Canton payroll process criticized

CANTON — A state audit report criticizes Canton Central School District for allowing the district's treasurer to handle all payroll duties without any oversight.

The report, released this week by the office of state Comptroller Thomas P. DiNapoli, identified the shortcomings during a review of the district's finances.

"The treasurer processes the district's payroll without any oversight," the report noted. "Internal controls over the district's payroll process were not appropriately designed because the treasurer performed virtually every phase of the payroll process."

School District Superintendent William A. Gregory said Wednesday that steps have already been taken to rectify the problems cited in the 10-page audit, which covered the period from July 1, 2007, to March 31, 2009.

"We put the additional checks in place as soon as they were recommended," Mr. Gregory said. "They made good recommendations and we adopted them."

Although internal oversight for District Treasurer Mary H. Shatraw was lacking, the report also noted that a review of several payroll documents did not show any improper or inaccurate payments.

"Our testing of payroll did not reveal any exceptions," the report states.

Mrs. Shatraw's duties include setting up employee payroll deductions and direct deposits, preparing and signing payroll checks, and maintaining payroll records.

She also has unreviewed user access rights to the district's computerized payroll system, according to the report. That access allows her to enter new employees, activate and deactivate existing employees and make changes in employees' hourly and annual salary rates, including her own.

The report noted that internal financial controls require a segregation of duties so that not just one person controls all phases of the payroll process.

"Specifically, strong internal controls over payroll require that one person does not have the ability to authorize, execute and record a transaction or control an entire payroll processing cycle," the audit states.

Little or no management oversight also "significantly increases the risk" that errors or irregularities might occur and go undetected or uncorrected, auditors said.

The district's lack of internal oversight created increased risk the treasurer could create fictitious employees, process improper employee payroll payments and adjust the records to avoid detection, auditors claimed.

The audit also faulted the district for having its superintendent sign a payroll certification sheet without actually reviewing payroll information to check for accuracy.

In response, the district has provided documentation to the state showing that Mr. Gregory now reviews a detailed listing of each person on the payroll before certifying it.

Also, as of June 19, the district's business manger, Judy A. Rienbeck, started routinely requesting, reviewing and retaining payroll change reports for each pay period.

The audit report also recommended that the school's claims auditor should review selected payrolls throughout the fiscal year without informing district officials or employees of her selection in advance, which has begun.