State Comptroller DiNapoli Releases School Audits

July 8, 2016

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].

Avon Central School District – Information Technology (Livingston County)

The board did not adopt policies for password management, protection of personal, private and sensitive information, wireless technology, remote access, mobile devices, sanitation and disposal of electronic media, user accounts, access rights, data backups and breach notification. In addition, the board did not adopt a disaster recovery plan. As a result, there is an increased risk that the district’s IT data and components will be lost or misused and that the district will not be able to resume critical operations in the event of a system failure.

Brighton Central School District – Separation Payments (Monroe County)

The payroll clerk did not use a standard separation payment calculation form and district officials did not provide guidance specifying the required documentation needed to support each payment calculation and the methodology to be used. While the district’s separation payments generally conformed to the terms of the collective bargaining agreements and employment policies, deviations and errors occurred because officials did not develop procedures for processing separation. In addition, the claims auditor did not review or approve any of the separation payment calculations before payment was made. As a result, three employees were paid $4,850 more than they were entitled to.

Dansville Central School District – Separation Payments (Livingston County)

The district established authorizing provisions in the board-adopted collective bargaining agreements, contracts and management confidential benefit resolutions that defined how to calculate the various components of the separation payments. However, no policies or procedures have been adopted or put in place to provide guidance to employees and officials when processing, reviewing or approving these payments to ensure that the calculations were accurate and sufficiently supported. As a result, district officials made eight questionable separation payments and incorrectly calculated five separation payments totaling $73,568.

East Rochester Union Free School District – Financial Management and Separation Payments (Monroe County)

The board did not adopt budgets based on historical or known trends. The board consistently overestimated expenditures from fiscal years 2012-13 through 2014-15, which generated $4.2 million in operating surpluses. The board also budgeted for operating deficits during this time by appropriating $400,000 in fund balance each year, but did not need to use these funds due to the operating surpluses. When adding back unused appropriated fund balance, the district’s recalculated unrestricted fund balance was more than 5.5 percent of the ensuing year’s budget in each year, higher than the statutory limit. Auditors also found that four of the district’s ten general fund reserves, which had balances totaling $6.3 million as of June 30, 2015, were overfunded or potentially unnecessary. Finally, district officials did not have written policies and/or procedures governing separation payments and did not maintain adequate supporting documentation for each separation payment. District officials made payments totaling $12,058 to four employees that they could not verify were correct due to ambiguous contract terms.

Edgemont Union Free School District – Procurement (Westchester County)

District officials did not develop or implement procedures for staff to follow when procuring professional services. Therefore, district staff did not have any guidance to determine when they should use competition, such as a request for proposal process or written or verbal quotes. Also, staff did not have any direction for maintaining required documentation during the solicitation process, including documentation requirements for decisions made. During the audit period, district officials properly sought competition when procuring the services of five providers who received payments totaling $1.2 million. However, the district procured the services of three of those five providers more than seven years ago. District officials did not seek competitive proposals or quotes for the remaining 28 professional service providers who received payments totaling $1.1 million, including payments for student services totaling $570,339, legal services for $228,085 and consulting services for $85,930.

Garrison Union Free School District – Financial Condition (Putnam County)

District officials need to improve the budget process to ensure budget estimates and reserve balances are reasonable and fund balance is maintained in accordance with statutory requirements. The district appropriated approximately $500,000 of fund balance annually from 2010-11 through 2014-15 as a financing source in the annual budget, but more than 90 percent of this amount was not needed due to operating surpluses. In addition, officials transferred money to the district’s reserves at the end of each year, which resulted in four reserves being overfunded by approximately $1.8 million. These practices allowed the district’s unrestricted fund balance to appear that it was within the 4 percent statutory limit. However, when unused appropriated fund balance and excess reserves were added back, the district’s recalculated unrestricted fund balance was about 30 percent of the ensuing year’s appropriations.

Great Neck Union Free School District – Fuel (Nassau County)

The board did not adopt a policy for fuel inventory accountability and there were no written procedures to provide guidance to employees. In addition, district officials need to improve oversight of fuel reconciliations and review of fuel inventory records. Inconsistencies and variances in fuel use records ranging from 4 to 18 gallons of fuel per day occurred, but officials did not investigate and resolve these discrepancies. Officials also did not perform any vehicle-based reviews to determine whether district vehicle use was reasonable. Auditors identified 16 different mile per gallon (mpg) readings that did not appear reasonable when compared with the vehicle performance records. Officials also did not investigate variances identified on the fuel inventory reconciliations.

Lisbon Central School District – Cafeteria Cash Receipts (St. Lawrence County)

The board has not adopted policies and district officials have not developed procedures governing cafeteria cash receipts or segregated the incompatible financial duties of cash handling, recordkeeping and cash reconciliations for the food service program. The food service manager did not perform an independent reconciliation of cash sales to deposits or review the work of those who performed incompatible cash receipt duties. In addition, the treasurer performed incompatible financial duties related to collecting, recording and depositing cafeteria cash receipts and had access to the cafeteria’s point-of-sale system that she did not need to fulfill her job responsibilities.

Lyncourt Union Free School District – Financial Condition (Onondaga County)

The board and district officials did not adequately manage the district’s financial condition to ensure that fund balance was within the statutory limit. From fiscal years 2012-13 through 2014-15, the district’s unrestricted fund balance exceeded the 4 percent statutory limit. The board adopted budgets for the three-year period that appropriated a total of $810,000 in fund balance to finance district operations. However, due to operating surpluses in the same years, none of the appropriated fund balance was used. The district experienced operating surpluses because budgeted revenues were underestimated and appropriations overestimated by almost $2.7 million for the three-year period. As a result, the district’s year-end unrestricted fund balance as a percentage of next year’s budgetary appropriations averaged about 14.1 percent over the last three years, which is almost three and a half times the statutory limit. When the unused appropriated fund balance is added back to the unrestricted fund balance, the district’s recalculated fund balance ranged from 11 percent to 21 percent of the ensuing year’s appropriations.

Stamford Central School District – Fund Balances (Delaware County)

The board and district officials need to improve the budgeting process to ensure that the fund balances maintained in the general and certain restricted funds are reasonable. Over the five-year period ending June 30, 2015, the district’s unrestricted fund balance exceeded the 4 percent statutory limit, ranging from 6.5 to 12.3 percent of the ensuing year’s budgeted appropriations. From 2011-12 through 2015-16, district officials appropriated a combined total of approximately $956,000 of unrestricted fund balance as a financing source in the annual budgets. However, because the district generated operating surpluses totaling approximately $1.8 million, none of the appropriated fund balance was actually used to finance operations. When the unused appropriated fund balance was added back, the district’s recalculated unrestricted fund balance further exceeded the statutory limit, ranging from 9.4 to 14.2 percent. Furthermore, auditors found that restricted fund balances (i.e., the debt service fund and four general fund reserves) totaling more than $2 million were significantly more than their respective liabilities and, therefore, were overfunded.

Van Hornesville-Owen D. Young Central School District – Financial Condition (Herkimer County)

The board and district officials did not effectively manage the district’s financial condition by ensuring budget estimates were reasonable and based on historical costs and trends. In 2013-14 and 2014-15 the district adopted budgets that projected planned operating deficits of $103,272 and $218,440. However, the district instead experienced operating surpluses of $173,105 in 2013-14 and $37,382 in 2014-15 and did not need to use the appropriated fund balance. As a result, the district has accumulated unrestricted fund balance that exceeds the 4 percent statutory limit for the ensuing year’s budgeted appropriations. As of June 30, 2015, the district’s reported fund balance was 19 percent of budgeted appropriations.

Wilson Central School District – Reserves and Fuel Accountability (Niagara County)

The board has not properly managed financial reserves or sufficiently followed the district’s reserve policy and regulations. District officials were unable to provide auditors with evidence that they have documented the financial need or purpose to be served for each reserve, the conditions under which reserves will be used or replenished and the rationale used to determine the appropriate funding level for each reserve. As of June 30, 2015, the district had seven reserves totaling approximately $11 million. Four reserves, with balances totaling $7.3 million, appear to be overfunded. In addition, the district has not properly used the debt reserve, which had a balance of $2.9 million, to pay related debt. In addition, officials did not provide appropriate oversight over fuel that was delivered to the transportation contractor’s tanks. As a result, officials cannot be certain that all of the fuel purchased by the district was used for district purposes. It appears that the district may have purchased approximately 3,800 more gallons of fuel, valued at approximately $7,300, than it should have.

Windsor Central School District – Cafeteria Operations (Broome County)

Overall, district officials have taken actions to reduce the school lunch fund’s dependence on the general fund to support operations. Specifically, officials took steps for the district to become a summer food service program provider and increased the amount of in-house catering. As a result, auditors project that the school lunch fund’s revenues will increase by approximately $87,000 through 2015-16, and the fund will generate an operating surplus of approximately $5,000.

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.