Meeting of the Board of Regents | April 2010

Report of

REGENTS SUBCOMMITTEE ON AUDITS

to

The Board of Regents

April 20, 2010

 

Regent Geraldine Chapey, Chair of the Regents Subcommittee on Audits submitted the following report.

Your Regents Subcommittee on Audits had its scheduled meeting on April 20, 2010.  Chancellor Tisch, Chancellor Emeritus Bennett, Regents Bendit, Phillips, and Tallon,   were in attendance.

Items for Discussion

Chair’s Remarks:  Regent Chapey welcomed everyone and commented on the impact of the ARRA audits in establishing relationships with school district leaders.

Proposed Revision to the Statement on the Governance Role of a Trustee and Board Member

In follow up to our last meeting, staff proposed modified language to be included in the Statement. The language would provide guidance to boards in considering and/or adopting policies limiting or prohibiting the employment of relatives or other individuals with a personal relationship with board members. The language will be incorporated into the Statement.

Additional Information on expectations on the Department for Sub-recipient Monitoring

Staff provided further information on the basis in federal regulation for the Department’s monitoring of sub-recipients receiving federal funds. A discussion of current Department processes took place and a planned change for future coordination and efficiencies was presented.

Proposed Actions Taken in Response to the Findings and Recommendations in the Office of the State Comptroller Audit of Regents Examination Scoring

The Subcommittee was briefed on a proposal to phase in a requirement that school districts begin to scan Regents examination answer sheets. The proposal would call for the scanning of some exams in June 2011 and the balance of the exams commencing with the 2011-12 school year.

The introduction of the scanning will allow the collection of item level and test taker demographic data that the Department needs for federal reporting. It is expected that the districts will benefit by an accelerated exam scoring process, elimination of manual inputting of test results and provides actionable data that can be used to inform their instructional programs.

The Sub-committee agreed to forward to the EMSC Committee for discussion and approval.

Presentation of Audits

The Subcommittee was presented with 15 audits. Staff described the results of the four audits on school district use of ARRA funds. The audits found that 2 of the 4 claimed anticipated expenditures which are not permissible under ARRA ESF. We also found that 2 of the 4 charged ARRA funds for expenditures that were not included in the approved budget. Three districts did not comply with federal requirements requiring payroll certifications and none of the districts were aware of cash management requirements.

The Subcommittee asked to be updated on actions taken to communicate cash management issues to the field.

 

 

Regents Subcommittee on Audits

April 2010

Review of Audits Presented

Department’s Internal Audit Workgroup

 

Newly Presented Audits

We reviewed the 15 audits that are being presented to the Subcommittee this month.  Ten of the audits were issued by the Office of the State Comptroller (OSC) and five were issued by the Office of Audit Services (OAS).  Eleven of the audits were of school districts, three were of the Department’s programs and one was of a not-for-profit organization.  

The findings were in the areas of procurement, payroll, financial reporting, cash, information technology, claims processing, budgeting, fingerprinting, capital assets, and others such as use of American Recovery and Reinvestment Act funds, the Child Nutrition Program, online registration renewal and teacher certification, reimbursable expenditures, and Special Education Itinerant Teacher services rates.

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 categories of findings and audits for further review or follow-up as noted below.

 

• Use of American Recovery and Reinvestment Act (ARRA) funds (Eden, Hamburg, Malone, and Saranac)

 

Summary of Audits

Two of the four school districts claimed anticipated expenditures, which are not allowed for ARRA-Education Stabilization Funds.  Also, two of the four claimed expenditures were not included in their approved budget.  Three districts did not comply with federal requirements regarding payroll certification.  All four districts were not aware of federal cash management requirements.

Follow-up Action

 

None necessary.  All four agreed with the findings and recommendations and submitted corrective action plans.

 

• OSC Follow-up Audits (East Aurora, Highland Falls-Fort Montgomery, Ravena-Coeymans-Selkirk, Saugerties, and Unatego)

 

Summary of Audits

OSC auditors revisited five districts that had been previously audited to follow-up on the progress of implementing the recommendations. Sixty-one percent of the recommendations have been fully implemented, 22 percent have been partially implemented, 14 percent have not been implemented and the remaining 3 percent are no longer applicable.

Follow-up Action

The Department will assess the significance of the unimplemented recommendations and follow-up where appropriate.

 

• Lindenhurst Union Free School District

 

Summary of Audit

Weakness in controls over on-line wire transfers caused an unauthorized transfer of $601,577 from one of the District’s bank accounts to various external bank accounts. Officers at the depository bank recognized the inappropriate transaction and took action to recover the funds; however, only $496,590 was recovered.  The District did not investigate.  The matter was referred by OSC to the Suffolk County District Attorney’s Office who found no evidence of criminal activity by District officials and employees.  The remainder of the amount lost was recovered from the insurance company and the bank.

Follow-up Action

OAS will review the corrective action plan to ensure all recommendations are implemented.

 

• Roosevelt Union Free School District (Second Quarter Report on the 2009-2010 Budget)

 

Summary of Audit

The District is on track to exceed its revenue projection and stay within budgeted expenditure limits which could end the year with a $993,000 surplus.  However, the District over-expended 42 budget line codes by approximately $1.8 million.  Seventy-six special aid fund account codes were over-expended by $2.3 million.  Although District officials have expended or earmarked $4.96 million of the Academic Improvement Grant funds received in 2007-08, they have not earmarked and amended their 2009-10 budget to integrate the remaining $1.04 million.

Follow-up Action

Staff from the Office of EMSC will contact the District to follow-up and ask for the corrective action plan.

 

• State Education Department - Security Over Online Registration Renewal and Teacher Certification

 

Summary of Audit

The audit found the Department did not sufficiently guard against risks related to improper access to the computer applications which are used to process online payments for registration renewals of licensed professionals and teacher certifications. Specifically, the audit concluded the Department has not met the security requirements for these online applications.

Follow-up Action

The Department is required to submit an update on actions taken to implement recommendation, or, if not implemented, the reason.  This report is sent to the Governor and legislative leadership.

 

• State Education Department - Selected Child Nutrition Program Payments

 

Summary of Audit

The Department pays schools based on their submission of montlhy claims for meals served.  It was found that program payments totaling $124,446 were unsupported or inappropriate. This included $24,408 of reimbursed claims that appear to have been knowingly prepared in error.

Follow-up Action

The Department is required to submit an update on actions taken to implement recommendation, or, if not implemented, the reason.  This report is sent to the Governor and legislative leadership.

• State Education Department - Setting Special Education Itinerant Teacher Services Rates

 

Summary of Audit

The County Health Department and the New York City Department of Education contract with service providers to deliver Special Education Itinerant Teacher (SEIT) services.  It was determined that two of the providers inappropriately reported costs totaling $1.4 million.  One provider reported $1.3 million in direct care costs that should have been classified as non-direct care costs. The other provider charged $102,000 in bonuses paid to contractors as direct care costs. Such costs are ineligible for reimbursement.

Follow-up Action

The Department is required to submit an update on actions taken to implement recommendation, or, if not implemented, the reason.  This report is sent to the Governor and legislative leadership.