Board
of Cooperative Educational Services
July
1, 1997 through June 30, 1998
Board
of Cooperative Educational Services
July
1, 1997 through June 30, 1998
THE STATE EDUCATION
DEPARTMENT / THE UNIVERSITY OF
THE STATE OF NEW YORK / ALBANY, NY 12234
Daniel Tworek
Director
Office of Audit
Services
Tel. (518) 473-4516
Fax (518) 473-0259
E-mail: dtworek@mail.nysed.gov
June 30, 2000
Mrs. Charlene Murray
Board President
Cayuga-Onondaga BOCES
5980 South Street Road
Auburn, New York 13021
Dear Mrs. Murray:
The following is our final audit report (BOC-1298-6) on the Cayuga-Onondaga BOCES for the period July 1, 1997 through June 30, 1998. The audit was conducted pursuant to Sections 305 and 1950 of the Education Law in pursuit of Goal #5 of the Board of Regents/State Education Department Strategic Plan: “Resources under our care will be used or maintained in the public interest.”
It is the policy of the State Education Department to consider for review matters of significant disagreement which result from the issuance of final audit report. Appendix C describes the process to be followed in the event of such disagreement.
Ninety days from the issuance of this report, BOCES officials will be asked to submit a report on actions taken as a result of this audit.
I appreciate the cooperation and courtesies extended to the staff during the audit.
Sincerely,
Daniel Tworek
Enclosure
cc: Commissioner
Mills, R. Cate, G. Illenberg, J. Kadamus, T. Sheldon, S. Spear, B. Stambler, C.
Szuberla, C. Foster (DOB), H. Hoffman (OSC), G. Gilchrist, District Superintendent
of Schools
Table
of Contents
Introduction..................................................................................................................................................... 1
Background.................................................................................................................................................... 1
Objective, Scope and Methodology.................................................................................................. 1
Comments of Cayuga-Onondaga BOCES Officials..................................................................... 2
Employment Preparation Education.............................................................................................. 3
Contact Hour Documentation............................................................................................................. 3
Student Folders........................................................................................................................................... 6
Documentation for Work Experience Work Site
Visitations............................................ 7
Recommendations....................................................................................................................................... 7
Comments of Cayuga-Onondaga BOCES Officials..................................................................... 7
Expenditures..................................................................................................................................................... 8
Revenues and Expenditures for Two Service
Program Codes Not Included on Audited Financial Statements.............................................................................................................. 8
Recommendation.......................................................................................................................................... 8
Comments of Cayuga-Onondaga BOCES Officials..................................................................... 8
Opportunities to Improve Management Processes............................................................... 9
Value of Personal Use of Vehicle Provided to
the Former District Superintendent Incorrectly Reported to Taxing Authorities........................................ 9
Purchase Requisitions............................................................................................................................ 10
Purchases Requiring Quotations..................................................................................................... 10
Inadequate Documentation................................................................................................................ 11
Transactions Not Correctly Classified and
Allocation of Expense........................ 12
Confirming Purchase Orders............................................................................................................. 14
Cancellation of Documentation After Payment................................................................... 14
Policies and Procedures Manuals Incomplete....................................................................... 15
Long Range Plan for Educational Facilities............................................................................ 15
Investment Policy..................................................................................................................................... 16
Tracking of Fixed Assets
and Periodic Physical Inspections.......................................... 16
Employee Evaluations............................................................................................................................ 17
Employee Leave Accruals and Attendance............................................................................... 18
Recommendations..................................................................................................................................... 19
Comments of Cayuga-Onondaga BOCES Officials................................................................... 20
Attachment A – Schedule of EPE Contact Hour Audit Adjustments
Appendix A – Contributors to the Report
Appendix B – Comments of Cayuga-Onondaga BOCES Officials
Appendix C – Audit Review Proceedings
The pie chart illustrates general fund expenditures by program for the 1997-98 school year.
Background and Scope of the
Audit
Cayuga-Onondaga BOCES officials have made improvements in their EPE procedures and documentation. They have also taken corrective action to improve management processes relating to purchasing policies, expense reimbursement, allocations of transactions, and tracking of fixed assets.
Cayuga-Onondaga BOCES serves nine component districts which enroll more than 15,292 students. Cayuga-Onondaga BOCES ranked as the 36th largest in the State, in terms of total general fund expenditures, for the 1997-98 school year.
· determine if cost allocations and transfers between funds and among CO-SERs are accurate and reasonable;
· determine if CO-SERs comply with Department approved specifications;
· verify that only reasonable and necessary costs were incurred;
· verify that the budgetary process provides control over the expenditure of funds; and
· verify the accuracy and reliability of data reported to the Department for Employment Preparation Education aid.
Cayuga-Onondaga BOCES officials’ generally agreed with the findings and recommendations in this report. Their comments have been included where appropriate and their response is included as Appendix B.
Under Section 168.2 of the Regulations, a contact hour for EPE means 60 minutes of instruction given by a teacher in approved program component areas. The Department requires the number of reported contact hours to be clearly documented to ensure that EPE revenues paid to the districts or BOCES are appropriate. Any undocumented or overstated contact hours will be questioned upon audit and revenues will be reduced accordingly. The districts or BOCES must maintain classroom attendance rosters of all students who attend EPE Programs.
Part 168.4 of the Regulations states that BOCES are required to maintain appropriate attendance records to support contact hours reported on Forms SA-160.1 and SA-160.2.
The audit found that Cayuga-Onondaga BOCES’ records did not always adequately document EPE contact hours which resulted in errors when calculating EPE contact hours. The audit found the following for EPE Program activities:
- For Traditional Adult Education instruction classes, attendance was not adequately documented. The specifics were discussed with Cayuga-Onondaga BOCES officials.
-
For GED on TV
(Non-traditional Adult Education) contact hours, Cayuga-Onondaga BOCES used
contact log sheets that contained very little
information. It never mentioned any
shows watched or that the students did any work in their workbook. In some cases, there was only a date entered. This documentation problem was discussed
with the Office of Workforce Preparation and Continuing Education (OWPCE). OWPCE stated that very little guidance had
been given at that time on what documentation was required and they are in the
process of developing an EPE manual that will provide greater guidance on
documentation requirements and other EPE issues.
In agreement with
OWPCE, the audit did not adjust contact hours for this program activity because,
at that time, inadequate guidance had been given on documentation
requirements. However, Cayuga-Onondaga
BOCES needs to improve documentation for contact hours claimed for GED on TV in
order to prevent any future audit adjustments.
-
For the Community Work
Experience Program (CWEP), Cayuga-Onondaga BOCES only received summary
documentation from the county.
Cayuga-Onondaga BOCES did not obtain actual attendance for the students
to document and support these contact hours.
-
For the Work Experience program
activity, Footsteps, it is not clear whether the attendance sheets/registers
are maintained exclusively by Cayuga-Onondaga BOCES or the counties. The audit found attendance sheets/registers
in the binders maintained by Cayuga-Onondaga BOCES that had identical
information as the attendance sheets/registers in the supporting documentation
sent by the county to support CWEP hours.
In one case, there was a duplication of Footsteps hours. Since the county does not break out the
Footsteps hours from the CWEP hours when reporting total hours to
Cayuga-Onondaga BOCES for CWEP, duplication of contact hours can and did occur.
-
Summary contact hour
documentation for EPE contact hours did not segregate contact hours by program
activity for each student, except for Giving Rural Adults a Study Program
(GRASP) and GED on TV. This made it
difficult to determine how many hours were being claimed for each program
activity for each student, and difficult to verify contact hours claimed for
each student to supporting attendance documentation.
Cayuga-Onondaga BOCES’ summary sheet of EPE contact hours did not support the reported EPE contact hours. Specifically, the hours for the first half of the year were artificially inflated. Cayuga-Onondaga BOCES admitted that the prior EPE administrator had overstated the contact hours. The current EPE administrator and his staff went through the records for the first half of the year and recalculated the hours. Consequently, the EPE contact hours for the first half of the year were overreported by 35,209. The review also showed that contact hours for the second half of the year were underreported by 1,645. Therefore, the initial audit adjustment to EPE contact hours was 33,564.
In addition to overreporting EPE contact hours, Cayuga-Onondaga BOCES received an overpayment of EPE aid of $93,975 due to an error made by the Department. When the Department calculated the EPE aid payment for contact hours claimed for the second half of 1997-98, the Department incorrectly combined the contact hours claimed for the first and second half of 1997-98.
The audit reviewed supporting documentation for EPE contact hours for a judgmental sample of 30 students. Reported contact hours for the sample were 9,830 but the audit found that only 8,523 could be supported, resulting in an adjustment to EPE contact hours of 1,307. The audit adjustment was a result of several factors including:
-
hours
were claimed for students that were not EPE eligible because they were either
under 21 years of age or had a high school diploma,
-
hours
were claimed more than once under two different program activities,
- incorrect calculation of or accumulation of contact hours,
- documentation did not support all of the contact hours claimed, and
- Work Experience program activities were not prorated as required (.75 for CWEP contact hours and .5 for all other Work Experience contact hours), and classroom instruction did not always account for 30 percent of the contact hours claimed.
The audit also made additional adjustments to total contact hours claimed as follows:
- An adjustment of 497 contact hours was made for the sample students with Work Experience contact hours because classroom instruction did not account for at least 30 percent of the total contact hours claimed.
- Because Cayuga-Onondaga BOCES did not prorate Work Experience contact hours as required, the audit prorated the contact hours for the students not in the sample for the second half of the year. This resulted in an additional adjustment to total EPE contact hours of 93.
Because of a cap set on EPE aid, Cayuga-Onondaga BOCES was not paid for all of the overreported contact hours. Therefore, there is no direct correlation between the contact hour adjustment and the amount of EPE aid that needs to be refunded. Instead, the audit calculated the EPE aid to be paid based on audited contact hours and deducted this from the EPE aid paid to Cayuga-Onondaga BOCES. The total EPE aid paid to Cayuga-Onondaga BOCES was $354,227. Based on audited contact hours, Cayuga-Onondaga BOCES is only eligible to receive $96,780 in EPE aid and will have to refund $257,447. (This amount will be withheld from future EPE payments). See Attachment A for a schedule of EPE contact hour audit adjustments and EPE aid to be refunded.
Cayuga-Onondaga BOCES officials agree that some of the EPE contact hours were not documented adequately. They also agree that not all of the daily attendance sheets were complete. A new attendance procedure has been instituted beginning with the 1998-99 school year that will ensure that attendance documentation will be complete and adequately support all reported and claimed EPE contact hours.
Cayuga-Onondaga BOCES officials also agree that, other than for GRASP and GED on TV contact hours, they did not clearly identify the hours claimed for each student for each program activity on summary contact hour documentation. They stated that they are purchasing Enroll 2001 software to track Adult Education students per activity.
In addition, Cayuga-Onondaga BOCES officials agree that they claimed more EPE contact hours than were provided for the first half of the year. They believe that the new attendance sheets and software will enable them to report accurate contact hours.
Cayuga-Onondaga BOCES officials also agree that they did not properly prorate contact hours for the Work Experience program activity. They have reviewed the guidelines and will have certified staff members make weekly visits to the students at the work site.
Section 168.3 of the Regulations requires that every student served in an EPE Program have an individual student folder that is easily accessible to the student and the teacher, and includes information concerning registration, attendance, testing and individual program needs. At a minimum, registration information must include the student's name, class attendance, date of birth or age, and the diploma status. Beginning in 1995-96, each folder is also required to contain an Individual Education and Employment Preparation Plan (IEEPP).
The audit reviewed 30 student folders and found that 20 did not contain the required IEEPPs. The documentation the auditor accepted as an IEEPP was not consistent for each of the ten students with IEEPPs in the sample.
As a result, Cayuga-Onondaga BOCES is not in total compliance with the Regulations because not all of the student folders contained the required IEEPPs. Without them, it is difficult to determine if a student is receiving necessary services, or if the services provided are in line with the student’s stated goals. In addition, Cayuga-Onondaga BOCES needs to develop a form or collection of records that can clearly be identified as an IEEPP.
Cayuga-Onondaga BOCES officials agree that student folders did not always include required IEEPPs. They have requested a sample of an acceptable IEEPP from the Department.
According to pages 24-25 of the 1998-99 Employment Preparation Education (EPE) State Aid Program (Continuation Only) application, “Basic Requirements for all EPE –funded Work Experience Programs … Work Site Visitation … agencies must ensure that … individual student folders are kept documenting work experience attendance and related information such as work site visits and student progress.”
Cayuga-Onondaga BOCES does not document work site visitations for Work Experience contact hours and, therefore, is not in compliance with Department guidelines.
Cayuga-Onondaga BOCES officials agree they did not document work site visitations for Work Experience contact hours. They will have staff members document all work site visits.
2. Ensure that contact hours for each student for each activity are clearly identified.
4. Ensure that each student folder contains an IEEPP in an approved format.
Cayuga-Onondaga BOCES officials concur with these recommendations.
According to the Uniform System of Accounts for Boards of Cooperative Educational Services 1988 Edition, page 1, “… Financial statements must be presented in conformity with generally accepted accounting principals [GAAP]…”.
According to GAAP, one of the primary qualities of accounting information is reliability. One of the three ingredients of reliability is verifiability. Verifiability is demonstrated when a high degree of consensus can be secured among independent measures using the same measurement methods. In addition, GAAP requires that entities report on their financial statements the results of operations for all of their business functions.
When the audit compared the SA-111 to the audited financial statements, the audit found that the revenue and expenses for the Special Aid Fund service program codes 821 ($203,879) and 822 ($14,420) were not included in the audited financial statements. These amounts are not material in relation to the financial statements as a whole (unreported revenues were only 1.23 percent of the total revenues of $17,685,964 and unreported expenditures were only 1.29 percent of the total expenditures of $16,971,176). However, the audit believes they are material because they are an omission of data as opposed to a misstatement of data.
Revenues and expenditures on the financial statements were understated by $218,299 and the financial statements are not in conformity with GAAP.
Cayuga-Onondaga BOCES officials concur with this recommendation.
Management is responsible for establishing effective management processes or controls. In its broadest context, management controls include the plan of the organization, methods, and procedures adopted by management to ensure that its goals are met. These processes include such areas as planning, organizing, directing and controlling program operations. They include systems for measuring, reporting and monitoring program performance. The audit reviewed several processes that it determined significant to the audit objectives and found several opportunities for improvements. These areas include formulating an investment policy, inventory control, documentation of travel expenses, unnecessary and unreasonable expenses, and improving policies.
According to page 15 of the 1999 Internal Revenue Service (IRS) Publication 535 (the 1997 and 1998 publications were not available electronically):
“Special rules for highway motor vehicles. If an employee uses the employer’s vehicle for personal purposes, the value of that use must be determined by the employer and included in the employee’s wages. … Election not to withhold income tax. You can choose not to withhold income tax on the value of an employee’s personal use of a highway motor vehicle you provided. … You must, however, withhold the applicable social security and Medicare taxes on such benefits. … Amount to report on Forms 941 and W-2. … Include the value of the fringe benefit in box 1 of Form W-2. Also include it in boxes 3 and 5 if applicable. [In this case, it is applicable.]…”
For calendar years 1997 and 1998, Cayuga-Onondaga BOCES properly calculated the value of the personal use of the vehicle provided to the former District Superintendent. However, instead of including the value in the District Superintendent’s Form W-2, Cayuga-Onondaga BOCES reported the value as Non-Employee Compensation on IRS Form 1099-MISC. The audit did not review prior years but believes the same practice was most likely followed.
Since the District Superintendent’s salary exceeded the threshold for social security taxes, Cayuga-Onondaga BOCES is not required to withhold social security taxes on the value of the fringe benefit. However, Cayuga-Onondaga BOCES should have withheld the applicable Medicare taxes.
Cayuga-Onondaga BOCES officials agree that it should have reported the value of the personal use of the vehicle provided to the former District Superintendent on IRS Form W-2 instead of on the IRS Form 1099-MISC. Cayuga-Onondaga BOCES will ensure that, in the future, the value of the personal use of the vehicle provided to the District Superintendent will be reported on IRS form W-2 instead of on the IRS form
