Office of Shared Accountability MONTGOMERY COUNTY PUBLIC SCHOOLS Rockville, Maryland April 21, 2010 MEMORANDUM To: ‘Mr, James G. Fernandez, Principal ‘Albert Einstein High School c From: Roger W. Pisha, Supervisor, Internal Audit Qt Subject: Report on Audit of Independent Activity Funds for the Period December 1, 2008, through December 31, 2009 This audit report presents the results of our examination of the financial records, reports, and internal accounting controls relating to the Independent Activity Funds (IAF) for Albert Einstein High School for the period December 1, 2008, through December 31, 2009. The examination was made to determine the adequacy of accountability over these funds, compliance with applicable Montgomery County Public Schools (MCPS) policies and procedures, and effectiveness of IAF management. Findings and Recommendations ‘We appreciated the opportunity to meet with you, Ms. Robin Hart, school business manager, and ‘Mr. Juan Ramos, financial specialist, on April 9, 2010, to discuss the results of our audit. Ms. Hart and Mr, Ramos began the duties of their position after the end of the current audit period. Mr. Ramos attended the mandatory IAF training prior to his appointment; you and ‘Ms. Hart attended on March 23, 2010. ‘At our meeting we discussed conditions that continue to represent weaknesses in controls over IAF and recommendations to improve these conditions. We informed you in three prior audit reports that the IAF was insolvent with funds not sufficient to cover account balances of restricted memorial funds, and balances held for clubs, classes, and other school sponsored activities. Many accounts remain inactive and although there has been some improvement, several have had negative account balances since FY 2006. ‘The principal is the fiduciary agent for the IAF. In this role, it is your obligation to assure that management of the IAF meets MCPS requirements, and that activities funded with IAF are clearly in support of the students. Your responsibility involves monitoring monthly reports, investigating any negative balances to determine the cause, developing a plan to eliminate such balances, and assuring that financial reports properly present the status of the student funds. Asa steward of student funds, you are held to a higher standard of accountability for meeting your duties as a fiduciary agent (see September 6, 2007, memorandum from the chief operating officer). The continued non-compliance suggests that additional support may be needed toMr. James G. Fernandez April 21, 2010 implement strategies that will retum the IAF to a sound position, and ensure that funds are managed according to MCPS policies and procedures. Coding and recording of IAF transactions must conform to the standard chart of accounts, and expenses for staff must be recorded in separate fund accounts (see IAF manual, p. 11). Many transactions continued to be recorded in accounts where funds were available, rather than in activity accounts. We again recommend that staff appreciation expenses be recorded in a designated account. We also recommend that funds from pictures, vending, and cell tower commissions, and other revenues be recorded in corresponding revenue accounts, and before being expensed, transferred to activity accounts that identify the purpose being served, and that staff expenses be recorded in appropriate staff accounts as required by the August 4, 2008 ‘memorandum from the chief operating officer. Disbursements must be approved in advance and in writing using MCPS Form 280-54, Request {for a Purchase. The purpose of each disbursement must be fully explained on this form and complete documentation attached in order to properly record expenditures in appropriate accounts, and to ensure that expenditures comply with IAF requirements and benefit the student body (see IAF manual, pp. 1-8). We found that accountability over disbursements continues to need improvement. We recommend that Form 280-54 be prepared by staff and signed by you at the time verbal approval is sought, and that documentation is reviewed by appropriate staff to ensure that it is complete prior to making disbursements. Our review of disbursements revealed ‘unusual transactions that were not fully explained, or may have personal benefit including: © Reimbursement to you for the purchase of numerous gift cards, restaurant meals, and other items without documentation as to names of recipients, or the reason for the purchase so that it could be determined if the expense benefited students or staff, © Reimbursement to you for numerous restaurant meals where documentation did not indicate the purpose of the activity or who attended, and where receipts were not itemized to show the number of meals purchased; © A reimbursement from the Principal’s Supplemental account to you in the amount of $223.73 for restaurant meals at Ledo’s Pizza, where the reason for the expense was not explained, and the use of these funds for this purpose was prohibited (see April 29, 2008, ‘memorandum from the chief operating officer); « A reimbursement to a staff member for Godiva chocolates purchased with money donated for needy students. Monthly bank reconciliations and ledger reports of IAF transactions should be prepared and furnished to the principal by the 20" day of each month, and should be signed and dated to signify review. We again found that monthly reports were often not prepared in a timely manner, and while signed, were not dated by you and could not determine if the reports wereMr. James G. Fernandez April 21, 2010 reviewed on a monthly basis, We recommend that reports be printed and reviewed in a timely ‘manner (see IAF manual, pp. 10, 12). Cash and checks collected by sponsors and others for IAF activities should be remitted promptly and intact to the financial specialist along with a remittance form or other document indicating the source of the fimds (see IAF manual, p. 2). Remittances up to a maximum of $250 may accumulate if a combination safe is used ($50 if stored in a locked drawer). When sums accumulate to the maximum, all remittances must be deposited by the end of the day the maximum is reached (see IAF manual, p. 6). Numerous remittances were tumed in by you and other account sponsors without remittance forms or proper documentation to indicate the source of funds, and remittances were sometimes held in excess of the allowable limit. To minimize the risk of loss and ensure that fimds are used for the intended purpose, we recommend that all funds collected be remitted promptly and intact to the financial specialist with proper source documentation. In addition to the above items, we noted the following: MCPS purchasing cardmembers must record purchases on transaction logs and submit logs monthly with invoices and receipts attached for review and approval by the principal. Monthly summary reports from American Express are to be reviewed, signed and dated by the principal to ensure that purchases are appropriate and within established limits. We found that many logs were missing, late, incomplete, or not signed and reviewed by you. Some receipts or invoices were missing or were not marked to certify receipt of goods or services, and monthly summary reports were not signed by you to indicate your review. We recommend purchasing cardmembers be required to comply with the requirements of the MCPS Purchasing Card Users Guide, pp. 3-5 (see also the Principals Handbook). Fund raising at the school must conform to the Guidelines for Sponsoring an Independent Activity Fund Fund Raiser. We found that there was a lack of adherence to these guidelines. Following these internal control procedures provides for accountability of funds raised as well as the opportunity to evaluate the results at the conclusion of the event. Each fund raiser should be approved by the principal in writing, and the approval retained in the school office. Financial activities for each fund raising activity should be recorded in a separate account in the 800 series, and a completion report prepared that analyzes the results. Completion reports should also be signed by you to indicate your review and retained in the business office (see [AF manual, p. 15). Sponsors of field trips should keep records of the names of trip participants and the amounts collected from each, and give this information to the financial specialist when all fees have been collected. MCPS Form 280-41, Field Trip Accounting, or an equivalent accounting form, should be used for this purpose. We found some field trip fees were not being remitted in a timely manner. Also, the data required to enable reconciliation of field trip accounts was not always provided. To minimize the risk of loss, all funds collected should be given to the financial specialist daily. We recommend Form 280-41 be provided to the financial specialist when all fees have been collected (see IAF manual, pp. 6 and 13).‘Mr. James G. Fernandez -4- April 21, 2010 Admission receipts for athletic and non-athletic events should be controlled according to MCPS Regulation DMB-RA, Control of Admission Receipts. Admissions must be controlled with serially numbered tickets, separation of duties, use of the required MCPS Form 280-50, Tickers and Cash Report of Admissions Manager, for tracking and reconciling sales, and perpetual inventory of tickets. We found that many ticketed events were not supported by ticket reports, unsold tickets were not always turned in to the business office, and tickets were not tracked by a perpetual inventory. We recommend that procedures for sale of tickets be reviewed with appropriate staff prior to events, and that admission to all events be controlled in accordance with the above cited regulation. Other matters were discussed and satisfactorily resolved. In accordance with MCPS Regulation DIA-RA, Accounting for Financial Operations/Independent Activity Funds, please provide a response to the Intemal Audit office within 30 days of this report, with a copy to Ms, Bronda Mills, community superintendent. RWP:DKH:MIB:sd Copy to: Mr. Bowers Dr. Lacey Dr. Stetson Dr. Scott Ms. Mills Ms. DeGraba Ms. Diamond Mr. Doody