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CAT A Charter School is a high school (grades 9-12) located in one of the industri al parks in Northwest Albuquerque. The school's 2010-11 total budget was $ 1, 542,716.
CAT A Charter School is a high school (grades 9-12) located in one of the industri al parks in Northwest Albuquerque. The school's 2010-11 total budget was $ 1, 542,716.
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CAT A Charter School is a high school (grades 9-12) located in one of the industri al parks in Northwest Albuquerque. The school's 2010-11 total budget was $ 1, 542,716.
Copyright:
Attribution Non-Commercial (BY-NC)
Verfügbare Formate
Als PDF, TXT herunterladen oder online auf Scribd lesen
ALBUQUERQUE PUBLIC SCHOOLS REPORT # 10/1146 June 22, 2011 AUDIT STAFF Peg Koshmider, Audit Director Sonia Montoya, Senior Auditor Joyce Ramirez, Staff Auditor BACKGROUND At the request of the Legi sl ative Finance Committee (LFC), the Superintendent of Albuquerque Public Schools directed an audit of the financial processes and internal controls of Career Academy and Technical Academy (CATA) Charter School be conducted The LFC request was a result of a complaint registered with them regarding financial matters at the school. Albuquerque Public School s is the current authorizer of twenty-one charter schools in the Albuquerque area. CAT A is a high school (grades 9-12) located in one of the industri al parks in Northwest Albuquerque. The school curricu lum provides both educational and career based programs for the students. Duri ng the 2010-11 school year, the school had a student enrollment of one hundred thirty-nine students as reported in the February 2011 STARS report, eight cert ified staff and six support staff. The school 's 2010-11 total budget was $ 1, 542 ,716. The school's finances are incorporated into APS' yearly fi nancial audit conducted by an external audit firm. In addition, a site visit reviewi ng curri culum and financial processes is conducted by APS staff on an annual basis. OBJECTIVES 1. Review the financi al records of CAT A Charter School to determine if there is waste, fraud or abuse. 2. Evaluate the adequacy and effectiveness of the internal control s related to the various CATA Charter School processes. SCOPE Processes and financial transactions related to CATA from 2007 through July 201 1, with a concentration on the financial transactions during the 2010-201 1 school year. METHODOLOGY 1. Review the school charter, policies, directives, procedural manual s, state and federal laws, budgets, governing board minutes, personnel fil es and organizational charts related to CAT A Charter School processes 2. Conduct interviews with the CATA pri ncipal , staff members and related personnel at Albuquerque Public Schools and PED as deemed necessary. FINDINGS Finding #1 Condition: Oversight by Albuquerque Public Schools duri ng the approval process and start-up phase should be more thorough to avoid law violati ons, infracti ons involving the school's charter and poli cies and procedures which result in audit findings. CATA's compliance with State Laws, its charter, policies and procedures and internal controls was found to be lacking. Criteria: The New Mexico Open Meetings Act outlines how school governing boards must handle their meetings. State law, (13-1- 169 N.M.SA , 1978 Compilation, as amended) , mandates the proper state procurement processes. State law, 22-88-10 NMSA 1978, mandates how nepotism issues are handled. In addition, the school 's Charter outlines the expected internal control structure, polici es and procedures. Cause: The scope of the audit included a review of compliance issues dating to the opening of the school and it was found that compliance was an issue from the start but not identified in the external audit and a site visit was not conducted until the second year the school was in existence. Effect: A lack of early and close supervision all ows inexperienced school admi nistrators and governi ng council members to start processes that are not in compliance wi th the charter, laws and policies and to devel op poor administrati ve habits that can be difficult to change. Recommendation: Close supervision with a start-up charter school is necessary to insure that the state and federal laws, school charter, policies and procedures are adhered to from the beginning. A thorough review of the charter prior to the authori zer's approval is necessary. A revi ew of the governing board processes during the start-up phase and prior to the start of the actual school year is recommended to insure full compl iance with all governance issues. Multiple site visits the first year, with the first one during the first semester are recommended. The authorizing district's personnel charged with financial review should include sampling of all financial transactions on a regular basis. As the administration gains experience and proves their level of expertise, the authorizer shoul d be able to reduce the frequency of their oversi ght. After each external audit it is recommended that follow-up be conducted to insure an acti on plan has been developed and the plan is tested for successful implementation. Management Response: (From APS Charter Schools) Two years after CATA was initially cl1artered by the Albuquerque Public Schools a department (CharterlMagnet Schools) was specifically created for applicatlonlrenewal review and over site of charter schools. The department has policy and procedure that governs the interaction between the distnct and charter schools Part of these procedures is a provision for an annual site VISIt. The site visit protocol has been updated each year as the need for greater over site In certam areas becomes apparent In response to this audit the department has added a more detailed review of charter school board mmutes to the review process. Dunng this last year (10-11) the financial component of the site visrt has become a separate viSIt. at the direction of the Executive Director of Accountmg. The mitlal year (plannmg) VISitS are now reqUired by law and in policy 22-8B-/2. Charter sc!lOols; term,' oversight and corrective actions,' site visits,' renewal of charter; grOllllds for 1l0tlTellewa/ or revocation. (Effective July 1,2012.) A. A charIer school may he approved/hI' an initial lerm ofsix year ',' provided Ihat the/irs! year ..hall he used exclllsivelyfor planning ami nol for completing the application. A charIer may he renewed/or sLlccessive periods offive years each Approvals oIIess f/wn/ive years may be agreed 10 belween Ille charter school and Ihe charlerinR B. During Ihe planning year, Ihe charIer w.:hool shall tile (I minimum olthree .\'Ialu\ reporls lI'ilh tlze chartering authority and the depw'!Tl1enlfor the purpose (4 demonslraring fhallhe charTer school' implementation p"ORre 's is con iSlent with the condilions, standard., (md procedures of il.'I approved charter. The report con/e11l, formal lind schedule/or submission shall he agreecilo by the chartering authority and Ihe charter schoo/and become parI charier contrael. This should ensure Ihal the authorizer doe.\ work with a . 'chool inlhe fhrmation olliS procedures and(ollows slatule closely Management Response: ( by APS Finance Department) I was not working with Charter Schools during CATA's approval and start-up phase and don 't have any records pertaining to this period As the Charter School Busmess Manager, I work closely with the independent auditors during tl1e annual audit through the eXit conference. Each charter school submits a Corrective Action Plan annually in response to their audit findings and how they plan to resolve them to aVOId repeat findings. Dunng the annual site viSIts. whicl? started In the 2008-09 school year, one of the items addressed in the fiscal portion are the audit findings and their Corrective Action Plan is reviewed with each BUSiness Manager I continue to update the fiscal section of the site viSit as needed and welcome Qny suggestions for improvement . Finding #2 Condition: A Procedures Manual outli ning dail y operati ons does not exist for the APS Charter School/Magnet School Department Criteria: Department procedures ensure processes are performed accurately, effectively and effi ciently, ensure internal controls are in place and assist in the devel opment of new departmental empl oyees. Cause: A Procedures Manual has not been created. It appears the depart ment was considering the newly adopted APS Charter Schools Procedural Directive as its manual. However, the directive does not include day-to-day operations which are essential to ensure effi ciency and effectiveness of its operations/processes. Effect: Processes and procedures may not be performed in the most effective or efficient manner. In addition, new employee trai ning may be hi ndered. Recommendation: A Procedures Manual needs to be created outlini ng the various day-to-day operations/processes handled by the department Management Response: The CharterlMagnet School Department will start a review and documentation of daily procedures with the goal of creating a procedures manual for the department. Finding #3 Condition: The governing board conducted closed sessions during the regular meeti ngs that did not adhere to the state laws rel ated to the Open Meeti ngs Act Criteri a: Secti on1 0-15-1(/) of the NM Open Meeti ngs Act states, "If any meeting is closed pursuant to the exclusions contained in Subsection H of this section, the closure. (1) If made in an open meeting, shall be approved by a majority vote of a quorum of the policymaking body, the authority for the closure and the subject to be discussed shall be stated with reasonable specificity in the motion calling for the vote on a closed meeting; the vote shall be taken in an open meeting, and the vote of each individual member shall be recorded in the minutes. Only those subjects announced or voted upon prior to closure by the policymaking body may be discussed in a closed meeting." ''The board, commission or other policymaking body shall keep written minutes of all its meetings. The minutes shall include, at a minimum, the date, time and place of the meeting, the names of members in attendance and those absent, the substance of the proposals considered and a record of any decisions and votes taken that show how each member voted. " Cause: The purpose for the closed session was not consi stently identified, the business conducted in the closed session was not consistently appropriate, properl y stated moti ons to adjourn to closed sessions and back to open sessions were not documented, improper personnel were incl uded in the roll call vote, and action taken on items discussed in a closed session must be taken in an open meeti ng. In addi tion, minutes were recorded with errors or incorrect information. The documented minutes did not consistently contain a date, time and place of the meeting. Changes to the minutes were not consistently or properly documented, and minutes were not consistently recorded in an accurate manner. Effect: Adherence with the Open Meetings Act is important to insure correct documentation of the governing board's activities and proper governance of the school. When closed sessions are hel d, adherence to the state law is important to assure the publi c that those sessions are appropriate and in compliance wi th the state laws. Recommendation: A thorough review of the State Law, the procedures used by the Governi ng Council and retraining of staff and board members is recommended, The authorizer must also review the meeting minutes to ensure compliance with the Law Management Response: The CATA Governing Council will receive further training on the reqUIrements/procedures of the Open Meetings Act by CA T A 's attorney at tile September regular Governing Council meeting, Governing council meeting minutes remam avaifable to the authorizer for reView, although there is no law requiring authorizer review of the minutes FINDING #4 Conditi on: The Governi ng Council did not approve the hiri ng of employees that are related to the CEO/COO/Principal in a timely manner, Criteria: 22-88-10 NMSA 1978 states, "The head administrator of a charter school shall not initially employ or approve the initial employment in any capacity of a person who is the spouse, father, father-in-l aw, mother. mother-in-law, son, son-in-law, daughter. daughter-in-law, brother brother-in-law, sister or sister-in-law of a member of the governing body or the head administrator The governing body may waive the nepotism rule for family members of a head administrator" Cause: A brother of the CEO/COO/Pri ncipal was hi red in 2007 as evidenced by the 1 099 forms issued to him in 2007 and 2008, His hiring was not approved for waiver by the Council, as requi red by the law relative to nepotism, until the Governing Council meeti ng of November 19, 2009 and al most a year after the initial nepoti sm approval for the son, which demonstrates knowledge of the law, The hiri ng of one of the sons of the CEO/COO/ Pri ncipal , did not recei ve a waiver from the Law by the Counci l unti l December 11, 2008, nearly two years after his employment These nepotism issues shoul d have been dealt with prior to the employment of the family members, The Governing Board should have had timely notificati on and approval to remain within the limitations of the state nepotism laws, It appears that employment of the Princi pal' s son and brothers was paramount to following the state laws or the school administration is not sufficiently famil iar with state laws, Both need to be closel y moni tored in the fut ure by the charter's governing council Effect: Thi s exposes the school to potential il legal acts, fraud and reputational risk_ Recommendation: The CEO/COO/ Pri ncipal must request and receive a waiver from the law, as provided in the law, from the school's Governing Council prior to employing individuals who are family relations, The Governing Counci l should al so consider the concentration of family members involved in the management of this school Management Response: The Principal's brother was hired as an employee and HD Systems was hired by the Governing CounCil as an independent contractor, in 2007 - prior to the 2008 effective date of NMSA 1978 SectIOn 22-B8-10 See NMSA 1978 Section 22-B8-10(C) Moreover, neither of these personnel are related to any Governing Council members and thus the contract does not violate NMSA 1978 Section 22-88-10, to the extent that 22-88-10 applies to these contracts, the nepotism provisions of that Section were expressly waived by the Governing Council in 2009, as allowed under the statute, out of an abundance of caution The School will continue to follow NMSA 1978 Section 22-8B-10, as applicable FINDING #5 Condition: The salary administrati on does not appear to be consistent relative to the contracts and sal ary schedules Teachers' salaries do not appear to be consistent with the approved salary schedule Teachers' contracts were signed after the start of the school year (Brilli on, Cl ark, King, Brookl ey & Ganz dated 9-27-1 0 Dvorak dated 9-28-10). Contracts are not written consistently relati ve to number of days for administrati ve staff making it difficult to analyze. Teachers with the same degree, certificati on level, credit hours earned and years of recognized teaching experience are paid di fferent amounts (King level 2, BA, 10+ years, 45 extra hrs $43, 333; Garcia level 2, BA 10+ years, 0 extra hrs, $45,480; Tyler level 2, BS 10+ years, 0 extra hrs, $46,241 ; Clark leve! 2, BA 10+ years, 0 extra hrs, $51, 545) Change in number of days/hours per year worked provided a 35.5% increase in salary for a family member and the salary is not appropriate for responsibility levels. Criteri a: The salary schedule was approved by the Goveming Council and should be followed as approved. Cause: It appears that school administrati on makes decisions outside the di rection approved by the Governing Council which can have an impact on the budget. Effect: Teachers will not stay if they are not paid according to the approved salary schedule. Turnover is harmful to the continuity of the school. Recommendation: Testing of approved salary schedules should be part of the site visit or quarterly financial follow-up. Management Response: Employee contracts were signed in August. prior to the School's September start date Staff will be paid according to the approved salary schedules. Discrepancies in the number of days on certam employee contracts was typographical error corrected when discovered. The School is staffed, and contract days are set and scheduled, according to the School 's needs. The Governing Council has discretion in setting salaries, as allowed by the charter and the Charter Schools Act. Salary consistency between similarly-situated staff will be maintained. It should be noted that the current Business Clerk's salary is consistent with the salary of prevIous business clerks FINDING #6 Condit ion: Benefi ts paid to employees are not being properl y reported. Criteri a: Federal tax code states, "Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it." Cause: The cellular telephone bill of an employee, the CEO/COO/Principal's son, is being reimbursed using school funds. A review of payroll transacti ons and 1099 forms did not reveal the benefit was ever included in the individual's pay It should be noted that the cellul ar telephone bill s are in the employee's name and home address. The school reimbursed the CEO/COO/Pri ncipal for these expenses. Effect: The individual 's income was improperly reported as the benefit should have been charged appropriately. The school is in violation of federal tax code. Recommendation: Expenses paid by the school should be in the school's name. The school should work with all vendors to ensure billings are sent in the school' s name and to the school 's address. The payment of cell phone bi lls should be properly reported on an individual's tax documents Management Response: The celf phones at issue are now in the School's name and the School's address; the recommendation for proper tax treatment/reporting on individual tax returns has been duly noted by those indiVIduals. FINDING #7 Condition: Operational funds/public fund s were used to make permanent improvements to a leased building without prior approval of the Governing Council and without full and accurate information to the Governing Council prior to obtai ning their approval. Conditions in the lease approved by the Governi ng Council were not followed The lease was signed June 29, 2007 and approval was sought at the July 2007 Governi ng Council meeting. "Lessor to advance $80,000 to bri ng building up to ADA standards (needs to be up to fire code, needs boys' bathroom; needs revolving door from art to photo room, needs ramp/elevator) . Lease payments will be $14,000 per month until we pay back the $80,000; then lease payments reduced to approximately $12, 000 per month. It is a year by year lease. We are locked in for five (5) years, Lease gives school option to pLlrchase. Motion by Tom to approve the lease. 2 nd by Tranci. Vote: Approved 4:0 (yea: Tranci, Kay, Tom, Debra) ." Description provides for $800,000 expendi ture. Actual expenditure based on lease totals $860,993.21, There is no reference to interest expense that will be incurred, Based on lease figures interest expense totals $60,993,21 on $80,000 in borrowed funds (76.2% interest on the principal) , Not all improvements approved by the board in the $80,000 designated for ADA improvements were completed (ramps/elevators) Landscaping was added to the school Walls were removed and added to the school Obligation to obtain APS approval was not completed, Terms of the lease were not correctly reported to the board. Criteria: The Lease document between the Lessor and Lessee (CATA) section 7.4(b) states, "Before Lessor commences construction of the Leasehold Improvements, Lessee shalf obtain the approval APS and of any governmental authority have jurisdiction under the Charter School Act and shall deliver evidence of such approval to Lessor' Cause: It appears that the amounts are not clearly disclosed in the lease as renovati ons of leased buildings cannot be made with operational funds and the payment statement obscures the detail of the repayment plan. Effect: Public funds were spent on a building that is not owned by the taxpayers and it appears that an excessive amount of interest was paid. Recommendation: The lease should be presented to the board prior to signing. Calculati ons should be run to determine actual costs that will be incurred. Taxpayer dollars should be expended on buil di ngs owned by the school or the authori zer. The lease should be clear in the amount to be repaid and describe any additional charges such as total for lease of the building, charges advanced for use in renovations, and interest charges with a total to be repaid that matches the payments. Management Response: The Lease between AEG Investors LLC and CATA IS in accordance with New Mexico law and was reviewed/discussed/approved by the Governing CouncH and was effecUve as of the date of the Governing Council's approval/ratification of this lease agreement. The terms of the Lease call for payments of $14687.58 per month in SY 2007-08: $14. 931. 19 per month In SY 2008-09 and $15, 179.68 in SY 2009 10; decreasing to $12,926. 13/month in 2010-11 and $13. 184. 65/month In SY 2011 -12 - this comports with what the Governing Council minutes reflect and is In accordance with New Mexico law. which does not allow public entities to permanent Improvements to private property. There was no supplemental or additional payment for improvements. Here, as reflected in Section 7.4 of the Lease, the landlord made the Improvements at the landlord's cost and, as permitted under the law. charged back its Increased costs as monthly rent to the School. There were no funds "borrowed" by the School. With respect to the al/eged obligation to obtain APS approval of the improvements, the Lease obligates the School to APS approval, if applicable and if APS had jurisdiction over the Improvements pursuant to the Charter Schools Act. (Lease, Section 7. 4 (b)) Pn'or to the improvements, the School's Principal contacted APS (Kizito Wijenje) . who told the Principal that because the improvements were being made on privately-owned property, APS approval was not necessary. CATA worked with POMS & Associates the City of Albuquerque, and the Fire Marshal's office with respect to improvements made to the facilities. Pursuant to the Charter Schools Act. Section 22-88-4.2, taxpayer dollars may be expended on privately-owned facilities leased by the School, there has been no violation of law. Nevertheless, inasmuch as the Lease expires on July 20, 2012, the School will be exploring its alternative with the Landlord, including a Lease Purchase Agreement, for any future lease or utilization of the properly by the School. FINDI NG #8 Condition: The Capital Inventory was not properly maintained according to CATA policies, nor was the furniture and equipment properly tagged. The Capital Inventory was not availabl e wi th all information that is required. An inventory was provided that included an inconsistent list of furniture and equipment depending upon the area that was inventori ed. Values were not included; some items were dupli cated, Criteria: The CATA Financial Procedures Manual states, "Detailed property records must be maintained to include the following information for each item of property: Tag number Description of property Date of acquisition New or used at acquisition Physica//ocation Cost An inventory of all non-expendable property must be taken annually at each school site " Cause: The format required in the policies of the school should be strictly followed. This includes values, locations, tagging and descriptions of the equipment. An annual inventory is necessary to protect the taxpayer property. Effect: At the ti me of purchase the Capital Inventory should be started and incl ude the tagging process. Anytime equipment is salvaged or purchased the li st should be updated and the inventory should be checked annually. Recommendation: It is recommended that the school review all furniture and equipment by location for tagging and all required information including the values. The inventory should be run each year wi th the individual present who is responsible for the particul ar work area One individual should admi nister the entire inventory to insure completeness and accuracy. Management Response: The new business manager will assure CATA 's compliance with the State Law for Capital Assets Inventory CATA will have a designee (s) to assure accuracy of inventory. FINDING #9 Condition: HD Systems contract was initi ated with a fam il y member in viol ation of State l aw, HD Solutions is owned by the oldest son of the CEO/COO/Principal of CATA Criteria: Procurement Law 13-1-190 Except as permitted by the University Research Park Act {21-28-1 NMSA 1978], it is unlawful for any state agency or local public body employee, as defined in the Procurement Code (13-1-28NMSA 1978j, to participate directly or indirectly in a procurement when the employee knows that the employee or any member of the employee's immediate family has a financial interest in the business seeking or obtaining a contract Cause: It appears that there was an attempt to circumvent the procurement law by havi ng the Governing Board approve t he waiver of the Nepoti sm Act as it relates to H D Systems during the Governing Board Meeting dated December 11 , 2008. This is not a nepoti sm issue per se, but a violation of procurement law, as well as a conflict of interest issue, Again approval was untimely since the company was used since the inception of the school in 2007, Effect: This gives unfair advantage to a f ami ly member in obtaining business from an organization supported by taxpayer doll ars and may not prove to be the most economical use of those doll ars, Recommendation: In additi on to violating state procurement laws, a business owned by a family member should not be used as it all ows for an unfair advantage wi thout a competiti ve bid process, This can reduce dollars that would have been available for use in the classroom for the students Management Response: CA T A disagrees and dIsputes that the New MexIco Procurement Code has been violated as al/eged by the auditor HD Systems was hired by the Governmg Council in 2007 poor to the 2008 effective date of NMSA 1978 Section 22-88-10. See NMSA 1978 Section 22-88-10(C). Moreover, HD Systems personnel are not related to any Governing Council members and thus the contract does not violate NMSA 1978 Section 22-88-10, to the extent that 22-88-10 applies to this contract, the nepotism provisions of that Section were waived by the Governing Council m 2009 (see Response to Finding #4). The admmistratrve family member referenced m this finding did not sit on the Governing Council and did not particlpate directly or indirectly" in the aware of the contract to HD Systems m 2007 or thereafter, and thus there was not violation of Section 13-1-190 The Governing Council's 2008 action with regard to HD Systems was taken in compliance with NMSA 1978 Section 13-1-194. Finally, the hourly contract with a not-to-exceed amount of $20, 000 complies with the Small Purchases exception of the Procurement Code (NMSA 1978 Section 13- 1- 125) for services: the $65/hour rate in the contract IS well within market rates for such services The Governing Council and the School do reaffirm thelf commitment to continumg to follow the New Mexico Procurement Code FINDING #10 Condition: Inadequate segregation of duties, Criteria: NMAC 6,20.2.11 letter B states, "Each school district shall develop, establish and maintain a structure of internal accounting controls and written procedures to provide for segregation of duties,. " Cause: Funds submitted by the staff for deposit were presented to the Business Cl erk who would physically take the funds to the Administrative Assi stant who would issue a receipt. The recei pted funds were then given back to the Business Clerk who would then prepare the deposit Effect: The Business Cl erk could alter the amount of funds prior to submitting them to the Admini strative Assistant for receipt. Recommendation: Funds shou ld be submitted to the Administrative Assistant who must verify the funds with the individual submitting them and issue a multi -part factory pre-n umbered receipt. Funds may then be submitted to the Business Clerk who wil l verify the funds and receipt balance and then prepare the fu nds for deposit. The Business Manager al so has a contract as the Drill Team Coach/Instructor. This will also be inadequate segregation of duties if the Business Manager is involved in raisi ng or handli ng the finances of the drill team. Management Response: The School and the new business manager will successfully manage internal accounting controls to Insure adequate segregation of duties that have been Implements and encouraged by Judy Berg during the APS site visit At this time, the School policy is to use 3-ply factory pre-numbered receipts in conjunction of segregation of duties to hinder the possibility anyone altering the amounts of the funds Staff that submit funds for deposit have the opportunity to review funds deposIted in their actiVIty account to assure quality assurance FINDING #11 Condition: State Procurement Code was not always fOllowed. Criteria: State law, (13-1-169 N.M.SA , 1978 Compilation, as amended), mandates the use of purchase order procedures. In addition, per CATA's Fi nancial Procedures Manual dated October 16, 2006, Purchasing Procedures #1: "All employees shall utilize the Requisition/Purchase Order process before obligation of school funds. " Cause: Purchases were made pri or to the purchase order being issued. Effect: These purchases are an obli gation to the school. The school may not have the money all ocated to pay for these purchases since the school was not aware of the purchase. Recommendation: Ensure that a purchase order is in place pri or to expenditures being made. Management Response: The new business manager will ensure that CAT A's Financial Procedures Manual shall be updated; purchase orders will be In place before expenditures are made. FINDING #1 2 Condition: Disbursements were not always handled properly. The followi ng findings were identified: Invoice amount exceeds purchase order amount Checks over $1 ,000 were processed with one Signature Receiver not signed Invoices not marked paid Insufficient supporting documentation (non-itemized invoices) Gross receipts tax paid Purchase does not match PO description Overpayment of rei mbursement Voided check not handled appropri ately (document destroyed) Criteria: State Law, the school's Charter and Financial Procedures Manual outli ne requirements for the disbursement processes. In addition, good business practices require adequate internal controls. Cause: Disbursement procedures were not handl ed consistently. Variation may be a result of having several business managers handl ing the financial transactions duri ng the year. In addition, the extensive number of reimbursements, whi ch totaled over $38,000 this school year to the CEO/COO/Pri ncipal, did not allow procedures to be handl ed conSistently. Detail ed invoices were not provided on all transactions. Effect: The school is not in compliance with State Law or its own Charter and Financial Procedures Manual. Recommend ation: The school must foll ow State, Law and its own Charter and Procedures Manual. In addition, the Procedures Manual needs to be revi sed to Include changes made to the procedures approved by the Governing Council. Management Response: On a few occasIons over the past four years, due to the turnover in bUsmess managers, the school may have mconsistently followed state law/charger internal control procedures, however, overall the Instances noted did not result in material violations of law or the charter. The School and the new business manager wIll ensure CATA 's Financial Procedures Manual will be updated. FINDING #13 Condition: Deposits were not made in a timely manner. Criteria: Per NMAC 6.20.2.14. letter C: "Money received and receipted shall be deposited in the bank within 24 hours ... . " and CAT A Financi al Procedures Manual dated October 16, 2006, Receipt of Funds, #1 states "CATA shall safeguard .... .. .. and shall deposit funds in the bank within 24 hours of receipt Cause: Deposits were not made wi thin 24 hours. Effect: The risk of theft increases when money is held at a location and not deposited. Also, balances are not current when funds are kept in a safe. Recommendation: A better effort must be made to get the funds to the proper banking authority in a timely manner Management Response: The new business manager will ensure that deposits are made in a timely manner w;thin 24 hours. FINDING #14 Condition: Receipts were not always issued for revenue received Criteri a: Per NMAC 620.2.14 letter 8, "'The school district shall issue a factory pre-numbered receipt for al/ money received." and CATA's Fi nancial Procedures Manual dated October 16,2006, Receipt of Funds, #2: "The Registrar shall prepare a receipt in triplicate for money received from all sources . ..... Receipts will be pre-numbered . _ Cause: Not all ori ginal sources of funds were receipted. Effect: The school is in violation of State Law and its own Procedures Manual. In addi tion, there is not a clear trail of all the funds received at the school. Without this trail , there is no way to ensure that all funds received at the school are maki ng it to the bank. Recommendation: All sources of funding must be issued a pre-numbered receipt. A copy of this receipt should be kept with the supporti ng documentation and with the school 's daily deposit slip. This will provide a clear trail of all funds received. Management Response: The issues noted by the audItors in this Finding related to the School's OECA program. The new business manager will ensure that the Schoof's DECA program will use pre-numbered receipt books, CA TA has utilized and will continue to use pre-numbered receipt books for all other monies received by the School FINDING #15 Condition: Bank statements were not reconciled in a timely manner. Criteria: Per NMAC 6. 20.214 letter K: "All bank accounts shall be reconciled on a monthly basis" and 2 nd CATA's Financial Procedures Manual dated October 16, 2006, Fi nancial Reporting, sentence states "Financial records shall be kept up to date and available for inspection .... .. " Cause: The Business Offi ce di d not complete the bank reconciliations in a timely manner. Effect: A true accounting is not available when accounts are not balanced in a timel y manner. Recommendation: Monthly statements must be balanced on a monthly basis. Management Response: The new business manager will ensure that bank statements are reconciled in a tImely manner, on a monthly basis. FINDING #16 Condition: Petty cash funds were not in balance. At the time of the audit $154.67 was being maintained as the petty cash fund . Criteria: Per CATA' s Financial Procedures Manual dated October 16, 2006, page 8, Issuance of Petty Cash, "the petty cash fund shall not exceed $100.00" Cause: The petty cash fund was not in bal ance. Effect: The books are out of bal ance when the appropriate amount is not maintained. Recommendation: A deposit should be made for $54 67 in excess funds so that the petty cash will be in balance to the school' s books and in compliance with the Financial Procedures Manual. Management Response: The new business manager ensured that the entire petty cash fund was deposited before the SY 2011-12. FINDING #17 Condition: An unauthorized change fund for the DECA store operati ons was being maintai ned. Criteri a: State Law 60.20. 2. 14 letter M number 4 states, "Change funds shall be established pursuant to school district procedures." Change funds are requi red to be listed on the school' s balance sheet as cash on hand. Cause: It appears that revenue was held out from a deposi t to create the change fund Effect: The school's balance sheet is incorrect. In addition, since the funds are not accounted for on the balance sheet, fraudulent use of the change fund could occur. Recommendation: The funds must be incorporated into the school' s books or deposi ted if use of the fund is no longer required. Management Response: The new business manager will ensure that change funds for the Schoof's DECA store will be listed on the School's balance sheet as cash on hand. CONCLUSION The review of fi nanci al records and processes identified weak internal controls, and general mismanagement of the school's finances. In general, the use of mternal controls is weak due to the failure to follow state laws, procurement laws, IRS regulations, CATA's own charter and policies and procedures. The number of family members involved in the administrati on of the school makes segregation of duties issues more complicated and further weakens the internal controls. An organization that is supported by taxpayer dollars has an obligati on to fol low the established laws and poli ci es to insure the management of said organization makes the best use of the taxpayer funds. There appears to be a disregard of the rul es and regulations established to protect taxpayer funding, there is mismanagement as a result of the lack of attenti on to the establ ished laws, and a tack of awareness or concern that the financial support of the school is publ ic as opposed to private in nature. Close supervisi on of the school administration by the authorizer is necessary to insure that the state and federal laws and regulations, procurement laws, and agreed upon charter are foll owed. Additional trai ning for the Governi ng Board is recommended, al ong with regUlar testing of the action plan developed to correct current and future audit fi ndings. More frequent si te visits and follow-up may be appropriate to insure the corrective action is being taken by the school. The school is approaching the renewal process and it is recommended that the authorizer revi ew the performance prior to a long-term extensi on. RESPONSE TO APS AUDIT CONCLUSION: CATA disagrees that the fmdings described in the audit report reflect an overall failure to follow state laws, IRS regulations the charter and School policies and procedures, although occasionally a Violation has been identified In those instances. the matter has been or shall be corrected None of the items Identified, either individually or cumulatively, rises to the level of a material violation of law or the School's charter, and no ongoing pattem of mismanagement. financial or otherwIse, has been demonstrated As reflected in the School's responses, some of the findmgs reflected In the APS audit report are in error, and no violatIon of law/polIcy occurred Contrary to the Internal Audit Dlfector's assertIon, the School is well aware of its legal and ethical obligations with respect to its use of public funds. The School welcomes Increased cooperation on the part of APS to assist CATA on an as needed basis wIth regard to the matters identified in this audit report, as well as addItional training for the School's Governing Counct/ The Internal Audit Department staff appreciates the cooperation of the CATA Charter School Staff, the APS Charter and Magnet Schools Department, and APS Charter School Busi ness Manager (Accounting Department) Audit conducted by Peg Koshmider, Director; Sonia Montoya, Senior Auditor; and Joyce Ramirez, Staff Auditor. Date f 3 i - (I