New York State Comptroller Thomas P. DiNapoli today announced his office completed audits of the Batavia City School District, Cohoes City School District, Cooperstown Central School District, Gorham-Middlesex Central School District, Lindenhurst Union Free School District, Manchester-Shortsville Central School District, Monroe No. 1 Board of Cooperative Educational Services North Syracuse Central School District, Oakfield-Alabama Central School District, Valley Stream Union Free School District #30 and Westhill Central School District.
State Comptroller DiNapoli has made it a priority to audit school district, BOCES and charter school finances and operations to ensure money is being spent appropriately and effectively. The Comptroller’s audits are designed to help schools improve their financial management practices and ensure proper policies and procedures are in place to protect taxpayer dollars from waste, fraud and abuse. New York’s school districts annually spend approximately $60 billion in federal, state and local funds.
For additional background or a comment on a specific audit, please contact Brian Butry at 518-474-4015 or email: [email protected].
The board appropriated fund balance in the annual budgets to help finance operations, but these amounts were not needed because the district’s budgeting practices produced operating surpluses. District officials also appropriated reserves as a funding source in the annual budgets that were not expended as budgeted. District officials appropriated $3 million in reserves from the 2012-13 through 2014-15 fiscal years but charged expenditures totaling only $138,000 to the related reserves during these years. The district’s unrestricted fund balance was in excess of the statutory limit, ranging from 6 percent to 7 percent of the ensuing year’s appropriations during two of these years (2012-13 and 2013-14). However, when unused fund balance is added back, the district’s recalculated unrestricted fund balance was in excess of the statutory limit for all three years examined, ranging from 5 to 9 percent of the ensuing years budget.
For the 2012-13 through 2014-15 fiscal years, the district’s unrestricted fund balance exceeded the statutory limit ranging from 5.5 to 7.6 percent of the ensuing year’s budget appropriations. During this same period, the board significantly overestimated district expenditures by a combined total of approximately $7.2 million, which resulted in annual operating surpluses totaling approximately $2.1 million. In addition, the board appropriated approximately $1.1 million of fund balance during these years to finance operations but none of the amounts appropriated were used. Despite experiencing operating surpluses, district officials increased the real property tax levy by an average of approximately $397,000 each year.
The board and district officials could improve their management of the school lunch fund’s financial condition. Over the last three fiscal years, fund balance decreased over $61,000 as a result of operational deficits averaging approximately $20,000 per year. At the end of 2014-15, the school lunch fund owed the general fund $131,000 and the district has reported negative total fund balance since 2012-13.
District officials developed multiyear financial plans that include revenue and expenditure projections as well as the anticipated use of reserve funds to aid in future budget preparations. However, district officials have not prepared a formal analysis of reserve funds based on the district’s projected needs. As of June 30, 2015, the district’s reserve funds totaled $6 million, or approximately 17 percent of the total budgeted appropriations for the 2015-16 fiscal year. Two of the reserves – unemployment insurance and liability – have balances that are excessive or unnecessary based on the district’s needs.
District officials need to improve the procedures established to govern the issuance and use of district credit cards. During the audit period, the district had two credit card accounts and 29 credit cards. One account was for general purpose purchases with two credit cards and the other account was for fuel purchases with 27 fuel credit cards. While the credit card policy is extensive, it did not require employees to acknowledge receiving the policy or address cash advances available with the general purpose cards. Auditors reviewed 15 credit card payments totaling $32,906 for purchases made using these credit cards to determine whether the purchases were for a legitimate district purposes, and was found to be legitimate. However, district officials did not always follow the district’s credit card policy and procedures.
Manchester-Shortsville Central School District – Procurement of Professional Services (Ontario County)
Although the board adopted an administrative regulation outlining the requirements for obtaining requests for proposals (RFPs) for professional services, the regulation did not provide sufficient detailed requirements or guidance for seeking competition when procuring professional services. District officials properly sought competition using RFPs for contracts of three service providers (architect, attorney and external auditor) totaling $120,493. However, the district did not properly seek competition for contracts with the other four professional service providers totaling $119,196.
Monroe No. 1 Board of Cooperative Educational Services (BOCES) – Procurement of Professional Services (Monroe County)
Although the board has developed a purchasing policy and BOCES officials have developed corresponding regulations, they do not require competition when procuring professional services. Therefore, the policy and regulations do not indicate when or at what monetary threshold it is appropriate to use written requests for proposals or written or verbal quotes. Instead, the regulations state that these are not required, but may be used at the business office’s discretion. Additionally, although the policy and regulations require adequate documentation be maintained, they do not outline the specific documentation requirements to be used during the solicitation process.
The district has not adequately restricted user access and transaction rights on the computerized payroll system based on job responsibilities, which compromises the segregation of duties and could permit improper payroll changes. Six individuals had access to functions in the payroll system that were not required to fulfill their assigned job duties. Three of these individuals were in the human resources department and three were in the business office. Auditors also found that an elementary school secretary had more rights to the payroll system than needed for her job. Additionally, district officials are not adequately monitoring the payroll for improper or erroneous transactions.
The board and district officials did not prepare accurate budgets for the 2011-12 through the 2014-15 fiscal years. While the district appropriated fund balance and reserves to help finance operations, it was not needed because the district’s budgeting practices produced operating surpluses in three of the four fiscal years reviewed. The district only used $296,578 of the $3.1 million of fund balance it appropriated during this time to finance operations. When unused appropriated fund balance was added back, the district’s recalculated unrestricted fund balance exceeded the statutory limit by up to 5 percentage points. Furthermore, the balance in the retirement contribution reserve was $1.7 million as of June 30, 2015, which was more than five times the district’s annual average contribution.
The district procured goods and services in accordance with its policy and the statutory requirements. Specifically, the district made 174 purchases totaling approximately $1 million that were subject to bidding requirements and all of these purchases were either competitively bid or allowable exemptions from bidding.
Although the district complied with competitive bidding requirements and adopted a purchasing policy, the policy did not include guidance for procuring professional services. As a result, district officials did not use competitive methods when procuring services from five professionals costing $363,815. In addition, although the policy did require district officials to obtain written quotes for purchases under the competitive bidding thresholds, they did not obtain the required quotes for 11 purchases costing $49,250. District officials also did not enter into a written agreement with an attorney for services costing $44,586.
For access to state and local government spending and nearly 50,000 state contracts, visit OpenBookNY. The easy-to-use website was created by Comptroller DiNapoli to promote openness in government and provide taxpayers with better access to the financial workings of government.