Office of Shared Accountability MONTGOMERY COUNTY PUBLIC SCHOOLS Rockville, Maryland April 2, 2009 MEMORANDUM To: Mr. Darryl L. Williams, Principal Montgomery Blair High School From: Roger W. Pisha, Supervisor, Internal Audit Rutt Subject: Report on Audit of Independent Activity Funds for the Period July 1, 2007, through December 31, 2008 ‘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 Montgomery Blair High School for the period July 1, 2007, through December 31, 2008. 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 During our meeting with you on March 5, 2009, we provided you with an analysis of the financial condition of the school which suggests some weakness. The principle cause of this condition is the amount owed to MCPS, much of it for purchases made prior to your appointment. We noted that accounts payable are not among the figures reported to you monthly with the IAF statements, We recommend that your business staff prepare an accounts receivable aging report from the MCPS Financial Management System to accompany the monthly IAF reports, Below we describe conditions which weaken controls along with recommendations for improvement which may have a positive impact on the school financial condition. Several weaknesses in procedures and practices were noted in your finance office. Cash and checks collected by sponsors and others for IAF activities should be counted and remitted promptly and intact to the financial assistant. The financial assistant should promptly count remittances, immediately resolve any difference with the remitter’s count then issue a receipt. Once issued, a receipt should never be altered. Errors should be corrected by voiding the initial receipt and issuance of a new receipt. All receipted funds should then be deposited promptly. At the end of each month the balance in the checking account statement should be reconciled with the EPES ledger report and any errors located and corrected. The following describes the weaknesses observed: © Some sponsors were not remitting funds promptly and/or with insufficient support to enable a determination that all funds collected had ‘been remitted;‘Mr. Darryl Williams -2- April 2, 2009 «An instance in which a receipt prepared in error had been altered; © There was $284.76 on hand that had not been receipted; the financial assistant explained this was a change fund for staff and student convenience; ‘s The office of the registrar was in possession of $235.91 and it was explained that the amount was not devisable by the $3 transcript fee because the fund was sometimes used to purchase postage or other office needs; «Noted were instances in which the financial assistant made adjusting entries to force the reconciliation between the bank statement and the ledger report, rather than locate and correct error(s) causing the imbalance. We recommend these conditions and requirements be discussed with your financial team and additional training be offered as deemed necessary. We also recommend that the change fund now in the hands of the financial assistant be eliminated, or if essential, that it be made the responsibility of someone other than the financial assistant. Disbursement of IAF must be controlled in a number of ways. All disbursements must be approved in advance and in writing using MCPS Form 280-54, Request for a Purchase. Purchases should be made using school funds and not personal funds of staff. Purchases in excess of $6,500 must be approved by the Chief Operating Officer (COO). All purchases must be supported by documentation sufficient to assure school purposes are served. Once again numerous instances were found, in which controls over purchases were weakened; these are described below: © In our sample, 13 of 50 purchases (26 percent) were either not pre-approved, or the documentation was insufficient to determine whether pre-approval had been obtained; a considerable improvement from the 73 percent error rate of the previous andit period; «Numerous instances of staff being reimbursed for expenses paid with personal charge cards or cash. Personal charge card reimbursements included one for $10,000 relating to a robotics competition, and another one for $6,466.95 which was supported by more than 20 pages of various receipts relating to a drama production; «Examination of a purchase of communication equipment which exceeded the $6,500 limit did not have the approval of the COO; = One check in the amount of $5,163 had no documentation to indicate the purpose of the disbursement; * Review of purchase card use revealed many monthly purchase logs Jacked the required original receipts.‘Mr. Darryl Williams -3- April 2, 2009 ‘Action is needed to correct these conditions and bring purchasing into conformity with MCPS: requirements (see IAF manual, p. 8). Fund raising at the school must conform to the Guidelines for Sponsoring an Independent “Activity Fund Fund Raiser. Records of fund raising activities were incomplete, these are detailed below. «There were instances in which the approval form was missing; © Detailed remittance forms were insufficient to enable us to determine that all funds were accounted for, * At several events for which admission tickets were sold we could not assure all funds collected had been remitted since unsold tickets bad been destroyed or were otherwise not available. Field trip procedures need improvement. Sponsors of field trips should keep records of the names of trip participants and the amount collected from each, and give this information to the financial assistant when all fees have been collected. MCPS Form 280-41, Field Trip “Accounting, or its equivalent, should be used for this purpose. Trips involving an overnight stay must be approved by the community superintendent. ‘The data required to enable reconciliation of field trip accounts with sums collected and remitted could not be located. In addition, two field trips involving overnight stays did not have the required approval. We recommend field trip guidelines be reviewed with appropriate staff to bring field trip activities into compliance with requirements (see [AF manual, pp. 6 and 13). ‘The financial assistant had complete control over sale of parking permits including collection of fees and issuance of hang tags. However, she did not retain the unsold tags, therefore we were ‘unable to reconcile permits sold with sums recorded to assure that proceeds of all sales had been deposited. We recommend the duties of selling and issuing parking permits be divided, and the person responsible for distributing tags be instructed to retain unsold parking permits until reconciliation has been verified by intemal audit. Other matters were discussed and satisfactorily resolved. Since our previous audit report, we noted that most sponsors now complete their monthly account reconciliation, and improved cash management between the checking and savings account. We appreciated the cooperation and assistance of your staif during our visit. 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 Dr. Heath E. Morrison, community superintendent. RWP:LS:sd Copy to: Mr. Bowers, Dr. Lacey, Dr. Scott, Mr. Bedford, Dr, Morrison, Ms. DeGraba, Ms. Diamond, Mr. Doody