November 22, 2006

Ms. Linda Padgett

Board President

Tompkins-Seneca-Tioga BOCES

555 Warren Road

Ithaca, NY 14850

Dear Ms. Padgett:

The following is our final audit report (BOC-0104-1) on the Tompkins-Seneca-Tioga BOCES for the period July 1, 2004 through March 30, 2006. The audit was conducted pursuant to Education Law Section 305 and the Board of Regents/State Education Department Strategic Plan – Goal #5 which states: “Resources under our care will be used or maintained in the public interest.”

Ninety days from the issuance of this report, District officials will be asked to submit a report on actions taken as a result of this audit. This required report will be in the format of a recommendation implementation plan and it must specifically address what actions have been taken on each audit recommendation.

I appreciate the cooperation and courtesies extended to the staff during the audit.

Sincerely,

Calvin Spring, CGFM, CIA

Enclosure

c: Commissioner Mills, T. Savo, B. Porter, G. Smith, C. Szuberla, J. Canaday, C. Foster (DOB), W. Campbell (OSC), Ellen O’Donnell, District Superintendent, R. Kesper

Executive Summary

Background and Scope of the Audit

Tompkins-Seneca-Tioga (TST) Board of Cooperative Educational Services (BOCES) is headquartered in Ithaca, New York and serves nine component districts. Together these schools serve more than 14,000 students. TST BOCES had general fund expenditures of $17.8 million and was ranked as the 35th largest BOCES in the State, in terms of total general fund expenditures, for the 2002-03 school year.

The objective of the audit was to assess the adequacy of TST BOCES' management controls which are designed to help ensure its goals and objectives are accomplished; laws, regulations, and good business practices are complied with; assets are safeguarded; and accurate and reliable data are maintained. The audit focused on management controls and reviewed practices, records, and documentation for the period July 1, 2004 through March 31, 2006. This audit also followed up on findings and recommendations from the previous New York State Education Department (Department) audit.

Summary of Audit Results

The audit determined that TST BOCES had many of the necessary controls in place; however, improvement opportunities exist in certain areas. A summary of our recommendations and findings follows:

Ensure the budget status report submitted to the Board is complete. (page 4)
Appoint a deputy treasurer, execute, and file the necessary paperwork. (page 5)
Designate a person, not just a position, to be responsible for each of the BOCES’ petty cash funds. (page 5-6)
Ensure that the Board authorizes designated employee(s), who may also collect money and that these employees issue pre-numbered triplicate treasurer’s receipts. (page 6)

· Ensure the Board appoints and approves a central treasurer and an internal auditor. (pages 6-7)

· Recognize the difference between the position of a claims auditor and that of an internal auditor. The TST BOCES has erroneously designated its claims auditor as an internal auditor. (page 7)

· Implement the following for all Career and Technical Education (CTE) programs:

o Establish a policy for all CTE retail sales and other CTE services (pages 7-8);

o provide an annual notice to the public concerning the availability of the TST BOCES automotive repair program (page 8);

o implement a clear, fair, and consistent selection methodology among all of the automotive repair instructors (page 9);

o develop an accounting system for the automotive repair program with the use of pre-numbered work orders and cash receipts issued in triplicate at a minimum (pages 10-11); and

o refrain from using any extraclassroom funds to buy parts or supplies for the automotive program. (page 10)

· Establish procedures to use sign in and out sheets for all EPE traditional classrooms. (page 11)

Implement procedures to prevent outstanding checks more than six months old. (page 13)
Implement the use of a pre-numbered duplicate receipt system whereby a person submitting money to the treasurer and the treasurer each retain a receipt. (page 13)

· Ensure compliance with TST BOCES Policy whereby the District Superintendent must authorize the disposal of all obsolete equipment. (page 16)

· Implement procedures to restrict access to TST BOCES fuel pumps. (page 17)

· Name a person to supervise the attendance process for the TST BOCES Board meetings (pages 19-20)

Comments of TST BOCES Officials

TST BOCES officials’ comments about the findings were considered in preparing this report. Their response to the findings and recommendations in this report are included as Appendix B.

Introduction

Background

“The Mission of the Tompkins-Seneca-Tioga (TST) Board of Cooperative Educational Services (BOCES) is to identify, to propose, and to provide services for children, youth and adults which are economical and efficient in their operation, and which will complement the educational programs provided by local school districts and other agencies in our regions." TST BOCES is headquartered in Ithaca, New York and serves nine component districts. Together these schools serve more than 14,221 students. TST BOCES had general fund expenditures of $17.8 million and was ranked the 35th largest BOCES in the State, in terms of total general fund expenditures, for the 2004-05 school year.

BOCES are organized under Section 1950 of the Education Law to provide shared educational programs and services to districts. These programs and services may include career and technical education for students and adults, alternative education, adult basic education, special education, professional development, technology services, and school library services. Section 305 of the Education Law requires the New York State Education Department (Department) to perform fiscal audits of BOCES at least once every three years, resources permitting.

BOCES are required to collect and report various fiscal and performance data. The data are used to prepare the New York State BOCES Report Card (Report Card) and the Financial and Statistical Outcomes of the Boards of Cooperative Educational Services Report (Chapter 602 Report). The Report Card summarizes program accomplishments and services provided for children and adults. The Chapter 602 Report details certain financial and statistical data such as tuition costs for selected programs, per student cost information, and aggregate expenditure data for BOCES administrative, capital, and service functions.

The Report Card and Chapter 602 Report can be obtained from the following online sources.

· The Report Card is available at

http://www.emsc.nysed.gov/repcrdfall2003/boces/home.html

· The Chapter 602 Report is available at

http://www.emsc.nysed.gov/mgtserv/602_Report/AnnualReportTable.htm

Objectives, Scope, and Methodology

The Office of Audit Services reviewed selected management practices, records, and documentation for the period July 1, 2004 through March 31, 2006. The audit focused on five key areas: governance and planning, accounting and reporting, purchasing and expenditures, facilities and equipment, student services, and student related data and other BOCES data.

The objective of the audit was to assess the adequacy of TST BOCES’ internal controls which are designed to help ensure its:

· goals and objectives are accomplished;

· laws, regulations, and good business practices are complied with;

· assets are safeguarded; and

· accurate and reliable data are maintained.

To accomplish this objective, we reviewed applicable laws, regulations, policies and procedures; interviewed TST BOCES management and staff; examined records and supporting documentation; sampled a limited number of transactions on a non-statistical basis; and reviewed TST BOCES’ audited financial statements.

Our audit included examining, on a test basis, evidence-supporting transactions recorded in the accounting and operational records and applying other procedures considered necessary in the circumstances. The audit also assessed the estimates, judgments, and decisions made by management and determined the status of the implementation plan submitted for our prior audit report BOC-0797-4. We believe that the audit provides a reasonable basis for our findings, conclusions, and recommendations.

Summary of Audit Results

A BOCES’ board and management are responsible for establishing, implementing, and monitoring internal control systems. Internal controls are the policies, procedures, and practices designed and implemented to provide management with reasonable assurance that resources are safeguarded against waste, loss, and misuse; that operations are efficient and effective; that specific management objectives are achieved; that financial reports are reliable; and that the entity complies with applicable laws and regulations. The internal control systems must be built into the business processes to ensure core activities are accomplished effectively, efficiently, and economically.

The audit determined that TST BOCES had many of the necessary controls in place; however, some improvement opportunities were identified and are addressed in detail in the body of this report. TST BOCES should give careful consideration to the recommendations to further improve its operations and management.

Comments of TST BOCES Officials

TST BOCES officials’ comments about the findings were considered in preparing this report. Their response to the findings and recommendations in this report are included as appendix B.

Governance and Planning

A BOCES’ board is responsible for the provision of cost-effective programs and services and must provide for the governance and oversight of the BOCES’ affairs, personnel, and properties. The audit determined that the Tompkins-Seneca-Tioga (TST) BOCES’ Board of Education (Board) addressed many of its governance and planning responsibilities related to the control environment, compliance with legal requirements, fiscal oversight, staffing, and strategic planning. However, the Board could make improvements related to the approval and completeness of budget status reports, the appointment of certain individuals, and the development of a uniform policy for the BOCES’ Career and Technical Education (CTE) Program.

Budget Status Reports

A BOCES board needs accurate and timely budget status reports to monitor the financial condition and to ensure timely corrections to the budget plan. The budget status report provides an accounting of budget estimates compared to actual activity and can help ensure that the BOCES does not overspend its budget.

Recommendation 1: Ensure that a complete budget status report is provided to the Board at least quarterly (monthly if budget transfers were made).

Education Law Section 1950(4)(j) and Section 170.2(p) of the Regulations of the Commissioner of Education (Regulations) require the treasurer to prepare a budget status report at least quarterly (monthly if budget transfers have been made) for all funds. The required information for the report is provided for in the Regulations. The Department has a sample report format, which shows both revenue and expenditures, at the following web site:

www.emsc.nysed.gov/mgtserv/budget_status_report%20PAGE.htm

TST BOCES submits a Clerk’s Report as its budget status report to the Board; however, this report does not have all the required information. While it does show appropriation accounts, it does not show any revenue accounts. Without a complete and accurate budget status report, the Board may not be able to effectively monitor the budget or financial condition of TST BOCES.

Appointment of Certain Individuals

Board meetings are held to conduct official BOCES business including electing board officers, discussing and voting on educational and fiscal policies, and appointing officials. The organizational meeting is the first regular meeting of the board held in the new fiscal year and its agenda should include items requiring attention either because they are required by law or regulation, or because this is the logical time to address them. This includes various appointments such as: treasurer, purchasing agent, independent auditor, and others. TST BOCES made some appointments, but needs to appoint a deputy treasurer, a petty cash custodian, a person(s) other than the treasurer to collect money, a central treasurer for the TST BOCES’ extraclassroom activities, and a claims auditor.

Deputy Treasurer

Education Law Section 1720(2) allows a board to appoint a deputy treasurer who shall serve at the discretion of the board. The deputy treasurer can then sign checks in lieu of either the treasurer or other officer, whose signature is required, in the event of their absence or inability. The deputy treasurer needs to execute and file an official undertaking (bond) in the same amount and manner as the treasurer.

Recommendation 2: Appoint a deputy treasurer and execute and file the necessary paperwork.

The Board of TST BOCES has not appointed a person to sign checks in addition to the treasurer. This would facilitate check processing in the treasurer’s absence.

Petty Cash Custodians

BOCES are authorized to establish petty cash funds for the payment of certain materials, supplies, and services. TST BOCES had many of the necessary controls over petty cash, but could improve its controls by designating a person responsible for each fund as required by Section 170.4 of the Regulations.

Recommendation 3: Appoint a Board designated person responsible for each petty cash fund on an annual basis.

TST BOCES does have a position officially designated by the Board to be responsible for each petty cash fund; however, it has not named a person for the position.

Individuals Authorized to Collect Monies

Section 170.2 of the Regulations requires the board to authorize any individual with the responsibility to receive money and to also require the individual to use a pre-numbered triplicate receipt form. Copies are distributed as follows: the original to the payer, a copy to the treasurer with the money or bank deposit receipt, and a copy retained by the individual authorized to receive money.

Recommendation 4: Ensure the Board authorizes individuals collecting money at various TST BOCES locations.

Certain TST BOCES individuals collect money at various locations and use pre-numbered triplicate receipt forms; however, such individuals have not been authorized by the Board, as required by Section 170.2 of the Regulations. The Board’s approval of these individuals to collect money would improve controls by letting employees know what is expected of them. It would also make the Board aware of the various collection sites and the reasons for collecting the money. It could also affect the BOCES’ bonding policy.

Central Treasurer

Section 172.4 of the Regulations requires the board to designate a treasurer of the extraclassroom activity fund to receive the monies from the conduct, operation, or maintenance of the extraclassroom activities. Such treasurer is known as the central treasurer of the extraclassroom activity fund and must report to the Board at least quarterly.

Recommendation 5: Ensure the central treasurers of the TST BOCES extraclassroom activity fund have been appointed by the Board.

The central treasurers of the TST BOCES extraclassroom activity fund have not been appointed by the Board.