TO: /
The Honorable the Members of the Board of Regents
Subcommittee on AuditsFROM: / Theresa E. Savo
SUBJECT: / Board of Regents Oversight – Financial Accountability
DATE: / October 1, 2008
STRATEGIC GOAL: / Goal 5
AUTHORIZATION(S):
Executive Summary
Issues for Discussion
Four items are presented for discussion with the Members of the Subcommittee on Audits including:
1. Wyandanch Union Free School District – Interim Status Report on Actions
2. Completed Audits – Including a Summary of the Department’s Internal Audit Workgroup (Attachment II)
3. Audit Trend – Conflict of Interest (Attachment V)
4. Draft Topics – Office of Audit Services Two-Year Audit Plan 2008-2010 (Attachment VI)
Reason(s) for Consideration
Update on Activities
Proposed Handling
Discussion and Guidance
Procedural History
The information is provided to assist the Subcommittee in carrying out its oversight responsibilities related to audits of financial and reporting practices; performance audits or reviews; ethical conduct issues arising from audits; internal controls; and compliance with laws, regulations, and policies.
Background Information
1. Wyandanch Union Free School District – Staff will provide an interim status report on actions taken by the Department in response to fiscal conditions at the Wyandanch Union Free School District.
2. Completed Audits
The Subcommittee is being presented with 15 audits this month. The audits have been reviewed by the Department’s Internal Audit Workgroup. Their report is attached. (Attachment II)
Audits are provided as follows:
Office of the State Comptroller
A Starting Place
Elmira City School District
Hadley-Luzerne Central School District
Highland Falls-Fort Montgomery Central School District
Mattituck-Cutchogue Union Free School District
North Tonawanda City School District
Oswego County Board of Cooperative Educational Services
Port Chester-Rye Union Free School District
Roosevelt Union Free School District
Sag Harbor Union Free School District
SED - Higher Education Opportunity Program
SED - Security Over Regents Examinations Follow-up Report
Unadilla Valley Central School District
Union-Endicott Central School District
Union Free School District of the Tarrytowns
2. Audit Trend – Conflict of Interest – The results of the many audits of school districts conducted by the Office of the State Comptroller and others have been summarized and tracked over several months. One frequent audit finding includes conflict of interest of school board members. Department staff will describe the issue in more detail. (Attachment V)
3. Draft Topics - Office of Audit Services Two Year Audit Plan 2008-2010 – Staff will provide an overview of the Office of Audit Services draft audit plan. The Office prepares a two-year audit plan to define its priorities and activities. Input from the Regents and Deputy Commissioners and information from our risk assessment were used to establish audit areas. The presentation of the draft plan will provide members with the opportunity to comment on the plan before it is finalized. (Attachment VI)
Recommendation
For item one (Wyandanch Interim Report) and item two (Completed Audits), no further action is recommended. For items three (Audit Trend) and four (Audit Plan), the advice and guidance of the Members of the Subcommittee is sought.
Timetable for Implementation
N/A
The following materials are attached:
· Roadmap
· Minutes of the September Meeting (Attachment I)
· Review of Audits Presented – Department’s Internal Audit Workgroup (Attachment II)
· Summary of Audit Findings (Attachment III)
· Audit Report Abstracts (Attachment IV)
· Audit Trend – Conflict of Interest (Attachment V)
· Draft Topics – Office of Audit Services Two-Year Audit Plan 2008-2010 (Attachment VI)
REGENTS SUBCOMMITTEE ON AUDITSMEETING ROADMAP
/ Date: October 2008Time: TBD
Location: TBD
TOPIC / OUTCOME / WHO / MINUTESOpening Remarks / Chair / 3
Review Agenda/Minutes (Attachment I) / Approval / Conway / 7
Wyandanch – Interim Status / Information / Szuberla / 10
Completed Audits – Including a Summary of the Department’s Internal Audit Workgroup (Attachment II), Summary of Audit Findings (Attachment III), and Audit Report Abstracts (Attachment IV) / Questions answered / OSC and Department Audit Staff / 20
Audit Trend – Conflict of Interest (Attachment V) / Information / OAS Staff / 10
Draft Topics - Office of Audit Services Two-Year Audit Plan 2008-2010(Attachment VI) / Input / Conway / 10
5
Attachment I
REGENTS SUBCOMMITTEE ON AUDITS – MEETING MINUTES
Your Subcommittee on Audits held its scheduled meeting on September 15, 2008.
Subcommittee Members in Attendance:
Geraldine D. Chapey, Chair
Regent Arnold Gardner
Regent Milton Cofield
Regent Joseph Bowman Jr.
Other Members of the Board of Regents in Attendance:
Regent Roger B. Tilles
Discussion Items
· Regent Chapey welcomed the attendees and noted that we are at the beginning of the new academic year. She also pointed out that the Accountability legislation has so far resulted in over 300 audits by the Office of the State Comptroller (OSC). The audits pointed out improvement opportunities that make school districts operate more efficiently. She also mentioned the other reports that the Subcommittee has been involved in including the audit trends, flagged audits and possible policy changes.
· The Director of Office of Audit Services (OAS) presented the agenda for the meeting including the report on the 62 audits, policy changes and another audit finding trend which is conflict of interest. He also discussed the six audits identified by the Internal Audit Workgroup for follow-up and their specific findings.
o TheraCare Preschool Services, Inc. – TheraCare charged non-reimbursable costs to the preschool program and it did not maintain the necessary documentation to support some expenses. It misreported revenue and expenditure on the Consolidated Fiscal Report. It has a questionable fiscal viability. It did not maintain fingerprint clearance records for all of its employees.
o Campbell-Savona Central School District – The District had a general fund deficit of $3.2 million as of June 30, 2006. It was approved for deficit financing. The board of education did not have procedures to plan for long-term operational and capital needs. It also did not monitor compliance with the procurement policy, issuing confirming purchase orders and allowing purchase orders generated even though appropriations were insufficient.
o Jamestown City School District – There was no significant oversight by the treasurer over recording and reporting of past due school taxes. The District had a total of $206,485 in property taxes past due with more than half of the amount outstanding for more than a year. There was no segregation in the treasurer’s duty of billing and collecting annual contribution from retirees for health insurance.
o Liverpool Central School District – A former superintendent was overpaid by a total of $26,275 during the 2000-01 to 2002-03 fiscal years for unused leave. A board member received unauthorized health insurance coverage costing the District $44,283. Weak controls over its student laptop program resulted in 32 missing laptops valued at $38,400. The District donated the proceeds of the sale of 28 new laptops to a nonprofit organization. The District turned over the BOCES aid it received to various community organizations that supported and provided funds to various student activities.
o Orange-Ulster BOCES – Purchasing controls need to be improved. Tests of sample transactions show that the BOCES did not obtain quotes, RFPs were not used, there were no written contracts, and vendor payments were not reported to the IRS.
o Wyandanch Union Free School District – This audit was conducted by OAS to follow-up on the Department of Education’s Office of Inspector General audit of Title I and II programs. The District did not adequately substantiate expenditures charged to the programs. The disallowance amounted to $252,221 in salary and $33,465 in non-salary expenditures.
· Regent Tilles raised concerns about Wyandanch, including the firing of administrators and the increasing amount of deficit. He suggested that the Department do a 60-day monitoring of the Wyandanch situation but allow time for the new board of education to act.
· Commissioner Mills stated that by law, school districts are required to keep its spending within budgetary appropriation and may not operate in a deficit and doing so is willful violation and could be grounds for removal.
· Staff from the Office of Education - P-16 provided information on steps the Department has already taken as well as planned steps to address Wyandanch’s predicament. At the next Wyandanch board meeting, a discussion of the budget deficit, deficit financing, transportation issues, and school lunch program deficit is anticipated.
· It was agreed upon that Department staff will examine information related to Wyandanch’s actions and report back within 60 days on the status of the District. In addition, a 30-day status report at the next Subcommittee meeting will be provided.
· Department staff also provided a list of three areas of proposed policy changes that the Regents could consider in order to enhance accountability in school districts and address the OSC audit finding trends. The three areas were: changing the qualifications for key positions within school districts, enhancing required training for key positions in school districts, and increasing the number of school district officials subject to removal. Department staff will continue to examine the appropriateness of the policy changes and report back to the Subcommittee.
· Regent Cofield moved to accept the minutes of the June meeting and Regent Bowman seconded the motion.
· Completed audits presented this month:
Office of Audit Services
Beacon City School District
Theracare Preschool Services, Inc.
Wyandanch Union Free School District
Office of the State Comptroller
Avoca Central School District
Berkshire Union Free School District
Bethpage Union Free School District
Bolton Central School District
Briarcliff Manor Union Free School District
Byron-Bergen Central School District
Campbell-Savona Central School District
Cherry Valley-Springfield Central School District
Cohoes City School District
Croton-Harmon Union Free School District
Dolgeville Central School District
East Greenbush Central School District
East Quogue Union Free School District
Eastchester Union Free School District
Eastport-South Manor Central School District
Eldred Central School District
Elizabethtown-Lewis Central School District
Fredonia Central School District
Genesee Valley Central School District
Glens Falls City School District
Green Island Union Free School District
Greenville Central School District
Hartford Central School District
Herkimer Central School District
Herricks Union Free School District
Indian River Central School District
Jamestown City School District
Liverpool Central School District
Longwood Central School District
Lyncourt Union Free School District
Manchester-Shortsville Central School District
Marcellus Central School District
Margaretville Central School District
Millbrook Central School District
Multi-Agency Emergency Preparedness at Selected State Agencies
New Lebanon Central School District
New Rochelle City School District
North Colonie Central School District
North Rose-Wolcott Central School District
North Warren Central School District
Oneida City School District
Oppenheim-Ephratah Central School District
Orange-Ulster BOCES
Pittsford Central School District
Plattsburgh City School District
Poland Central School District
Port Jefferson Union Free School District
Procurement and Use of Green Cleaning Products (Chazy Central Rural SD,
Chenango Forks CSD, East Greenbush CSD, East Meadow UFSD, Erie I BOCES, Half Hollow Hills CSD, Patchogue Medford UFSD, Seneca Falls CSD, Sewanhaka CHS, Watertown City SD)
Sandy Creek Central School District
Shoreham-Wading River Central School District
Springs Union Free School District
Town of Webb Union Free School District
Tuckahoe Union Free School District
Tuxedo Union Free School District
Valley Stream Central High School District
Westfield Academy and Central School District
Westhill Central School District
Whitesboro Central School District
Wyoming Central School District
4
Attachment II
Regents Subcommittee on Audits
October 2008
Review of Audits Presented
Department’s Internal Audit Workgroup
Newly Presented Audits
We reviewed 15 audits that are being presented to the Subcommittee this month. The audits were of 11 school districts, 1 BOCES, 1 preschool special education service provider, and 2 were of Department functions. The audits were issued by the Office of the State Comptroller (OSC) and the findings were in the areas of procurement, information technology, payroll, cash, claims processing, financial reporting, segregation of duties, extraclassroom activity fund, budgeting, conflict of interest, fingerprinting and other. The audits of Department functions were related to the Higher Education Opportunity Program and a follow-up on Regents Examination Security.
The Department has issued letters to the auditees, reminding them of the requirement to submit corrective action plans to the Department and OSC within 90 days of their receipt of the audit report.
The Department’s Internal Audit Workgroup identified five school district audits, one BOCES audit, and two Department audits for further review and follow-up.
· Elmira City School District –
Summary of Audit
Unauthorized and inappropriate payments for unused leave were made to a former assistant superintendent amounting to $35,312. Six employees who transferred to the Greater Southern Tier BOCES Central Business Office were paid for unused and accrued vacation time, and allowed to carry over vacation days from one fiscal year to the next without contract provisions. These transfers necessitated a BOCES contract change increasing it by $56,000 which the superintendent approved without formal board approval, to cover for, among others, the vacation time cost that the District agreed to fund for transferred employees. Three former school administrators provided educational consulting services without the benefit of a written contract for one of the two years.
Follow-up Action
Upon Elmira’s submission of the corrective action plan for this audit, Office of Audit Services’ (OAS) staff will review to ensure all findings have been addressed.
· Highland Falls-Fort Montgomery Central School District –
Summary of Audit
The District did not obtain fingerprint-supported background checks for 27 of 58 employees and four contractors who were in direct contact with students.
Follow-up Action
The response to the draft audit report indicated that the District has implemented procedures to ensure all employees and contractors having direct contact with students undergo criminal background checks and fingerprinting as prescribed by law. In addition, the Department’s Office of School Personnel Review and Accountability (OSPRA) will provide annual guidance to remind school employers about their obligations under the SAVE law and to inform interested parties about new technology advancements for the processing and management of fingerprint applications and information. OSPRA staff will continue to provide technical assistance.