the public, and law enforcement had to be called to respond
to physical altercations between board members. In April 2005, the
board attempted to remove the board president who has filed a notice of claim
against the district for $10 million.
- Poor Meeting Attendance. Critical board meetings were
cancelled due to lack of a quorum. The board failed to act on a bond
resolution for the repair and building of school buildings in 2003,
a bond that had previously been turned down by voters. According
to law, the district had 45 days in which to submit the bond issue
for a re-vote, however the board meeting that was to be held so the
board could act on the bond issue was cancelled due to a lack of
a quorum. As of May 2005, the bond issue had not been resubmitted
to voters. In addition, when one board member was removed because
of misuse of a district credit card for personal expenses, a replacement
was not appointed by the board until seven months later.
- Failure to Meet Budget Deadlines. The board initially failed
to approve a tentative school budget for the 2005-2006 school year
by April 25, 2005, as required by law. The board later passed a contingency
budget in July 2005 after voters twice rejected a proposed budget
and SED issued a legally binding order forcing the board to act on the budget
and several other key duties.
- Failed to Respond to Building Repair Needs. The board allowed
district buildings to deteriorate and failed to take action even
after SED criticized the district for poor maintenance, fire hazards and overcrowding.
Two buildings were closed because of disrepair, resulting in further
overcrowded conditions in existing schools and students being placed
in portable classrooms that were in poor physical condition, had
leaks, bug infestations, and air conditioning, lighting and heating problems
at an additional annual cost of $370,000.
- Significant Management Turnover. For the ten
month period ending May 2005, the district employed a total of five
different assistant superintendents for business. In October 2004,
the board fired the current superintendent, Nathaniel Clay, but then
later suspended him when SED rescinded the decision of the board.
During his suspension, Superintendent Clay was paid $74,347. The
board later fired his replacement, Susan Johnson, and reinstated
Superintendent Clay in July 2005.
“The board’s embarrassing and irresponsible conduct had
a direct and significant impact on thousands of school children. The
board failed the taxpayers it was elected to serve, and there was no
excuse or justification for its past actions,” Hevesi said. “I
commend Commissioner Mills for stepping in when the board was incapable
of doing its job, and I urge the State Education Department to continue
to closely monitor the actions of the board and take necessary action
if the board fails to meet its obligations.”
The audit makes 29 recommendations to correct weaknesses in the district’s
system of internal controls and management, including:
- Periodic evaluations of district buildings to facilitate timely
planning for repairs and renovations.
- Written agreements should be entered into with firms and individuals
that provide professional services to the district only after soliciting
proposals and those agreements should clearly stipulate the services
provided and compensation.
- A comprehensive capital asset policy and accurate reporting
of all assets should be developed and the district should investigate
the missing items and take appropriate action.
- Termination payments must comply with provision of an individual’s
employment contract.
- Before hiring temporary employees, an analysis should be prepared
to determine whether it is cost effective.
- Policies and procedures should be established or strengthened
for verifying expense claims, using cell phones, providing meals
and refreshments at meetings, and travel expenses.
The Hempstead school district has more than 7,000 students, approximately
1,100 employees and an operating budget of about $113 million.
Click here for a copy of the audit report.
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Internet: http://www.osc.state.ny.us
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