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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.
Preparation of the Department’s Monthly Financial Reports – Department staff will brief the Subcommittee members on the preparation and content of the financial reports to provide the members with a better understanding of the content and purpose of the reports.
Completed Audits – Reports are provided on a Department audit of internal controls at a BOCES, an Office of the State Comptroller audit of internal controls at a school district, and a federal audit of Title I expenditures at a school district.
For items one (Department’s Monthly Financial Reports) and two (School District Accountability), the advice and guidance of the Members of the Audit Subcommittee are sought.
For item three (completed audits), no further action is recommended.
The following materials are attached:
·              Minutes of the January Meeting (Attachment I)
·              Audit Report Abstracts (Attachment II)
Department‘s Monthly Financial Reports
Status of School District Financial Accountability Regulations and Guidance
Audit Report Abstracts (Attachment II)
SED and OSC Staff
MEETING OF THE REGENTS SUBCOMMITTEE ON AUDITS
Subcommittee Members in Attendance:
Regent Geraldine D. Chapey, Chair
Regent Joseph E. Bowman, Vice Chair
Regent Milton L. Cofield
Regent Chapey opened the meeting by welcoming Regent Cofield to the Subcommittee and welcoming Regent Bowman as the new Vice Chair. Regent Chapey stated that change is in the air and identified a New York Times article which described the positive effects of implementation of the Sarbanes-Oxley Act.
Follow-up From a Previous Meeting
The Regents previously asked that staff from the Office of Elementary, Middle, Secondary and Continuing Education attend a meeting to brief the Subcommittee on efforts to improve performance in the Wyandanch Union Free School District. An EMSC manager was present and provided an oversight of conditions not only in Wyandanch but in Roosevelt and Hempstead as well. All three of the districts are tier 1 districts, which means they are the highest priority in terms of monitoring. Performance plans have been developed for Wyandanch and Hempstead resulting in the establishment of specific targeted goals, which are then closely monitored by SED staff on an on-going basis. The Members of the Subcommittee were briefed on the District's superintendents, the boards and student performance data.
The Regents spent time discussing possible strategies for improving performance at the three districts. Among the strategies discussed were collaboration among the three districts and others within the Long Island region, encouraging more team interaction among school district administrators and the boards of education, and using the State's influence in Roosevelt to demonstrate successful strategies. The Regents asked that the EMSC manager come back to the Subcommittee periodically to provide and update.
The Subcommittee members approved the minutes of the prior meeting.
Staff was available to answer questions on the following audits:
Rochester Business Institute Report 2004-T-6
Wyandanch Union Free School District Report S8-5-46
New York City Department of Education Audit of the Manhattan Center for Early Learning Report CA-0698-36
Regents Subcommittee on Audits
Office of Audit Services
Capital Region Board of Cooperative Educa-tional Services
The audit found that while the BOCES had many of the necessary controls in place, improvement opportunities exist in certain areas.
Budget status reports were not provided to the Board, prior approval was not obtained for the District Superintendent's conference attendance, individuals were not appointed by the Board to key positions, competitive bidding requirements were not always followed, and some required policies were not in place.
The report also found the BOCES did not have an integrated accounting system and lacked adequate docu-mentation in the EPE program.
The report identified weak-ness in controls related to cash collections, the fixed asset inventory, refunds, EPE waivers, grant accounting, technology planning, payroll and other internal controls.
The BOCES has imple-mented or otherwise satisfied one of the eight recom-mendations contained in the prior audit report, partially satisfied six of the recom-mendations and not satisfied one. The unimplemented recommendation involved prohibiting the expenditure of funds in excess of the appropriation.
The report includes recom-menddations related to improving governance and planning, accounting and reporting, revenue and cash management, and facilities and equipment. The report also contains recommendations regarding refunds to school districts, EPE program controls, grants accounting, payroll and other areas of internal control.
BOCES officials generally agreed with the recommen-dations.
Office of the State Comptroller
Sachem Central School District
The audit found that the District needs to provide more oversight of contractual agreements and employee contracts; and one Board member needs to disclose his interest in contracts with the District. The audit also identified weaknesses in how the Board structured and carried out the internal claims audit and treasury functions, and opportunities for the Board to improve the District’s control environment by providing more policy guidance for some adminis-trative expenses.
Some specific findings identified in the audit were: one Assistant Superintendent was overpaid when he cashed in unused vacation days twice, the District incorrectly calculated the payments for retiring adminis-trators for unused sick days, and the District paid a contractor for unused sick leave even though he wasn't an employee.
The audit also found the District purchased athletic uniforms from a company that employed a member of the Board and the member did not disclose the relationship, and the District entered into a contract with a company owned by the son of the Board President, again without disclosure of the relationship. The internal claims auditor reported to the Assistant Superintendent for business instead of the Board, the Board had not adopted a written policy outlining when it is appropriate to provide meals and refreshments, and the Treasurer did not adequately control the use of her signature disk.
The report recommends the Board ensure all employee benefits provided are in accordance with contracts, examine payments made to retiring administrators for unused sick days to determine if appropriately calculated, review the Superintendent's accumulated leave balances, and strengthen controls over the payment of accrued vacation. The report also recommends that Board members disclose interests in district contracts and review its practices related to interest in contracts. The report recommends the Board: remind all employees involved in claims processing and purchasing of the District's procurement policy, and monitor compliance with the meals and refreshments, travel and cell phone policies.
The report also recommends the District not make payments to independent contractors in excess of contractual amounts, and that all claims for meals and refreshments include information on the purpose, and attendees.
Finally, the report recommends the Treasurer continue to control the check signature disk and compare the signed check to approved warrants and certified payrolls.
District officials generally agree with the recommendations and have taken actions to implement them.
United States Department of Education Office of Inspector General
William Floyd Union Free School District Allowability of Title I Salary and Salary- Related Expendi-tures
The audit found that the District could not support over $4.6 million in salary and salary-related expenses funded through the Elementary and Secondary Education Act - Title I. The questioned costs include salaries unsupported by periodic employee certifica-tions, nonprofessional salaries and academic intervention services, em-ployee benefits, associated indirect costs and some salary expenses charged to the program through journal entries.
The audit also found that the District charged some unallowable costs to the Title I program.  The audit identified a significant internal control weakness that placed Title I funds at risk of being misused. The particular weakness is the lack of control over access to the District's accounting system. The report states that seven BOCES employees, as well as the District's auditing firm, had access to the system.
Finally, the audit concluded that the State Education Department failed to adequately monitor grants distributed to the District.
11 recommendations to the Department
The report recommends the Federal Department of Education require the State Education Department (Depart-ment) to instruct the District to: provide support for the $4.6 million in questioned costs and return any unsupported amounts, recalculate all indirect costs, develop policies requiring teacher certification of time attributable to Title I, and establish procedures for main-taining proper documentation.
The report also recommends the Department instruct the District to return $54,810 in unallowable costs, implement procedures to ensure employee benefits are appropriately charged to federal grant programs, and establish and implement adequate internal controls to limit access to the accounting system.
The report recommends that the Department increase monitoring of the District, enforce procedures for reviewing and approving budget amendments, ensure funding dates are proper and consistent, and ensure the District returns $1,066 related to a miscalculation of teacher salaries.
Department officials generally agree with the recommen-dations but expressed some concern with the tone of the report and the audit approach used by the Office of the Inspector General.