sm 102 – school business management, ethics & audit compliance july 10, 2013

SM 102 – School Business Management, Ethics & Audit Compliance

July 10, 2013

L. Freeman Wish, CPAClarksville School District

1701 Clark RoadClarksville, AR 72830

[email protected]

Presented by:

School Board Structure 6-13-616. Qualifications of directors.

(a) No person shall be eligible to be a member of any school district board of directors in this state unless he or she is a qualified elector of the school district which he or she serves.

(b) No person who is elected to a school district board of directors shall be eligible for employment in that same school district.

History. Acts 1935, No. 30, § 4; Pope's Dig., § 11524; Acts 1957, No. 131, § 1; A.S.A. 1947, §§ 80-504, 80-504.1; Acts 1989, No. 242, § 1; 1993, No. 294, § 7; 1993, No. 346, §1; 1999, No. 1390, § 1.

School Board Structure6-13-608. Length of directors' terms.

All members of a school district board of directors shall be elected to a term of office of not less than three (3) years nor more than five (5) years in length and with the expiration of such terms so arranged that, as nearly as possible, an equal number of positions are filled each year. All members of a school district board of directors shall have terms of office of equal length.

History. Acts 1981, No. 50, § 1; A.S.A. 1947, § 80-549; Acts 1999, No. 1078, § 35.

Effective Dates. Acts 1999, No. 1078, § 92: July 1, 2000.

(a) All school districts shall have a board of directors with five (5) members or seven (7) members or nine (9) members in the case of a school district having an average daily attendance of twenty-four thousand (24,000) or more.

(b) Subsection (a) of this section shall not apply to those school districts that have a board of directors of seven (7) members, or in the case of a school district having an average daily attendance of twenty-four thousand (24,000) or more, nine (9) members, if that school district is operating under a court order or a consolidation agreement that provides for a board of directors.

6-13-634. School district board of directors — Size.

(c) (1) No board of directors shall have an even number of directors.(2) No less than ninety (90) days prior to the next annual

school election, any school district with an even number of directors shall file a petition with the State Board of Education to establish the requisite odd number of directors.

(3) If the number of members of a board of directors needs to be reduced to create an odd number of directors, the board of directors in office on August 12, 2005 shall draw lots to determine which board positions will be eliminated.

(d) Any change in the number of directors serving on the local school board of directors required under this section shall be

effective upon the directors taking office following the 2005 annual school election.

6-13-634. School district board of directors — Size.

(d) Any change in the number of directors serving on the local school board of directors required under this section shall be effective upon the directors taking office following the 2005 annual school election.

History. Acts 1999, No. 1078, § 29; 2005, No. 2151, § 13.

6-13-634. School district board of directors - Size.

School Board Structure6-13-109. School superintendent.

(a) The public school districts in the state shall each employ a superintendent of schools, whose qualifications and duties shall be prescribed by the General Assembly and the State Board of Education.

(b) "Superintendent of schools" is defined as the executive officer of a school district board of directors directing the affairs of the school district and teaching not more than one-half (1/2) of the time in the school day.

History. Acts 1999, No. 1078, § 27.

6-13-617. Oath.

(a) Each director elected or appointed shall, within ten (10) days after receiving notice of his election or appointment, subscribe to the following oath:

"I,__________________, do hereby solemnly swear or affirm, that I will support the Constitution of the United States and the Constitution of the State of Arkansas, and that I will not be interested, directly or indirectly, in any contract made by the district of which I am a director, except as permitted by state law and that I will faithfully discharge the duties as school director in ____________ School District, No. ____________ of ____________ County, Arkansas, upon which I am about to enter."

(b) The county clerk, upon receipt of the oath prescribed for a director, shall immediately commission such persons, and they shall enter at once upon their duties as directors.

History. Acts 1935, No. 30, § 12; Pope's Dig., § 11532; A.S.A. 1947, § 80-505; Acts 2001, No. 1599, § 20.

6-13-618. Organization - Disbursing officer.

(a) At the first regular meeting following the annual school election, the board of directors of each school district shall organize by electing:

(1) One (1) of their number president; (2) One (1) of their number vice president; and (3) A secretary who may be, but need not be, a member of the board.

(b) (1) By resolution adopted by majority vote, the board shall designate one (1) of its members who shall serve as the primary board disbursing officer of the district. (2) In addition, the board may designate one (1) or more board members as an alternate board disbursing officer or officers in the absence of the designated primary board disbursing officer. (3) Such a resolution must be filed with the county treasurer and the Director of the Department of Finance and Administration.

(c) No warrant or check other than food service or activity funds warrants or checks shall be valid in the absence of the following manual or facsimile signatures: (1) That of the designated board member serving as disbursing officer for the district or the designated alternate; and (2) That of the superintendent of the school district.

History. Acts 1959, No. 78, § 1; 1967, No. 187, § 1; A.S.A. 1947, § 80-506; Acts 2003, No. 671, § 1.

(a) (1) The board of directors shall hold regular monthly meetings during the school

term and shall meet on call of the president or secretary or any three (3) members of the board of directors or when petitioned to do so by a petition in writing signed by fifty (50) electors in the school district.

(2) Regular meetings of the school board of directors and all school board

committees, and special meetings of the school board of directors and school board committees that deal with personnel or personnel policies, shall, except in emergency situations, be held after 5:00 p.m.

(3) (A) Not less than ten (10) days prior to the date of a regular meeting of its board of directors, a public school district shall publish on the public school district's website a notice of the date, time, and place of the meeting.

(B) Not less than twenty-four (24) hours prior to a rescheduled regular

meeting, a public school district shall publish a notice on its website of the change in the date, time, or place of the regular meeting.

6-13-619. Meetings.

(b) (1) Minutes of regular and special meetings of the school board of directors shall be kept by the secretary of the board of directors

and filed by him or her in a permanent record.(2) This record shall also contain a copy of all budgets of the

school district and all reports of the county treasurer on the financial affairs of the school district.(c) (1) (A) A majority of a quorum voting affirmatively shall be required for the passage of any motion or resolution.

(B) Any member who abstains from voting shall be counted as having

voted against the motion or resolution.(C) If a member announces a conflict of interest with regard to the

issue,the member may leave the meeting until the voting on the issue is concluded, and the member who abstains from voting thereby

shall not be counted as having voted.

6-13-619.Meetings (Continued)

(c) (2) For the purposes of this section, a quorum shall be a majority of the

membership of the board of directors.(d) (1) Any member of the board of directors who misses three (3) regular and consecutive board of directors meetings during a school year for any reason other than military service of the member or illness of the member verified by a written sworn statement of the member's attending physician may be removed from office by a majority vote of the remaining board members, but only after an opportunity for a hearing before the board of directors upon fifteen (15) days notice received by personal delivery or by certified mail with the return receipt signed by the addressee only requested.

(2) If the board of directors takes action to remove the member from office, the remaining members shall then appoint another individual to serve until the next annual school election, when electors shall select in the usual manner a director to serve the unexpired term of the removed member.History. Acts 1931, No. 169, § 96; Pope's Dig., § 11534; Acts 1983, No. 855, § 1; A.S.A. 1947, § 80-507; Acts 1993, No. 608, § 1; 1995, No. 1347, § 1; 2007, No. 1588, § 1.

6-13-619.Meetings (Continued)

The board of directors of each school district in the state is charged with the following powers and required to perform the following duties in order to provide no less than a general, suitable, and efficient system of free public schools:

(1) Attend meetings of the school board;(2) Determine the mission and direction of the school

district;(3) Adhere to state and federal laws governing public

schools;(4) Enact, enforce, and obey school district policies;(5) (A) Employ staff, including:

(i) (a) A superintendent of schools to oversee the day-to- day operations of the school district.

(b) A superintendent shall be evaluated annually or no less often than prior to any extension of his or her employment contract.

(c) Superintendents and assistant superintendents may be employed under contract terms and conditions that incorporate all elements prescribed by the State Board of Education; and

6-13-620. Powers and duties.

(ii) (a) School district employees under initial written employment contracts in the form prescribed by the State Board of Education, not including day-to-day substitutes.

(b) The employment contract shall:(1) State the duration of employment, specific duties of

the employee and the annual salary or hourly wage of the employee and projected annual earnings in the case of nonexempt employees under applicable state and

federal law; and(2) Incorporate all personnel policies adopted by June

30 to be in effect on July 1 of the following employee contract year, subject to the requirements and exceptions contained in §§ 6-17-204 and 6-17- 205.

6-13-620. Powers and duties. (Continued)

(5)(B) Copies of initial written employment contracts and renewed written employment contracts issued in accordance with §§ 6-17-1506 and 6-17-1703 shall be distributed as follows:

(i) One (1) copy to be given to the employee;(ii) One (1) copy to be retained by the school board

of directors; and(iii) One (1) copy to be retained by the school

district's treasurer or bookkeeper;(6) Understand and oversee school district finances required

by law to ensure alignment with the school district's academic and facility needs and goals, including without limitation:

(A) Reviewing, adopting, and publishing the school district's budget;


(B) Overseeing and monitoring the school district finances, including:(i) Revenues;(ii) Expenditures;(iii) Investments;(iv) Debts;(v) Obligations;(vi) Inventory; and(vii) Real property;

(C) Borrowing money as necessary, but in no case shall the school board of directors permit the school district to end the fiscal year with a negative legal balance;

(D) Entering into contracts for goods and services necessary to operate the school district;

(E) Buying, selling, renting, and leasing real property and personal

property on behalf of the school district;(F) Receiving, reviewing, and approving each annual financial

auditreport and presenting it to the public;


(7) Ensure that:(A) Necessary and sufficient facilities are built or obtained, furnished, and maintained; and(B) All properties belonging to the district are managed and maintained for the benefit of the school district;(8) Approve the selection of curriculum and ensure that students are offered and taught the courses of study and educational content required by the State Board of Education;(9) Visit district schools and classrooms when students are present no less than annually and attend some events and functions;(10) Obtain the training and professional development necessary to

serve as active and informed members of the school board of directors; and(11) Do all other things necessary and lawful for the conduct of

efficient freepublic schools in the school district.


History. Acts 1931, No. 169, § 97; Pope's Dig., § 11535; Acts 1939, No. 316, § 1; 1941, No. 389, § 1; 1943, No. 96, § 1; 1949, No. 287, § 1; 1953, No. 204, § 1; 1957, No. 280, § 1; 1969, No. 327, § 1; 1973, No. 253, § 3; 1973, No. 690, § 1; 1977, No. 658, § 1; 1983 (Ex. Sess.), No. 41, § 1; 1983 (Ex. Sess.), No. 53, § 1; A.S.A. 1947, § 80-509; Acts 1989, No. 822, § 1; 1993, No. 294, § 7; 1995, No. 233, § 1; 1999, No. 391, § 3; 1999, No. 1078, § 38; 2001, No. 581, § 1; 2001, No. 1747, § 1; 2003, No. 1738, § 1; 2007, No. 617, §§ 5, 6; 2007, No. 710, § 1; 2007, No. 1573, § 45; 2009, No. 1180, § 2.


6-13-622. Publication of budget.

(a) The requirement of Arkansas Constitution, Amendment 40, for publication of the budget shall be discharged by the board of directors of each school district by publication of its budget one (1) time in some newspaper published in the county in which the district lies or, if the district lies in more than one (1) county, in the county in which the district is administered.

(b) The publication shall be made not less than sixty (60) days before the school election at which the annual ad valorem property tax for the district is decided by the electors.

History. Acts 1951, No. 403, § 4; A.S.A. 1947, § 80-538; Acts 2003, No.1280,§ 1.

“The secret of managing is to keep the guys who hate you away from the guys who are undecided.”

Casey Stengel

The Organizational ChartVoting Public/Board of Directors

Superintendent

Curriculum Financial

Principal

Teachers/Staff

Maintenance/Transportation

Staff

Treasu rer

P u rch as in g C lerk

A ss t fo r F in an ce

P rin c ip a l H ig h S ch oo l

P rin c ip a l M id d le S ch oo l

P rin c ip a l E lem S ch oo l

A ss t fo r C u rricu lu m

A ss t fo r P erson n e l A ss t fo r M a in t/Tran sp

S u p erin ten d en t

B oard o f E d u ca tion

The secret to how a structure works is not the position of the agents…but the condition of the LINES IN BETWEEN!

Structure in School Management

“Life is like a dogsled team. If you ain’t the

lead dog, the scenery never changes.”

Lewis Grizzard

“Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall.”

Steve R. Covey AuthorThe Seven Habits of Highly Effective People

Business Stockholders invest in a business voluntarily.

vs.

Voters pay mandatory property taxes to invest in schools.

Why Can’t A School Be Run Like A Business?

Businesses are generally run by a board of directors that has intimate knowledge of the business environment and industry.

vs.

School Board of Directors only qualification is that they be a registered voter and be breathing.

Why Can’t A School Be Run Like A Business?

The manager administers.

The leader innovates.

The manager is a copy. The leader is an original.

The manager maintains. The leader develops.

Differences Between Managers and Leaders

The manager relies on control. The leader inspires trust.

The manager has a short-range view. The leader has a long-range

perspective.

The manager asks how and when. The leader asks what and why.


The manager has his or her eye on the bottom line.

The leader has his or her eye on the horizon.

The manager accepts the status quo. The leader challenges it.


The manager is the classic good soldier.

The leader is his or her own person.

The manager does things right. The leader does the right thing.

Managers are necessary. Leaders are essential.


“You can have brilliant ideas, but if you can’t get them across, your ideas won’t get you anywhere.”

Lee Iacocca

Senior Management could identify only 4% of the problems of the organization

When middle management was added, it went up to 9%

Adding all supervisors increase it to 74%When all staff were included it was up to

100%We need to let those under us see how they

can help improve the organization

Results of a Ford Motor Company Management Study

“You do not lead by hitting people over the head – that’s assault, not leadership.”

Dwight D. Eisenhower

6-20-1805. Training requirements for bookkeepers.

(a) The State Board of Education shall establish by rules or regulations appropriate training and continuing education requirements for individuals whose job responsibilities include preparing a budget or classifying, recording, or reporting receipts or expenditures of a school or school district.

(b) The State Board of Education shall establish rules or regulations to assure the proficiency of school employees or other individuals to properly classify, record, and report the fiscal transactions of schools or school districts.

(c) If the State Board of Education determines that a school or

school district is not properly recording or reporting the fiscal transactions or budget of the district, the superintendent and school board may be required to appear before the State Board of Education to explain why the school or school district has not complied with the fiscal recording and reporting requirements.

History. Acts 2003 (2nd Ex. Sess.), No. 40, § 2.

(a)As used in this section, “general business manager” means a chief financial officer or business manager, however the position is titled, who:

(1)Is responsible for the fiscal operations of the public school district; and

(2)Performs his or her duties under the direction of the superintendent of schools of the public school district.

(b)(1)On and after July 31, 2007, a general business manager for a public school district shall meet the minimum qualifications established by rule of the Department of Education.

(2)This subsection (b) is intended to require minimum qualifications for a general business manager that support the implementation of best financial management practices for public school districts.

(c)A general business manager who was employed prior to July 31, 2007, shall be exempt from the provisions of subsection (b) of this section.

History. Acts 2007, No. 1591, § 1.

6-15-2302.General business manager.

Important to the way the school operatesEvidence of decisions, transactions,

operationsSchool historyStrategic Planning

Why Record Management?

Recorded information, regardless of medium or characteristics, received by an organization that is evidence of its operations, and has value requiring its retention for a specified period of time.

Information created, received and maintained by an organization or person in pursuance of legal obligations or in the transaction of business.

What is a Record?

CorrespondenceInvoicesPurchase OrdersPayroll RecordsSchool Board Meeting MinutesBond IssuesElectionsE-MailTelephone Calls

Sources of Information/Records

The systematic control of all records from their creation or receipt, through processing, distribution, organization, storage and retrieval to their ultimate disposition.

What is Record Management?

Comply with Government RegulationsReduce Legal LiabilityControl Valuable Company AssetsReduce Record Archive Size

Why Do I Need Record Management?

RecordFile PlanRetention ScheduleRecords RetrievalDisposition

Essential Elements ofRecord Management

File PlanA system for categorizing records, divided into

categories.

Each category has its own retention schedule.

All records in the system are assigned to a category.

Retention Schedule

The amount of time a record should remain in the system.

When (and if) the record should be disposed.

How the record should be disposed.

Record Retrieval

Structured query, full text search, or a combination of both.Export records into their native formats.Print or e-mail records.Version records.Add notes or comments to original record.

Disposition

The method by which a record is removed from the system.

Disposition is based on time, event, or a combination of time and event.

The process is generally either transfer or destruction.

Why Dispose of Records?

Not all records are permanent records.

Non-permanent records may have set retention rules.

Enforcing retention rules removes records when they become obsolete.

Example: Destroy employee personnel records seven (7) years after retirement.

Record Retention PolicyLack of a formal Arkansas School Record Retention and Disposal Plan.

West Virginia Records Retention Schedule

Michigan Public Schools Record Retention Plan

Recommend that each school adopt a Record Retention Plan and follow it.

Legislative Action19-4-1108. Retention of documents.

(a) The original evidences of indebtedness, including documents prepared in connection with purchasing procedure, and all original contracts, invoices, statements, receipts, petty cash tickets, bank statements, cancelled checks drawn upon bank accounts, and other original supporting papers shall be retained in the permanent file of the business office of each state agency. These documents shall be kept in a safe place subject to audit and shall not be destroyed until authorization is given for their destruction by the Legislative Auditor.

(b) With the approval of the Legislative Auditor of the state, a state agency may retain evidences, to satisfy record retention policies, of indebtedness and other contracts, invoices, statements, receipts, petty cash tickets, bank statements, cancelled checks drawn upon bank accounts, and other supporting papers by microform or a form of stored images in a computer system or other form of computer technology in lieu of retaining the originals of such documents.

History. Acts 1973, No. 876, § 15; A.S.A. 1947, § 13-341; Acts 1997, No. 541, § 2; 2001, No. 1453, § 33.

DFA InterpretationsR1-19-4-1108 Public Records

The law defines public records as writings, recorded sounds, films, tapes, electronic or computer-based information or data compilations in any medium required by law to be kept or otherwise kept and which constitute a record of the performance or lack of performance of official functions which are or should be carried out by a public official or employee, a governmental agency or any other agency wholly or partially supported by public funds or expending public funds.

All public records shall be open to inspection and copying by any citizen of the State of Arkansas during the regular business hours of the custodian of the records, except as otherwise specifically provided by law.Refer to Arkansas Code ACA 25-19-105 for exceptions, charges for providing copies of records and required response time to requests for copies and ACA 25-19-109 for special requests for electronic information.

R2-19-4-1108 Records Retention

All records that are public property are required to be maintained by the agencies that generate the documents. The type of business record in question and the business process it supports determines the length of retention. Generally, all records should be maintained a minimum of three fiscal years. All records and supporting documentation must be maintained until they have been audited and may not be destroyed until permission has been granted by the Division of Legislative Audit. Other records such as records for grants are maintained according to State or Federal laws.

Public records can only be destroyed after permission is granted by the Division of Legislative Audit.

Storage of records in electronic form is permissible in some cases. Refer to Arkansas Law ACA 19-4-815, 19-4-1108, 25-32-112, 13-4-203, 25-32-117, 25-32-118.

Effective January 1, 2006, the Executive Chief Information Officer shall promulgate rules and guidelines governing the retention and management of public records and issue periodic updates as necessary. Each State agency shall comply with these rules and guidelines by the earlier of July 1, 2007, or when the line item appropriation is established to comply with this requirement.

ACT 918 of 2005Applies to all cities, county or local governments in Arkansas

Requires the development of rules and guidelines for the retention of public records commonly found in state agencies

Requires rules and guidelines to be effective July 1, 2007

Arkansas Record Retention Schedule

Agency Directives, Internal Policies and Procedures

Keep until superseded plus three years


Meeting Agenda and Minutes of Governing Bodies

Permanent


Employee Benefit Records and Employee Personnel Records

Workers Compensation Accident Reports

5 years after separation or until closure of unresolved personnel issues, whichever is greater

3 years from date of injury


Accounts Payable

Accounts Receivable

Until authorized by the legislative auditor (as required by Arkansas Code)

Until authorized by the legislative auditor (as required by Arkansas Code)

Let’s Take A Look At A Few Examples of Record Retention Periods

(Comparing West Virginia, Michigan and Arkansas)

Accounting Records

Bank Statements, Deposit Slips

West Virginia – Audit + 3 years

Michigan – Current FY + 7 years

Arkansas – Until authorized by legislative auditor

Cash Receipts/Receipt Books




A/P Invoices/Purchase Orders




Journal Entries




Bonds

West Virginia – Permanent

Michigan – Expiration + 7 years

Arkansas – Expiration + 5 years

Audit Reports

West Virginia – Permanent

Michigan – Permanent

Arkansas – Until the next audit report is issued by Legislative Audit

Let’s Talk Payroll Records

Employment History RecordsPayroll History (Annual Earnings)

West Virginia – 50 years

Michigan – Current Fiscal Year + 50 years

Arkansas – Permanent

Unemployment CompensationRecords

West Virginia – At least 4 years

Michigan – Current Fiscal Year + 1 year

Arkansas – 5 years after case closed

Forms W-2

West Virginia – At least 4 years


Arkansas – Not Addressed in Arkansas Record Retention Schedule

Time and Attendance Records

West Virginia – Not Addressed



After a 6-week trial and 10 days of deliberation, a jury found Arthur Andersen guilty of obstruction of justice when it destroyed Enron Corp. documents while on notice of a federal investigation by the SEC.

The Andersen Lesson

The jury rejected Arthur Andersen’s defense that the documents were destroyed as part of its housekeeping duties and not as a ruse to keep Enron documents away from the regulators.

The Andersen Lesson

Arthur Andersen received the maximum sentence of 5 years probation and a $500,000 fine.

35,000 people lost their jobs worldwide.Court did overturn the Arthur Andersen

conviction, but it was too late to save the company.

The Andersen Lesson

The lesson to be learned from the Arthur Andersen experience is that a Document Retention Program, an otherwise critical part of a company’s risk management program, will not save you from sanction if the policy does not conform to law, either in content or in implementation.

The Andersen Lesson

Applies to Board Member, Administrators, and Employees.

Act 1599 sets the guidelines for business transactions between the school district and its board, administrators and employees.

May require both local board approval and state board approval.

Refer to Arkansas Code 6-24-100 through 6-24-120 for detailed information.

Act 1599 of 2001

The spirit of this act is to provide for full disclosure of business activities between the local school district and its board members, administrators and employees.

Board Members and Administrators are held to higher ethical standards, since they are in a position of control.

Act 1599 of 2001

SECTION 2. Arkansas Code § 6-24-105 is amended to read as follows:(a) General Prohibition. Except as otherwise provided, it is a breach of the ethical standards of this chapter for a board member to contract with the public educational entity the member serves if the board member has knowledge that he or she is directly or indirectly interested in the contract. (b)(1)(A)(i) Employment of Family Members. This chapter does not prohibit family members of board members from being employed by the public educational entity the board member serves if the board determines that the employment is in the best interest of the public educational entity A board member's family member may not be initially employed by the public educational entity the member serves during the member's tenure of service on the local board for compensation in excess of five thousand dollars ($5,000) unless the Director of the Department of Education issues a letter of exemption and approves the employment contract based on unusual and limited circumstances.

Act 1381 of 2005

(ii) The determination of unusual and limited circumstances shall be at the sole discretion of the Director of the Department of Education and may be further defined by rule of the State Board of Education.

(B) A family member of a school board member who was employed by the public educational entity during the school year immediately preceding the election of the board member may continue employment with the public educational entity under the same terms and conditions of the previously executed contract and any renewal of the contract under § 6-17-1506.

(C) Subject to the local board's written policy, a qualified family member of a board member may be employed as a substitute teacher, substitute cafeteria worker, or substitute bus driver for a period of time not to exceed a total of thirty (30) days per fiscal year for the public educational entity served by the board member.

Act 1381 of 2005

(2)(A)(i) No employment contract that is prohibited under subsection (b) of this section is valid or enforceable by any party to the employment contract until approved in writing by the Director of the Department of Education.

(ii) The Director of the Department of Education's approval of an employment contract may include restrictions and limitations that are by this subsection incorporated as terms or conditions of the contract.

Act 1381 of 2005

(B) Excluding any renewal of a contract under § 6-17-1506, any change in the terms or conditions of an employment contract, a promotion, or a change in employment status for a family member of a school board member employed by a public educational entity that will result in an increase in compensation of more than two thousand five hundred dollars ($2,500) must be approved in writing by the Director of the Department of Education before any change in the terms or conditions of the employment contract or promotion or changes in employment status are effective, valid, or enforceable.

Act 1381 of 2005

Roslyn, New York

$11.2 million dollars stolen

Those involved:SuperintendentDistrict TreasurerAccounting Clerk (Treasurer’s niece)School Auditor

WHY BOTHER?

An audit is the process by which an independent accountant reviews your financial records and procedures in order to express an opinion of the fair presentation of your financial statements.

An audit is not designed to detect fraud.

An audit is not designed to make your life miserable.

What is an audit?

Audit Planning Form Completion

Internal Control Questionnaire Completion

Risk and Control Assessment

Tests of Controls Assessment

Substantive Testing of Financial Data

Planning the Audit

Required by state law.Required by federal law.Required by debt agreements.Required by bonding companies.Citizens like them.Evaluation of the performance of

management.

Why do we have an audit?

Visit with your auditor.Find areas for improvement.Keep records up to date.Maintain all minutes in timely manner.Reconcile all bank statements in a timely

manner.Record all asset additions and retirements

promptly.

How Can I Make This Easier?

Fixed Asset FindingsAccounting Records/Internal Control Employee Records/Payments Uncollaterized Bank Accounts Federal Compliance Issues Activity Funds Bids, Bonds, Architects Undocumented/Unauthorized Transactions Self Construction Conflicts of Interest

Summary Analysis of Audit FindingsDivision of Legislative Audit

For the Two Years Ended June 30, 2000

Segregation of Duties/Internal ControlExceeded Budget/Unallowable CostsMisstatements Missed by Internal ControlsDavis-Bacon ActFederal Cost Principals (Time Certifications)Fixed Assets Not Recorded In InventoryBuy American ActIncorrect Employee PayrollBank Reconciliations (Accuracy/Timeliness)Misappropriation of Funds

Summary Analysis of Audit FindingsArkansas Department of EducationFor the Year Ended June 30, 2011

June 30, 20001. Fixed Asset Findings2. Accounting Records3. Employee Records/ Payments4. Uncollaterized Bank Accounts5. Federal Compliance6. Activity Funds7. Bids, Bonds, Etc.8. Unauthorized Transactions9. Self Construction10. Conflicts of Interest

1. Segregation of Duties/IC2. Exceeded Budget/Costs3. Misstatements Missed by IC4. Davis-Bacon Act5. Federal Cost Principles (Time)6. Fixed Asset Findings7. Buy American Act8. Incorrect Employee Payroll9. Bank Reconciliations10. Misappropriation of Funds

Comparison of FindingsJune 30, 2011

Finding:The majority of findings in this category involved the failure to maintain periodic time certifications or monthly personnel activity reports were not prepared for employees who worked with Federal programs.

Fix:Maintain accurate time sheets for all employees, especially those working in federal programs

Allowable Costs/Cost Principles

Clarksville School District Monthly Time Sheet

Name: Social Security Number (Last 4 Digits Only) School: Job Assignment: Source of Federal Funding: For Month Ending July 31, 2010 (Please record the hours worked each day.) Regular Overtime Saturday Sunday Monday Tuesday Wednesday Thursday Friday Hours Hours

Total For the week of: Fed Non-Fed Fed Non-Fed Fed Non-Fed Fed Non-Fed Fed Non-Fed Fed Non-Fed Fed Non-Fed Hours Fed Non-Fed Fed Non-Fed July 1-2 July 3-9 July 10-16 July 17-23 July 24-30

July 31

Totals This represents a true and accurate record of time worked. Codes:

I certify that the hours shown above reflect the actual time the employee worked for the Federally Funded Program indicated, and that the employee listed aboveS = Sick Leave was paid from the non-fedeal funds only for the hours indicated. Hours other than those spent in the Federally Funded Program were paid by other district funds.P = Personal Leave Paid H = Holiday Signature of Employee: Date: V = Vacation

X = Absent without leave Signature of Supervisor: Date:

PD = Professional Development

Overtime Approval/Authorization Forms Must Be Attached To This

Time Sheet

Sample Time Sheet

Finding:Inadequate or Non Existent Records.

Fix:If you have no asset records you must inventory all fixed assets and create a listing of them.Be sure to include all known data:

a. Date Purchasedb. Costc. Asset Tag Numberd. Locatione. Estimated Life

Once the asset listing is complete, you must maintain an annual recap of additions and deletions.Recommend that the local school board adopt a capitalization policy for asset acquisitions.Record lease/purchase in fixed asset records at the time of purchase.Police report is needed for any stolen assets.

Fixed Asset Problems

ABC School DistrictFixed Assets

Analysis of Additions and Retirements

Audited Balance, June 30, 2002 10,000,000.00

Additions: (At Cost)

Total Additions for Fiscal Year Ended 6-30-03(See Attached Detail Listing) 1,000,000.00

Retirements: (At Cost)

1982 Bus Number 6 (40,000.00)1990 Computer Lab (25,000.00)

Balance, June 30, 2003 10,935,000.00

Finding:Bank accounts not reconciled.

Fix:Adopt an accounting policy of having all district bank accounts reconciled within 7 days of the end of the month. This includes any activity fund accounts.

Accounting Records

Finding:Expenditures were made without proper documentation.

Fix:1. Do not pay any invoices before item is received.2. Use purchase orders and other means to insure that the

items purchased were authorized by the proper personnel.

3. Make sure that the amount paid agrees with the invoice.4. Verify that the items invoiced were received.5. Pay only on original invoices. No photocopies.6. Record all expenditures in the period in which they were

paid.

Accounting Records

Finding:Revenues were not properly receipted or

accounted for.

Fix:1. Deposit all monies received on a timely basis.

(Preferably daily)2. Receipt all monies as they are received by the

district.3. Record receipts in the period received. 4. In order to assist the auditor, record range of

receipt numbers on the deposit slip.5. Instruct all sponsors to turn in activity funds

promptly. (Within one day is preferable)

Accounting Records

Finding:Travel expenses are not properly documented.

Fix:1. Document all travel and meeting expenses with original

receipts.2. Meal and motel tickets, detailing the expenditures by

item, must be maintained for inspection by the auditor. Credit card slips are not adequate!

3. Travel expenses must be for school personnel and school related activities only. No payments can be made for spouse or children.

4. Adopt a district policy on amounts that can be allowed for mileage reimbursement and for meal reimbursement.

5. Try to avoid advancing cash for travel. You are much better off reimbursing an employee.

Accounting Records

Finding:Bank accounts in excess of the FDIC insured limit were not

collateralized.

Fix:1. Instruct bank in writing that all monies deposited with

their institution must be collateralized by proper securities.

2. Review monthly bank reconciliations and verify that collateralization amounts are adequate.

3. Be aware of any unusual transfers (ex: bond proceeds) that may be wired to your bank. They will need to make arrangements to have these amounts collateralized on the day received.

4. Deposit funds only in approved institutions. (Those with federal insurance guarantees)

Bank Accounts Not Adequately Collateralized

Finding:Salary schedule and contracts did not reflect actual pay

practices.

Fix:1. Pay according to salary schedule and contract amounts.2. No salary advances.3. Maintain accurate records on leave balances.4. No “borrowing” from next years leave. (However, a

district can establish a leave bank that employees donate to)

5. Uncompensated leave must be deducted from the current year contract.

Employee Records/Payments

1. Maintain a file for all items on which bids were taken and received. Retain proof of mailing, faxing or email, response received from vendor, and amount of bids.

2. If you accept anything other than the low bid, you should document the reason(s) that the low bid was rejected. Have the board approve any bid acceptance that is not the low bidder.

Other Issues - Bids

1. Maintain a file on all lease items.

2. Maintain a repayment schedule an all items that are acquired through a lease/purchase agreement.

Other IssuesLease/Rental Agreements

1. Maintain adequate insurance coverage for equipment, vehicles, buildings, etc.

2. Maintain copy of each policy and binder.

3. Maintain a copy of builders risk insurance for projects under construction.

Other Issues - Insurance

Adjust for any additional revenues received and/or expenditures incurred after original budget is complete.

Other Issues - Budgets

How to get rid of that irritating comment in the audit that says:

“The District had inadequate control over cash transactions because of insufficient segregation of duties due to a limited number of personnel.”

INTERNAL CONTROL

Internal control comprises the plan of organization and all of the coordinate methods and measures adopted within a business to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies.

Internal Control

Separation of Duties

Internal Control Procedures

Each transaction should require more than one person for approval.

Purchase Orders must be approved by someone other than the person placing the order.

Invoices must be approved by someone other than the person responsible for writing the check.

Divide a transaction into multiple steps from being initiated until completion with different people approving different steps.

How to Separate Duties

Written Procedures


Use a written accounting procedures handbook. (Green Book)

Make sure that all administration and staff are familiar with the written accounting procedures handbook.

Follow your written procedures.Any departure from the written procedures must

be approved by more than one person. (Approving persons should not be party to the transaction)

Written Procedures

Board Approved Policies


Have the local board approve your accounting policies.

One section of your board policies should address fiscal procedures.

Board policies should address minimum capitalization amounts.

Board policies should address amounts that require board approval and amounts that the superintendent is allowed to approve.

Board Approved Policies

1. Separation of Duties2. Written Procedures3. Board Approved Policies4. Adherence to Items 1-3.


“That old law about “an eye for an eye” leaves everybody blind. The time is always right to do the right thing.”

Rev. Martin Luther King, Jr.

School business management is as complex an area to work in as any profession I know. The variable and complicated elements of human resources, changing legislation, and technological society make our duties challenging and sometimes overwhelming.

Summary Statement

“Change is the law of life and those who look only to the past or present are certain to miss the future.”

John F. Kennedy

GOOD LUCKI HOPE I HAVE HELPED

ALWAYS REMEMBER THIS!

IT IS NEVER TOO LATE TO HAVE A HAPPY

CHILDHOOD

sm 102 – school business management, ethics & audit compliance july 10, 2013

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