Internal Controls Over Purchasing, Claims Auditing, and Separation by zlf68208

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									OFFICE   OF THE   NEW YORK STATE COMPTROLLER
                  D IVISION OF LOCAL GOVERNMENT
                      & SCHOOL ACCOUNTABILITY



    Rockland
 Community College
   Internal Controls Over
Purchasing, Claims Auditing,
 and Separation Payments
           Report of Examination
                    Period Covered:
          September 1, 2007 — May 18, 2009
                       2009M-217




              Thomas P. DiNapoli
                               Table of Contents


                                                                               Page

AUTHORITY LETTER                                                                2


EXECUTIVE SUMMARY                                                               3


INTRODUCTION                                                                    5
           Background                                                           5
           Objective                                                            5
           Scope and Methodology                                                5
           Comments of College Officials and Corrective Action                   6


CLAIMS AUDITING                                                                 7
            Recommendations                                                     8


PURCHASING                                                                      9
               Solicitation of Bids                                             9
               Request for Proposals                                           10
               Quotations                                                      10
               Recommendations                                                 11


SEPARATION PAYMENTS                                                            12
            Recommendations                                                    13


APPENDIX   A   Response From College Officials                                  14
APPENDIX   B   OSC’s Comments on the College Officials’ Response                18
APPENDIX   C   Audit Methodology and Standards                                 20
APPENDIX   D   How to Obtain Additional Copies of the Report                   21
APPENDIX   E   Local Regional Office Listing                                    22




                      DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY          11
                                              State of New York
                                 Office of the State Comptroller


Division of Local Government
and School Accountability

March 2010

Dear Community College Officials:

A top priority of the Office of the State Comptroller is to help community college officials manage
their colleges efficiently and effectively and, by so doing, provide accountability for tax dollars
spent to support college operations. The Comptroller oversees the fiscal affairs of community
colleges statewide, as well as their compliance with relevant statutes and observance of good
business practices. This fiscal oversight is accomplished, in part, through our audits, which identify
opportunities for improving college operations and Board of Trustee governance. Audits also can
identify strategies to reduce community college costs and to strengthen controls intended to safeguard
community college assets.

Following is a report of our audit of the Rockland Community College, entitled Internal Controls Over
Purchasing, Claims Auditing, and Separation Payments. This audit was conducted pursuant to Article
V, Section 1 of the State Constitution and the State Comptroller’s Authority as set forth in Article 3 of
the General Municipal Law.

This audit’s results and recommendations are resources for community college officials to use in
effectively managing operations and in meeting the expectations of their constituents. If you have
questions about this report, please feel free to contact the local regional office for your county, as listed
at the end of this report.

Respectfully submitted,


Office of the State Comptroller
Division of Local Government
and School Accountability




   2         OFFICE OF THE NEW YORK STATE COMPTROLLER
                                                                  State of New York
                                                     Office of the State Comptroller
                                                      EXECUTIVE SUMMARY


The Rockland Community College (College) is sponsored by Rockland County and was founded in
1959 as part of the State University of New York (SUNY) system. The College is governed by a Board
of Trustees (Board) which comprises nine appointed members and a student trustee. The Board is
responsible for the general management and control of the College’s financial and educational affairs.
The President of the College (President) is the College’s chief executive officer, and the Executive
Vice President is the College’s chief fiscal officer. The Assistant Director of Finance is responsible for
the daily operation of the Accounts Payable, Payroll, and Purchasing Departments. Under the direction
of the Board, these individuals are responsible, along with other administrative staff, for the day-to-
day management of the College.

Scope and Objective

The objective of our audit was to examine internal controls over selected financial operations for the
period September 1, 2007 to May 18, 2009. Our audit addressed the following questions:

   •   Are internal controls over claims auditing appropriately designed and operating effectively to
       adequately safeguard College assets?

   •   Are internal controls over purchasing appropriately designed and operating effectively to
       adequately safeguard College assets?

   •   Are separation payments that are made to employees properly authorized?

Audit Results

The College’s claims audit process is not effective. The Board has not ensured that an internal
control system for the audit and approval of claims was designed and implemented. We reviewed 202
payments totaling $1,620,995 made to 117 vendors and found no indication that claims were audited
and approved before payments were made. Claims also lacked adequate documentation to show that
the purchases were valid and necessary College expenditures. As a result, the College is at an
increased risk of paying for unauthorized or improper purchases, paying incorrect claim amounts, or
paying for goods or services that were not received.

College officials did not always seek competitive bids for purchases of $10,000 or more, as required
by College policy and General Municipal Law. We reviewed 30 purchases subject to statutory
competitive bidding requirements totaling $1,028,770 and found that College officials made 11
purchases totaling $209,000 without requesting required bids. The College also has not developed

                           DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY                  33
guidelines for the procurement of professional services. We found no evidence that the College sought
requests for proposals (RFPs) or utilized any other form of competition for 17 of 23 procurements
of professional services totaling $331,491. In addition, the College’s purchasing department did not
ensure that faculty and staff complied with the provisions of the College’s procurement policy. We
reviewed 15 purchases totaling $26,633 that required verbal quotes and found that College officials
made eight purchases totaling $13,673 without documenting that they had obtained the required
quotes. The failure to properly solicit bids, RFPs, and quotes and the absence of guidelines for
acquiring professional services increases the possibility that goods and services may not be acquired
economically, which could result in excess costs to the College.

Controls over retirement incentive payments also need to be improved. We tested the retirement
incentive payments totaling $429,696 that the College made to all 14 faculty members who retired
during our audit period and found that the College overpaid two employees by a total of $44,379. This
error occurred because officials did not adequately review payments before they were made.

Comments of College Officials

The results of our audit and recommendations have been discussed with College officials and their
comments, which appear in Appendix A, have been considered in preparing this report. College
officials disagreed with certain aspects of our findings and recommendations in our report, but
indicated they plan to implement some of our recommendations. Appendix B includes our comments
on issues raised in the College officials’ response.




  4         OFFICE OF THE NEW YORK STATE COMPTROLLER
                          Introduction

Background         The Rockland Community College (College), founded in 1959 as
                   part of the State University of New York (SUNY) system, is located
                   in the Village of Suffern in Rockland County. The College’s campus
                   consists of nine academic buildings. The College also operates
                   two remote sites in the Village of Spring Valley and the Village
                   of Haverstraw. During the 2007-08 fiscal year, the College had an
                   enrollment of 9,475 students and 1,013 administrators, faculty, and
                   staff. The College’s budgeted expenditures for the 2007-08 fiscal
                   year were $54 million, which were funded primarily with State and
                   County aid and tuition and fees.

                   The College is governed by the Board of Trustees (Board) which
                   comprises nine appointed members and a student trustee. The
                   Board is responsible for the general management and control of
                   the College’s financial and educational affairs. The President is the
                   College’s chief executive officer, and the Executive Vice President is
                   the College’s chief fiscal officer. The Assistant Director of Finance is
                   responsible for the daily operation of the Accounts Payable, Payroll,
                   and Purchasing Departments. Under the direction of the Board, these
                   individuals are responsible, along with other administrative staff, for
                   the day-to-day management of the College.

Objective          The objective of our audit was to examine internal controls over
                   selected financial operations. Our audit addressed the following
                   questions:

                      •   Are internal controls over claims auditing appropriately
                          designed and operating effectively to adequately safeguard
                          College assets?

                      •   Are internal controls over purchasing appropriately designed
                          and operating effectively to adequately safeguard College
                          assets?

                      •   Are separation payments that are made to employees properly
                          authorized?

Scope and          We examined internal controls over selected College financial
Methodology        operations for the period September 1, 2007 to May 18, 2009.

                   We conducted our audit in accordance with generally accepted
                   government auditing standards (GAGAS). More information on
                   such standards and the methodology used in performing this audit is
                   included in Appendix C of this report.
              DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY                 55
Comments of                The results of our audit and recommendations have been discussed
College Officials and       with College officials and their comments, which appear in Appendix
Corrective Action          A, have been considered in preparing this report. College officials
                           disagreed with certain aspects of our findings and recommendations
                           in our report, but indicated they plan to implement some of our
                           recommendations. Appendix B includes our comments on issues
                           raised in the College officials’ response.

                           The Board has the responsibility to initiate corrective action.
                           Pursuant to Section 35 of the General Municipal Law, a written
                           corrective action plan (CAP) that addresses the findings and
                           recommendations in this report must be provided to our office within
                           90 days, with a copy forwarded to the Commissioner of Education.
                           To the extent practicable, implementation of the CAP must begin by
                           the end of the next fiscal year. For more information on preparing and
                           filing your CAP, please refer to our brochure, Responding to an OSC
                           Audit Report, which you received with the draft audit report. The
                           Board should make the CAP available for public review in the Clerk
                           to the Board’s office.




  6        OFFICE OF THE NEW YORK STATE COMPTROLLER
             Claims Auditing

     The Board is responsible for ensuring that internal controls are
     designed and implemented that help safeguard the College’s assets,
     ensure the prudent and economical use of the College’s monies
     when procuring goods and services, and protect against favoritism,
     extravagance, fraud, and corruption. A good system of internal
     controls consists of policies, practices and procedures that provide
     reasonable assurance that the College is using its resources effectively
     and is complying with applicable laws and regulations. An effective
     claims processing system ensures that, with few exceptions, claims
     are paid only after receiving a warrant (summary report) of claims
     that have been audited and approved for payment. Every claim should
     contain enough supporting documentation to determine whether it
     complies with statutory requirements and College policies, and that
     the amounts claimed represent actual and necessary expenses. This
     helps ensure that taxpayer dollars are expended with integrity in the
     most efficient manner. A proper claims audit function helps ensure
     that the College pays only those claims that are properly supported
     and represent actual and necessary College costs.

     The Board has not ensured that an internal control system for the audit
     and approval of claims was designed and implemented. We reviewed
     202 payments totaling $1,620,995 made to 117 vendors during our
     audit period and found no indication that the claims were audited
     and approved before payments were made. The Board Chairperson
     and the Chair of the audit committee informed us that, at one point,
     the audit committee audited the claims. However, the current audit
     committee has not been auditing the claims. The Associate Vice
     President of Finance reviews the check registers prior to the issuance
     of the checks; however, he informed us that he only scans the register
     for unusual names and dollar amounts. This is not a substitute for a
     thorough audit of claims. We reviewed these claims to determine if
     they contained sufficient evidence to verify that they were valid and
     necessary College expenditures. We found exceptions with 86 claims
     totaling $394,780. For example:

         •    26 claims totaling $166,307 did not have evidence that
              employees sought competition for the purchases, as required
              by College policy.

         •    Four claims totaling $82,510 did not have all of the required
              authorizations noted on the requisition.1
     1
       The College notes approvals for purchases on the requisitions. Requisitions are
     created by the head of each department and approved by the corresponding Vice
     President and the assistant purchasing clerk, who then generates the purchase order.
     The purchasing agent approves travel and facilities purchases.

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY                             77
                             •   The purchasing clerk did not create purchase orders for eight
                                 payments totaling $26,928. Seven of the eight payments
                                 were made using a standard voucher, and the last included
                                 a requisition that was created after the services had been
                                 rendered.

                             •   17 claims totaling $21,869 did not have adequate supporting
                                 documentation, such as receipts. These payments were made
                                 to credit card companies. In addition, College officials did not
                                 properly authorize five of these payments totaling $6,784.

                             •   Three vendors received five payments totaling $8,536, which
                                 exceeded the amount that they were entitled to by $1,166.
                                 These errors resulted from the lack of a thorough review of
                                 claims before they were paid.

                         The Board’s failure to institute an internal control system that ensures
                         that claims are audited and approved increases the risk that payments
                         may be made for unauthorized, unnecessary, or unsupported charges;
                         that proper claims may be paid for an incorrect amount; or that claims
                         may be paid for which funds are not available. Further, without
                         appropriate supporting documentation, College officials may not be
                         able to determine what a claim is for and, therefore, cannot properly
                         approve its payment. As a result, the College is at an increased risk
                         of paying for unauthorized or improper purchases, paying incorrect
                         claim amounts, or paying for goods or services that were not
                         received.

Recommendations          1. The Board should institute an internal control system that ensures
                            that claims are audited and approved before they are paid.

                         2. College officials should ensure that employees submit sufficient
                            and appropriate documentation for all claims. Claims that do not
                            contain the required documentation for payment should not be
                            approved.

                         3. College officials should attempt to recover overpayments made to
                            the three vendors.




  8      OFFICE OF THE NEW YORK STATE COMPTROLLER
                                       Purchasing

                            An effective system of internal controls should include purchasing
                            policies, practices and procedures that provide reasonable assurance
                            that resources are expended prudently and economically and that
                            applicable laws and regulations are followed. Purchasing controls
                            should be designed to help safeguard College assets from loss or
                            misuse and ensure that necessary goods and services are obtained
                            at the best available prices. A good system of internal controls helps
                            ensure that purchases are authorized, valid, supported, recorded, and
                            accounted for in a timely and accurate manner.

                            The Board has not established adequate internal controls over
                            purchasing. Although the Board has adopted policies that require
                            the solicitation of bids and/or written and verbal quotes when
                            competitive bidding is not required by law, College officials have
                            not always enforced compliance with these policies. In addition,
                            the policy does not address how services should be procured. We
                            found that officials made 11 purchases totaling $209,000 without
                            requesting sealed bids as required by law. We also found no evidence
                            that the College sought requests for proposals (RFPs) or used any
                            other form of competition to select professional service providers
                            who received 17 payments totaling $331,491. Eight purchases
                            totaling $13,673 did not have documentation to show that officials
                            had obtained verbal quotes as required by policy. In addition, two
                            purchases totaling $7,215 did not have documentation to show that
                            officials had obtained written quotes as required by policy. As a
                            result, the College may have paid more than necessary for these
                            goods and services.

Solicitation of Bids        General Municipal Law (GML) requires that, with certain
                            exceptions, all purchase contracts of $10,000 or more and all public
                            works contracts of $20,0002 or more must be publicly advertised
                            for sealed bids prior to awarding the contract. Exceptions include
                            purchases of materials, equipment or supplies under State or County
                            contracts, professional services, purchases of good or services that
                            are available from only one source, or emergency purchases.

                            We found that College officials did not always seek competitive
                            bids for purchases of $10,000 or more as required by College policy
                            and GML. We reviewed 30 purchases that were subject to statutory
                            competitive bidding requirements totaling $1,028,770 and found
                            2
                              At the time of this audit. Effective November 12, 2009, GML was amended to
                            increase the bidding threshold from $20,000 to $35,000 for public works contracts.
                            The $10,000 bidding threshold for purchase contracts remains the same.

                       DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY                           99
                             that officials made 11 of these purchases totaling $209,000 without
                             requesting sealed bids as required by GML. These purchases included
                             a truck, automotive equipment, cleaning supplies and paving. College
                             officials stated that the payment for paving was for an emergency
                             situation; however, there was no Board resolution declaring the
                             emergency. College officials could not explain why they did not bid
                             the other 10 purchases. Because College officials failed to obtain the
                             required competition for all purchases, they do not have assurance
                             that they paid the lowest price possible.

Request for Proposals        GML requires the Board to adopt written policies and procedures
                             for the procurement of goods and services that are not subject to
                             competitive bidding requirements. Although College officials are not
                             legally required to competitively bid professional services, seeking
                             competition, such as RFPs, is an effective way to ensure the College
                             receives the desired services for the best price without favoritism.

                             Although the College has developed written policies and procedures
                             for the procurement of goods and services that are not subject to
                             competitive bidding requirements, it does not have guidelines for
                             the procurement of professional services. We tested 23 payments
                             totaling $989,009 made to professional service providers and found
                             no evidence that the College sought RFPs or used any other form
                             of competition in selecting service provides who received 17 of the
                             payments totaling $331,491. These services included advertising,
                             electrical work, and an elevator maintenance agreement. The
                             purchasing agent stated that the payments for advertising were for
                             a sole source purchase and the payment for the elevator was for an
                             emergency; however, there was no documentation to show that the
                             vendor was the only agency that could provide advertising services,
                             or any evidence that the Board declared an emergency. College
                             officials did not provide an explanation for not seeking competition
                             for the other 15 purchases or any documentation to show that they
                             sought other forms of competition. As a result, officials do not have
                             assurance that they obtained the best price possible for these services.

Quotations                   The College’s purchasing procedures require faculty and staff to
                             obtain a minimum of three verbal quotes for purchases between
                             $1,000 and $2,999 and a minimum of three written quotes for
                             purchases between $3,000 and $9,999. We reviewed 15 purchases
                             totaling $26,633 that required verbal quotes and found that College
                             officials made eight purchases totaling $13,673 without documenting
                             that they had obtained the required quotes. In addition, we reviewed
                             12 purchases totaling $58,387 that required written quotes and found
                             that College officials made two purchases totaling $7,215 without
                             documenting that they had obtained written quotes.


  10         OFFICE OF THE NEW YORK STATE COMPTROLLER
                       Four employees directly involved in the purchasing process told
                       us that management had instructed them to override the purchasing
                       controls. The Associate Vice President of Finance told us that
                       management had not instructed employees to override the purchasing
                       controls, but he could not explain why officials made these purchases
                       without the required documentation.

                       The failure to properly solicit bids, RFPs, and quotes, and the absence
                       of guidelines for acquiring professional services increases the
                       possibility that goods and services may not be acquired economically,
                       which could result in excess costs to the College.

Recommendations        4. College officials should monitor compliance with the Board’s
                          purchasing policy to ensure that all procurements exceeding
                          bidding thresholds are properly bid and documented.

                       5. College officials should amend the purchasing procedures to
                          include guidelines for procuring professional services.

                       6. College officials should monitor compliance with the Board’s
                          purchasing policy to ensure that written and verbal quotes are
                          routinely sought and documented.




                  DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY                 11
                                                                                        11
                      Separation Payments

                     College officials establish the pay and benefits for professional
                     employees and support staff in the written employment agreements
                     they negotiate with employee bargaining units and individual
                     employees. Officials may also elect to supplement the terms of the
                     labor agreements with written policies. Employment agreements
                     and policies must contain clear and unambiguous language
                     to allow proper interpretation of their terms and conditions.
                     The documentation and proper implementation of policies and
                     employment agreements are essential aspects of internal control.
                     Supervisory review and approval of separation payments helps
                     to ensure that separation payments are correctly calculated in
                     accordance with policies and employment agreements.

                     The labor agreement with the College’s faculty members is clear
                     and unambiguous regarding the terms of the retirement incentive
                     payments. The agreement states that employees who have attained
                     20 years of service or greater and are between the ages of 55 and 66,
                     inclusive, are entitled to a retirement incentive. The incentive is a
                     percentage of the employee’s annual salary based on his or her age
                     at retirement. When a faculty member is ready to retire, the member
                     notifies the Human Resources Department of his/her intent to retire
                     and the effective date. An employee in Human Resources will then
                     determine the employee’s accruals and send the information to the
                     payroll clerk. The payroll clerk is responsible for calculating the
                     amount of the retirement incentive and any accruals based on the
                     labor agreement.

                     We tested retirement incentive payments totaling $429,696 that the
                     College made to all 14 faculty members who retired during our audit
                     period and found that the College overpaid two faculty members by
                     a total of $44,379. One of the two employees incorrectly received
                     an incentive amount of $39,377 because she exceeded the age limit
                     set in the labor agreement. The other employee received an incentive
                     amount that was $5,002 higher than what he was entitled to base on
                     the percentages stipulated in the agreement. We also found that a
                     third employee received an incentive amount that was $669 less than
                     the amount he was entitled to because the District used the wrong
                     salary when computing the incentive amount. These errors remained
                     undetected because supervisors did not review the calculation or
                     payments prior to their issuance. As a result of this deficiency, the
                     College incurred $44,379 in unnecessary expenses, and one employee
                     was paid less than he was due. Without improved controls over the
                     calculation of separation payments, the College is at risk of making
                     similar errors in the future.

12   OFFICE OF THE NEW YORK STATE COMPTROLLER
Recommendations        7. The payroll clerk should issue retirement incentives to only
                          those employees who are entitled to receive them and ensure
                          that all payments are made in the correct amounts based on the
                          contract.

                       8. College officials should review retirement incentive payments
                          before they are issued to ensure that they are accurate.

                       9. College officials should attempt to recover the incorrect
                          separation payments.




                  DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY            13
                                                                                   13
                                         APPENDIX A

                      RESPONSE FROM COLLEGE OFFICIALS

The College officials’ response to this audit can be found on the following pages.




  14        OFFICE OF THE NEW YORK STATE COMPTROLLER
                                                               See
                                                               Note 1
                                                               Page 18




                                                               See
                                                               Note 2
                                                               Page 18




DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY    15
                                                         15
                                                See
                                                Note 3
                                                Page 18




                                                See
                                                Note 4
                                                Page 18




16   OFFICE OF THE NEW YORK STATE COMPTROLLER
                                                           See
                                                           Note 5
                                                           Page 19




                                                           See
                                                           Note 6
                                                           Page 19




                                                           See
                                                           Note 7
                                                           Page 19




DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY    17
                                                         17
                                          APPENDIX B

         OSC’S COMMENTS ON THE COLLEGE OFFICIALS’ RESPONSE


Note 1

We performed our audit testing on a sample basis. We did not review 100 percent of transactions,
which in this case, amounts to $32,961,220. During the initial assessment of the College’s internal
controls, we identified potential problems with separation payments. Therefore, we examined
separation payments made to the 14 employees who left the College’s employ during our audit period.
We found exceptions with three payments, which is 14 percent of the separation payments made by
the College.

Note 2

While we acknowledge that there are no statutory requirements for the Board to audit the claims or
cause an audit of the claims, good management practices and sound internal controls require that
the Board establish a claims audit process. As College officials noted, “… The Board has oversight
responsibility for the College operations and this includes ensuring that public monies are properly
accounted for and protected….” To ensure that public monies are used properly, the Board must ensure
that an internal control system is designed and a process to audit claims is implemented. This process
should ensure that claims contain sufficient supporting documentation to determine whether they
comply with statutory requirements and College policies, and verification that the amounts claimed
represent actual and necessary expenses. We adjusted the report to reflect that the Board should ensure
that such controls are designed and implemented.

Note 3

College officials were unable to provide us with documentation substantiating that these purchases
were on State or County Contracts. Furthermore, the “OGS or less rule” is not a valid exception to
GML’s bidding requirements, and the purchase should have been bid.

College officials could not substantiate the emergency for four other public work jobs. Further, we
found that several purchases for roof repairs were made from the same vendor, on the same date, with
consecutive purchase order numbers. As such, it appears that College officials split the purchases to
circumvent GML’s bidding requirements.

Note 4

College officials did not provide us with documents substantiating that purchases were made on
County and State contracts, the reasons sole source vendors were used, or that requisite quotes were
obtained. Further, we obtained e-mail documents that show College officials were told that the
elevator service contract with the State expired and that there was another State elevator service
provider that they could contract with. The College chose to use the vendor that was not on State
contract.

  18        OFFICE OF THE NEW YORK STATE COMPTROLLER
The College’s limited documents indicated that the $204,459 in question was for professional services.
The vendors’ invoices lacked itemization, and the College’s accounting records lacked description of
work performed to indicate that these invoices were for public work repairs.

Note 5

The College submitted documentation, subsequent to issuance of the draft report, to support that they
had obtained the required three telephone quotes for a purchase totaling $1,012. We adjusted the audit
report to reflect this new information. In addition, we reviewed additional documents submitted by the
College to support the five purchases totaling $9,110 and determined that College officials should have
obtained three telephone quotes for all of the purchases - in accordance with its policy for the purchase
of goods - rather than treating the purchases as public work. In addition, College officials could not
provide us with any support to show that the $3,570 purchase was on State contract.

Note 6

College officials did not provide documents to support that purchases cited in the report were made on
an emergency basis.

Note 7

At no point during our audit were we informed that the $39,377 overpayment was due to a “side bar”
agreement between the College and the Faculty Union. Further, College officials did not provide
documentation to support this statement.




                           DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY                   19
                                                                                                   19
                                          APPENDIX C

                     AUDIT METHODOLOGY AND STANDARDS

Our overall goal was to assess the adequacy of the internal controls put in place by officials to
safeguard College assets. To accomplish this, we performed an initial assessment of the internal
controls so that we could design our audit to focus on those areas most at risk. Our initial assessment
included evaluations of the following areas: financial oversight, cash receipts and disbursements,
purchasing, and payroll and personal services.

During the initial assessment, we interviewed appropriate College officials, performed limited tests
of transactions and reviewed pertinent documents, such as College policies and procedures manuals,
Board minutes, and financial records and reports. In addition, we obtained information directly from
the computerized financial databases and then analyzed it electronically using computer-assisted
techniques. This approach provided us with additional information about the College’s financial
transactions as recorded in its databases. Further, we reviewed the College’s internal controls and
procedures over the computerized financial databases to help ensure that the information produced by
such systems was reliable.

After reviewing the information gathered during our initial assessment, we determined where
weaknesses existed, and evaluated those weaknesses for the risk of potential fraud, theft and/or
professional misconduct. We then decided on the reported objective and scope by selecting for audit
those areas most at risk. We selected claims auditing, purchasing, and separation payments for the
period September 1, 2007 to May 18, 2009 for further audit testing.

To accomplish the objective of this audit and obtain relevant evidence, our procedures included the
following:

   •   We reviewed policies and procedures over purchasing and claims processing.

   •   We reviewed individual purchase transactions and checked claims for sufficient
       itemization and adequate documentation to verify the nature and validity of the purchase.

   •   We interviewed staff directly involved with the purchasing process.

   •   We examined cash disbursement records and judgmentally selected disbursements that were
       above bidding and quotation thresholds and reviewed them for adherence to policies and legal
       requirements.

   •   We reviewed employee contracts and separation payments for all 14 faculty members who
       retired from the College during our audit period.

We conducted this performance audit in accordance with generally accepted government auditing
standards (GAGAS). Those standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objective.

  20        OFFICE OF THE NEW YORK STATE COMPTROLLER
                                           APPENDIX D

           HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT

To obtain copies of this report, write or visit our web page:




                            Office of the State Comptroller
                            Public Information Office
                            110 State Street, 15th Floor
                            Albany, New York 12236
                            (518) 474-4015
                            http://www.osc.state.ny.us/localgov/




                           DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY    21
                                                                                    21
                                                    APPENDIX E
                             OFFICE OF THE STATE COMPTROLLER
                              DIVISION OF LOCAL GOVERNMENT
                               AND SCHOOL ACCOUNTABILITY
                                            Steven J. Hancox, Deputy Comptroller
                                            John C. Traylor, Assistant Comptroller

                                      LOCAL REGIONAL OFFICE LISTING
BUFFALO REGIONAL OFFICE                                      GLENS FALLS REGIONAL OFFICE
Robert Meller, Chief Examiner                                Karl Smoczynski, Chief Examiner
Office of the State Comptroller                               Office of the State Comptroller
295 Main Street, Suite 1032                                  One Broad Street Plaza
Buffalo, New York 14203-2510                                 Glens Falls, New York 12801-4396
(716) 847-3647 Fax (716) 847-3643                            (518) 793-0057 Fax (518) 793-5797
Email: Muni-Buffalo@osc.state.ny.us                          Email: Muni-GlensFalls@osc.state.ny.us

Serving: Allegany, Cattaraugus, Chautauqua, Erie,            Serving: Clinton, Essex, Franklin, Fulton, Hamilton,
Genesee, Niagara, Orleans, Wyoming counties                  Montgomery, Rensselaer, Saratoga, Warren, Washington
                                                             counties

ROCHESTER REGIONAL OFFICE                                    ALBANY REGIONAL OFFICE
Edward V. Grant, Jr., Chief Examiner                         Kenneth Madej, Chief Examiner
Office of the State Comptroller                               Office of the State Comptroller
The Powers Building                                          22 Computer Drive West
16 West Main Street – Suite 522                              Albany, New York 12205-1695
Rochester, New York 14614-1608                               (518) 438-0093 Fax (518) 438-0367
(585) 454-2460 Fax (585) 454-3545                            Email: Muni-Albany@osc.state.ny.us
Email: Muni-Rochester@osc.state.ny.us
                                                             Serving: Albany, Columbia, Dutchess, Greene,
Serving: Cayuga, Chemung, Livingston, Monroe,                Schenectady, Ulster counties
Ontario, Schuyler, Seneca, Steuben, Wayne, Yates
counties
                                                             HAUPPAUGE REGIONAL OFFICE
SYRACUSE REGIONAL OFFICE                                     Jeffrey P. Leonard, Chief Examiner
Eugene A. Camp, Chief Examiner                               Office of the State Comptroller
Office of the State Comptroller                               NYS Office Building, Room 3A10
State Office Building, Room 409                               Veterans Memorial Highway
333 E. Washington Street                                     Hauppauge, New York 11788-5533
Syracuse, New York 13202-1428                                (631) 952-6534 Fax (631) 952-6530
(315) 428-4192 Fax (315) 426-2119                            Email: Muni-Hauppauge@osc.state.ny.us
Email: Muni-Syracuse@osc.state.ny.us
                                                             Serving: Nassau, Suffolk counties
Serving: Herkimer, Jefferson, Lewis, Madison,
Oneida, Onondaga, Oswego, St. Lawrence counties

BINGHAMTON REGIONAL OFFICE                                   NEWBURGH REGIONAL OFFICE
Patrick Carbone, Chief Examiner                              Christopher Ellis, Chief Examiner
Office of the State Comptroller                               Office of the State Comptroller
State Office Building, Room 1702                              33 Airport Center Drive, Suite 103
44 Hawley Street                                             New Windsor, New York 12553-4725
Binghamton, New York 13901-4417                              (845) 567-0858 Fax (845) 567-0080
(607) 721-8306 Fax (607) 721-8313                            Email: Muni-Newburgh@osc.state.ny.us
Email: Muni-Binghamton@osc.state.ny.us
                                                             Serving: Orange, Putnam, Rockland, Westchester
Serving: Broome, Chenango, Cortland, Delaware,               counties
Otsego, Schoharie, Sullivan, Tioga, Tompkins
counties



  22            OFFICE OF THE NEW YORK STATE COMPTROLLER

								
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