METHUEN — During former School Business Administrator Joseph Salvo's tenure, some employees got overtime pay without working and school credit cards were not properly kept track of, according to a new audit report.

Superintendent Jeanne Whitten hired the Boston-based firm Feeley & Driscoll to audit the business office in April. Police Chief Katherine Lavigne has said police are investigating Salvo, although she has refused to divulge details.

Salvo resigned suddenly Jan. 15, citing health reasons.

He had been on the job since October 2003.

Through his spokesman, Frederick Fairburn, Salvo released a five-page detailed response to each of the issues raised in the audit. Fairburn says Salvo applauds the fact an audit was done.

Here is what the audit found and Salvo's response:

Verbal compensation agreements. The auditors reviewed records and interviewed 15 employees. They said Salvo had "verbal compensation agreements" with his workers and he "inconsistently" upheld those agreements.

"It was also noted that certain agreed-upon work and overtime hours promised to employees was being abused by the former business administrator and being paid out for work not being performed," says the 14-page summary of the report, which is dated July 10 and was released by the School Department last week.

"These employees with verbal compensation agreements were instructed by the former business administrator to not interact with the Human Resource Department and to report all matters directly to him."

Salvo disputes that anyone was paid for work that was never done. He says if people were asked "to work beyond their normal work shift ... they were entitled to be paid for that effort."

"Under no circumstances were people not paid for work they performed nor were they ever paid for the work they did not perform," Salvo wrote, adding that he "categorically and unequivocally denies that either or both occurred and further denies that anyone was instructed to conceal overtime activity from anyone."

Credit card use. The School Department has credit cards with Best Buy, Home Depot, Borders Books, Wal-Mart, A.C. Moore and Market Basket. The cards were locked in a safe in the business office and workers kept a log of who used them, but the records were not always accurate, the report says.

The key to the safe was kept in the secretary's desk, and employees used the cards on a daily basis.

"When the secretary was not around, anyone who knew where the key was located could check out the card and not sign the log," the report says.

Prior to taking over the business manager's job, Salvo said, the credit cards were entrusted to one person who did not report their usage. Under Salvo, the secretary was in charge of handing out the credit cards, and "to the best of my knowledge this function was performed as required.

"It is highly unlikely that anyone would enter her desk, remove the key, enter the Business Administrator's Office and access the safe without someone being aware," Salvo wrote. "It is assumed that her desk as well as all others would be secured after hours as it is a matter of security for all of our employees in a public building."

He said only in rare, emergency situations would a card be used prior to the approval of a purchase order and a "purchase order would be issued within a day of its use barring the absence of an approving administrator."

The storage unit. The auditors mentioned the school storage unit at All American Self Storage on Hampstead Street. School officials discovered the unit and reported it to police, and police inventoried the contents, Whitten has said previously.

"The majority of the equipment appeared to be unused maintenance equipment," the report says.

The auditors said school officials did not track equipment, which made the items susceptible to misuse.

Salvo said the storage facility had been in use long before 2003, used to store snow removal equipment during the summer and grounds maintenance equipment, like lawn mowers, during the winter.

"I've never been to the facility and only have the assurances of the staff that their use was consistent with the stated purpose for their rental," he said.

Salvo also stated that prior to his departure, he was in talks with a vendor about an inventory management and control software system.

Blanket purchase orders. Between July 2003 and October 2006, employees created "blanket" purchase orders on a regular basis. With "blanket" purchases, they didn't have to give a description of what they bought — they just called it "miscellaneous costs," the report says.

"Most any purchase could be matched up against a 'blanket' PO," the auditors wrote.

Salvo said this was a long-standing practice that began prior to 2003. Following a previous audit, he said, "such purchase orders was winnowed down to a select few necessary for maintenance of the school facilities." Fairburn gave the example of a box of screws.

"This was done to insure that small items deemed necessary for routine maintenance could be acquired as needed by the maintenance staff without delay," Salvo wrote. "All large purchases required the creation of individual purchase orders."

Purchase order approvals. Salvo, also during that time span, gave final approval for purchase orders when the previous superintendent was absent, and the auditors called that "a lack of oversight."

Salvo responded by saying that under former Superintendent C. Phillip Littlefield "this was done rarely, on an as needed basis, and not if the superintendent was only out for a brief period." He stated the procedure was changed after Whitten took office in 2006 and all purchase orders were approved by her.

OK to pay cash. When the School Department wrote a check, and the check was lost, ruined or voided and another check was needed as a replacement, Salvo could allow the item to be "paid by cash." The method was used in situations where the cost of the item being purchased was greater than the spending amount originally authorized, or when a purchase order "was never initially created," the report says.

They noted that Salvo had final approval of those purchases.

Salvo maintains the "majority of instances ... occurred when shipping costs were either under-estimated or not included in the original request for purchase and the items had been delivered." He said he attempted to rectify the situation by "educating staff" to ask for specific shipping costs or how to properly estimate the cost.

"This reduced the 'stickering' of purchase orders but failed to completely eliminate the need," he wrote.

Salvo also stated the practice was used when bills were received at the end of the fiscal year and could not be paid in the subsequent year.

"This required the use of the 'Okay to pay cash' option as no additional purchase orders could be written in the year in which the expense was incurred," he wrote.

Shipping and receiving. The auditors said the School Department needs to have one person tasked with receiving all deliveries, and matching them up against a purchase order. They said there was "cause for concern" when a package would be delivered and not matched up with a purchase order.

They found there is no formal process to approve vendors, so, "There is the potential use of fictitious vendors."

Salvo agreed. "This is a point where there can be no disagreement," he wrote.

He said a central receiving and delivery system is "highly desirable" but difficult to accomplish for two reasons — money and space. He said one person would have to be paid to not only receive the packages but deliver them to eight buildings as well.

Secondly, there is "no one facility within the schools with the available space required to perform the functions of receival, warehousing and distribution."

Staff writer Gretchen M. Putnam contributed to this report.