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DiNapoli’s Office Audits Garden City School District

Officials Implementing Comptroller’s Recommendations

An audit of the Garden City School District has revealed school officials used available fund balance monies to increase the Employee Benefits Accrued Liability Reserve (EBALR) to $8.1 million as of June 2007 while the district’s EBALR liability totaled only $2.9 million. The district overfunded the liability by $5.1 million or 175 percent, according to New York State Comptroller Tom DiNapoli.

School officials, who agree that the comptroller’s 18 recommendations could help ensure district operations reflect best practice, said that since the 2007-2008 school year, the district no longer allocates interest earnings from the Employee Benefits Accrued Liability Reserve to the general fund; instead, officials said, these monies are now credited back to the EBALR, as required by the comptroller.

School officials continue to have differences of opinion with the Office of the State Comptroller concerning EBALR and the board’s authorization of salaries and fringe benefits.

In their response, district officials state Garden City established the EBALR after receiving expert guidance concerning the requirement that public agencies accrue reserves in contemplation of significant liabilities for post-employment health benefits.

“As recently as June 24, Comptroller DiNapoli stated, ‘While we are facing difficult times, now is not the time to push this issue aside.’ The school district held the well-intentioned belief that the EBLAR was the only reserve available for accruing funds for a liability the comptroller has called ‘staggering’ (Newsday June 24, 2009),” school officials state. “Garden City was far from alone in this action; 250 other districts in New York State approached this issue in the same way, thereby demonstrating that there is considerable confusion about how post-employment health benefits may be funded.”

School district officials recognize though that the comptroller has the “final say” in the matter and is already identifying ways in which the EBALR surplus can be used to finance non-recurring expenses or pay off debt.

The school district also maintains that all compensation and fringe benefits provided to employees have been consistently authorized by the board at public meetings, with full disclosure to the public, the district’s response reads. Official minutes contained documentation of such practices. Furthermore, the Board of Education always received exhibits identifying specific compensation for employees before votes were taken, and these exhibits were always posted and accessible to the public at board meetings, district officials further state.

The district now includes salary information directly in board resolutions, rather than as attachments.

Further, state auditors found there were no written procedures for using electronic signatures or for authorizing and reviewing online banking transactions. District officials did not include $1.6 million in annual salaries paid to 13 employees in board minutes, the audit states. Further, the district also paid five vendors a total of $732,571 for professional services without soliciting competitive proposals.

In response, school district officials said that separate signature discs are provided for the treasurer and deputy treasurer and bank reconciliations are performed according to the standards identified in the audit report. Fringe benefits provided to employees are covered by districtwide policy, resolution, employment contracts or collective bargaining agreements and overtime must be pre-authorized and approved in writing.

As recommended in the audit report, the school district has revised its purchasing policy and practices to ensure that Request for Proposals (RFP) are solicited and carefully reviewed before purchasing professional services.

School officials further note that controls have been “heightened” concerning the issuing of confirming purchase orders and new procedures have been implemented to ensure effective controls over fuel purchasing and dispensing.

An extensive Disaster Recovery Plan for information technology has been initiated, with full implementation scheduled to be complete in a few months. The district also revised its protocols for controlling access to computer applications to ensure that accounts are activated and deactivated on a timely basis.

“The school district is very pleased to note that the audit contains no findings of fraud, misappropriation of funds, financial wrongdoings or other improprieties,” school officials said in a statement.

The Garden City School District has already implemented, or is currently in the process of implementing, all 18 recommendations contained in the audit. The district had already begun to implement many of the recommendations during the audit period.

DiNapoli’s office also completed audits of the Merrick Union Free School District and the New Hyde Park–Garden City Park Union Free School District.

“My office’s audits of school districts and BOCES help schools improve their financial management practices,” DiNapoli said. “These audits are tools for schools to make sure proper policies and procedures are in place to protect taxpayer dollars and provide students with the best possible education.”

To view the audit, visit www.osc. state.ny.us/localgov/audits/index.htm. If you have any questions or would like a comment from the comptroller’s office regarding the audits above, call Emily DeSantis at 518-474-4015.