The Sullivan West Central School District (District) is governed by the Board of Education (Board) which comprises nine elected members. The Board is responsible for the general management and control of the District’s financial and educational affairs. The Superintendent of Schools (Superintendent) is the chief executive officer of the District and is responsible, along with other administrative staff, for the day-to-day management of the District under the direction of the Board.

The District was formed in July 1999 by the merger of the Narrowsburg, Jeffersonville-Youngsville, and Delaware Valley central school districts. Since the time of the merger, the District has experienced declining pupil enrollment. Before the merger, the combined pupil enrollment for all three districts in 1997 was 1,721 pupils, while six years after the merger the District had 1,468 pupils attending school during the fall of 2005. However, according to a 1998 merger study, declining and/or stable pupil enrollment was expected. In June 2005, the Board approved the closing of the Narrowsburg and Delaware Valley school buildings and laid off 44 employees due to declining pupil enrollment and the need to control expenditures, because of the District’s declining financial condition. Notwithstanding the Board’s actions, District taxpayers were still faced with an 18.72 percent increase in the tax levy for the 2005-06 school year

Scope and Objectives

The objective of our audit was to determine if District officials had established an adequate control environment and internal control system to ensure that their goals and objectives relating to the short- and long-term financial and operational needs of the District would be achieved. Our audit addressed the following related questions for the period July 1, 2003 to June 8, 2005:

• Did the Board develop, institute and monitor comprehensive short- and long-term strategic operating plans at the time of the merger, or thereafter, to assist them in making informed decisions relating to the financial and operational needs of the District?
  
  
• Were internal controls designed and operating effectively over cash receipts and disbursements, purchasing, and capital assets?

We extended our audit period to 2002 to include a review of a payment to a former business manager. Our audit also addressed various taxpayer complaints received by our Office which are discussed in Appendix A.

Audit Results

Because District officials failed to adopt a comprehensive strategic plan, they mismanaged the merger and wasted millions of taxpayer dollars. From before the merger to the release of this report, the Board did not adopt a plan to identify and address the District’s financial, educational, managerial, and personnel issues. A clear example of District officials’ mismanagement of the merger is that they were aware that building occupancy levels would obviously decline dramatically when they moved pupils in Grades 7 to 12 out of the Delaware Valley and Narrowsburg schools and into the new high school (Grades 9 to 12) and the Jeffersonville-Youngsville school building (Grades 7 to 8). However, they did not have a plan to address what financial impact this would have on the District. Consequently, their decision to renovate the Delaware Valley and Narrowsburg school buildings — which they later closed because they did not properly address building occupancy levels and declining pupil enrollment — resulted in their wasting $12.5 million in taxpayer dollars.

District officials submitted materials to SED that showed they knew that they would receive only 75 percent of the capital project costs in State building aid.1 However, District officials allowed taxpayers to think that this State funding would cover 95 percent of the costs of the District’s capital projects. Because District officials did not have an ongoing comprehensive plan, they did not have a financial plan to cover the additional capital project costs that they knew would not be covered by the State building aid.

Without a comprehensive strategic plan in place, District officials also failed to address actual and projected staffing levels. Consequently, when total staffing levels increased after the merger, the District was unable to realize approximately $2.1 million in savings due to economies of scale that were identified in the merger study.

District officials also did not properly plan for pupils-per-class levels. For example, the District had six kindergarten classes in the fall of 2004. Two of these classes had 10 pupils each, two classes had 16 pupils each, and the other two classes had 17 and 18 pupils, respectively. If District officials had combined these kindergarten classes into five different classes with approximately 17 pupils per class, the District would have been able to eliminate one kindergarten class, which would have allowed the District to achieve approximately $75,000 in savings.

We also found that the District’s system of internal controls were inadequate in the areas of segregation of the Treasurer’s duties, purchasing, and capital assets. The Treasurer’s duties regarding safeguarding cash and recording financial transactions did not provide a good set of checks and balances to protect taxpayer moneys. We found instances where District personnel did not comply with the procurement policy, and the purchasing agent was able to approve his own requisitions without any additional supervisory approval. Also, the Board did not enforce the requirements of its adopted capital assets policy.

Lastly, in 2002, the Board improperly paid $8,400 to a former business manager for unused vacation time.

Comments of District Officials

The results of our audit and recommendations have been discussed with District officials and their comments, which appear in Appendix B, have been considered in preparing this report.
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¹ Charles Szuberla, Coordinator of SED’s Office of School Operations and Management Services, made this statement in a September 8, 2005 letter to Superintendent Alan Derry.