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September 29, 2009

DiNapoli’s Office Completes School Audits

New York State Comptroller Thomas P. DiNapoli today announced his office completed audits of Alfred-Almond Central School District, Barker Central School District, Friendship Central School District, Hornell City School District, Morristown Central School District, Orleans Niagara Board of Cooperative Educational Services and Western Suffolk Board of Cooperative Educational Services.

“My office’s audits of school districts and BOCES help schools improve their financial management practices,” DiNapoli said. “These audits are tools for schools to make sure proper policies and procedures are in place to protect taxpayer dollars and provide students with the best possible education.”

Alfred-Almond CSD – Internal Controls Over Selected Financial Activities (Allegany and Steuben counties)
Auditors found internal controls were not appropriately designed or operating effectively. The board did not appoint a claims auditor in accordance with State Education Department regulations. The board contracted with the Greater Southern Tier BOCES Central Business Office for claims auditor services for the 2007-08 and the 2008-09 fiscal years. During this time, the district paid more than $1.1 million to BOCES for other services. As a result of these payments and the appointment of a BOCES employee as claims auditor, the district did not comply with the independence requirements for this position. Auditors also found the claims auditor did not always ensure that claims submitted for approval for the model transition program grant were in accordance with the district’s policies and procedures.

Barker CSD – Internal Controls Over Financial Condition and Student Transportation Services (Niagara and Orleans counties)
The audit found the district accumulated more than $1.1 million that should be used to benefit taxpayers by paying one-time expenditures, funding necessary reserves, reducing debt or reducing the tax levy. District officials did not prepare reasonable budgets for the 2004-05 through the 2007-08 fiscal years. As a result of these practices, the district generated an average operating surplus of more than $1.7 million per year. The district used these surpluses to increase various reserves. In addition, the employee benefit accrued liability reserve is over-funded by almost $200,000. The district also overstated its reserve for encumbrances by approximately $548,000 and $648,000 in June 2007 and June 2008, respectively. Finally, auditors reviewed contracts and invoices relating to certain specialized transportation routes and determined that the transportation vendor over-billed the district by approximately $33,000.

Friendship CSD – Internal Controls Over Selected Financial Operations (Allegany County)
Auditors found district officials established an unauthorized other post-employment benefits insurance reserve fund. However, there is no statutory authority for this reserve. If the district had properly classified the funds, the unreserved, unappropriated fund balance would have been $710,656, in June 2008, which is more than twice the amount allowed by law. Auditors also found the district failed to include guidelines for selecting professional service vendors in its procurement policies. In addition, the employee serving as the internal auditor is not independent in performing the internal audit function.

Hornell City SD – Internal Controls over Selected Financial Activities (Steuben County)
The audit found the board appointed a claims auditor from BOCES. The district spent approximately $5 million for BOCES services during the 2007-08 fiscal year and budgeted appropriations for BOCES services for the 2008-09 fiscal year totaled $4.5 million. The district’s significant payments to the BOCES resulted in the claims auditor not being independent because, as a BOCES employee, she approved district payments to her employer. In addition, the district’s internal controls over wire transfers were not adequately designed and operating effectively. District officials did not adopt written policies for wire transfers. The treasurer controlled all aspects of the wire transfer process without independent verification or oversight by another district official.

Morristown CSD – Internal Controls Over Non-Payroll Cash Disbursements (St. Lawrence County)
Auditors found internal controls over cash disbursements were not adequately designed due to a lack of segregation of duties and oversight, and the treasurer’s failure to control the check-signing process. Although auditors’ testing did not disclose any discrepancies, the weaknesses increased the risk that unauthorized transactions could be initiated and not detected.

Orleans Niagara BOCES – Internal Controls Over Selected Financial Activities (2009M-118)
The audit found BOCES did not properly estimate certain budget appropriations and used the resulting surplus to fund a trust account and various reserves. BOCES improperly restricted $7.7 million in the trust account. Furthermore, BOCES did not fund reserves transparently, did not use the $1.5 million unemployment insurance reserve in a fiscally prudent manner, and improperly funded the career and technology education equipment reserve. Had these actions not occurred, BOCES would have returned more than $7.7 million to its component districts.

Western Suffolk BOCES – Internal Controls Over Information Technology and Gasoline Credit Cards (Suffolk County)
Auditors found BOCES officials did not adopt comprehensive IT policies and procedures that provided guidance to BOCES employees on all aspects and appropriate use of IT systems and data. However, BOCES officials adopted a sound credit card policy that clearly outlined when credit cards may be issued and how they are to be used. Furthermore, BOCES officials have developed supplementary procedures for gasoline purchases.

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 640 school audits and approximately 85 school audits are currently underway.


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