TEXAS SCHOOL FOR THE DEAF Austin, Texas ANNUAL INTERNAL AUDIT REPORT

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1 Austin, Texas ANNUAL INTERNAL AUDIT REPORT Garza/Gonzalez & Associates CERTIFIED PUBLIC ACCOUNTANTS

2 Austin, Texas Annual Internal Audit TABLE OF CONTENTS Internal Auditor s... 1 Introduction... 2 Internal Audit Objectives I. Compliance with Texas Government Code 2102: Required Posting of Internal Audit Information... 4 II. Internal Audit Plan for.4 III. Consulting and Nonaudit Services Completed... 5 IV. External Quality Assurance Review... 5 V. Follow-Up of Prior Year Findings & Recommendations VI. External Audit Services Procured in VII. ing Suspected Fraud and Abuse VIII. Proposed Internal Audit Plan for Fiscal Year IX. Organizational Chart... 12

3 Garza/Gonzalez & Associates CERTIFIED PUBLIC ACCOUNTANTS Board Members and Budget Audit Committee Members Texas School for the Deaf Austin, Texas We performed follow-up procedures for the year ended August 31, 2016 for the Texas School for the Deaf (TSD) to determine the implementation status of the findings and recommendations that were presented in prior year internal audit reports. The results and implementation status of our follow-up procedures performed are reported in the accompanying report, which also includes all information required to comply with the State of Texas Internal Audit Annual requirements. We have discussed the implementation status of the findings and recommendations with various TSD personnel and will be pleased to discuss them in further detail; to perform an additional study of these matters; or, to assist you in implementing the recommendations. October 14, Arden Grove San Antonio, TX / Fax

4 Annual Internal Audit INTRODUCTION The Texas School for the Deaf (TSD) was established in 1856, and is the oldest continuously operating publicly funded school in Texas. It currently serves approximately 580 students from school districts across the State. TSD s mission is to ensure that students excel in an environment where they learn, grow, and belong. TSD is established as a state agency to provide a continuum of direct educational services to students, from birth through twenty-one years old, who are deaf and hard of hearing and who may have multiple disabilities. TSD is governed by a nine-member board appointed by the Governor and confirmed by the Senate. Board members, five of whom must be deaf, are either parents of children who are deaf, professionals working with persons who are deaf, or persons who are deaf. The Board is directed to organize and conduct itself like the board of a local school district and; thus, in addition to overseeing the provision of all TSD services, has specific responsibilities related to budget preparation, policy adoption and appointment of TSD s Superintendent. TSD s curriculum is designed to meet the needs of a diverse student population. The school is staffed with certified teachers and qualified support personnel in assessment, auditory/speech training, counseling/psychological services, remedial programs, and after-school programs. Residential facilities are available and provided to students needing them. Programs offered at TSD include a Parent Infant Program (from birth to 35 months old); Early Childhood Education (for students from 3 to 5 years old); a Special Needs Department (for students with multiple disabilities); Elementary, Middle and High School Programs (for kindergarten to graduation); a Career and Technology Education Program (for high school and transitional students); Career and Transition Services (for post-graduation students); and, the Access Program (for students 18 to 22 years old) Internal Audit Functions Performed For fiscal year 2016, the Internal Auditor performed follow-up procedures of the findings and recommendations that were presented in prior year internal audit reports; and, prepared the Annual Internal Audit. 2

5 Annual Internal Audit INTERNAL AUDIT OBJECTIVES In accordance with the International Standards for the Professional Practice of Internal Auditing, the audit scope encompassed the examination and evaluation of the adequacy and effectiveness of TSD s system of internal control and the quality of performance in carrying out assigned responsibilities. The audit scope included the following objectives: Reliability and Integrity of Financial and Operational Information Review the reliability and integrity of financial and operating information and the means used to identify, measure, classify, and report such information. Compliance with Policies, Procedures, Laws, Regulations and Contracts Review the systems established to ensure compliance with those policies, procedures, laws, regulations, and contracts which could have a significant impact on operations and reports, and determine whether the organization is in compliance. Safeguarding of Assets Review the means of safeguarding assets and, as appropriate, verify the existence of such assets. Effectiveness and Efficiency of Operations and Programs Appraise the effectiveness and efficiency with which resources are employed. Achievement of the Organization s Strategic Objectives Review operations or programs to ascertain whether results are consistent with established objectives and goals and whether the operations or programs are being carried out as planned. 3

6 Annual Internal Audit I. Compliance with Texas Government Code 2102: Required Posting of Internal Audit Information To comply with the provisions of Texas Government Code 2102 and the State Auditor s Office, within 30 days after approval by TSD s Board, TSD will post the following information on its website: An approved fiscal year 2017 audit plan, as provided by Texas Government Code, Section A fiscal year 2016 internal audit annual report, as required by Texas Government Code, Section The internal audit annual report includes any weaknesses, deficiencies, wrongdoings, or other concerns raised by internal audits and other functions performed by the internal auditor as well as the summary of action taken by TSD to address such concerns. II. Internal Audit Plan for An internal audit plan for fiscal year 2016 was not prepared. The only functions performed by the Internal Auditor for fiscal year 2016 were the follow-up procedures and preparation of the Annual Internal Audit. In the prior 3 years, the Internal Auditor performed the following audits and functions: Fiscal Year 2015: Athletic Revenue Follow-up of Prior Year Audit Recommendations Preparation of the Annual Internal Audit Fiscal Year 2014: Performance Measures Follow-up of Prior Year Audit Recommendations Preparation of the Annual Internal Audit Fiscal Year 2013: Athletic Revenue Follow-up of Prior Year Audit Recommendations Preparation of the Annual Internal Audit The internal audit report prepared for fiscal year 2016 was as follows: No. Audits/ Titles Date 1. Annual Internal Audit Follow-Up of Prior Year Internal Audits 10/14/2016 4

7 Annual Internal Audit III. Consulting and Nonaudit Services Completed The internal auditor did not perform any consulting services, as defined in the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing or any non-audit services, as defined in the Government Auditing Standards, December 2011 Revision, Sections IV. External Quality Assurance Review The internal audit department s most recent System Review, dated October 7, 2015, indicates that its system of quality control has been suitably designed and conforms to applicable professional standards in all material respects. 5

8 Annual Internal Audit V. Follow-Up of Prior Year Findings & Recommendations No. Date Name of Observations/Findings and Recommendations Current Status (, Partially, Delayed, No Action Taken, Do Not Plan to Take Corrective Action or Other) with brief description if not yet implemented Fiscal Impact/Other Impact 1 10/14/ Follow-Up Follow-Up of Prior Year Audits Following is the status of the recommendations made in previous fiscal years that had not been implemented. Athletic Revenue ( date 9/9/2015) 1. Disbursements TSD should: Develop a policy similar to the procurement card policy, which disallows reimbursement of sales tax paid on purchases made on behalf of the Athletic Department, since TSD is a tax-exempt entity. Delayed To support the disbursement of Athletic Activity Funds. Develop a policy requiring itemized receipts to support reimbursement requests to ensure items purchased are allowable. Document the determination of the cash advance on the Request for Check to support the requested amount. (Ex. 10 students x $25 (est. meals cost) = $250) 2016 Follow-Up Our follow-up indicated that TSD has not developed a policy that disallows the reimbursement of sales tax. It is management s understanding that their Expense Reimbursement policy, which references Chapter 660 of the Government Code; specifically, Section , requires employees to submit itemized receipts. However, this section indicates that the State Agency (TSD), not the employee, is required to ensure compliance with this Chapter. Furthermore, since this Chapter is the Travel Regulations Act, and covers a number of rules, employees may not be aware that itemized receipts are required. In 2 instances of 20 cash disbursements tested, the Request for Check, which was for an advance, did not include documentation to support the computation for the estimated cost of meals. The Business Office has undergone key staff changes during fiscal year 2016, which has delayed implementation of these recommendations. TSD plans to train employees of the Business Office regarding purchasing and the level of documentation required before payment is made. 6

9 Annual Internal Audit No. Date Name of Observations/Findings and Recommendations Current Status (, Partially, Delayed, No Action Taken, Do Not Plan to Take Corrective Action or Other) with brief description if not yet implemented Fiscal Impact/Other Impact 1 10/14/ Follow-Up 2. Airfare Payments TSD should ensure reasons for any discrepancies in amounts paid per the airline receipt and supporting documentation are adequately documented. To ensure payments are adequately supported and documented. 3. Student Airfare Payment Plans TSD should develop a policy for the repayment of travel costs that were paid by students using a payment plan to ensure they are repaid within the academic school year. In addition, TSD should make additional efforts to collect the remaining unpaid balances from the school year, if considered feasible. Other To ensure a policy exists for the repayment of travel costs Follow-Up Our follow-up indicated that TSD has not developed a policy regarding the repayment of travel costs by students on a payment plan. TSD plans to implement a policy that will allow travel costs to be paid from the Student Assistance Activity Fund in lieu of using a payment plan. 4. Payment Logs TSD should: Implement a better process; such as, performing a reconciliation between the overall payment log and the individual trip logs to ensure a complete and accurate accounting of amounts owed by students. Other To ensure reimbursement of travel costs are properly accounted for and provide for authorization of trip fee waivers. Develop a policy that addresses criteria for fees to be waived for students and delegating the authorization for the waiver of fees to the Superintendent Follow-Up Our follow-up indicated that TSD plans to implement a policy that will allow the Student Assistance Activity Fund to be used to pay for travel costs for those students that are unable to pay. Upon implementation of that policy, the Superintendent s authorization for waived fees will not be considered necessary. 7

10 Annual Internal Audit No. Date Name of Observations/Findings and Recommendations Current Status (, Partially, Delayed, No Action Taken, Do Not Plan to Take Corrective Action or Other) with brief description if not yet implemented Fiscal Impact/Other Impact 1 10/14/ Follow-Up Performance Measures ( date 8/5/2014) 1. ing TSD should retain documentation or implement procedures to demonstrate that performance measures are timely reported. To provide verification that performance measures are reported by the established due date(s). 2. Number of Residential Students Transported Home Weekly Method of Calculation TSD should revise the method of calculation in its Strategic Plan to reflect the method in its long definition, which is the actual method of calculation. To ensure the Strategic Plan accurately reflects the actual method of calculation for this performance measure. 3. Key Efficiency Performance Measures Calculation TSD should retain documentation used to calculate and report actual performance for the Average Daily Cost of Transportation per School Day key efficiency performance measure. Other To ensure reported performance is supported and accurately calculated Follow-Up Our follow-up indicated that documentation was retained; however, the key measure, Average Daily Cost of Transportation per School Day had a variance of 5.88% due to the number of school days used being incorrect. As in the prior year, staff development and teacher work days (student holidays) are (incorrectly) used in the calculation. 4. YTD Calculation Method TSD should revise its long definitions to include the YTD calculation method and retain documentation to support the calculation for reported YTD amounts. Improve controls over reporting of YTD amounts. 5. Policies and Procedures Manual TSD should develop written policies and procedures that document all steps performed in the collection, calculation, review, and reporting of each performance measure. To improve the guidance in all steps of the performance measure process. 8

11 Annual Internal Audit No. Date Name of Observations/Findings and Recommendations Current Status (, Partially, Delayed, No Action Taken, Do Not Plan to Take Corrective Action or Other) with brief description if not yet implemented Fiscal Impact/Other Impact 1 10/14/ Follow-Up Athletic Revenue ( date 7/3/2013) 1. Cash Receipts The Athletic Department should implement a process to ensure collections are submitted to the Business Office as required by the established policies and procedures, or institute a more practical timeline and revise the policies and procedures accordingly. Delayed Improve the process of depositing cash receipts in a timely manner Follow Up Our follow-up indicated that it is TSD s practice that the Athletic department submit collections to the Business Office 3 business days after the date of the event. Our testing of 10 cash receipts indicated that in one instance, although the cash receipt was submitted to the Business Office 3 business days after the date of the event, it was not deposited in the bank by the Business Office until 16 days after receipt. To address this concern, TSD has hired a new cashier and plans to schedule a training session with all employees of the Business Office to strengthen internal controls. 2. Athletic Disbursements TSD should retain documentation to support all athletic disbursements to provide evidence of proper use of the athletic activity funds. To support the disbursement of athletic activity funds. 3. Athletic Admission Fee TSD should develop a policy that indicates the Athletic Director has authority to decide when an admission fee will be charged for entry to an athletic event Follow Up Our follow-up indicated that TSD has not revised their policy to indicate that the Athletic Director has the authority to decide when an admission fee will be charged. The Business Office has undergone key staff changes during fiscal year 2016 and plans to update all policies and procedures to reflect current practices. Delayed To ensure TSD management has authorized the admission of fees to only selected athletic events and improve controls over cash collections and deposits. 9

12 Annual Internal Audit No. Date Name of Observations/Findings and Recommendations Current Status (, Partially, Delayed, No Action Taken, Do Not Plan to Take Corrective Action or Other) with brief description if not yet implemented Fiscal Impact/Other Impact 1 10/14/ Follow-Up 4. Fundraising Fund TSD should revise its policy to reference the 12 separate purpose specific accounts that it began using in the prior (2015) year. Delayed To ensure the minimum number of funds are used to account for athletic activity Follow Up Our follow-up indicated that the Activity Fund Operational Procedures have not been updated to reflect changes. The Business Office has undergone key staff changes during fiscal year 2016 and plans to update all policies and procedures to reflect modifications to its student activity fund accounts. Transportation ( date 9/21/2010) 1. Commercial Air Travel Perform a reconciliation of the home-going program s scheduled travel to the actual travel dates and locations by traveler to ensure that all Commercial Air Travel is valid and properly supported. In addition, TSD should track and verify that unused travel vouchers are accounted for and used on subsequent flights. To ensure travel expenses are proper and fully utilized. Admissions/Records Department ( date 9/26/2008) 1. Safe Storage of Student Records TSD should store active files in fire proof file cabinets and assess the need for a fire suppression and water detection system to properly store and secure all records. Safety and security of records. 10

13 Annual Internal Audit VI. External Audit Services Procured in TSD procured the internal audit services for follow-up procedures and preparation of the Annual Internal Audit for fiscal year VII. ing Suspected Fraud and Abuse TSD has provided information on its home page on how to report suspected fraud, waste, and abuse to the State Auditor s Office (SAO) by posting a link to the SAO s fraud hotline. TSD has also developed a Fraud Prevention Policy that provides information on how to report suspected fraud. VIII. Proposed Internal Audit Plan for Fiscal Year 2017 A risk assessment is in the process of being performed, which will be used to develop the Internal Audit Plan (Plan) for fiscal year The proposed and preliminary areas that are being suggested for internal audit and other tasks to be performed for fiscal year 2017, are as follows: Admissions and Assessment Follow-up of Prior Year Internal Audits Other Tasks Assigned by the Board Upon completion of the risk assessment, the 2017 Plan will be presented to the Board for acceptance, at a later date. 11

14 Annual Internal Audit IX. Organizational Chart Governing Board Internal Auditors Executive ERCOD (0-3 Services including PIP) Human Resources Information Technology Services Legal Services Academic Affairs Student Affairs Support Operations Financial Instructional Departments Residential Services Athletics Accounting Curriculum, Instructional Student Development Food Services Budget Support & Assessment Student Alternative Programs Homegoing Transportation Purchasing Professional Development/ASL After School Programs Interpreting Services Records Management Support and Services Staff Development Risk Management Internal Audit Liaison Student Support Services Student Resources Security Postal Services Family & Student Advocacy Services Curriculum & SPICE Student Health Services Texas Facilities Commission Liaison Transportation Risk Management Property Management 12