GUILDERLAND — The school district here is taking steps to safeguard finances just as the state comptroller’s five-point plan has been signed into law.

A scandal at Long Island’s Roslyn School District last year, where millions of dollars were allegedly stolen by school administrators working in collusion with school board members, spurred Comptroller Alan Hevesi to come up with a plan, requiring substantial changes in how school districts audit their finances and in the comptroller’s role in investigating them.

Last Tuesday, the Guilderland School Board reviewed a report from a committee of seven residents, which made recommendations for the district.

The committee members were Gregory Aidala, schools superintendent; Neil Sanders, assistant superintendent for business; Thomas Nachod, a school board member and banker; Terrance Hurley, chief financial officer for the Port of Albany; William Kahn, a certified public accountant with UHY Advisors; Steven Koslowski, an internal control officer with the state’s Labor Department; and Jeffrey Levy, senior vice president of M & T Bank.
"With an annual budget exceeding $75 million in 2005-06, the district’s goal was to be proactive in responding to the comptroller’s upcoming general statewide findings and recommendations by engaging local experts in a discussion of how best to examine our internal control procedures," the report says. "Philosophically, this approach was viewed as an opportunity to maintain and enhance public trust and confidence in carrying out our fiduciary responsibilities, not a call to investigate or seek to uncover any local wrongdoing for which no indicators were present."

The comptroller’s five-point plan requires:

— School board members elected or reelected on or after July 1 take six hours of financial oversight training;

— School boards create audit advisory committees by Jan. 1, 2006;

— School board put in place, by July 1, 2006, rigorous internal audit functions to assess risk for fiscal operation and to review financial policies and procedures;

— The internal claims auditor function become part of the broader internal audit function; and

— A district’s independent auditor report directly to the school board. A competitive process for selecting auditors would be required at least every five years.

"New turf"

The Guilderland panel made these seven recommendations:

— Establish direct personal contact between the school board and the district’s independent auditors;

— Create an audit advisory committee ahead of the Jan. 1 deadline;

— Create additional school-board policies on internal controls and develop a job description for an internal auditor position;

— Solicit requests for proposals for internal audit services on both a part-time and full-time basis;

— Use specialized cash-management services to control unauthorized access to the district’s bank accounts;

— Issue all employee paychecks through a direct-deposit payroll system, to reduce the risk of improprieties; the system is to be in place for the start of the 2006-07 school year; and

— Increase the indemnification limits for the district’s treasurer, deputy treasurer, and tax collector.

At last Tuesday’s school board meeting, the board voted unanimously to accept the report and, in a separate motion, also voted unanimously to increase the indemnification from the current level of $250,000 to $1 million.

Sanders said that the added coverage, for all three positions, would cost $670 more on the total premium for the district.
The superintendent reported on other progress with the recommendations. "We’ve already sent out an RFP for an internal control auditor...We’re on some new turf here," said Aidala.

In December, Sanders has presented the board with a sample policy of the job description for an internal claims auditor as a part-time post.

The policy was prefaced with four reasons for a board-appointed internal claims auditor: proper auditing requires expertise and time; timely auditing and payment results in discounts; the work of the auditor would not preclude board review of the warrant; and false claims — such as illegal gifts, overstatements, or fake vendors — are the most common frauds against a school district.
The panel, in its report, noted, "A full-time internal auditor could result in lower fees for the external audit service. Given the size of the district’s annual operating budget, a full-time internal auditor can provide the necessary support and assistance to help ensure that school funds are being expended more judiciously. Such a position must report directly to the board and not central office administration."
"I applaud the board," Aidala said at last Tuesday’s meeting. "I feel we’re early out of the gate. Before the field gets crowded, we’ll have several measures in place."