Office of Shared Accountability MONTGOMERY COUNTY PUBLIC SCHOOLS Rockville, Maryland May 28, 2009 MEMORANDUM To: Mr. Henry R. Johnson, Principal Northwood High School From: Roger W. Pisha, Supervisor, Internal Audit pwrir~ Subject: Report on Audit of Independent Activity Funds for the Period July 1, 2007, through February 28, 2009 This audit report presents the results of our examination of the financial records, reports, and intemal accounting controls relating to the Independent Activity Funds (IAF) for Northwood High School for the period July 1, 2007, through February 28, 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 [AF management. It has been noted that you, the business manager, and financial assistant have previously attended the mandatory LAF training. Our findings and recommendations appear below. Findings and Recommendations ‘At our meeting on April 29, 2009, we discussed actions taken to correct conditions described in our report dated September 5, 2007. We recognized improvements that have occurred since the prior audit, and recommended actions to improve accountability for field trips, fund raisers and admissions receipts, areas that continue to be of concem. We recognize that the efforts of Ms. Thuy Trang (Suzy) Duong, school business manager, and Mrs. Mary Allen, financial assistant, to improve accountability over funds and adhere to spending guidelines helps to assure that IAF benefit the students at Northwood High School. Admission receipts for both athletic and non-athletic events must be controlled in accordance with 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, Receipts must be reconciled to ticket reports for each event and unsold tickets must be retained until after the next internal audit. We found that tickets for athletic events were issued to the admissions manager for the season and not issued for each event. In addition, unsold tickets were not returned to the report auditor with the ticket report after each event. Also, the admissionsMr. Henry R. Johnson -2- May 28, 2009 manager was sometimes collecting admissions without issuing tickets, then destroying the number of tickets required to force tickets sold to equal funds remitted. Control over admissions for non- athletic events had improved during the audit period, but unsold tickets for FY 2008 were destroyed and not retained for the audit. We recommend that procedures for sale of tickets be reviewed with appropriate staff prior to events, that all tickets be serially numbered and issued by the ticket controller, that ticket reports are properly completed and returned with unsold tickets after each event, and that unsold tickets are retained until after the next internal audit. Review of field trip activities again revealed that not all field trip sponsors are providing financial information to the financial assistant at the completion of a trip, and field trip fees are not always remitted promptly. Sponsors should record cost and fee information for each field trip on MCPS Form 280-41, Field Trip Accounting, or equivalent, and submit the data to the financial office when a trip is completed, Also, to minimize the risk of loss, all funds collected should be remitted daily (see IAF manual, p. 13). ‘The record of the names of participants and sums collected strengthens intemal controls by enabling the reconciliation of receipts to sums recorded in the field trip account. We recommend all sponsors be required to use Form 280-41, or equivalent, and follow the procedures outlined above. Fund raising at the school must conform to the Guidelines for Sponsoring an Independent Activity Fund Fund Raiser. Fund raisers must be approved in writing by you, and a separate account must be established in the 800 series for recording transactions of each fund raiser. At the conclusion of the activity, a completion report must be prepared to analyze the results and approved by you before proceeds are transferred to the benefitting account. Request and completion reports must be retained in the schoo! financial office. We again found fund raiser activity recorded in class and club accounts. In addition, we did not find approved fund raiser request forms and completion reports on file in the financial office for each fund raiser. 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. MCPS Form 280-54, Request for a Purchase, is used to obtain principal approval to proceed with an intended purchase (see IAF manual, p. 8). The purpose of each disbursement must be fully explained on this form in order to properly record expenditures in appropriate accounts and to ensure that expenditures comply with LAF requirements. In our random sample of disbursements, it does not appear that prior approval was obtained for most purchases made. Many requests were not dated when signed by you, or the date was typewritten, making it difficult to determine when the purchase was actually approved. By requiring prior approval, the principal retains control over the expenditure of IAF funds. We recommend that Form 280-54 be prepared by staff and signed and dated by the principal at the time verbal approval is sought so that purchase orders and invoices bear a date subsequent to the approval date. MCPS purchasing cardmembers must record purchases on transaction logs and submit logs monthly with American Express statements and cardmember invoices and receipts attached, for review and approval by the principal. Monthly summary reports from American Express are to be reviewed,Mr. Henry R. Johnson May 28, 2009 ed and dated by the principal to ensure that purchases are appropriate and within established limits, We found that logs and the summary reports were not reviewed by the principal. Also noted, some receipts were missing, and some cardmembers were not signing logs. 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). Controls over cash receipts need improvement, Cash and checks collected by sponsors must be tured in promptly to the financial assistant, and receipts must be deposited promptly and always on the last working day of each month and before each weekend or holiday. Funds in excess of $250 must be deposited in a bank at the end of the school day (see IAF manual, pp. 6-7). We found that staff collecting fees for activities were not remitting them to the financial assistant in a timely manner. In addition, receipts were sometimes not deposited promptly by the financial assistant. To minimize the risk of loss, and provide assurance that available funds will be fully utilized to meet school needs, all funds collected should be remitted to the financial assistant daily, and promptly deposited to the bank Other matters were discussed and satisfactorily resolved. We appreciated the cooperation and assistance of your staff, especially Ms. Duong and Mrs. Allen, In accordance with MCPS Regulation DIA-RA, Accounting for Financial Operations/Independent Activity Funds, please provide a response to the Internal Audit office within 30 days of this report, with a copy to Dr. Heath E, Morrison, community superintendent. RWP:DKH:sd Copy to: Mr. Bowers Dr. Lacey Dr. Scott ‘Mr. Bedford Dr. Morrison ‘Ms. DeGraba ‘Ms. Diamond Mr. Doody