Comptroller: CDCH Needs To Better Monitor Its Financial Management

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The New York State comptroller’s office, in an audit released on July 11, recommended that the Child Development Center of the Hamptons ramp up review of its finances.

The audit evaluated the East Hampton charter school’s relationship with Family Residences and Essential Enterprises Inc., a corporation the school uses to manage its finances, and suggested that the school improve its monitoring of the management corporation to ensure that funds are used effectively.

According to Dr. Christopher Long, FREE’s chief operating officer, the audit results were among the best for charter schools in the state. Dr. Long said that FREE and CDCH could not be more proud.

Charter schools are public schools financed by local, state and federal resources that are not under the control of local school district boards, although they are governed by the State Department of Education and have boards of their own.

The comptroller’s office said that CDCH’s seven-member board did not receive quarterly and annual balance sheets and monthly banking transaction reports, as required by the agreement between FREE and the school.

Instead, the financial reports provided to the board contained only budget-to-actual revenue and expenditure reports for, on average, a two-month period, the audit report said. Additionally, the management corporation did not present the board with bank statements or canceled checks and a list of all moneys received and paid each month—documentation that supports information in the financial reports.

Additionally, the audit report stated that the school’s summer program incurred a $46,541 loss in the 2011-12 school year and a $53,507 loss in 2012-13, which was not shown in the budget-to-actual financial reports.

Dr. Long said, however, that FREE and CDCH explained to the comptroller’s office that the school had actually generated “ample” revenue to cover the summer program. He said that CDCH’s 12-month preschool program was included in those financial reports, which was misunderstood to be part of the summer program when expenditures were tallied.

The audit report said that these were only minor deficiencies found in the school’s fiscal operations, but that they could someday cause major issues if not addressed now.

“The board’s failure to rigorously review the school’s finances, particularly in view of the management corporation’s complete control of its financial activities, significantly increases the risk that school assets could be lost or misappropriated,” the report stated.

“Although we found only minor deficiencies, which we discussed with school officials, when the board is not provided with adequate and detailed financial information, it diminishes the board’s ability to monitor and manage the school’s fiscal operations and increases the risk that errors and irregularities may occur and go undetected and uncorrected.”

A spokesman from the comptroller’s office said that CDCH’s problems are not uncommon and that the school has 90 days from the audit report’s release to come up with corrective action.

Eugenia AuKim, the school board president, responded to the audit in a letter, saying that the board has worked hand in hand with FREE, but will make sure FREE provides all recommended documents to the school board from now on.

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