Audit: Riverhead Charter School should end employees' use of debit cards

State auditors recommended the Riverhead Charter School's board end the use of debit cards after finding two employees incurred charges totaling $56,000 during the audit period.

State Comptroller Thomas P. DiNapoli’s office audited the district between July 1, 2015 and Feb. 28, 2017. The regular audit, which was released late last month, found the school did not establish a comprehensive policy for employees' use of debit cards. 

The state said it reviewed all 404 debit card disbursements made during the audit period. According to the state, 190 purchases totaling $21,583 appeared questionable or lacked sufficient documentation from school officials to confirm that the purchases were for school expenditures.

Local, state and federal resources finance the charter school, which is a public school. It is governed by a six-member board of trustees, however, and is not under control of the Riverhead school board. 

In a written response to the audit, Aimee LoMonaco, president of the Riverhead Charter School Board of Trustees, said no debit card purchases would be allowed without prior requisition and approval from the superintendent. The board will develop a “corrective action within 90 days” of the state’s report, LoMonaco said.

For one of the school's bank accounts, there are two debit cards issued to two employees. During the audit period, the school incurred debit card charges totaling $56,079 on this account. Operating expenses for the 2016-2017 fiscal year totaled an estimated $6.3 million, the audit said. During the 2016-2017 school year, 409 students were enrolled in the school. 

Debit cards pose significant risks because they give users direct access to the school’s bank accounts and make unauthorized use more difficult to detect, the state audit said.

The state recommended the board end use of debit cards. If the board continues to use debit cards, the audit said the school should establish a policy that “identifies authorized users, defines acceptable spending limits, and describes the types and circumstances of the purchases allowed, and the penalties for violating the policy.”

Among the audit’s key findings:

• There was no policy in place to ensure all charges were for business-related expenses.
• None of the debit card purchases included paperwork to indicate prior approval or that the charges were reviewed by the board.
• Despite the school’s tax-exempt status, two employees repeatedly paid sales tax on debit card purchases.

LoMonaco agreed with the state’s recommendation that should the school continue to use debit cards, a detailed policy needs to be put in place.