Office of Shared Accountability MONTGOMERY COUNTY PUBLIC SCHOOLS Rockville, Maryland April 16, 2009 MEMORANDUM To: Mr. James G. Fernandez, Principal Albert Einstein High Schoo! From: Roger W. Pisha, Supervisor, Internal Audit Nast. Subject: Report on Audit of Independent Activity Funds for the Period May 1, 2007, through November 30, 2008 ‘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 May 1, 2007, through November 30, 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. ‘We appreciated the opportunity to meet with you, Mrs. Angela Blade, business manager, and Mrs. Karen Thompson, financial assistant, on March 9, 2009, to discuss the results of our audit, ‘At our meeting we noted the progress made to improve conditions described in our previous report dated September 18, 2007. You resumed your fiduciary responsibilities, no longer delegating these to an assistant principal. MCPS purchase card usage was in compliance with the MCPS Purchasing Card User Guide. Procedures for field trips, fund raisers, and admission events all improved. While we commended you for progress made, some conditions continue to need improvement. ‘We noted in our prior audit that the IAF continued to be in a weak financial condition, with funds held in the IAF not sufficient to cover account balances of restricted memorial funds and balances held for clubs, classes, and other school sponsored activities. A deficit continues to exist, although the financial position as of our audit date had improved significantly over conditions at April 30, 2007. We recommend that you continue to work with your business manager on a plan which includes means to eliminate negative balances and further reduction of outstanding debt, a goal we believe the school may well obtain by the end of the fiscal year. Disbursement of IAF must be controlled in a number of ways. Disbursements must be approved in advance and in writing using MCPS Form 280-54, Request for a Purchase. After a purchase is completed, the recipient of the goods or services should submit the invoice or documented evidence of purchase, noted to indicate the satisfactory receipt of the goods or services, to the financial assistant. A check may then be drawn, charged to the appropriate activity account, TtMr. James G. Fernandez -2- April 16, 2009 must bear two signatures, one of which is that of the principal or acting principal. We again found that for purchases requiring advanced approval, MCPS Form 280-54 was not signed by the principal in advance of the purchase; 54 percent of our current sample lacked pre-approval. Recipients and purpose of gift card distributions were not always recorded. The general ledger lacked a separate account to record staff appreciation expenditures. Some expenses were charged to an incorrect account. In addition to these previously identified weaknesses, the following additional conditions in the disbursement process must be addressed: © School did not use the standard chart of accounts; * Documentation was not marked to indicate receipt of the goods or services; © Documentation was missing or inadequate for some reimbursements paid to the principal; © Principal was reimbursed for usage of an additional cell phone, whereas using the MCPS- issued Blackberry would conserve IAF resources; © Principal was reimbursed for over $11,000 in expenses charged to personal credit cards, a practice that may provide reward benefits to accrue to the cardholder. Action is needed to correct these conditions and bring purchasing into conformity with MCPS requirements (see IAF manual, p. 8). Monthly bank reconciliations and ledger reports of IAF transactions should be prepared and fumiished to the principal by the 20 day of each month, and should be signed and dated to signify review. Staff members who sponsor events involving the collection and disbursement of LAF should likewise receive a copy of their account report for each month in which transactions are recorded. We noted that monthly reports were often not prepared in a timely manner, and while signed, were not dated by the signers and thus we could not determine if the principal and sponsors reviewed the activity 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 assistant, jointly counted, and a pre-numbered receipt issued to the remitter, Funds in excess of $250 must be deposited in a bank at the end of the school day and all funds must be deposited on the last working day of each month and before each weekend or holiday (see IAF manual, p. 6). Sponsors sometimes held fees collected rather than remit them to the financial assistant on a daily basis. Also, the financial assistant sometimes held funds in excess of the allowable limit. We noted that funds from the after school “snack shack” operated by parents were deposited net of expenses. To minimize the risk of loss, we recommend that all funds collected be remitted promptly and intact to the financial assistant, then counted, receipted, and deposited daily.Mr. James G. Fernandez -3- April 16, 2009 Other matters were discussed with Mrs. Blade and Mrs. Thompson and satisfactorily resolved. We appreciated their cooperation and assistance during the audit. 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 Dr. Heath Morrison, community superintendent. RWP:VAD:WKH:r Copy to: Mr. Bowers Dr. Lacey Dr. Scott Mr. Bedford Dr. Morrison Ms, DeGraba ‘Ms. Diamond Mr. Doody