Board Never Received Financials on Time
By Hank Russell
A recent report from the New York State Comptroller’s office found that local school district officials submitted financial information to the board that was reportedly inaccurate, incomplete and not submitted on time.
Officials from the Riverhead Central School District did not provide the Board with complete and accurate information in a timely manner to enable them to monitor the District’s financial operations, according to the report. Other findings were as follows:
- Reports to the Board were not always accurate, complete and submitted in a timely manner. Financial reports submitted in six of the 22 months to the Board were between 60 and 107 days after month’s end. For example, the July 2022 reports were provided to the Board at the November 2022 meeting, three months later
- While all 141 bank transfers totaling $127 million we reviewed were between District bank accounts, none of the transfers were reviewed and approved by someone other than the Treasurer prior to the transaction taking place. This occurred because the Treasurer’s duties were not properly segregated, compensating controls were not established and the Treasurer’s work was not reviewed
- Budget transfers were not properly approved or reported to the Board. None of the 47 budget transfers totaling $12 3 million we reviewed were approved by the Board.
“When the Board is not provided with sufficient information, and financial reports are not accurate, complete and submitted in a timely manner, the Board’s ability to adequately and effectively monitor the District’s financial operations is limited,” the report stated.
In addition, the bank activity reports that were provided to the Board were not accurate The auditors compared the bank balance from the bank statements to the bank balance reported on the Treasurer’s report for the audit period and determined the following discrepancies:
- The November 2023 month-end balance on the federal fund bank statement was $104,330, but the Treasurer reported $620,602. The book balance of the account was overdrawn as of November 30, 2023
- The December 2023 month-end balance on the investment account bank statement was $5,979,618, but the Treasurer reported $5,990,482, a difference of $10,864. Interest earned per the bank statement was $26,771, but the Treasurer reported $37,635. The auditors reviewed journal entries and determined the interest was recorded correctly in the general ledger
- The March 2024 month-end balance on the library account bank statement was $1,135,487, but the Treasurer reported $10,973, a difference of $1,124,514. The difference was due to an outstanding check that did not clear the bank until the following month. The Treasurer reported $0 in outstanding checks on the March Treasurer’s report
There were also three other instances that stood out, according to the auditors, which reviewed the district’s finances between July 1, 2022 and April 30, 2024:
- In September 2023, approximately $4.4 million was transferred from the money market account into the payroll bank account The Treasurer’s report showed the $4.4 million disbursed from the one account, but $6 5 million deposited into the payroll bank account The Treasurer used the total deposits and credits from the bank statement instead of the actual amounts recorded in the general ledger In addition, although the Treasurer reported the correct amount for transfers out, he reported it as disbursements related to payroll rather than on the transfer to payroll account line
- In November 2023, there were two transfers totaling $4.2 million from the money market account into the general fund checking account The Treasurer’s report showed the $4.2 million transferred from the money market account, but $4.4 million transferred into the checking account Had the transfer been reported accurately, the report would have shown the deficit book balance in the checking account To reconcile the account, the Treasurer reduced the outstanding check amount by $200,000
- Also, in November 2023 there were two transfers totaling $328,000 from a money market account into the special aid account The Treasurer reported $328,000 transferred out of the money market, but $844,000 transferred into the other account Had the transfer in been reported accurately, the report would have shown the deficit book balance in the special aid account To reconcile the account, the Treasurer increased the bank balance by $516,000 However, the transfer into this account for $516,000 was made the following month.
“Because no one reviewed the Treasurer’s work, errors and irregularities occurred and reports to the Board were not accurate, complete and submitted in a timely manner,” the report said. “When financial reports are not accurate, complete and submitted in a timely manner, the Board’s ability to adequately and effectively monitor and manage the District’s financial resources is limited.”
The comptroller’s office made the following recommendations:
- Submit complete and accurate monthly financial reports to the Board in a timely manner.
- Perform formal bank reconciliations.
- Assign the Assistant Superintendent to monitor and review the Treasurer’s reconciliations and reports.
- Develop policies and procedures for day-to-day financial operations, including electronic transfers and payments.
- Ensure electronic payments and transfers are properly reviewed and approved.
- Make sure the Assistant Superintendent segregates the Treasurer’s duties or provides greater oversight by establishing compensating controls to routinely monitor and review the Treasurer’s work and ensure electronic payments are audited by the claims auditor.
In response, Board President James Scudder and School Superintendent Dr. Robert M. Hagan sent a letter to the comptroller’s office. “We found the audit review process to be a collaborative effort with a thorough review of our financial operations and governance practices,” they wrote.
Scudder and Hagan said they found the audit’s findings and recommendations “to be accurate” and noted the board is responding to the recommendations by starting to prepare “a formal written Corrective Action Plan.”