Improving fiscal health and controls

Two years ago, Mohonasen was a district headed for financial distress. Now, thanks to more detailed budgeting, a concerted effort to rebuild its “rainy day” reserves and a bump in state aid for the 2007-08 school year, the district’s fiscal outlook is much improved. That was the message from Mohonasen’s independent auditor Raymond Preusser, CPA, PC in a report to the Board of Education this fall.

“For too many years, Mohonasen budgeted very close to the bone,” explains Denise Swezey, Mohonasen’s assistant superintendent for business. “Then we had several years of unexpected expenses—such as the spike in energy and fuel prices in 2006—which forced the district to deplete its reserves to cover this and other costs. Now we’re being much more realistic in predicting and monitoring annual expenses in every budget line,” she said. This approach—along with a much-needed boost in state aid—has allowed the district to restore some of the 19 positions that were cut two years ago, rebuild reserves and restore the fund balance to the three percent now allowed under state law.”

Tightening fiscal controls

This year Mohonasen also underwent an audit of its financial practices by the Office of the New York State Comptroller and has taken steps to improve internal financial controls.

Following the 2004 discovery of massive fraud in a Long Island school district, the state comptroller initiated a five-point plan that included new fraud prevention and accountability rules for all schools in New York State. As part of this plan, every public school district, BOCES and charter school in the state is being audited by the comptroller’s office during a five-year period. State auditors look for weaknesses and vulnerabilities in each district’s financial controls in order to prevent the likelihood of fraud. The purpose is to inform school districts about areas where they may be at risk and provide recommendations for improved business practices.

The official state audit report was released on December 17, 2007. However, almost all of the recommendations have already been put into place. In fact, some were underway before the audit even began. (Mohonasen's official response to the auditor's report can be found here.)

Many of auditor’s recommendations related to the need to ensure greater separation of business office duties so that no one person has full control over the receipts, deposits and reconciliation of bank records. Toward that end, Mohonasen had already planned for the creation of an assistant treasurer position in the 2007-08 budget and the person was hired this fall. Without this additional position, it was very difficult to comply with all of the new state fiscal regulations.

“Mohonasen has a long history of running very lean and, frankly, our business office was understaffed by today’s standards,” Swezey admits.

Other recommendations from the state auditors relate to the need for more timely preparation of records and deposits. District officials acknowledged problems in this area which were exacerbated when Swezey herself was out for three months on extended medical leave and there was a turnover in the district treasurer position. The state audit came soon after, when officials were already taking steps to catch up on the backlog of work created by these two factors.

“The good news is our business office is now staffed more appropriately to meet the state’s new regulations,” Swezey said. “We’re definitely in a stronger position coming out of the state audit process since it forced us to take a hard look at how we operate and where we might be at risk.”

Swezey underscored the fact that none of Mohonasen’s audits (state, internal or independent) have uncovered any evidence of fraud ­--  and the chance that anyone could defraud the district going forward is now much less likely thanks to all of the steps the district has taken to improve fiscal controls.