State Comptroller DiNapoli Releases School Audits

July 27, 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 the press office at 518-474-4015.

Amityville Union Free School District – Payroll (Nassau County)

The board and district officials need to segregate payroll processing duties and develop procedures to ensure that overtime is pre-approved. Auditors found $15,105 in overtime payments made to eight employees was paid without pre-approval of the overtime hours worked. Overtime payments also included work of a routine nature that may have been avoidable.

Chester Union Free School District – Financial Management and Board Oversight (Orange County)

From fiscal years 2011-12 through 2014-15, district officials adopted budgets that resulted in operating surpluses. District officials also appropriated between $800,000 and $1 million of fund balance each year that was not used, resulting in an unrestricted fund balance of almost $3.4 million as of June 30, 2015. The board also did not adequately segregate financial duties or oversee the claims audit process.

Hamilton Central School District – School Lunch Fund Financial Condition (Madison County)

The school has reported a negative school lunch fund balance since 2006-07. Over the last three fiscal years, fund balance decreased by over $141,000 as a result of operating deficits averaging approximately $47,000 per year. Operating deficits were covered in part by the general fund which averaged $23,000 over the past three years. Without these subsidies, the fund’s operating deficits would average about $70,000 a year. Furthermore, at the end of 2014-15, the school lunch fund owed the general fund $168,000.

Hawthorne Cedar Knolls Union Free School District – Internal Controls Over Wire Transfers (Westchester County)

Auditors found a lack of segregation of duties in the wire transfer process. In addition, the district did not have comprehensive agreements with each bank that addressed electronic or wire transfers. These weaknesses increase the risk that inappropriate wire transfers could be initiated and not detected.

Katonah-Lewisboro Union Free School District – Procurement of Professional Services (Westchester County)

Auditors reviewed the procurement of all 41 professional service providers’ contracts totaling $4.8 million. Auditors found the district had not recently sought competition when procuring services from eight providers, who received payments totaling $699,328. According to district officials, the board contracted with these service providers each year rather than issue a formal request for proposal because the providers have a long history with the district and are familiar with its needs.

Levittown Union Free School District – Reserve Funds and Extra-Classroom Activity Fund (Nassau County)

The board and district officials did not appropriately establish and maintain reserve funds. The district had five reserves as of June 30, 2015. The unemployment insurance reserve had a balance of $2.9 million. However, district officials are unable to find a resolution establishing this reserve, and it is overfunded. The current balance in the unemployment insurance reserve could pay for unemployment insurance costs for more than 27 years. In addition, the employee benefit accrued liability reserve (EBALR) has a balance of $6 million. However, the EBALR is not needed because the district does not have a liability for compensated absences. Further, the Comptroller previously recommended that the district consider using the EBALR surplus when planning its future budget. The board and district officials also need to improve controls over extra-classroom activity funds. Club officials did not maintain adequate supporting documentation, such as duplicate pre-numbered receipts, for cash collections totaling $38,377.

Manhasset Union Free School District – Separation Payments (Nassau County)

The board did not ensure that district officials developed written procedures for processing or approving separation payments and there was no adequate independent review of the calculations to ensure they were accurate. As a result, the district overpaid seven employees for retirement incentives by total of $35,000 and underpaid four employees for unused vacation time by a total of $1,359.

Montauk Union Free School District – Financial Condition (Suffolk County)

From 2012-13 through 2014-15, district officials overestimated appropriations in the adopted budgets. This budget practice generated approximately $1 million in cumulative operating surpluses for these years. Officials also appropriated nearly $2.8 million of fund balance as a financing source in the annual budgets. However, approximately 94 percent of this amount was not needed due to the operating surpluses. As a result, the district’s unassigned fund balance exceeded the statutory limit each year ranging from 4.3 to 6.8 percent of the ensuing year’s budget. When unused appropriate fund balance is added back, the district’s recalculated unassigned fund balance ranged from 9 to 11 percent of the ensuing year’s appropriations, further exceeding the statutory limit each year. During 2014-15, the district appropriated $830,000 for the 2015-16 budget, but the district projects it will not be needed.

New Hartford Central School District – Procurement (Oneida County)

While district officials did develop a policy to address the procurement of goods and services not subject to competitive bidding, the policy did not specify the frequency of seeking competition for professional services. Auditors did not find any evidence the board determined which professional services were subject to the request for proposal (RFP) process or any evidence that the board monitored the RFP procedures for professional services.

Potsdam Central School District – Payroll (St. Lawrence County)

District officials established adequate procedures to ensure employees were paid their approved salaries or wages.

Rye City School District – Payroll and Leave Accruals (Westchester)

District officials did not require employees to follow established procedures to ensure that paid salaries and wages were accurate and did not have procedures in place to ensure that leave accruals were properly verified and recorded. As a result, auditors found errors in nine employees’ pay. Although not significant, these errors occurred due to lack of management or independent review of the payroll clerk’s work.

South Huntington Union Free School District – Financial Condition (Suffolk County)

The board and district officials did not ensure that budget estimates and reserves were reasonable. They overestimated general fund appropriations when preparing and adopting the last three budgets, which resulted in operating surpluses totaling $10.6 million. From the 2011-12 through 2014-15 fiscal years, the district also increased the tax levy by more than 13 percent and appropriated fund balance totaling $14.6 million, which was not used to finance operations as planned. At the same time, district officials designated more than $3 million of unrestricted fund balance for costs related to other post-employment benefits (OPEB) each year, but did not use this money to make related payments and instead budgeted for OPEB costs in the general fund budget. When combining the unused appropriated fund balance and unused designated OPEB moneys, the district’s recalculated unrestricted fund balance averaged more than 8 percent of the ensuing year’s appropriations, exceeding the 4 percent statutory limit.

Uniondale Union Free School District – Procurement (Nassau County)

The board generally ensured that district officials complied with General Municipal Law and the district’s procurement policy for purchases requiring quotes and purchases subject to competitive bidding. However, auditors found that district officials could improve their purchasing process by attaching sufficient supporting documentation to claims for purchases not subject to competitive bidding.

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.