THE STATE EDUCATION DEPARTMENT / THE UNIVERSITY OF THE STATE OF NEW YORK / ALBANY, NY 12234

 

TO:

The Honorable the Members of the Board of Regents

FROM:

Michael Abbott    

 

COMMITTEE:

Audits

TITLE OF ITEM:

Audit Activities

DATE OF SUBMISSION:

December 21, 2004

PROPOSED HANDLING:

Discussion

RATIONALE FOR ITEM:

Enable the Board of Regents to review audits

STRATEGIC GOAL:

5

AUTHORIZATION(S):

 

 

SUMMARY:

 

The following materials are attached.

 

·        Roadmap

·        Minutes of December Meeting (Attachment I)

·        Audit Report Abstracts (Attachment II)

·        Audit Reports

 

REGENTS SUBCOMMITTEE ON AUDITS

MEETING ROADMAP

 

Date:  January 11, 2005

Time:  8:00 – 9:00 AM

Location:  146 EB

Last Revised 1/7/05

TOPIC

OUTCOME

WHO

MINUTES

Opening Remarks

 

Chair

2

Review Agenda/Minutes (Attachment I)

Approval

Abbott

1

Audit Report Abstracts (Attachment II)

Questions Addressed

SED Staff

20

Fiscal Accountability

Review

Abbott

25

Current Issues

Update

Abbott

10

Next Session

Preview

Staff

2

 

 

 

 

 

 

 

Attachment I

 

MEETING OF THE REGENTS SUBCOMMITTEE ON AUDITS

December 16, 2004

 

Subcommittee Members in Attendance:

 

Regent Geraldine D. Chapey, Chair

Regent Arnold B. Gardner, Vice Chair

Regent Joseph E. Bowman

Regent Harry Phillips, 3rd

 

Discussion Items

 

Regent Chapey opened the meeting by welcoming everyone and reminding them of the importance of accountability in the public sector and our responsibilities under Regents Goal 5.

 

Previous Meeting Minutes

 

The Subcommittee approved the minutes of the prior meeting.

 

Ethics

 

Steven Earle, the Director of the Department's Diversity, Ethics and Access Office, discussed his offices' role in ensuring compliance with the State Ethics Law. He mentioned a number of ways it is done including:

 

 

Mr. Earle stated that members of the Board of Regents are subject to the New York State Ethics Law. It was agreed that a packet of information from the New York State Ethics Commission would be provided to all of the Regents and would be placed in their mailboxes.

 

School District Leadership Training

 

Dr. Kevin McGuire, Director of the Center on School Leadership, described efforts that are being taken to train the practitioner's in the school districts across the State. He described some of the efforts which include:

 

 

The training of school leaders involves a cooperative effort of major stakeholders including the Department, the New York State Association of School Business Officials, New York State School Boards Association and the New York State Association of School Superintendents. The training involves:

 

 

Dr. McGuire mentioned that the efforts to improve leadership in school districts are impacting colleges and universities. However, ensuring that information gets into the classrooms is always a challenge.

 

It was suggested that as individual Regents meet with college and university officials, an effort be made to speak with the deans of the schools of education and inform them of the current initiatives in training future leaders in the education community. It was decided that a packet of information would be made available for the Regents to share with the higher education community during visits or meetings.

 

Current Issues

 

Staff briefly updated the members on the 5-Point Plan that was developed by the Schools Accountability Coalition (Coalition). The Comptroller has proposed language for new legislation. Department Staff are reviewing.

 

Audits

 

Staff was available to answer questions on the following audit:

 

 

Follow-Up

 

Staff was asked to follow up on a question regarding the statute of limitations on acts of fraud committed by school district officials.

 

Staff will research the development of a fiscal guide for other USNY members.

Attachment II

 

Audit Report Abstracts

Regents Subcommittee on Audits

January 2005

 

Office of the State Comptroller

Report of Examination

Major Finding

Recommendations/Response

Roslyn Union Free School District Independent Audit Services

July 1, 2001 - June 30, 2003

Report 2004M-84

 

10th Judicial District

$ 0 adjustments

 

The Office of the State Comptroller is currently auditing the fiscal operations of the Roslyn Union Free School District (District). The results of that audit will be issued in a separate report. This report addresses the District's procurement of quality audit services.

 

The District did not follow its own policies to obtain requests for proposals (RFP's) for professional audit services. The District contracted with the same CPA firm each year for a dozen years without competition from other firms.

 

The annual audit of the District did not meet 9 of 22 professional auditing standards and the audit was significantly deficient in planning and execution.

 

One key standard involved auditor independence. The report found two of the three partners of the firm were not personally independent of the District. The two partners had an ownership interest in a software company that provided accounting software to the District. In essence, the CPA firm was auditing its own financial system, which is specifically prohibited by professional standards.

 

The report also found deficiencies in the planning of the audit and in testing of transactions. A review of a sample of transactions raised questions about workpapers that appear to have been altered or prepared well after the conclusion of the audit.  

10 recommendations

 

Three of the recommendations relate to improving the procurement of audit services by using RFP's as required in District policy, maintaining documentation of the RFP's, and by considering the rotation of audit firms or key audit personnel at least every five years.

 

One recommendation is to improve the quality of audit services by more specifically addressing key issues in the engagement document.

 

Two recommendations address the duties and responsibilities of an audit committee.

 

Two involve communication between the CPA firm and the District and Board.

 

Finally, two recommendations are for Board members to improve their knowledge and awareness of responsibilities for fiscal oversight, and the scope and limitations of the annual independent audit. 

 

District officials agree with the recommendations and indicated they have or plan to implement.

 

This report has been referred to the State Board of Public Accountancy for further investigation and possible disciplinary action.

 

 

 

 

 

Baldwin Union Free School District

S8-4-128

 

10th Judicial District

$0 adjustment

 

This was an examination of the District's internal controls over administrative expenses.  The District was 1 of 16 Long Island school districts selected for audit by OSC.  The report did not identify any significant exceptions with the District's administrative expenses.

 

The report revealed a need for more policy guidance for some expenses and noted an opportunity for the Superintendent to improve the control environment.  The report stated that the Board has not provided adequate written policies regarding reimbursable travel expenses, meals and refreshments at meetings, cellular telephones, and gasoline credit cards. 

 

The report also notes that documentation was generally not available to support the provision of meals and refreshments at more than 450 meetings or the use of gasoline credit cards.

 

The report states that despite the lack of a policy regarding cell phone use, officials actively managed District cell phones.

5 recommendations

 

The report contains recommendations to adopt written policies for travel-related expenses and for the provision of meals and refreshments at meetings.  It is recommended that the internal claims auditor require every claim to contain sufficient supporting documentation so that a determination can be made whether the amounts are reasonable and necessary.

 

The report also recommends the Board and managers monitor compliance with newly established policies on cell phone and gasoline credit card usage and ensure gasoline receipts are reconciled with credit card invoices.

 

District officials responded that the Board will carefully consider creating policies on travel and the provision of meals, and has adopted a policy for cellular phones and for gasoline credit cards. Officials state that the internal claims auditor has and will continue to require sufficient supporting documentation.   

Plainedge Union Free School District

S8-4-129

 

10th Judicial District

$0 adjustment

 

This was an examination of the District’s internal controls over administration expenses.  The District was 1 of 16 Long Island districts selected for audit by OSC.

 

The examination disclosed significant weaknesses in how School District officials structured and carried out the internal claims audit function. The report also described a need for more policy guidance from the Board for some expenses and noted opportunities for district management to improve the control environment by always including itemized receipts to support claims for reimbursement.

 

The internal claims auditor did not report directly to the Board, and did not review claims for reasonableness. For a two-month period more than $8 million in claims were paid without audit or approval. The District lacks a policy on credit card usage. The report identified $10,300 in credit card charges that were not supported by itemized invoices or receipts. While the Board has established policies governing travel and conference attendance, it did not monitor whether school district officials follow them.

 

The report also noted the Board has not adopted a policy regarding meals and refreshments at meetings. The claims supporting these expenses generally did not show who was attending or why the attendees required meals to conduct business.

 

The Board has not established policies regarding reimbursement for the cost of high-speed internet service in individuals' homes or cellular phone usage. Expenses are incurred for both.

 

The District did not adequately separate duties within the Treasurer's office.

 

 

 

 

 

 

 

 

 

 

 

 

9 recommendations

 

The recommendations are for the current internal claims auditor to review the expenditures that were paid without audit or approval to determine if they were actual and necessary.  The internal claims auditor should also require every claim be supported by sufficient information to determine it complies with District policy and is actual and necessary.

 

The report also recommends that the Board adopt policies on credit card usage, meals and refreshments at meetings, internet services in the homes of Board members and officials, and cellular telephone usage.

 

The report recommends the Board review the former Board President's claim for travel expenses to Orlando, Florida. If is determined they were not for actual and necessary expenses, steps should be taken to recover the funds. Finally, the report recommends the District consider segregating the duties currently performed by the Treasurer.

 

District officials agree with all of the recommendations. However, they feel the report implies negative findings when in fact the auditors found no wrongdoing.

 

 

New York City Department of Education, Office of Auditor General

Audit

Major Finding

Recommendations/Response

United Cerebral Palsy (UCP) of New York City, Inc.

Preschool Program for the Year Ended June 30, 1999

CA-0402-9

 

An audit conducted by Watson Rice LLP for the Office of the Auditor General, Department of Education of The City of New York and Approved by the State Education Department Pursuant to Education Law Section 4410

 

1st and 2nd Judicial Districts

$214,059 adjustments

 

The audit found that UCP had misreported $113,794 as Medicaid revenue when is should have been reported as Evaluation program revenue. The audit also found the UCP had overstated expenditures by $214,059. The largest component of the overstatement was $147,413 for the allocation of non-mandated fringe benefits. Other adjustments included median salary and fringe benefits ($20,327), vacation accruals ($13,540), interest costs ($19,701), depreciation ($12,777), and travel ($301).  

2 recommendations

 

The recommendations were to ensure travel expenses are accurately reported and documented and to conduct periodic physical inventories of all depreciable assets.

 

UCP officials agree with the findings and recommendations and have taken action to implement necessary procedures.

 

The results of this audit will be used to establish tuition rates.

 

 

 

 

 

A Summary of Findings and Recommendations from the Fiscal Year 2003 Internal Audits of Schools of the Department of Education (DOE) for the City of New York

Report 05-15

$0 adjustment

 

The report was prepared by the DOE's Office of Auditor General in conjunction with Ernst and Young, LLP and presents summary findings of internal audits conducted at 34 elementary/middle schools, 1 special education school and 8 high schools.  The audit found exceptions in many of the areas reviewed. The specific areas addressed included record keeping for per diem and paid class coverage, documentation and usage of procurement cards (p-cards), weaknesses in performing computer and audio-visual equipment inventories, and weaknesses in some controls over fund raising activities.

 

 

30 recommendations

 

The report contained 30 recommendations. Some of the key recommendations were to: integrate the per diem payroll and employee identification system to better monitor use of per diem and paid class coverage; automate and standardize processes to track paid class coverage assignments; and require principals to review information regarding teacher absences.

 

Other key recommendations are to: reinforce the need for compliance with procedures for p-card usage; make school personnel aware of their responsibility and train them to create, maintain, and update inventory records; and verify that school personnel involved with fund raising activities are familiar with requirements for recording keeping and use of funds.