Internal Controls - Associated Student Body Accounts Training San Diego Unified School District

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1 Internal Controls - Associated Student Body Accounts Training San Diego Unified School District 2017 Crowe 2017 Crowe Horwath Horwath LLP LLP

2 General Overview Management of ASB Funds Don t Be An Audit Exception 2017 Crowe Horwath LLP 2

3 General Overview Roles and Responsibilities State of California Establishes the laws and regulations that govern the activities of school districts, including ASB California Department of Education Develops policies regarding any legislation or regulations enacted as a result of the law Board of Education Is responsible for everything that happens in the District Education Code section the governing board has the authority to approve the formation of a student body organization within the district 2017 Crowe Horwath LLP 3

General Overview Roles and Responsibilities Superintendent Responsible for ensuring that board policies are implemented and that staff follow those policies Business Services Responsible for general

4 General Overview Roles and Responsibilities Superintendent Responsible for ensuring that board policies are implemented and that staff follow those policies Business Services Responsible for general oversight of student body activities Principal Responsible for student body organization financial activities ASB Advisor Must be a certificated employee ensure policies and procedures are followed ASB Bookkeeper Responsible for ASB bookkeeping Student Council Authorizes activities, approves expenditures, follows policies and procedures 2017 Crowe Horwath LLP 4

5 General Overview ASB Purpose Promote the general welfare, morale, and educational experiences of the Students Students learn how to operate a small business Develop skills such as leadership 2017 Crowe Horwath LLP 5

6 General Overview ASB General Principles Funds derived from the Student Body must be expended in a manner approved by the Student Governing Body Student Body funds must be expended for the benefit of those students currently enrolled in school who have contributed to the accumulation of the funds Prior approval by the Student Governing Body must be obtained in the raising of revenue and the expenditure of Student Body funds 2017 Crowe Horwath LLP 6

7 General Overview ASB Unorganized ASB Students do not govern the ASB organization. Usually there is only the primary student body organization and no additional clubs. Adult education, continuation, special education, regional occupational programs (ROPs) and K-8 schools are also considered to have unorganized ASBs. Students usually have limited involvement in making decisions about the fundraising events and how the funds are to be spent. The governing board delegates the authority to oversee the raising and spending of funds to the principal/school site administrator or another school employee, who is able to make all of the decisions related to the ASB operations and funds. Although authority is delegated to the principal/school site administrator, the rules and guideline regarding fundraising and allowable expenditures remain the same as those for organized ASBs Crowe Horwath LLP 7

8 General Overview ASB Organized ASB (Typically Middle/High School) Students organize activities around student clubs and a student council. Students in organized ASBs are primarily responsible for their organizations; the student council and student club leaders hold formal meetings, develop budgets, plan fundraisers, decide how the funds will be spent, and approve payments. The students make the decisions and have primary authority over the funds; the school administrators, ASB bookkeeper and club advisor(s) assist, advise and co-approve student decisions Crowe Horwath LLP 8

General Overview Organized ASB - Meeting minutes Minutes

governance for organized student bodies, the student

record of each meeting and the actions taken, and

followed ASB policies and procedures as well as current

at a minimum, the following: Date, time and place of

9 General Overview Organized ASB - Meeting minutes Minutes of Meetings Because there is a formal process of student governance for organized student bodies, the student council and each club must prepare and maintain a record of each meeting. These records are called minutes, and they serve as the record of each meeting and the actions taken, and demonstrate that the student council or club has followed ASB policies and procedures as well as current law. The minutes of each club meeting should document, at a minimum, the following: Date, time and place of meeting Name of those in attendance What was discussed What action was taken during the meeting 2017 Crowe Horwath LLP 9

10 Fraud Risk 2017 Crowe Horwath LLP 10

11 Management of ASB Funds Cash Receipts Collections and Verification The auditor s determination will be based on the following question Is all of the money that was deposited all of the money that should have been deposited? All money collected from any source must be substantiated by auditable records Examples: pre-numbered receipts, class receipt records, ticket reconciliations, deposit forms, student lists, tally sheets, cash register tape reconciliations, etc. Overages and Shortages must be reported in detail 2017 Crowe Horwath LLP 11

12 Management of ASB Funds Cash Receipts Fundraisers Governing board is responsible for approving fundraising events Events must contribute to sound educational principles and must not be in conflict with the ideals of the educational program Revenue potential form budget to actual Games of chance (bingo) are prohibited 2017 Crowe Horwath LLP 12

13 Management of ASB Funds Cash Receipts Deposits Cash receipts should be deposited timely. If daily deposits are not feasible, money should be secured in a safe, or other locked place Cash receipts should never be left in the school office over weekends or holidays Never take cash home; don t lock it in your car, etc Crowe Horwath LLP 13

14 Management of ASB Funds Cash Disbursements Purchases Purchase requisitions/orders must be submitted for prior approval by Student Body Organization A Student Body Organization is not obligated to pay for an expenditure ordered by a teacher, student or other person who has not first received a written purchase requisition/order Payment must be made only after evidence of receipt of goods/services Expenditures must be supported by invoices Equipment Purchases Student Body is responsible for repair, maintenance, upkeep and insurance Insurance responsibility for insurance should be delegated to District Office, as part of the District s overall insurance coverage 2017 Crowe Horwath LLP 14

15 Management of ASB Funds Other Balances at end of year Review balances during the year to ensure the funds are spent for the benefit of the students enrolled when the funds were raised, unless pre-approved If club has a balance at end of year, students determine how they should spend the money, gift to another club, or donate to general ASB fund 2017 Crowe Horwath LLP 15

16 What to Look For.. Bank reconciliations and financial reports Deposits that are outstanding for a long period of time Unusual transactions Clearing accounts are set up in accounting system Cash disbursements Detail of invoices are all the items on there for the purpose approved? Invoices paid twice 2017 Crowe Horwath LLP 16

17 What to Look For.. Student stores Inventory shortages Cash shortages Deposits Cash count not done in dual custody when turning funds in No reconciliation of cash sales and cash on hand Deposit form not matching bank statement deposit amount 2017 Crowe Horwath LLP 17

18 Best practices For everyone s protection, do the following: Never leave money unattended Always count all money with a witness When possible, have two people transport deposits Always sign and initial and have a witness sign and initial documentation in as many places as possible indicating the status and amount of money that the two signers counted Always retain duplicate cash count forms for the club s records Always protect the ASB bookkeeper by counting cash with them and obtaining signatures attesting that the cash counts agree 2017 Crowe Horwath LLP 18

Best practices For everyone s protection, do the following (continued) Safeguard user identities, passwords, combinations and other access controls Double-check bank reconciliations,

19 Best practices For everyone s protection, do the following (continued) Safeguard user identities, passwords, combinations and other access controls Double-check bank reconciliations, cancelled/cleared checks, and check endorsements Obtain proper authorizations for all transactions including journal entries, transfers, reimbursements and advances Always compare the advisors copies of club transactions with the financial report for the club Ensure that all club advisors retain club-related records for as long as they have serve as club advisor Ensure that the ASB bookkeeper is never afraid to say no The ASB bookkeeper should never be afraid to refuse an incorrect deposit or improper authorization for disbursement 2017 Crowe Horwath LLP 19

20 Common ASB Audit Exceptions Fundraisers No evidence of approval prior to fundraiser Cash receipts Receipts is not issued when funds are turned into ASB Tally sheets are not used to support the number of items sold/unit price per item Cash not counted in dual custody Timing of deposits. Cash held over summer/winter/spring breaks 2017 Crowe Horwath LLP 20

21 Common ASB Audit Exceptions Purchases Unsupported expenditures Lack of proper approval for expenditure Bank reconciliations No review of bank transactions or financial activity reports by the site 2017 Crowe Horwath LLP 21

22 Case Study 2017 Crowe Horwath LLP 22

23 Case Study It s Friday night at ABC High School and they are playing against their biggest rival in the last basketball game of the season. The gymnasium is packed with spectators on both sides. Knowing this was going to be a big event Andy the Athletic Director made sure to have extra ticket sellers and ticket takers. To ensure he had adequate coverage he told teachers of the school that he would pay them each $25 for their time. At the end of the night Andy paid 10 teachers who helped out $25 in cash from the door fee collections. It was late when the game ended. ABC High School lost in the final seconds. Andy was tired and wanted to get on the road for his hour long drive home. He decided to take the money collected from door fees home and would give it to the site controller first thing Monday morning. He counted the money at home and prepared the deposit form for the site controller. Andy put the deposit in the schools drop safe before the site controller arrived at work on Monday. Please discuss the following questions: 1. What type of potential audit exceptions are there with this scenario? 2. Are there other concerns? 2017 Crowe Horwath LLP 23

24 Questions 2017 Crowe Horwath LLP 24

25 Thank you Matthew Nethaway, Partner Arthur Ngo, Senior Manager Joe Trone, Manager In accordance with applicable professional standards, some firm services may not be available to attest clients. This material is for informational purposes only and should not be construed as financial or legal advice. Please seek guidance specific to your organization from qualified advisers in your jurisdiction Crowe Horwath LLP, an independent member of Crowe Horwath International crowehorwath.com/disclosure Crowe Horwath LLP

District Business Office Staff YES NO N/A Comments

District Business Office Staff YES NO N/A Comments Internal Controls Checklist by Job Responsibility A No response to any of the following questions may indicate an internal control weakness. The district should perform a self-evaluation and investigate