AUDIT PLAN

December 1, 2006
Through
June 30, 2008

 

 

 

December 2006

Since the development of the last audit plan, some significant events have occurred:

• School district and BOCES accountability legislation was implemented.
• The State Education Department‘s (Department) internal control officer instituted a new internal control process.
• The Office of Audit Services (OAS) implemented a fraud, waste, and abuse hotline.
• Additional guidance and information on internal controls was issued.

However, some things have remained constant:

• The need for additional oversight and controls in the public and private sectors remains high.
• The Board of Regents and the Department continue to recognize the need and importance of internal controls.
• A significant portion of our audit resources need to be devoted to ensuring effective internal controls are in place for school districts, BOCES,  Department operations, and others.
• The need to leverage our resources and partner with others has never been higher.

This Audit Plan (Plan) defines the audit initiatives to be pursued by OAS during the period December 1, 2006 through June 30, 2008.  In developing the Plan, consideration was given to Department managers’ requests for audit, audit coverage provided by other organizations, information from the Department’s risk assessment, and other factors.  In addition, many of the initiatives identified in the 2004-06 Audit Plan were carried over to the current Plan.  The audit areas are outlined in the following pages.

OAS conducts audits in accordance with Government Auditing Standards issued by the Comptroller General of the United States.  The audits focus on assessing risk and improvement opportunities.  The audits result in written reports that are provided to the auditee, the Regents Subcommittee on Audits, Department managers, and representatives of the Legislature, the Office of the State Comptroller and the Division of the Budget.  The reports are available to the public and are also posted on OAS’ web site. 

OAS anticipates having 21 professionals and 1 support staff to address the priorities and activities defined by this Plan.  The Department has requested permission for funding for additional audit staff.    If additional audit staff becomes available, OAS will assess priorities and use the resources to enhance school district accountability through audits of data reliability or commit the resources to those areas with limited or no audit coverage.

Audits of Schools and Districts 7 FTE Auditors

• Internal Controls over District Operations
• Accuracy and Reliability of Student and Fiscal Data including Violent and Disruptive Incident Data

Internal Audits of Department Operations 2 FTE Auditors

• Update the Risk Assessment of Department Offices
• VESID Procurement and Provision of Case Services
• VESID’s Payment of Maintenance and Transportation (M&T) Costs

Fraud, Waste, and Abuse Hotline Follow-up 2 FTE Auditors

• Continue to follow-up on complaints to the extent resources are available

Review of Financial Statements, Single Audit Reports, and Other Fiscal Data 3 FTE Auditors

• Financial Statements and Single Audit Reports – Financial condition, improvement opportunities, compliance with reporting requirements
• Other Fiscal Data

Audits of BOCES 1 FTE Auditor

• Accomplishment of Goals and Objectives Related to Student Performance
• Accuracy of information reported for Special Education Tuition Rates

Audits of Partner Organizations 1 FTE Auditor

• Use of Funds and Effectiveness of Early Child Direction Centers (ECDC)
• Internal Controls over the Museum Institute

Technical Assistance and Training 1 FTE Auditor

• Continue to provide training sessions to school business officials, school board members, Superintendents, CPAs, and others (in conjunction with Department program staff)
• Continue to provide technical assistance and information to Department staff, USNY institutions, government officials, and others
• Continue to partner with various organizations (Office of the State Comptroller (OSC), Association of School Business Officials, NYS Society of CPAs, NYS School Boards Association, and others) to improve fiscal accountability

Other Activities

• Information Technology (IT) Systems
• Timeliness of Audits
• Continuing Professional Education
• Peer Review

The Department has requested resources to enhance the auditing capability.  Additional resources will be used to enhance school district accountability through audits of data reliability or committed to those areas with limited or no audit coverage.

Audits of Schools and Districts

• Long-Term Planning
• Use of Individuals with Disabilities Education Act (IDEA) Funding
• Internal Controls over Charter Schools
• Reliability and Integrity of School District Data

Internal Audits of Department Operations

• Grants Management
• Office of Higher Education’s (OHE) Regents Accreditation of Teacher Education (Rate)
• OHE’s Teacher Opportunity Corps (TOC)
• OHE’s Liberty Partnerships Program (LPP)

Audits of BOCES

• Internal Controls over BOCES Operations and the Accuracy of Selected Student and Fiscal Data including Tuition Rates for Special Education Programs

• Inventory Controls over Assets
• Cost-Effectiveness of Technology CO-SERs
• Reliability and Integrity of Selected Student and Fiscal Data

 

Audits of Partner Organizations - Use of Funds and Effectiveness

• Special Education Training and Resource Centers (SETRC)
• Parent Centers

 

 

 

Introduction

The Department has oversight responsibility for about 700 public districts in New York State that have total expenditures in excess of $37.6 billion.  The districts are responsible for educating students and establishing the necessary internal controls over their programs and activities.  The importance of and the need for internal controls have been highlighted by the recent misappropriation of funds in several districts.  The Department is committed to ensuring districts maintain adequate systems of internal controls.  This Plan includes audits of internal controls over district operations and the accuracy and reliability of student and fiscal data.

Audit Areas

Internal Controls over District Operations – These audits of internal controls will address governance and the control environment, planning and budgeting, financial accounting and reporting, cash receipts and revenue, cash management and investments, purchasing, payroll, student transportation, facilities, State aid, attendance, and student performance data.  The audits are aimed at providing the district, Department officials, and other interested parties with a fundamental assessment of the internal control systems in place that guide certain district operations.  These audits will include an examination of districts that have indicators of fiscal stress. 

Accuracy and Reliability of Student and Fiscal Data – These audits will assess districts’ systems and processes to collect and report student and financial data. The audits will include a detail examination of some aspect of information on attendance, cohort, student performance, expenditures, revenue, assets, liabilities, State aid, special education placements, and other school information.  It is crucial that the data are accurate, reliable, accessible, and timely since the information is used by schools, at the district and building level, the Department, BOCES, and the public.  For example, the Department uses student performance data as a benchmark to identify schools that may need assistance in raising student performance; it also uses some of the data for State aid and school report cards.
OAS will also provide staff to participate in 75 visits to school buildings in order to assess the reliability of Violent and Disruptive Incident Reporting data.

Introduction

 

Under the terms of the New York State Government Accountability, Audit, and Internal Control Act (Act), the Division of the Budget (DOB) has identified the Department as an agency that must have an internal audit function.  The Act requires the internal audit unit to, among other things, conduct internal audits in compliance with a plan that was developed based on a risk assessment of operations.  OAS will update a Department risk assessment and conduct audits of VESID district offices as well as a process used to provide direct payments to consumers.

Audit Areas

Risk Assessment of Department Offices – During the first year of the Plan, OAS will update its risk assessment of all Department programs in order to assess risk for each of the Department’s significant programs and activities.  This information will be shared with the Department’s Internal Control Officer and used to identify high-risk areas that may need further review.  The risk assessment will be updated in the second year of the Plan and annually thereafter.

VESID’s District Office Procurement Practices – Past OAS audits have identified weaknesses in internal controls over procurement in VESID district offices.  OAS will continue to audit district office operations.

VESID’s Payment of Maintenance and Transportation (M&T) Costs – OAS will conduct an internal audit of the M&T process.  VESID counselors are allowed to authorize direct payment of funds to consumers for payment of costs related to M&T.  OAS has determined that this practice is inconsistently administered, poorly controlled, and represents a significant risk for misuse of funds.

 

Introduction

Districts, BOCES, charter schools, private colleges and universities, and certain non-profit organizations are required to submit audited financial statements and, where applicable, audits required by the federal Single Audit Act (OMB Circular A-133).  OAS receives, processes, and reviews over 1,500 reports annually.

Audit Areas

Financial Statements and Single Audit Reports – Each report is reviewed by staff in OAS to assess the following:

• Financial condition of the institution.
• Quality, accuracy, and completeness of the audit reports.
• Significance of any reported management control weaknesses.
• Compliance with the requirements of OMB Circular A-133 and the adequacy of management's action related to any Single Audit findings, where appropriate.
• Accuracy of key ST-3 data used for State aid and reporting purposes for districts.

The financial statements of each district are evaluated to assess its financial condition and compliance with GASB 34 and the Department’s reference manual. Graphs are prepared for the districts in fiscal stress depicting fiscal trends for fund balance, revenue, and expenditures, etc.  These graphs will also be provided to the other districts.  Districts with indicators of fiscal stress and fiscal concern are identified and their financial condition is monitored.  These at-risk districts are notified and, in some cases, asked to prepare a plan to address their financial condition.

Other Fiscal Data – Start-up financial projections for colleges and proprietary schools are analyzed for reasonableness and information is provided to the Office of Higher Education (OHE) to assist in evaluating financial viability and the reasonableness of projections.  In some cases, the colleges and proprietary schools are required to submit budgets and quarterly reports that are reviewed and commented on.  When appropriate, OAS may participate in on-site reviews and hearings.  Similarly, charter schools are also required to submit budgets that are reviewed for reasonableness.

Collection and Review of Corrective Action Plans –  The recently enacted school district financial accountability regulations requires each school district and BOCES to file  a corrective action plan to findings contained in most audits. The corrective action plan must be approved by the board and submitted to the Department. In the first year of the audit plan, OAS will implement a system to notify districts of the requirement for submission.  This could involve the collection and review of up to 1,000 corrective action plans annually.

 

Introduction

 

Section 1950 of the Education Law authorizes the establishment of Boards of Cooperative Educational Services (BOCES) to provide shared educational programs and services to districts.  There are 38 BOCES in New York State providing services to districts.  Education Law Section 305(25) provides for the Commissioner of Education to conduct periodic audits of BOCES at least once every three years to the extent resources permit.  This Plan calls for audits of internal controls and the accuracy of selected student and fiscal data; inventory controls over assets; and the cost-effectiveness of technology CO-SERs.

Audit Areas

Accuracy of Special Education Tuition Rates- This audit will examine the reliability of data submitted by the BOCES for the establishment of preschool tuition rates. The audit will also examine both expenses incurred as well as the reporting of revenue. In addition, the audit will verify the reporting of enrollment information.

Accomplishment of Goals and Objectives Related to Student Performance – This audit will examine the activities of the Regional School Support Centers (RSSC). Emphasis will be on the expenses incurred by the RSSC’s and its relevance in meeting goals related to raising achievement in ELA and Math in grades K-12.

 

Introduction

The Department has responsibility to oversee financial and programmatic relationships with partner organizations. This plan calls for two audits of such organizations.

Audit Areas

Internal Controls over the Museum Institute – The New York State Museum Institute is a not-for-profit corporation whose mission is to encourage philanthropic contributions from individuals, corporations, foundations, and other organizations in support of activities and programs of the New York State Museum. The audit will examine the formal relationship between these two entities and ensure that the Institute is in compliance with formal agreements and maintains a strong internal control system.

Early Childhood  Direction Centers (Centers) – VESID expends over $2 million annually in contracts with 15 centers. The Centers are meant to enhance the knowledge and skills of parents of young children with disabilities. These audits will determine the Centers’ compliance with VESID contracts.  

Introduction

 

OAS, like most audit organizations, faces a number of challenges including developing an information technology (IT) audit capability, timely issuance of audit reports, continuing professional education, and peer review.

IT Systems – Most organizations use IT systems to conduct business.  These systems must be protected from internal and external threats.  Audit organizations need to develop the expertise or use consultants to assess the risks and controls related to IT systems to minimize the risks.  OAS needs to develop the capacity to conduct audits of controls over data centers and IT systems.  OAS also needs to develop the capability to provide input on the adequacy of controls for new IT systems that are being developed.  This Plan provides for assessing the feasibility of developing that expertise and conducting audits of IT data center controls.

IT systems maintain data, which can be analyzed using software such as ACCESS and Automated Control Language (ACL) to identify patterns, differences, matches, and anomalies in data sets.  OAS has used this software in its audits, such as the VESID audit, and will continue to use the software and become more proficient in its use.  This makes it possible to identify high-risk items.  OAS needs to continue developing proficiency and use of data analysis in its audits.

Timeliness of Audits – Many audit organizations are challenged to report audit results promptly.  OAS will analyze cycle times and identify opportunities to improve the time it takes to issue audit reports.

Continuing Professional Education (CPEs) – Professional auditing standards require that auditors receive continuing professional education to maintain and enhance their skills and proficiency.  The Department has been supportive of the need for CPEs and has made resources available.  OAS will continue to monitor CPEs for each of its auditors and seek cost-effective training.

Peer Review – Government Auditing Standards require an external peer review be conducted at least once every three years.  OAS, as well as most State audit organizations, has not had the resources to engage an outside entity to conduct such a review.  During this plan period OAS staff are participating on a statewide workgroup to consider solutions to meeting peer review requirements.

Appendix A

Office of Audit Services
Allocation of FTE Auditors/Audit Days
December 1, 2006 through June 30, 2008 (Year 1)
As of December 1, 2006

Audit Initiative	Positions	Total Actual Audit Days Available*
School Districts	7.0	1,400
Internal Audits of Department Operations	2.0	400
Fraud, Waste and Abuse Hotline Follow-up	2.0	400
Review of Financial Statements, Single Audit Reports, and other Fiscal data	3.0	600
Boards of Cooperative Educational Services	1.0	200
Audits of Partner Organizations	1.0	200
Technical Assistance and Training	1.0	200
Total Positions/Audit Days	17.0	3400
Management Support Staff and Paraprofessional	4.0 1.0
Total FTE Positions	22.0

*    One FTE auditor equates to 200 audit days per year.