Lake County School District s East Ridge Band Booster s Financial Report Audit Fiscal Year

Transcription

1 1 Lake County School District s East Ridge Band Booster s Financial Report Audit Fiscal Year Completed By: Thomas A. Mock, CIA Date: March 30, 2017

2 2 TABLE OF CONTENTS Cover Page...1 Table of Contents. 2 Detailed Audit Report A. Purpose..3 B. Objectives and Scope for the Follow-Up Audit 3 C. Findings from 2015 Financial Audit D. Follow-Up Audit Results E. Conclusion 7

3 3 A. Purpose Internal Audit s purpose in performing a follow-up review of the audit recommendations in the East Ridge Band Booster Financial Audit is to determine the status of their corrective actions. Performing a follow-up audit is a governance and risk management best practice and is included in the Internal Audit Charter of the School District (Policy 7.61). A follow-up audit process is required by the International Standards for the Professional Practice of Internal Auditing. B. Objective and Scope for the Follow-Up Audit The objective of this follow-up audit is to assess the extent to which the East Ridge Band Booster s has progressed in implementing the recommendations contained in the March 2015 Financial Audit Report. The audit scope included the status of current operations related to the audit objectives including any changes made as a result of the original audit recommendations. To accomplish the objectives for the follow up audit, Internal Audit undertook the following actions: Requested the financial statements and documentation for , and current financials for Reviewed all expenses and corresponding documents for the time period noted above. C. Findings from 2015 Financial Audit Internal Audit was asked to complete a review of the East Ridge Band Booster (ERBB) Financial statements for fiscal year. Internal Audit initiated the review by creating spreadsheets to validate the accuracy of the ERBB Monthly Financial Reports as they related to the corresponding Monthly Bank Statements. From this review Internal Audit noted the following exceptions: July 2013 Monthly Financial Report beginning balance didn t agree to the July Bank Statement by $ July 2013 Monthly Financial Report didn t include two checks (3708 & 3720) totaling $ December 2013 Monthly Financial Report has unrecorded deposit(s) in the amount of $ December 2013 Monthly Financial Report has unrecorded Debit Card expenditures totaling $2, May 2014 Monthly Financial Report has unrecorded deposit(s) in the amount of $ May 2014 Monthly Financial Report has unrecorded Debit Card expenditure totaling $ Internal Audit was provided a three ring binder with dividers, beginning with July 2013 through June Each divider contained the Monthly Financial Report, Bank Statement, check stubs and receipts. Internal Audit noted, in general the binder was not well put together. The individual that assembled the binder didn t include all the documentation into the appropriate month. Internal Audit spent a lot of time figuring out the correct month that paperwork belonged. There were also receipts/support information provided that could not be tied to any of the months in the binder. After working through the documents, Internal Audit found the following deficiencies with the ERBB Monthly Financial Reports: There was no supporting documents provided for any of the months related to deposits in the ERBB bank account. 68.5% of checks written did not have supporting documents. 72.7% of debit card transactions did not have supporting documents. Clear documentation was not provided when payments were less than the amount of the vendor invoice paid. Clear documentation was not provided when vendor invoices were combined for payment with one check, and in some cases didn t total to the check written.

4 4 Internal Audit analyzed in detail all 359 (average 30 per month) debit card transactions completed in 2013/2014. Debit card transactions are like cash transactions by ERBB and as such pose a greater risk related to proper expenditures. As noted, receipts were not provided for over 70% of the debt card transactions, so a judgmental review of vendor expenditures was performed for transactions without receipts. The following was observed from this review: The debit card is used weekly throughout the year. September, October and March were the most active months with over 40 transactions completed each month. Average monthly transaction on the debit card was approximately $4, for the time period reviewed. From debit card activity reviewed, the following were uncertain expenditures: o Vistaprint receipt $15.28 for Non-Band Thank You cards o Sunpass transponder fee for $50.00 o Seven Eleven Gas & Snacks receipt for $34.36 o Chili s Restaurant transaction for $16.75 o Godaddy.com for $ & $30.34 o Publix Sunpass Sticker for $5.34 o Groupon Inc. for $30.00 o Miscellaneous Debt for $10.00 o Returns in March 2014 to BJ Wholesale resulted in Gift Cards totaling $342.80, no disposition was provided. Petty Cash expenditures detail was not provided to Internal Audit. Interview questions with the Disbursement Secretary concerning cash transaction indicated little was maintained in this area as receipts were either not obtained or not available for many of these transactions. During the year $3, in cash was withdrawn from the bank account, with no audit trail. Internal Audit completed a count of the petty cash and found the balance to be $ on 9/12/2014. Internal Audit observed that recently, the ERBB started a Petty Cash Account Log. Internal Audit noted from this Petty Cash Account Log, on 8/7/2014 the ERBB paid the Band Director $ cash for Band Camp Director. This payment is in direct conflict with School Board policy 7.40 and may also be in conflict with the Florida Retirement System (FRS) regulations. In addition, Internal Audit noted cash payments are being made to individuals (prior students) for work provided to the band program. Internal Audit inquired about issuing 1099 s for these activities, and it was confirmed that when the ERBB made cash payments no 1099 s were issued to these individuals during the calendar year. Internal Audit reviewed checks written and compared each check to when it cleared the bank. Internal Audit noted there were 133 checks cleared through the bank in Of the checks clearing the bank, 9% only had one signature and 83.5% had the band director as the second signature. The following checks were noted written that were still open as of the June 2014 bank statement: Date Check # Stmt Date Notes Amount 10/16/ Open To replace lost ck #3740 to Ms. Shiemer $ /13/ Open Gabby's 5/13/14 for Deposit $ /10/ Open Jet Set Bus Lines 5/10/14 Festival $ /17/ Open Noah Cole $ Open Check Total $ 1, The East Ridge High School Band Internal account activity was reviewed in conjunction with this audit. Internal Audit noted that the only activity in this account was $12, in receipts and $11, in disbursements. All monies coming into the account were transfers from the ERBB account and the expenditures were payments to student instructors used by the band. Discussions with the East Ridge

5 5 High School bookkeeper, found that these processes were established to provide oversight for payment to these instructors as well as issue them 1099 s for payments made during the year. Recommendations and Management Response Internal Audit provides the following recommendations to the ERBB for improvements to its Financial Records: 1. Monthly Financial Reports should be reviewed and approved by another booster board member for proper and accurate completion. 2. All expenditures should require proper receipts and documentation. 3. All expenditures should have noted information concerning what the expenditure was for. 4. Debit Card transactions do not provide the appropriate level of control required for verification points (such as dual signatures is not required). This exposes the booster organization to unapproved transactions. 5. When paying multiple vendor invoices with a single check, clear documentation should be completed showing a summary of each invoice amount being paid. 6. When Invoices are not paid in full, a clear reason should be documented for the difference. 7. Petty cash should be properly documented, when receipts are not provided for cash paid out, appropriate internal documentation should be completed (signature of person receiving fund, disbursement secretary and reason for expenditure). 8. Payments for work should have appropriate time keeping records provided as support for amount paid. Additionally, no Lake County Employee should ever be paid for work from booster funds. 9. Open checks noted should have stop payments completed if they are still uncashed. 10. Lake County employees should not be involved in approval of booster expenditures. Therefore, they should not be signers on the check account and not a signer on booster disbursements. East Ridge High School Principal held meetings with the Band Director and the Band Booster Organization to address the findings from Human Resources and Internal Audit in September and November Additionally, the Principal has designated a Vice-Principal at the school to review and approve the monthly financial statements for all booster organizations to verify they are in compliance with LCS Policies. D. Follow-Up Audit Results Internal Audit performed a follow-up review of the 2015 financial audit findings. The follow-up audit was accomplished through the review of ERBB Financial Statements, Bank Statements and the supporting documentation for , and year to-date. The following is Internal Audits assessment for the implementation of each recommendation from the audit: 1. There was no evidence the Financial Reports were reviewed by another booster board member for proper and accurate completion. 2. Internal Audit noted that proper support and descriptions for transactions was provided. In cases were a receipt was not provided, the ERBB provided documentation explaining the transaction and approval. 3. All transactions reviewed provided an explanation for the expenditure. 4. Since the prior audit, ERBB has stopped using the bank/debit card to secure cash from their bank account. 5. Payment of multiple vendor invoices was not noted from any of the expenditures reviewed. The ERBB is now issues a check for each transaction. 6. ERBB now provides proper documentation when a check amount is deferent then the invoice amount for expenditures reviewed. 7. Petty Cash documentation is properly performed.

6 6 8. ERBB was noted performing payments for Band Tech Services through Internal Funds in and , however in ERBB reverted back to paying Band Tech Services from the ERBB Funds. 9. The audit showed ERBB was issuing Stop Payments for checks not cashed during the period of Financial Statements reviewed by audit. 10. Internal Audit didn t find any Lake County School staff being paid or reimbursed for services through the ERBB. What ERBB has accomplished since the Audit The ERBB has improved the organization of its documentation for each month since the initial audit was performed. Supporting documentation was noted for the majority of expenditures. When the supporting document was missing, the ERBB has established a form to document what the expenditure was for and it is signed by the appropriate ERBB members. Internal Audit did note that ERBB implemented the recommendation to pay Band Tech Service providers through the Internal Fund so that they could be provide a 1099 form at the end of the year. However, in Band Tech Service providers were all paid out of the ERBB bank account. E. Conclusion Overall, ERBB has made significate progress in addressing the audit recommendations. The improvements demonstrates a motivation to enhance the financial integrity and accountability of its funds. It is important to note that all Booster Organizations throughout the School District are not under the control of the School Board, but do impose a risk to the School District as each are allowed to operate under the name of the school they support. Therefore Lake County taxpayers don t see a separation between the School District and these Booster Organizations. Thomas A. Mock, CIA Director of Internal Audit Lake County Schools