The New Suffolk Common School District has responded to an audit from the Office of the State Comptroller that said the district has not complied with Local Finance Law.
The audit, released Dec. 14, evaluated the school board’s involvement in the district’s financial operations and checked whether the district complied with state finance law when using a line of credit.
Under that law, school districts are not permitted to borrow money by establishing a line of credit with a bank. The state audit determined that the New Suffolk board violated that law by borrowing $202,000 through two credit agreements with a local bank between Oct. 25, 2016, and Nov. 20, 2017. District officials claimed they did not comply because they were unaware of the law.
Board president Tony Dill said the bank manager had told the board that a line of credit would be less expensive for the district than other short-term borrowing options. District treasurer Angela Kohl said the district’s consulting accountant agreed.
“Discussions with local banks, as well as a New York Municipal Finance Advisory firm, all indicated the best approach for us was to obtain an unsecured line of credit from our local bank,” the district response to the state read.
The state replied by suggesting that district officials consult with their attorney to resolve the current lines of credit, stop using them and borrow in accordance with state finance law.
Its audit also found that Ms. Kohl performed some financial duties without proper review from the board.
The report reviewed 46 non-payroll transactions totaling $531,934. It concluded that 41 percent of those payments had been made without being initialed by board members to indicate they’d been reviewed. The remaining claims, which were initialed, did not include dates of payment.
In August 2013, the Board adopted a policy requiring the district principal to certify payrolls. But the report found former principal Chris Gallagher did not certify any of the 76 payroll transactions between July
1, 2016 and Jan. 31, 2018, totaling $113,485.
The district has already implemented a revision that ensures board members certify payroll prior to payment.
The state audit suggested the district and school principal routinely monitor Ms. Kohl and divide her responsibilities among board members or new employees — but the district responded that it is too small to do so, with only 27 full- and part-time students and 11 full- and part-time employees.
“Due to the extremely small size of the District, it is impractical to hire additional support staff to permit formal segregation of the Treasurer’s duties,” the response read. “We have, however, taken a number of steps to oversee her performance.”
The district also wrote that , as of December 2018, Ms. Kohl is expected to submit four documents to board members at each board meeting: a list of monthly expenses, a payroll report approved by the principal, a report outlining the monthly checks issued and a general fund report showing all deposits, transfers and withdrawals.
The state report also suggested the board review and approve all financial claims before they are paid. The district said it attempted to review all claims in the past, but it delayed the process of completing pending claims.
“The process was cumbersome, rushed and yielded very delayed payment of a number of valid, outstanding claims,” it read.
A review will be conducted by board members twice a month to eliminate delays.
State law requires that a written corrective action plan, or CAP, addressing the report’s findings and recommendations be sent to the comptroller’s office within 90 days of the audit’s release date. The report said district officials agreed with the findings and are outlining the CAP.
Correction: The payroll transactions between July 1, 2016 and Jan. 31, 2018 were during Chris Gallagher’s tenure as principal, not Nancy Carney, who began her position Oct. 1, 2018.