The New York State Comptroller's audit of the Mineola School District said that in a year's period from July 2004 to June 2005 and in some instances prior to 2004, the district had not controlled or properly documented how taxpayers' money was being spent or ensured that the district was getting the most for its money when purchasing goods and services. However, the district says the comptroller's report mischaracterizes much of what has taken place and fails to recognize current practices initiated to ensure district finances.

The district had been audited by the state after former assistant superintendent for finance and operations John Jackson pled guilty to bribe receiving and official misconduct. The comptroller at the time the school district was audited in 2006 was Alan Hevesi. Ironically, the current comptroller is Tom DiNapoli, who became the youngest person in New York State to hold public office when he was elected to the Mineola School Board in 1972 at the age of 18.

"Our auditors found that past practices of the district allowed taxpayers' funds to be used for questionable purposes. I am encouraged by the positive changes that auditors found at the district and by the board of education's serious consideration to the auditors' recommendations," said DiNapoli.

In a letter to the state comptroller's office in response to the audit report dated January 3, Mineola School Board President Mary Ellen Williams and Superintendent of Schools Dr. Larry Licopoli state that the administration and the board of education, starting in July 2004, have already addressed the internal controls that were lacking. "A substantial portion of the audit fails to identify the numerous steps already taken to ensure the district's sound financial management prior to the issuance of the report...the report creates a false perception that the board was not involved in the ongoing efforts to improve financial controls and practices," the letter stated.

Among the changes the district put in place was contracting with independent consultants to advise the district on its internal controls, an internal review of district accounts and a forensic audit of the district's Capital and Microband accounts conducted by the firm of Callaghan & Nawrocki. The district also points out that its external auditor, internal claims auditor and treasurer were replaced and the district hired a new assistant business administrator and new assistant superintendent for finance and operations.

Despite the district efforts in improving internal controls and creating a business office that is accountable to the taxpayers, the state's audit points out flaws that existed from July 2004 to June 2005 and in some instances prior to 2004. According to the audit, $95,275 in questionable payments was made to some contractors and more than $1.6 million in contracts were not awarded through a competitive bidding process.

In addition, the audit states that of the major changes the district made was to improve policies for seeking competitive proposals as well as re-bidding contracts for insurance coverage and security services, ultimately decreasing insurance costs by $369,000 and the hourly rate for security services by more than half.

According to the state's audit report, the district could not account for $564,332 collected in its Microband account, the account funded from lease agreements the district had with telecommunications companies for use for district's educational channels, due to poor records. According to the audit report, the district's independent audit firm has accounted for $256,000 and is currently working to identify the remaining funds. State auditors also found that money was spent from this account with little or no oversight.

However, according to the district's independent audit firm, Callaghan & Nawrocki, it is incorrect to conclude that there was an apparent shortage of $564,331 and that from 1999 through 2005, all funds from the Microband account can be accounted for. According to the district, the independent audit firm has accounted for the $564,331 by proving that $570,000 from the Microband account has been transferred into the district's General Fund.

The state audit report also determined that most of the money from this account was spent for technology purchases and construction projects that were approved by Jackson. When auditors examined 19 payments, totaling $522,383 made from the account, they found that six payments totaling $95,275 were questionable and had no prior approval from the superintendent, the school board or any of the school principals.

In addition, the audit found that the district contracts for converting a janitorial closet into a handicapped-accessible bathroom and installing radiator covers were deliberately split so they would be under the $20,000 legal threshold for competitive bidding and several of the companies awarded the work had the same owner and the district's checks were cashed at the same time, at the same check cashing facility and by the same person.

According to the letter to the state comptroller by Williams and Dr. Licopoli, the district has met with the staff of the Nassau County District Attorney regarding pursuing vendor bills.

In addition, the audit report found that $152,000 was paid for health insurance for independent contractors who were not entitled to this benefit because they were not actually district employees including IT (Information Technology) consultants and the former internal claims auditor. According to the district, the former internal claims auditor was granted the benefit by Jackson without formal board approval and the IT consultants had been receiving the benefit since the mid-1990s was a way to compensate them for low salaries.

The state auditors' report also indicates that tax-sheltered annuity payments were not property administered resulting in administrators receiving unearned or untimely contributions. However, according to the district, the opinion of the district's legal counsel, is that the employees were entitled to the contributions as part of the district legal obligation.

In addition, the report concluded that although Jackson went on voluntary unpaid leave in Jan. 2005 following his arrest, the prior month, in Dec. 2004, he received a full year benefit of his 403b tax-sheltered annuity plan. The letter to the state comptroller by Williams and Dr. Licopoli states that, although Jackson was arrested in Jan. 2005, the district did not know whether he was involved in any illegal activities, but it was anticipated that he would be back again at work for the good portion of the remainder of the school year. Because the 403b contribution to Jackson's tax-sheltered annuity payment was prepaid, the district is working with the district attorney's office to recover the funds, which amounts to $2,613.

The state comptroller's office stated it would come back to the district within the next year, as per the district's request, to evaluate the progress the district has made in response to the audit recommendations.