UTAH STATE OFFICE OF EDUCATION

Summary of Findings and Overall Recommendation Related to Selected School Districts and High Schools for the 2011-12 School Year

Report No. 12-SCH-B5

Financially Strong

Keeping Utah

AUSTON G. JOHNSON, CPA UTAH STATE AUDITOR

STATE OF UTAH

DEPUTY STATE AUDITOR:

Office of the State Auditor

UTAH STATE CAPITOL COMPLEX EAST OFFICE BUILDING, SUITE E310 P.O. BOX 142310 SALT LAKE CITY, UTAH 84114-2310 (801) 538-1025 FAX (801) 538-1383

Joe Christensen, CPA

AUDIT DIRECTORS:

Auston G. Johnson, CPA

UTAH STATE AUDITOR

Van H. Christensen, CPA Deborah A. Empey, CPA Stan Godfrey, CPA Jon T. Johnson, CPA

REPORT NO. 12-SCH-B5 November 8, 2012 Larry K. Shumway, State Superintendent of Public Education Utah State Office of Education 250 East 500 South PO Box 144200 Salt Lake City, Utah 84114 Dear Mr. Shumway: As a result of issues/concerns noted in our investigation of Provo City School District/Timpview High School (see Report #12-SCH-A), we selected four other school districts in Utah (Canyons, Davis, Granite, and Weber) and selected one high school for review from each of the four school districts (Alta, Davis, Cottonwood, and Fremont). We then performed the procedures enumerated below to certain aspects of internal control and compliance over certain areas at each of the four schools for the 2011-2012 school year. The purpose of these procedures was to review the internal control at the four schools and the policies and procedures at the four districts in order to determine whether there is an appropriate level of control and accountability over funds collected by and on behalf of the four schools for: 1) school-related fees and costs, 2) fundraising activities, and 3) donations. We also performed these procedures to assist the Utah State Office of Education in evaluating policies and procedures over fundraising at districts to determine guidelines to be developed for districts. Our findings resulting from the procedures listed below were communicated to each of the four districts and their sampled schools under separate cover (see reports #12-SCH-B1, #12-SCH-B2, #12-SCH-B3, and #12-SCH-B4 on the Utah State Auditors Office website at http://www.sao.utah.gov/_finAudit/rpts/2012reports.html). PROCEDURES PERFORMED AT THE SCHOOLS TESTED 1. We reviewed the separation of duties and internal control over the schools general cash receipting and disbursing procedures. We also reviewed the internal control over cash receipting procedures specific to selected programs at each school (see individual reports). We performed analytical procedures over revenues associated with selected activities and determined if revenues were deposited and recorded appropriately.

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We reviewed certain financial transactions for compliance with relevant State laws, district policies, and school policies related to issues such as cash receipting and fundraising. We performed other procedures as considered necessary.

Our procedures were more limited than would be necessary to express an audit opinion on compliance or on the effectiveness of the districts and the schools internal control or any part thereof. Accordingly, we do not express such opinions. Alternatively, we have identified the procedures we performed and the findings resulting from those procedures. Had we performed additional procedures or had we made an audit of the effectiveness of the districts and the schools internal control, other matters might have come to our attention that would have been reported to you. Following is our summary of general conditions, internal controls, and policy and procedural issues we found at the four schools tested. GENERAL CONDITIONS AT THE SCHOOLS TESTED 1. Fees and Activity-Related Costs The schools, in general, required students to pay fees and costs directly to the schools financial offices. However, for the band program in one school, the fees and costs were often paid directly to a parent volunteer and then remitted to the office. Fundraising Revenues In three schools, the faculty collects cash/checks from fundraising and remits to the office. One of those schools also allows boosters to conduct booster only fundraisers and maintain control of that money. In that school, it was difficult for us to distinguish between booster only fundraisers and school sponsored fundraisers. As mentioned above, another of the three schools allows a parent volunteer to collect funds for the band program. The fourth school had changed their procedures during the school year under audit and required students to pay fundraising proceeds directly to the office and did not allow faculty to handle the funds. Booster Club/Volunteer Management - Only one school allows booster clubs to maintain separate bank accounts. The other three schools require money associated with booster activities to be deposited and tracked through the school. Policies and Procedures Most of the districts were evaluating their policies and were beginning to implement changes to their policies during the time of our review.

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As a result of the issues noted in our reports to the districts and the schools, we noted the following areas that the Utah State Office of Education should consider addressing through the development of best practice guidelines and/or training efforts.

FINDINGS SUMMARY 1. Policies Policies and procedures regarding fundraising, donations, advertising, sponsorships, and booster clubs varied greatly between each of the four districts. While some of the districts adequately addressed certain areas, others did not. However, when policies did exist, the schools did not always follow them, and some policies were conflicting and/or unclear. The Utah State Office of Education should develop best practice guidelines related to the following: a. Management of fundraisers District policies and procedures vary regarding the responsibilities of teachers, coaches, volunteers, and others in conducting fundraisers. b. Allocation of fundraising proceeds to students Sometimes fundraising proceeds were shared equally among the participants of a program and sometimes the proceeds were credited specifically to the students who raised the funds. One district policy indicated that proceeds should be shared equally among participants, although in practice that was not always occurring. c. Advertisements and recognition of donors on school property, and sponsorship agreements with vendors District policies generally did not address these issues. Two of the districts policies included restrictions on the types of advertising allowed. One district required superintendent approval for donor recognitions placed on structures. We did not note any policies specific to sponsorship agreements, although one school had a sponsorship. d. Funds raised and collected outside of school/district authority by parent/booster groups In practice it can be difficult to make a clear distinction between school vs. booster fundraisers or public funds vs. private funds; consequently, commingling of funds occurred. At one school, a parent group held a fundraiser that school officials indicated was not associated with the school in any way. The funds were then donated to the school by the parent group. At another school, booster clubs had their own bank accounts and the district policies allowed for the proceeds of booster fundraisers to be deposited in those accounts. Three districts prohibited booster clubs from depositing funds in their own accounts. In addition, we are unsure whether the districts policies comply with the Charitable Solicitations Act (Utah Code, Section 13-22) regarding requirements for booster groups.

e. Fee dismissals by faculty/coaches Two schools did not have policies regarding the practice of fee dismissals; therefore, faculty/coaches could dismiss student fees/costs without administrative approval. f. Construction projects funded with donations One district did not comply with applicable laws, rules, guidelines, and accounting standards related to the construction of multiple projects that were funded with donations. Since State law does not give any exemptions related to construction based on the funding source, the district should have ensured compliance. g. Private events involving faculty on school property A private event was held at one school where faculty conducted a camp/clinic and revenue was divided among the coaches. 2. Internal Control Weaknesses The schools had varying degrees of internal control weaknesses related to cash receipting for fundraising activities. The Utah State Office of Education has provided some internal control training to districts but should consider additional guidelines and/or training over the following areas: a. Establishing adequate separation of duties and how to compensate for situations where separation is not possible. b. Establishing adequate internal controls over funds collected outside of the schools main office. c. Receipting procedures and internal controls for after-school and summer activities. d. Maintaining reliable and complete records of cash/checks received and accounts receivable (for both fees/costs and fundraising proceeds). e. Safeguarding cash/checks received prior to deposit in the bank. f. Reconciling the original record of receipt to what was deposited and recorded in the accounting system by someone who does not have access to cash/checks received. g. Accounting for booster club and other private entity activities. A significant amount of money is handled at schools through fundraising, donations, advertising, sponsorship, and booster club activities. Based on our review of a limited number of school districts and schools, we believe that similar problems would be found at other districts and schools. Therefore, we believe that all districts and schools would benefit from overall guidelines and training from the Utah State Office of Education. Without adequate best practice guidelines for 4

districts to follow, policies and procedures at the districts may be inadequate, incomplete, inconsistent, or ineffective. Without the guidelines and training of district employees on the guidelines, we believe that the problems identified will continue to occur at the States districts and schools. OVERALL RECOMMENDATION TO THE UTAH STATE OFFICE OF EDUCATION We recommend that the Utah State Office of Education develop best practice guidelines, including internal controls, for Utah school districts to incorporate into their policies and procedures related to fundraising, donations, advertising, sponsorships, and booster clubs. We also recommend that the Utah State Office of Education train all districts regarding adequate internal control procedures and the guidelines developed. This report is intended solely for the information and use of the Utah State Office of Education and is not intended to be and should not be used by anyone other than this specified party. However, the report is a matter of public record and its distribution is not limited. By its nature, this report focuses on exceptions, weaknesses, and problems. This focus should not be understood to mean there are not also various strengths and accomplishments. We appreciate the courtesy and assistance extended to us by the personnel of the Utah State Office of Education during the course of the engagement, and we look forward to a continuing professional relationship. If you have any questions, please call Debbie Empey, Audit Director, at (801) 538-1342. Sincerely,

Auston G. Johnson, CPA Utah State Auditor cc: Natalie Grange, Internal Auditor, Utah State Office of Education Dr. Martin W. Bates, Superintendent, Granite School District Gayleen Grandy, President, Granite School District Board of Education Alan Parrish, Principal, Cottonwood High School Brent Richardson, President, Weber School District Board of Education Dr. Jeff Stephens, Superintendent, Weber School District Dr. Rod Belnap, Principal, Fremont High School Tracy Scott Cowdell, President, Canyons School District Board of Education Dr. David Doty, Superintendent, Canyons School District Fidel Montero, Principal, Alta High School Marian Storey, President, Davis School District Board of Education Dr. W. Bryan Bowles, Superintendent, Davis School District Dee Burton, Principal, Davis High School Michael Mower, Deputy Chief of Staff, Governors Office Jonathan Ball, Director, Office of Legislative Fiscal Analyst