oversight

Wyandanch Union Free School District's Elementary and Secondary Education Act Title I, Part A and Title II Non-Salary Expenditures.

Published by the Department of Education, Office of Inspector General on 2005-09-14.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                           U.S. DEPARTMENT OF EDUCATION
                                OFFICE OF INSPECTOR GENERAL
                                      32 Old Slip, 26th Floor
                                        Financial Square
                                    New York, New York 10005
                                     Telephone (646) 428-3860 Fax (646) 428-3868



                                                September 14, 2005


Richard P. Mills
Commissioner of Education
New York State Education Department
89 Washington Avenue
Albany, NY 12234

Dear Commissioner Mills:

This Final Audit Report, Control Number ED-OIG/A02-E0031 presents the results of
our audit, Wyandanch Union Free School District’s (Wyandanch) Elementary and
Secondary Education Act (ESEA) Title I, Part A (Title I) and Title II1 Non-Salary
Expenditures for the period July 1, 1999, through June 30, 2004. Our objective was to
determine whether Wyandanch’s ESEA Title I and Title II non-salary expenditures,
distributed through the New York State Department of Education (NYSED), were
allowable in accordance with applicable laws and regulations. Due to issues arising from
our review of data reliability, this report also addresses salary-related expenditures.

We provided a draft of this report to NYSED. In its response to our draft report, NYSED
agreed with our findings and recommendations with the exception of Finding 1. We
summarized NYSED’s comments after the recommendation sections of the report and
included the entire response as an Attachment to the report.

                                               BACKGROUND

Wyandanch is a suburban school district located in Suffolk County, one of the two
counties in Long Island, New York. Wyandanch served approximately 2,300 students in
three schools, and it has a high percentage of students who qualified for free and reduced
price lunches under the National School Lunch Program. Wyandanch also experienced
high personnel turnover.

The Title I program provides Federal financial assistance through state educational

1
 Under ESEA, Wyandanch received Title II, Part B grant for the period July 1, 1999, through June 30,
2002. ESEA was reauthorized as the No Child Behind Act (NCLB) on January 8, 2002. Under NCLB,
Wyandanch received Title II, Part A and Part D grants from July 1, 2002, through June 30, 2004.
        Our mission is to ensure equal access to education and to promote educational excellence throughout the Nation.
Audit of Wyandanch UFSD’s                                                               Final Report
Title I and Title II Non-Salary Expenditures                                      ED-OIG/A02-E0031

agencies to local educational agencies with high numbers of poor children, to help ensure
that all children meet challenging state academic content and student academic
achievement standards. Title II programs are intended to increase student academic
achievement through strategies, such as improving teacher and principal quality; and to
provide assistance to states and localities for the implementation and support of a
comprehensive system that effectively uses technology in elementary and secondary
schools to improve student academic achievement. Wyandanch received a total of $6.6
million in Title I and Title II program funds during our audit period July 1, 1999, through
June 30, 2004.

                                        AUDIT RESULTS

We found Wyandanch’s records for $6.6 million of Title I and Title II expenditures were
unauditable. Specifically, we noted that Wyandanch had weak controls over its
accounting functions, including reconciliations, re-classifications, and recording of
expenditures for Title I and Title II funds. Wyandanch did not perform, or maintain,
reconciliations that would have permitted the tracing of Title I and Title II funds from
Wyandanch’s financial system, the Lawlor system (Lawlor), to the NYSED Financial
Expenditures Reports (FS-10-F Reports). Because of the systemic weaknesses we
identified, other U.S. Department of Education (ED) direct and flow- through funds could
also be at risk. On March 15, 2005, we issued an Interim Audit Memorandum (IAM) to
ED officials to take immediate action to protect $6.6 million of Title I and Title II funds,
and $5.9 million of other ED direct and flow-through funds Wyandanch received during
our audit period.

We also found that Wyandanch reported $165,326 of duplicate expenditures on both the
1999-2000 Title I, Part A Program Improvement program and the 1999-2000
Comprehensive School Reform program.2 In addition, we noted that Wyandanch had
significant internal control weaknesses that adversely affected Wyandanch’s ability to
properly administer Title I and Title II funds.

In other matters, we found that Wyandanch did not submit any of its Single Audit reports
to the Federal Audit Clearinghouse as required by Office of Management and Budget
(OMB) Circular A-133.




2
 The Program Improvement program was part of the Title I, Part A grant; and the Comprehensive School
Reform program was not part of Title I but a separate grant under ESEA, for the 1999-2000 year.
                                                  2
Audit of Wyandanch UFSD’s                                                                   Final Report
Title I and Title II Non-Salary Expenditures                                          ED-OIG/A02-E0031




                             FINDING 1
        Wyandanch’s Records For $6.6 Million of Title I And Title II
                    Expenditures Were Unauditable

We found that the $6.6 million of Title I and Title II expenditures reported on the
NYSED FS-10-F Reports, were inadequately supported by Wyandanch’s financial
system, the Lawlor system. Although our objective focused on non-salary expenditures,
both salary and non-salary expenditures were inadequately supported. Of the $6.6
million reported on the FS-10-F Reports, $591,515 was for non-salary expenditures.

We found material differences between amounts recorded in Title I and Title II accounts
in Lawlor and claims submitted to NYSED on the FS-10-F Reports. For example, the
amount of 2000-2001 Title I supplies and materials expenses reported on the FS-10-F
Report was $28,865, while the amount recorded in Lawlor was $15,624, a difference of
$13,241, or 46 percent. Also, $809,042 of professional salaries was reported on the 2001-
2002 Title I FS-10-F Report, but the amount recorded in Lawlor was $267,634, a
difference of $541,408, or 67 percent.

Due to the discrepancies noted between the Lawlor data and the FS-10-F Reports, we
requested reconciliations for the Title I and Title II expenditures between Lawlor and the
FS-10-F Reports for our audit period. Since Wyandanch did not perform or maintain
these reconciliations on a regular basis, the Business Manager had to create them.

We attempted to construct the population of Title I and Title II expenses claimed on the
FS-10-F Reports using the reconciliations provided by Wyandanch. However, these
reconciliations contained numerous errors, omissions, and inaccurately adjusted balances.
For example, the reconciliation for the 2001-2002 Title I, Part A, Program Improvement
program showed $92,456 of Board of Cooperative Educational Services expenses,3 but
this amount was not claimed on the FS-10-F Report.

Wyandanch did not make journal entries in Lawlor to reflect the reclassification of
expenses, and it did not routinely maintain an audit trail between the Lawlor data and the
FS-10-F Report submissions. According to a Wyandanch official, the Lawlor system, as
it functioned during our audit period, did not allow inter-fund journal entries in the
expenditure subsidiary ledger. Specifically, transfers could not be made from the Special
Aid Fund accounts to the General Fund accounts or vice versa.4



3
 Regional BOCES offers services that a single school district would not routinely provide. Services
offered include systems technical support, interpreters, and compiling student information.
4
 Wyandanch follows the New York State Uniform System of Accounts to set up different account codes in
Lawlor for each of the five types of funds: Special Aid Fund, General Fund, Cafeteria Fund, Capital Project
Fund, and Trust & Agency Fund. The Special Aid Fund is used to account for ED grants.
                                                    3
Audit of Wyandanch UFSD’s                                                             Final Report
Title I and Title II Non-Salary Expenditures                                    ED-OIG/A02-E0031

In addition, our review of Wyandanch’s reconciliations revealed that other non-Title I
and non-Title II expenses were charged to the Title I and Tile II account codes in Lawlor.
 For example, the reconciliation for the 2000-2001 Title I instructional staff showed
$14,456, but this amount was not claimed on the FS-10-F Report. According to
Wyandanch’s Business Manager, the $14, 456 should have been charged to the General
Fund account for regular education, but instead it was charged to the Special Aid Fund
account. Wyandanch did not reclassify any of the misclassified expenses to the correct
accounts in Lawlor.

The regulation at 34 CFR § 80.20, Standards for financial management systems (2003),
states “(a) . . . Fiscal control . . . must be sufficient to: . . . (2) Permit the tracing of funds
to a level of expenditures adequate to establish that such funds have not been used in
violation of the restrictions and prohibitions of applicable statutes.”

Pursuant to 34 CFR § 76.702, a state and its sub-grantees must use fiscal control and fund
accounting procedures that insure proper disbursement of and accounting for Federal
funds.

Wyandanch’s records for Title I and Title II were unauditable because Wyandanch did
not effectively maintain records that would permit the tracing of funds to Title I and Title
II expenditures. As a result we were unable to obtain a complete Title I and Title II
population or determine whether the $6.6 million in Title I and Title II funds claimed for
the period July 1, 1999, through June 30, 2004, were used for their intended purpose
under Title I and Title II requirements. We concluded that Wyandanch’s inability to
provide complete and accurate Lawlor data in a timely manner, or develop and maintain
accurate reconciliations for Title I and Title II expenditures, reveals that the Title I and
Title II grant funds were not properly administered. Further, $5.9 million of other ED
direct and flow-through funds for the period July 1, 1999, through June 30, 2004, could
also be at risk of not being administered properly.

RECOMMENDATIONS

We recommend that the Assistant Secretary for the Office of Elementary and Secondary
Education (OESE), instruct NYSED to require Wyandanch to:

1.1      Provide proper support for the $6.6 million in Title I and Title II expenditures for
         the audit period, and return any unsupported amounts to ED.
1.2      Improve the financial system and establish internal controls to ensure the
         financial system adequately identifies the source and application of Title I, Title
         II, and other ED direct and flow-through funds.

NYSED’s Comments

NYSED disagreed with our finding, but agreed with our recommendations. In its
response, NYSED stated that two different Certified Public Accounting (CPA) firms, in
addition to the Office of the New York State Comptroller, audited and reviewed
Wyandanch’s records. Therefore, it did not believe that $6.6 million of Title I and Title
                                                 4
Audit of Wyandanch UFSD’s                                                          Final Report
Title I and Title II Non-Salary Expenditures                                 ED-OIG/A02-E0031

II expenditures were unauditable. However, NYSED concurred with our
recommendations. NYSED indicated it would require Wyandach to provide additional
support for the $6.6 million, and ensure that Wyandanch improves its financial system
and establishes internal controls so that the source and application of ED grant funds
could be adequately identified.

OIG’s Response

Our position remains unchanged. Wyandanch’s records did not provide an adequate
audit trail to allow the tracing of Title I and Title II expenditures claimed on the FS-10-F
Reports. As a result, we were prevented from obtaining a complete Title I and Title II
population for our audit period. NYSED indicated that two CPA firms and the Office of
the New York State Comptroller reviewed Wyandanch’s records. According to the CPA
reports, for the four-year period, July 1, 1999 through June 30, 2003, “. . .the district’s
documentation, regarding the Title I program, was non-existent.” The New York State
Office of the State Comptroller’s audit report had not been published as of September 7,
2005, and NYSED did not provide further documentation to support its response.


                                      FINDING 2
                            Questioned Duplicate Expenditure

We found that Wyandanch submitted identical expenditure claims for two ED grant
programs, 1999-2000 Title I, Part A Program Improvement program5 and the 1999-2000
Comprehensive School Reform program.6 We compared the FS-10-F Reports for both
programs and found that Wyandanch claimed $165,326 for each of them. The
documentation supporting each of the $165,326 grant expenditures were identical.

In January 2001, the Interim Superintendent at Wyandanch certified and filed the FS-10-
F Report for the Title I, part A Program Improvement program with NYSED. The FS-
10-F Report was processed and approved by NYSED. In March 2001, NYSED mailed a
delinquency notice to Wyandanch in relation to their failure to file the FS-10-F Report
for the Comprehensive School Reform program. The delinquency notice indicated that a
stop was placed on all payments for Federal and State Categorical grants awarded to
Wyandanch.
Wyandanch’s Business Manager responded to the delinquency notice by notifying
NYSED that the expenses for both programs were identical. Despite this, NYSED
advised Wyandanch to file the FS-10-F Report for the Comprehensive School Reform
program. Wyandanch filed the FS-10- F Report in April 2001. NYSED processed and

5
 NYSED’s project number for the 1999-2000 Program Improvement program was 0122-00-1210. During
1999-2000, this program was part of Title I, Part A.
6
 NYSED’s project number for the 1999-2000 Comprehensive School Reform program was 0223-00-1210.
During 1999-2000, this program was a separate program from Title I, Part A.

                                               5
Audit of Wyandanch UFSD’s                                                       Final Report
Title I and Title II Non-Salary Expenditures                              ED-OIG/A02-E0031

approved the delinquent FS-10-F Report containing the same detail expenditures as those
reported for Title I, Part A Program Improvement program. The stop was lifted and
Wyandanch received final payment for both the Title I, Part A Program Improvement
program and the Comprehensive School Reform program. When we questioned
Wyandanch officials about the expenditures for the two programs, they admitted they had
filed duplicate expenditures and agreed to return the $165,326.

RECOMMENDATIONS

We recommended that the Assistant Secretary for OESE, instruct NYSED to require
Wyandanch to:

2.1      Return the duplicate ED grant expenditures of $165,326, plus applicable interest,
         to ED.
2.2      Review its accounting records to determine if there were other duplicate
         expenditures submitted for payments during the period of July 1, 1999, through
         June 30, 2004, and return any such funds to ED.

NYSED’s Comments

NYSED concurred with our finding and recommendations, but stated that it had not
advised Wyandanch to submit duplicate expenditures. NYSED further stated that it
would require Wyandanch to return the $165,326 to ED, and request that Wyandanch
review its accounting records for other duplicate expenditures.


                              FINDING 3
          Wyandanch Had Significant Internal Control Weaknesses

We found that Wyandanch had significant internal control weaknesses that placed ED
funds at risk of being misused. Specifically, we identified the following internal control
weaknesses:
   •      Lack of segregation of duties;
   •      Lack of periodic reconciliations and cash management oversight;
   •      Obsolete policy manual, and failure to follow the policy manual; and
   •      Ineffective and inefficient Board of Education (Board).

Lack of Segregation of Duties
Our audit noted a lack of segregation of duties existed from May 2003 to September
2004. During this period, one employee was performing the tasks of two positions. The
tasks that this individual performed included, but was not limited to the following:
    •      Prepared FS-10-F Reports;
    •      Prepared the Requests for Funds for Federal or State Project form;
    •      Entered budget information into Lawlor;
    •      Prepared checks after the purchase orders and the invoices were approved for
           payments;
                                               6
Audit of Wyandanch UFSD’s                                                                  Final Report
Title I and Title II Non-Salary Expenditures                                         ED-OIG/A02-E0031

    •      Prepared bank reconciliations;
    •      Signed checks; and
    •      Monitored cash flow.

Since one individual performed all of the above functions there was no segregation of
duties to ensure ED funds were adequately safeguarded.

Lack of Periodic Reconciliations of Accounts and Cash Management Oversight
Our review of the Independent Public Accountant (IPA) reports for fiscal years 2000,
2001, and 2002 indicated Wyandanch’s bank statements had not been reconciled to the
appropriate general ledger controls timely. During our audit period Wyandanch
experienced high personnel turnover, as evidenced by having three different Treasurers
from 2000 to 2005. Based on our discussion with a Wyandanch employee responsible
for signing checks, reconciling bank statements, and monitoring cash flow, we
determined that the cash flow and bank reconciliations were not reviewed by any
Wyandanch official prior to submission to the Board on a monthly basis. Therefore,
Wyandanch lacked an appropriate level of supervisory review of cash management
activities.

Obsolete Policy Manual and Failure To Follow The Policy Manual
Wyandanch’s policy manual, which had not been updated for 16 years, did not
appropriately reflect changes in laws, regulations, and guidance affecting ED grants. For
example, the purchasing section of the policy manual did not include the current
competitive bidding procedures as required by the New York State General Municipal
Law. Section 103 of the General Municipal law states that there must be formal bidding,
with legal advertisement, if a single item to be purchased exceeds $10,000 or the
aggregate annual purchases of a reasonable commodity grouping will exceed that figure
(Opinion of the State Comptroller 59-647). The limitation on public works contracts is
$20,000 before formal advertisement is required. However, the purchasing section of the
policy manual indicated $5,000 for single item bidding and $7,000 as a limitation on
public works contracts.

In addition, Wyandanch’s personnel did not follow its policy manual. For example, the
policy manual required a packing slip to be attached to the documentation when the
purchase orders and invoices are submitted for payment. We found that Wyandanch
personnel did not always attach the required packing slip.

Inadequate Oversight by the Board
The Wyandanch Board did not always perform an employee background check and
fingerprinting, as required by New York State Law. Our review of the IPA report for the
period July 1, 2003 to June 30, 2004, revealed that some employees did not have
personnel files, nor had they received clearance from the New York State Central
Registry, as required by New York State School law.7 From our review of the Board
meeting minutes, we noted that the Board failed to do a background check and

7
 Among the required qualifications, all persons holding teaching position must be cleared through the NYS
Central Registry of Child Abuse and fingerprints submitted to required authorities.
                                                   7
Audit of Wyandanch UFSD’s                                                             Final Report
Title I and Title II Non-Salary Expenditures                                    ED-OIG/A02-E0031

fingerprinting when it appointed one of the current employees.

We also found that the Wyandanch Board approved resolutions for the hiring of
unqualified personnel. The hiring procedure involved Wyandanch’s Superintendent
recommending qualified candidates, by resolution, to the Board for hiring. Our review of
the Board meeting minutes, related documents, and interviews of key Wyandanch
officials, disclosed that individual Wyandanch Board members pressured the
Superintendent to put forth, for resolution, friends and relatives of Board members who
were not always qualified for the vacancies. Wyandanch Board’s approval of resolutions
to hire unqualified personnel could result in non-compliance with the teacher
qualification requirements under Title I.

According to OMB Circular A-133 §___. 300 (1997), “The auditee shall . . . (b)
Maintain internal control over Federal programs that provides reasonable assurance that
the auditee is managing Federal awards in compliance with laws, regulations, and the
provisions of contracts or grant agreements that could have a material effect on each of
its Federal programs.”

Further, OMB Circular A-133 Compliance Supplement, Part 6 (2004), provides a
description of the components of internal control and examples of characteristics
common to compliance requirements:

         Control Activities are the policies and procedures that help ensure that
         management’s directives are carried out.
            •     Operating policies and procedures clearly written and
                  communicated.
            •     Procedures in place to implement changes in laws, regulations,
                  guidance, and funding agreements affecting Federal awards . . .
            •     Adequate segregation of duties provided between performance,
                  review, and recordkeeping of a task . . .
            •     Appropriate level of supervisory review of cash managements
                  activities.

Background checks per New York State Education Law Chapter 147 § 2 (2001)
Subdivision 39 of Section 1604 of the education law, as added by chapter 180 of the
laws of 2000 is amended to read as follows:

             39. a. Shall require, for purposes of a criminal history record check, the
         fingerprinting of all prospective employees pursuant to section three
         thousand thirty-five of this chapter, who do not hold valid clearance pursuant
         to such section or pursuant to section three thousand four-b of this chapter or
         section five hundred nine-cc or twelve hundred twenty-nine-d of the vehicle
         and traffic law . . . Every set of fingerprints taken pursuant to this subdivision
         shall be promptly submitted to the commissioner for purposes of clearance
         for employment.
             b. Upon the recommendation of the superintendent, the trustees may

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Audit of Wyandanch UFSD’s                                                                        Final Report
Title I and Title II Non-Salary Expenditures                                               ED-OIG/A02-E0031

           conditionally appoint a prospective employee. A request for conditional
           clearance shall be forwared to the commissioner along with the prospective
           employee’s fingerprints, as required by paragraph a of this subdivision. Such
           appointment shall not commence until notification by the commissioner that
           the prospective employee has been conditionally cleared for employement
           and shall terminate when the prospective employer is notified of a
           determination by the commissioner to grant or deny clearance, provided that
           if clearance is granted, the appointment shall continue and the condition
           status shall be removed.

The lack of segregation of duties, inadequate oversight of cash management activities, an
obsolete policy manual, and failure to follow its policy manual could lead to the misuse
of ED grant funds. Also, the Wyandanch Board’s failure to ensure that background
checks and fingerprinting were done for employees, coupled with management hiring
unqualified individuals to fill vacancies could harm the school children.
Wyandanch had weak internal controls because the Board did not provide adequate
oversight to ensure that employees were qualified and trained for their positions. In
addition, the policy manual was not updated appropriately. The Wyandanch Board
consisted of seven members elected by the qualified voters of the school district at the
annual election as prescribed by law. Current regulations do not require Board members
to be trained in management accountability. Recently, the New York State Office of the
State Comptroller, in cooperation with a coalition of education organizations, drafted a
Five-Point Plan for School Financial Accountability legislation.8 One of the points in the
legislation is to require that all school boards receive six hours of training in financial
oversight, accountability, and fiduciary responsibilities.

The significant lack of proper management by the Board, over Wyandanch’s affairs,
could have an adverse effect on Wyandanch’s ability to administer Title I and Title II
funds, as well as other Federal funds.




8
    This five-point plan bill was passed by the New York State Legislature in June 2005.
                                                      9
Audit of Wyandanch UFSD’s                                                       Final Report
Title I and Title II Non-Salary Expenditures                              ED-OIG/A02-E0031

RECOMMENDATIONS

We recommend that the Assistant Secretary for OESE, instruct NYSED to require
Wyandanch to:

3.1      Establish and implement adequate internal controls, for the segregation of duties,
         oversight of cash payments, and proper review of payment documentation.
3.2      Ensure that all bank statements and financial reports are reviewed for accuracy
         prior to submission to the Board.
3.3      Update the policy manual to reflect the changes in laws, regulations, guidance,
         and funding agreements affecting ED grants, and ensure the policy manual is
         implemented.
3.4      Provide necessary management accountability training to all Board members and
         adhere to laws and regulations related to hiring experienced candidates to fill
         vacant positions.

NYSED’s Comments

NYSED agreed with our finding and recommendations. NYSED indicated in its
response that it would work with Wyandanch to ensure all recommendations are
implemented.

                                        OTHER MATTERS

Wyandanch did not submit any of its Single Audit reports to the Federal Audit
Clearinghouse as required by OMB Circular A-133, Subpart C §__.320. Wyandanch
submitted its Single Audit reports to NYSED, but it failed to submit them to the Federal
Audit Clearinghouse.

                      OBJECTIVE, SCOPE, AND METHODOLOGY

The objective of our audit was to determine whether Wyandanch’s ESEA Title I and
Title II non-salary expenditures for the period July 1, 1999, through June 30, 2004, were
allowable in accordance with applicable laws and regulations.
To accomplish our audit objectives, we

  •      Reviewed Wyandanch’s Title I and Title II approved grant applications and the
         related budgets;
  •      Interviewed various Wyandanch officials and NYSED officials;
  •      Reviewed and analyzed Wyandanch’s FS-10-F Reports expenditures charged to
         the Title I and Title II grants during the audit period;
  •      Reviewed Wyandanch’s written policy manual and related purchase
         documentation to gain an understanding of the purchasing process;
  •      Reviewed selected Wyandanch Board meeting minutes and related documents;
  •      Reviewed the IPA reports for Wyandanch’s fiscal years 2000 through 2004, and
         NYSED reports on Wyandanch for the period July 1, 1998, through March 31,
         2000.
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Audit of Wyandanch UFSD’s                                                        Final Report
Title I and Title II Non-Salary Expenditures                               ED-OIG/A02-E0031



We also reviewed the FS-10-F Report of the 1999-2000 Comprehensive School Reform
program since the expenditure amount was exactly the same as the 1999-2000 Title I,
Part A Program Improvement program.

To ensure the completeness and accuracy of the data, we obtained from Lawlor all Title I
and Title II salary and non-salary expenditures for the period July 1, 1999, through June
30, 2004. We attempted to construct the population of all Title I and Title II charges
claimed on the FS-10-F Reports using the Lawlor data and the reconciliations provided
by Wyandanch. Our analyses determined that the Lawlor data was incomplete and we
noted numerous errors and omissions on the reconciliations. As a result, we were unable
to obtain a complete Title I and Title II population.

On March 15, 2005, we issued an IAM bringing to the attention of the U.S. Department
of Education, Office of Elementary and Secondary Education, the significant weaknesses
we found in Wyandanch’s utilization of the Lawlor system. An exit conference was held
with Wyandanch officials on April 14, 2005.

Our audit was conducted in accordance with generally accepted government auditing
standards appropriate to the limited scope of the review described above.

                                ADMINISTRATIVE MATTERS

Statements that managerial practices need improvements, as well as other conclusions
and recommendations in this report, represent the opinions of the Office of Inspector
General. Determinations of corrective action to be taken will be made by the appropriate
Department of Education officials.

If you have any additional comments or information that you believe may have a bearing
on the resolution of this audit, you should send them directly to the following Education
Department official, who will consider them before taking final Departmental action on
this audit:

                                    Henry L. Johnson
                                    Assistant Secretary
                                    Office of Elementary and Secondary Education
                                    U.S. Department of Education
                                    Federal Building No. 6, Room 3W315
                                    400 Maryland Avenue, SW
                                    Washington, D.C. 20202

It is the policy of the U. S. Department of Education to expedite the resolution of audits
by initiating timely action on the findings and recommendations contained therein.
Therefore, receipt of your comments within 30 days would be appreciated.




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Audit of Wyandanch UFSD’s                                                       Final Report
Title I and Title II Non-Salary Expenditures                              ED-OIG/A02-E0031

In accordance with the Freedom of Information Act (5 U.S.C. §552), reports issued by
the Office of Inspector General are available to members of the press and general public
to the extent information contained therein is not subject to exemptions in the Act.


                                                Sincerely,

                                                       /s/
                                                Daniel P. Schultz
                                                Regional Inspector General for Audit




                                               12
Audit of Wyandanch UFSD’s                                                              Final Report
Title I and Title II Non-Salary Expenditures   Attachment                        ED-OIG/A02-E0031




                     THE STATE EDUCATION DEPARTMENT / THE UNIVERSITY OF THE STATE OF NEW
                     YORK / ALBANY, NY 12234

                     CHIEF OPERATING OFFICER
                     DEPUTY COMMISSIONER FOR THE
                     OFFICE OF MANAGEMENT SERVICES
                     Tel. (518) 474-2547
                     Fax (518) 473-2827
                     E-mail: tsavo@mail.nysed.gov


                                                     August 30, 2005


Mr. Daniel P. Schultz
Regional Inspector General for Audit
U.S. Department of Education
Office of the Inspector General
32 Old Slip, 26th Floor
New York, NY 10005

Dear Mr. Schultz:

      The following is the New York State Education Department’s (NYSED) response to
recommendations contained in the draft audit report, Control Number ED-OIG/A02-E0031 for
the audit Wyandanch Union Free School District’s (Wyandanch) Elementary and Secondary
Education Act (ESEA) Title I, Part A (Title I) and Title II Non-Salary Expenditures.

FINDING 1: Wyandanch’s Records For $6.6 Million of Title I And Title II Expenditures
           Were Unauditable

       We disagree that $6.6 million of Title I and Title II expenditures were not auditable. Two
different Certified Public Accounting Firms in addition to the Office of the New York State
Comptroller audited and reviewed the district’s records. We do agree the district needs to
improve recordkeeping.

RECOMMENDATIONS

     We recommend that the Assistant Secretary for the Office of Elementary and
Secondary Education (OESE), instruct NYSED to require Wyandanch to:

1.1      Provide proper support for the $6.6 million in Title I and Title II expenditures for
         the audit period, and return any unsupported amounts to ED.

      We agree with the recommendation and will require Wyandanch to provide additional
support for the $6.6 million in Title I and Title II expenditures for the audit period, and return
any unsupported amounts to U.S. Department of Education (ED).


                                                1
Audit of Wyandanch UFSD’s                                                                 Final Report
Title I and Title II Non-Salary Expenditures     Attachment                         ED-OIG/A02-E0031

1.2      Improve the financial system and establish internal controls to ensure the
         financial system adequately identifies the source and application of Title I, Title II,
         and other ED direct and flow-through funds.

         We agree with the recommendation and will work with the district to ensure that the
district administrators improve the financial system and establish internal controls to ensure the
financial system adequately identifies the source and application of Title I, Title II, and other ED
direct and flow-through funds.

FINDING 2: Questioned Duplicate Expenditure

        We agree with the finding that the district submitted duplicate expenditures. We
disagree that NYSED advised the district to submit duplicate expenditures. Districts are often
required to submit amended FS-10 forms but are not allowed to submit duplicate expenditures.
NYSED’s          “Fiscal       Guidelines”     found         on       the       web          at
http://www.oms.nysed.gov/cafe/guidelines.html state that allowable costs must not be included
as a cost in any other project or grant.

RECOMMENDATIONS

           We recommended that the Assistant Secretary for OESE, instruct NYSED to require
      Wyandanch to:

2.1      Return the duplicate ED grant expenditures of $165,326, plus applicable interest,
         to ED.

       We agree with the recommendation and will require the district to return $165,326, plus
applicable interest, to ED.

2.2      Review its accounting records to determine if there were other duplicate expenditures
         submitted for payments during the period of July 1, 1999, through June 30, 2004, and return
         any such funds to ED.

       We will request that Wyandanch review its accounting records to determine if there were
other duplicate expenditures submitted for payments during the period of July 1, 1999, through
June 30, 2004, and return any such funds to ED.

FINDING 3: Wyandanch Had Significant Internal Control Weaknesses

         We agree with the finding that there are weaknesses in the district’s internal controls.

RECOMMENDATIONS

           We recommend that the Assistant Secretary for OESE, instruct NYSED to require
      Wyandanch to:



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Audit of Wyandanch UFSD’s                                                              Final Report
Title I and Title II Non-Salary Expenditures   Attachment                        ED-OIG/A02-E0031

3.1      Establish and implement adequate internal controls, for the segregation of duties,
         oversight of cash payments, and proper review of payment documentation.

       We agree with the recommendation and will work with the district to ensure that internal
controls procedures are improved and that staff and the board of education are trained in the
new procedures.

3.2      Ensure that all bank statements and financial reports are reviewed for accuracy
         prior to submission to the Board.

      We agree with the recommendation and will work with the district to ensure that all bank
statements and financial reports are reviewed for accuracy.

3.3      Update the policy manual to reflect the changes in laws, regulations, guidance,
         and funding agreements affecting ED grants, and ensure the policy manual is
         implemented.

       We agree with the recommendation and will work with the district to ensure that the
policy manual is updated to reflect the changes in laws, regulations, guidance, and funding
agreements affecting ED grants, and ensure the updated policy manual is implemented.

3.4      Provide necessary management accountability training to all Board members and
         adhere to laws and regulations related to hiring experienced candidates to fill
         vacant positions.

       We agree with the recommendation and will ensure that the board of education receives
management accountability training and adheres to the laws and regulations related to hiring
experienced candidates to fill vacant positions.

      If you have any questions, please contact Charles Szuberla, Coordinator, Office of
School Operations and Management Services, at (518) 474-2238.

                                                     Sincerely,

                                                     /s/

                                                     Theresa E. Savo


c:      Commissioner Mills
        Charles Szuberla




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