An audit of the Rochester City School District’s spending has found its payroll and procurement systems “rife with errors,” the state comptroller’s office said Monday.
Comptroller Thomas DiNapoli called the district’s payroll processes disorganized, highly decentralized and said they are not administered uniformly, possibly costing taxpayers more money.
“The Rochester City School District needs to substantially overhaul how it is managing payroll and purchasing of goods and services,” DiNapoli said in a statement. “Although the dollar amounts of many of the errors found by auditors were small, the sheer number of mistakes and their potential total dollar value is cause for significant concern.”
The school district has not implemented the controls and oversight procedures it needs to run a sound operation, he added. But he acknowledged the audit did not identify any instances of fraud or misappropriation of resources.
RCSD operates 52 schools with nearly 30,000 students and 7,000 employees. The district’s budget for 2016-2017 is roughly $865 million, funded primarily through state aid, aid from the city of Rochester and grants, the comptroller’s office noted.
Payroll payments totaled $640.4 million for the last two fiscal years. The audit was for the period of July 1, 2014 through October 25, 2016.
In a review of salary and wage payments of $3.8 million made to 45 employees, DiNapoli’s auditors found incorrect or unsupported payments made to 41 of the employees in nearly every type of payment made to them, including incorrect salary payments, retroactive payments and separation payments.
Sixteen of the 45 employees received bonus payments of $1,000 to $13,400. Ten of the payments were incorrectly calculated, totaling more than $5,400.
When examining 1,100 of those types of payroll payments, auditors identified errors in 97 percent of them. They found more than $356,600 in incorrect or unsupported payments. The errors also included underpayments to employees.
On March 30 RCSD responded to the audit, disagreeing with some of the viewpoints.
“The sample tested and errors noted were not representative of the entire payroll generated from our system,” board President Van White and Superintendent Barbara Deane-Williams wrote in their supporting letter. “However, the report is written in a manner that proclaims judgment on the entire payroll.”
Auditors reviewed 515 procurement card purchases totaling nearly $400,000 and found deficiencies with 500 purchases totaling more than $384,000.
A review of 11 purchase orders totaling $1.5 million that were subject to competitive bidding requirements found the district did not bid four purchases totaling $270,000. RCSD did not properly seek competition for contracts with six of 10 professional service providers, totaling $352,000. As a result, the district may have paid more than it needed to for its purchases of goods and services.
DiNapoli recommended RCSD establish written procedures that designate specific responsibilities to its payroll staff to better centralize the payroll process; develop adequate monitoring procedures to verify that all payroll-related payments are accurate; ensure that salaries are properly established, authorized and documented; and direct the district’s attorney to review the identified overpayments to take action within the law to recover those funds.
DiNapoli also suggest the board reimburse underpaid employees.
Additionally, DiNapoli recommended RCSD revise its policy for use of procurement cards for district purchases and require strict adherence to the updated safeguards; require the claims auditor to audit all p-card transactions; ensure that staff comply with competitive bidding requirements; and complete a thorough review of p-card transactions.
In its letter to the comptroller’s office, RCSD agreed improved monitoring procedures are required to ensure compliance with the control environment, documentation requirements and spending limitations. The letter also noted the district’s intent to evaluate and improve training and monitoring procedures to ensure a competitive bid process.
“We will actively implement controls to enhance our payroll and procurement processes, and will provide detailed actions for each of the recommendations in our corrective action plan,” RCSD officials wrote in the letter.
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