Purpose of Audit

The purpose of our audit was to review the District’s internal controls over selected financial activities and to identify opportunities for revenue enhancement, for the period July 1, 2012 through October 1, 2013.

Background

The Frewsburg Central School District is located in Chautauqua and Cattaraugus Counties. The District is governed by an elected seven-member Board of Education. For the 2012-13 fiscal year, the District reported general fund expenditures of approximately $14.2 million.

Key Findings

• District officials did not adopt policies governing the establishment, use and maintenance of reserve funds and could not demonstrate the reasonableness of reserve balances. As a result, two of the District’s reserve funds had balances that totaled $3.19 million in excess of the amounts needed for authorized purposes, and three of the District’s reserve funds had balances that totaled $1 million that were not supported by a written plan or other documentation validating the amounts retained.
• District officials also do not have a comprehensive payroll policy supported by written procedures. As a result, there is no independent review of leave time records.
• District officials do not ensure that access rights to the payroll and human resource modules within the computerized accounting system are appropriately limited.
• Board President Larry Gauger is employed by an engineering firm that does business with the District. Mr. Gauger formally disclosed his interest in writing and abstained from voting on matters involving the firm. However, it is unclear whether he has directly performed engineering work on District projects. If he was involved with the procurement, preparation or performance of the contract, or if his compensation from the firm was directly affected by the firm’s relationship with the District, he would have a prohibited interest in the contract.

Key Recommendations

• Develop and implement comprehensive policies for establishing and using reserve funds.
• Adopt a comprehensive policy and written procedures as guidance for the employees responsible for the preparation of time records and for employees requesting leave time use.
• Restrict employee access rights to update and edit employee leave time in the payroll and human resource modules.
• Review the conflicts of interest statutory provisions and ensure that District officials and personnel comply with the requirements.