ROSELLE PUBLIC SCHOOLS REPORT ON AGREED-UPON PROCEDURES RELATED TO PURHASING AND CAPITAL ASSETS USE DURING THE PERIOD OF JANUARY 1, 2017 TO JANUARY

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1 ROSELLE PUBLIC SCHOOLS REPORT ON AGREED-UPON PROCEDURES RELATED TO PURHASING AND CAPITAL ASSETS USE DURING THE PERIOD OF JANUARY 1, 2017 TO JANUARY 31, 2018

2 ROSELLE PUBLIC SCHOOLS REPORT ON AGREED-UPON PROCEDURES TABLE OF CONTENTS Page Independent Accountants Report on Applying Agreed-Upon Procedures 1 Agreed-Upon Procedures 2 5 Findings 4 9 Recommendations 10

3 DONOHUE, GIRONDA, DORIA & TOMKINS, LLC Certified Public Accountants Robert A. Gironda, CPA Robert G. Doria, CPA (N.J. & N.Y.) Frederick J. Tomkins, CPA, RMA Matthew A. Donohue, CPA 310 Broadway Bayonne, NJ (201) Fax: (201) Linda P. Kish, CPA, RMA Mark W. Bednarz, CPA, RMA Jason R. Gironda, CPA Mauricio Canto, CPA, RMA INDEPENDENT ACCOUNTANT S REPORT ON APPLYING AGREED-UPON PROCEDURES To Honorable President and Members of the Board of Education Roselle Public Schools Roselle, New Jersey We have performed the procedures enumerated in the attached schedule, which were agreed to by the management and members of the board of the Roselle Public Schools, related to purchasing and capital assets use during the period of January 1, 2017 to January 31, The Roselle Public Schools management is responsible for purchasing and capital assets use. The sufficiency of the procedures performed or to be performed is solely the responsibility of the management and members of the board of the Roselle Public Schools. Consequently, we make no representation regarding the sufficiency of the procedures described in the attached schedule either for the purpose for which the agreed-upon procedures report has been requested or for any other purpose. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on purchasing and capital assets use compliance. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the management and members of the board of the Roselle Public Schools, and should not be used by anyone other than these specified parties. Very truly yours, Bayonne, New Jersey April 26, 2018 DONOHUE, GIRONDA, DORIA & TOMKINS, LLC Certified Public Accountants 1

4 AGREED-UPON PROCEDURES 1) For all purchase orders initiated for goods and services from January 1, 2017 to June 30, 2017, where the aggregate cost for the fiscal year exceeds the bid threshold, review as to whether the purchase was properly authorized and in compliance with budget regulations, legal requirements of N.J.S.A. 18A:18-1 et seq. (Public School Contracts Law), and established policies and procedures of the District. 2) For all checks issued for goods or services from July 1, 2017 to January 31, 2018, perform the following: a) Review supporting documentation by comparing the amount, payee or vendor, date, and description to the purchase order, vendor s invoice, board approved bill s list, and canceled check. b) Review whether the purchase was properly recorded as to period, account, fund, and budget category. c) Review as to whether the purchase was properly authorized and in compliance with budget regulations, legal requirements of N.J.S.A. 18A:18-1 et seq. (Public School Contracts Law), and established policies and procedures of the District. 3) For all purchase orders initiated for goods and services, for which check has not been issued, from June 1, 2017 to January 31, 2018, perform the following: a) Review supporting documentation by comparing the amount, payee or vendor, date, and description to vendor s invoice. b) Review whether the purchase was properly recorded as to period, account, fund, and budget category. c) Review as to whether the purchase was properly authorized and in compliance with budget and legal requirements of N.J.S.A. 18A:18-1 et seq. (Public School Contracts Law) and established policies and procedures of the District. 4) For purchases of capital assets from July 1, 2017 to January 31, 2018, including but not limited to, furniture, fixtures, equipment, machinery, and vehicles without consideration as to amount, perform the following additional procedures: a) Review supporting documentation by additionally comparing the cost and delivery addresses to purchase orders, paid checks, notes payable, vendors invoices, purchase contracts, lease agreements, and receiving reports. b) Review as to whether capital asset purchase is physically in appropriate location in accordance with authorized purpose. c) For capital asset purchase, in excess of $2,000, review as to whether tagged and listed in a fixed assets inventory in accordance with N.J.A.C. 6A:23A-18.4 and established policies and procedures of the District. 2

5 AGREED-UPON PROCEDURES 5) For purchase of vehicles from July 1, 2017 to January 31, 2018, perform the following additional procedures: a) Review whether ownership is evidenced on the deed or title certificate. b) Review as to whether vehicle was assigned and used in accordance with N.J.A.C. 6A:23A-6.12 and established policies and procedures of the District. c) Review as to whether vehicle was tracked, maintained and accounted for in accordance with N.J.A.C. 6A:23A-6.11 and established policies and procedures of the District. 3

6 FINDINGS 1) Checks were issued by manually overriding controls in electronic accounting system and bypassing established procedures. Such checks are also known as manual checks and are evidenced by checks outside of the regular check batch runs timely included in bills lists for Board approval. documentation suggests that manual checks were issued at direction of School Business Administrator. However, since all checks were issued through electronic accounting system and there are various instances of checks being issued in a manner not consistent with established procedures, all manual checks cannot be identified and therefore we could not determine the amount or number of manual checks. The following instances were results of issuing manual checks: a) Check no cleared the bank account for 2 separate purchases. It appears check no was incorrectly manually issued as sequence no when such sequence no. had already been issued for another check. b) Check no cleared the bank account for $41,300 in accordance with purchase order no to GL Group, Inc. and cleared again for $1,300 with no other known purchase order to GL Group, Inc. c) Check no cleared the bank account twice for $217 in accordance with purchase order no to Wilson Language Training. d) Check no cleared the bank account for $20,871 to Delta Dental; however, the electronic accounting system states $22,761. 2) Checks were issued on a regular basis prior to submitting on bills list for Board approval, although not prohibited, this is a manual override of internal control that should not be normal practice. Furthermore, the bills list was not always timely approved or properly approved as evidenced by the following are 2 instances where the Board has not approved monthly bills: a) The October 2017 bills have not been properly approved because the October 2017 Board meeting was cancelled and the October 2017 bills were not properly included in the sum total of the November 2017 bills list. b) The December 2017 bills have not been approved by the Board as of the last day of this engagement s field work, April 19,

7 FINDINGS 3) All general fund budget appropriation transfers in the electronic accounting system were not submitted to the Board for approval and there were instances where net transfers did not balance or zero out. The electronic accounting system did not allow overexpenditures of appropriations; however, this control was invalidated by questionable transfers. Therefore, determination of proper availability of funds for purchases could not be made. The following set of budget appropriation transfers in the electronic accounting system are questionable: a) Budget appropriation transfer on September 1, 2017, whereby only a general operating account appropriation was increased by $25,000 with the description of WINTER SPORTS. Such transfers or appropriations of excess revenues were not submitted to the Board for approval. b) Budget appropriation transfers on September 1, 2017, whereby only capital outlay account appropriations were transferred in the gross total of $45,852 and zeroed out with the description state aid adjustment appr. Such transfers were not submitted to the Board for approval. c) Budget appropriation transfers on October 1, 2017, whereby only general operating account appropriations were transferred in the gross total of $255,685 in, and $472,170 out, for a net total imbalance of $216, with various descriptions. Such transfers did not zero out as required and were not submitted to Board for approval. d) Budget appropriation transfers on November 1, 2017, whereby only general operating account appropriations were transferred in the gross of $206,999 and zeroed out with various descriptions and November 31, 2017, whereby only general operating account appropriations were transferred in the gross of $542,679 and zeroed out with various descriptions. There was a budget appropriation transfer approved by the Board on November 20, 2017; however, the attachment referenced in the approval was not provided nor a gross amount stated. e) Budget appropriation transfers on December 31, 2017, whereby only general operating account appropriations were transferred in the gross of $347,000 and zeroed out with various descriptions. Such transfers were not submitted to the Board for approval. 5

8 FINDINGS 4) There were instances where it was questionable whether purchases were reasonable and necessary and/or properly classified as follows: a) Purchase order no , included in check no , description stated District Replacement Mac Books as presented on September 2017 bills list for Board approval; however, the respective invoice included an Apple Watch and Apple Care. b) Purchase order no , included in check no , description stated District Equipment as presented on December 2017 bills list for Board approval; however, the respective invoice included an Apple Watch and Apple Care. c) Purchase order no , included in check no , description originally stated Apple Watch Mr. Jones ; however, was presented on January 2018 bills list for Board approval as Business Equipment and then changed again to District Equipment. The respective invoice included an Apple Watch. d) Purchase order no description stated Replacement Trucks, however there is no evidence of District vehicles being taken out of service before or after purchase. Therefore intended purpose or use could not be determined. There was no respective invoice, but an accompanying lease agreement was for 2 new Ford F-150 trucks. See finding no. 11 for additional information on this purchase. e) Purchase order no description stated Vehicles Replacement, however there is no evidence of vehicles being taken out of service before or after purchase. The reflective invoice includes 5 used vehicles with one inoperable at time of purchase. The intended purpose or use of vehicles could not be determined. Furthermore, purchase was charged to account for construction services which does not appear to be a proper classification. f) Purchase order no description stated Mileage reimb, items Organizer ; however, the respective invoices included gym carpets, gym accessories and rolling TV stand. Furthermore, purchase was charged to account for professional development/travel which does not appear to be a proper classification. g) Purchase order no.s , , and for vendor Bob s Creative Lawn Care were charged to account no with the account description of Facilities Grant Trans., which does not appear to be a proper classification as majority of the work performed was for landscaping. Furthermore, the account description for account no in the budget certified for taxes is Capital Reserve Transfer to Capital Projects which would not appear to be a proper classification either. h) Purchase order no , , , and for Bob s Creative Lawn Care were charged to account no with the account description of Construction Services, which does not appear to be a proper classification as majority of work performed was for landscaping with some repairs and maintenance. 6

9 FINDINGS 5) There were 509 instances where invoices were dated before respective purchase order. This is also known as a confirming order. Although, there are occasions where this cannot be avoided, this is a manual override of internal control that should not be normal practice. 6) There were 1,617 instances where purchase orders had an electronic signature in the superintendent s signature authorization block. However, the electronic accounting system reports those purchase orders as approved by ADMAPPROVE. The District practice was that all electronic accounting system users have specific usernames for logging onto accounting system comprised of their first initial and last name. ADMAPPROVE is not a specifically assigned user and appears to have been used to override the internal controls of the electronic accounting system. Furthermore, the Superintendent has no recollection of approving those purchase orders directly on the electronic accounting system. 7) There were 620 instances where purchase orders were not signed by a department head/receiving official and 87 instances where purchase order were not signed by Superintendent. 8) There were 416 instances where purchase order did not have supporting documentation such as an invoice. 9) There were 425 purchase orders that could not be located as of the date instructed by management of the District to end field work, April 19, ) There were 16 instances where aggregate purchases from vendors during fiscal year were in excess of the bid threshold without any evidence of advertising for bids or likely exception to requirement, nor were contracts formally awarded by the Board for such purchases. There were 7 instances where aggregate purchases from vendors during fiscal year were in excess of the bid threshold without any evidence of advertising for bids or likely exception to requirement, nor were any contracts formally awarded by the Board for such purchases. It appears that aggregate vendor purchases were not being monitored for compliance with the bid threshold requirements. Of the 7 instances, the 5 following instances were questionable aggregate purchases from vendors because of the vendors limited history with the District and the quantity of purchases: a) M & J Global Transportation LLC was paid $77,786 from October 1, 2017 to December 1, 2017 for transportation services. b) Alliance Tours was paid $45,269 from September 1, 2017 to December 1, 2017 for transportation services. Same mailing address and claimant s certification suggest that Alliance Tours and M & J Global Transportation LLC have the same owner. c) Bob s Creative Lawn Care was paid $70,078 from August 29, 2017 to October 1, d) LSP Electrical Contractors Inc was paid $39,250 from August 1, 2017 to December 21, e) GL Group, Inc. was paid $175,800 from July 25, 2017 to December 21,

10 FINDINGS 11) There was a questionable lease-purchase of 2 new vehicles, where it appears neither procurement nor purchase was properly executed. The lease agreement was executed by the School Business Administrator on behalf of the District for 2 new Ford F-150 totaling $86,647 with a down payment of $20,823 and balance payable over 4 years. The down payment of $20,823 was paid with a manual check executed by the School Business Administrator without any prior Board approval. There is no evidence of advertising for bids or likely exception to requirement, nor was contract formally awarded by the Board for such purchase. Furthermore, the 4 year lease agreement was entered into without any Board approval. 12) The District did not comply with the following required policies of N.J.A.C. 6A: district board of education vehicle assignment and use policy: a) The Board did not have an adopted policy to ensure compliance with N.J.A.C. 6A: district board of education vehicle assignment and use policy. b) Purchase order no was for 5 used vehicles purchased without Board authorization nor vehicle assignment for the conduct of official District business. c) Purchase order no was for 2 new vehicles lease-purchased without Board authorization nor vehicle assignment for the conduct of official District business. d) Purchase order no was for 2 new vehicles lease-purchased totaling $86,647 exceed the vehicle luxury limit per vehicle. There are exceptions depending on assigned use and requirements of vehicles; however, there was no formal assignment. The purchase order stated Replacement Trucks ; however, there is no record of vehicles being replaced to reference. e) Purchase order no was for 2 new vehicles that were utilized as evidenced by substantial added mileage; however, there were no formal vehicle logs maintained of any vehicles, including the driver, mileage, and starting and destination points. f) Purchase order no stated reimbursement vehicle detailing included reimbursement for tinting of windows of new vehicle(s); however, these physical alterations were made without prior Board approval. 8

11 FINDINGS 13) The District did not comply with the following required polices of N.J.A.C. 6A: vehicle tracking, maintenance, and accounting: a) The Board did not have an adopted policy to ensure compliance with N.J.A.C. 6A: vehicle tracking, maintenance, and accounting. b) A vehicle inventory control record was not maintained that includes information on vehicles, assignments, drivers, insurance, and usage category. c) A driving record of the operators of the District vehicles was not maintained. d) A record of maintenance, repair, and body work for each District vehicle as not maintained. The District purchased goods and services for maintenance and repairs of vehicles; however, there is no evidence of centralized records maintained. 14) The District did not properly maintain a fixed assets inventory, whereby updating such inventory with acquisitions and dispositions of furniture, fixtures, equipment, machinery, and vehicles. 9

12 RECOMMENDATIONS 1) Checks should only be prepared after accounts payable staff have reviewed respective purchase orders for completeness. Manually overriding controls in electronic accounting system and bypassing established procedures to issue checks, also known as manual checks, should be prohibited unless such checks are signed by 2 authorized signatories. 2) Checks should only be released/issued subsequent to obtaining Board approval on bills list and any instances of checks issued prior to approval should be noted on such bills list. The Board Secretary should review bills lists for completeness prior to presenting to Board. 3) General fund budget appropriation transfers should only be performed subsequent to obtaining Board approval. Any instances of budget appropriation transfers prior to approval should be noted on schedule for approval. The Board Secretary should review budget appropriation transfer schedules for completeness prior to presenting to Board. 4) Purchase orders should be presented to Superintendent for approval, whereby the Superintendent should review purchases as to whether reasonable and necessary and classified to proper account. 5) Purchases should be properly encumbered with approved purchase orders prior to commitment. Confirming orders should only occur under special circumstances with appropriate reasons documented on purchase orders. 6) Log-on credentials for electronic accounting system must be properly assigned, inventoried, and safeguarded, and administrative log-on credentials stringently safeguarded. The Board should adopt a policy outlining such responsibilities and prohibited actions. 7) Aggregate vendor purchases should be monitored for compliance with the bid threshold requirements. Any purchases in excess of bid threshold should be advertised for bid and awarded through a bid process or appropriate exception. 8) The District comply with required policies for vehicle assignment and use, whereby the Board should adopt a policy to ensure compliance with such policies. The policies include requirements that any type of vehicle purchases must be approved by Board and assigned for the conduct of official District business; vehicles not exceed the luxury limit per vehicle; formal vehicle logs maintained of any vehicles, including the driver, mileage, and starting and destination points; and physical alterations to vehicles be approved by Board prior to being made. 9) The District comply with required polices for vehicle tracking, maintenance, and accounting, whereby the Board should adopt a policy to ensure compliance with such policies. The policies include requirements maintenance of a vehicle inventory control record that includes information on vehicles, assignments, drivers, insurance, and usage category; a driving record of the operators of the District vehicles; and a record of maintenance, repair, and body work for each District vehicle. 10) The District should properly maintain a fixed assets inventory, whereby automatically updating such inventory with acquisitions and dispositions of furniture, fixtures, equipment, machinery, and vehicles. 10