Employee Expenses and the District - A Review

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1 Ernst & Young LLP Suite 900 One Clearlake Centre 250 S. Australian Avenue West Palm Beach, FL Tel: Fax: Report of Independent Accountants on Applying Agreed-Upon Procedures The Chairperson and Members of the School Board of Palm Beach County, Florida: We have performed the procedures enumerated below, which were agreed to by the responsible officials of the School District of Palm Beach County, Florida (the District), solely to assist you in evaluating the District s compliance with its policies and procedures with respect to specified expenditure transactions occurring during the period from 1 July 2008 through 30 June 2009 as set forth below. The District is responsible for its compliance with established policies and procedures with respect to processing expenditures. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures and the associated findings are as follows: Population and Sample The District provided a detail of expenditure transactions processed during fiscal year 2009 (the Detail) associated with the following officials and members of senior management (excluding any transactions that had been specifically approved by the School Board), School Board Members, the Superintendent, the Chief of Staff, Chief Academic Officer, and Chief Operating Officer. The Detail included the following three types of payments: 1) Vendor payments approved by the individual (Vendor Payments) 2) Unusual (as determined by the District) p-card purchases made by the individual (P-Card Purchases) 3) All expense reimbursements for the individual (Employee Reimbursements) The Detail and agreed upon sample sizes are summarized as follows: Expenditure category Value Number of transactions Sample size Vendor Payments $ 174, P-Card Purchases 26, Employee Reimbursements 9, Totals $ 210,

2 Page 2 Procedures We performed the following: Read the District s policies and procedures related to Vendor Payments, P-Card Purchases, and Employee Reimbursement transactions. Selected a sample of 60 Vendor Payments and 60 P-Card Purchases from the Detail (through a random selection process while ensuring that all individuals had at least one of each type of transaction selected) and selected 100% of the Employee Reimbursement transactions. Performed the procedures as enumerated below for the sample based on the respective type of transaction. We reported any findings as a result of our procedures in the following section of this report. Vendor Payments 1. We obtained the vendor invoice and a system generated report from PeopleSoft (the Query Report) which contained the approval information for the purchase order (PO), requisition and receiving report (the report included the PO number, PO date, PO approver, PO approval date, requisition identification, requisition date, requisition approver, requisition approver date, receiver number, receiver, receiver date, department, description, PO quantity, PO amount, unit of measure and vendor name). 2. We agreed the PO number, amount, vendor name and description of the transaction in the Query Report to the corresponding vendor invoice. Additionally, we confirmed that the purchase orders and requisitions were approved by the appropriate person per review of the Query Report and that the approvals were in accordance with the District s policies based on the dollar amount of the transaction. We performed this procedure for all transactions except for certain transactions for which a purchase order or requisition was not completed. In these instances we reviewed the following documents in place of the purchase orders noting they were approved by a board member, department head or superintendent, as applicable: Miscellaneous Payment Request (PBSD1275) or Hotel & Registration Prepayment (PBSD1717) form. These forms were used for all expenditures related to registration, dues or membership fees. Additionally, a Miscellaneous Payment Request form was completed for a scholarship expenditure. With respect to the scholarship expenditure, we were informed by responsible officials that the funding source was from auxiliary enterprises and that per the District s policy 2.161, Expenditure of Proceeds from District-Level Fund-Raising, auxiliary enterprise funds may be disbursed for purposes deemed to be for the benefit of the District (a portion of such funds may be used for hospitality of business guests, promotion, and public relations, including provision of refreshments, related to but not limited to activities involving graduation, visiting committees, orientation and inservice seminars, recruitment and interviewing of prospective employees, official meetings and receptions, guest speakers, accreditation studies, and other developmental activities, awards, or occasions when persons are recognized for meritorious performance). Leave/Temporary Duty Elsewhere (PBSD0032) form. This form was completed for two expenditures related to a car rental.

3 Page 3 3. For all transactions, we examined the invoice and other support submitted and verified the documentation contained evidence of the educational purpose of the expenditure. 4. For all board member expenditures, we verified that the expenditure appeared to be allowable based on select provisions covered in the District's policy 1.08, Expenditures of Board Members, such as for telecommunication devices, communication costs and travel expenditures pursuant to policy 6.01, Authorized Travel Expense Reimbursement, as applicable. This procedure did not apply to expenditures that were approved on behalf of the board office (and thus, not pertaining specifically to a board member) by an Administrative Assistant (designee). We obtained a letter from responsible officials indicating the appointed designee and noted that this individual had approved expenditures for courier services, advertising costs, and professional dues and membership fees. P-Card Purchases 1. We obtained the Cardholder Acceptance Guidelines and Contract (PBSD 2077) for all employees/board members included in our sample and verified that the employee/board member (cardholder) signed the agreement. 2. We obtained and reviewed the signed receipt (or Missing Receipt Form (PBSD 2094)) and detailed invoice, if applicable, and agreed the vendor name, amount and date to our sample selection per the Detail. We also agreed the selected transaction from the Detail to the following reports for the corresponding month: a. Monthly Billing Statement signed by the cardholder and the Department Head b. End-of-Cycle Checklist for Cardholder (PBSD 2095) c. PeopleSoft Monthly Transaction Report There were several purchases that related to the Superintendent s office for which all Monthly Billing Statements were signed by an executive secretary that approves on behalf of the Superintendent (his designee). We obtained a letter from responsible officials indicating the designee. 3. For all transactions, we verified that the purchased item was within the cardholder s authorized purchasing limits established per the cardholder application. 4. For any travel related transactions selected, we verified compliance with the District s policies and procedures regarding travel per policy 6.01, Authorized Travel Expense Reimbursement, as follows (as applicable). a. Verified that the expenditure was approved in accordance with the District's policy (authorized by Superintendent or designee) (Note: Policy 6.01 specifies Out-of-County travel by School Board members and the Superintendent for which reimbursement will be claimed shall be considered approved by the adoption of their expense budgets, accordingly no specific approvals were reviewed for any such selections). b. Reviewed the supporting documentation as described above and verified that the travel expense appears to be necessary to the performance or of a public purpose for the District.

4 Page 4 c. Verified that lodging and transportation expenses were charged and reimbursed in accordance with policy provisions (i.e. single occupancy for actual lodging expenses charged, proper supporting invoices/receipts were provided). d. Verified that incidental travel expenses are of the nature specified in the policy and that appropriate documentation was submitted based on policy guidelines. e. For registration fees, verified that the registration receipt was supported by a copy of the program or agenda of the convention or conference, itemizing registration fees and any meals or lodging included in the registration fee. Also, based on the review of the registration information, we confirmed that the main purpose of the conference or convention appeared to be in connection with the official business of the District, consistent with the lawful functions of district school systems, and directly related to the performance of the assigned duties and responsibilities of the traveler. f. Verified compliance with policies related to any advancements or direct payment transactions selected. 5. Based on a review of the signed receipt and corresponding invoice/supporting documentation for the selected transactions, we verified that the purchase was not for any of the following prohibited purposes as described in the District s purchasing manual, chapter 24: Cash advances and money orders Personal use Alcohol or drugs Food, except where allowed by funding and with appropriate documentation Purchases greater than $1000, except for travel when allowed Chemicals and custodial supplies (except in special circumstances with pre-approval from District P- Card Admin/Director of Purchasing) Any and all computers (excludes peripheral equipment) Salary and monetary awards Gift certificates or gift cards (except in special circumstances for students with pre-approval from District P-Card Admin/Director of Purchasing) Services Consulting, professional, and temporary services Maintenance and rental agreements (any contracts or services except in special circumstances with pre-approval from District P-Card Admin/Director of Purchasing)

5 Page 5 Beautification and decoration accessories such as plants, pictures, etc. except where allowed with FF&E (furniture, fixtures and equipment) funding Taxes, late penalties/fees, and interest charges Cell phones, Blackberry s, PDA s and beepers, including upgrades (only accessories allowed) Utilities and telephone services and cell phone service Gas, except for rental vehicles and District golf carts and blowers 6. For board member expenditures, we verified that the expenditure appeared to be allowable based on select provisions covered in the District's policy 1.08, Expenditures of Board Members, such as for telecommunication devices, communication costs and travel expenditures pursuant to policy 6.01, Authorized Travel Expense Reimbursement, as applicable. This procedure did not apply to expenditures that were approved on behalf of the board office (and thus, not pertaining specifically to a board member) by an Administrative Assistant (designee). Employee Reimbursements 1. We obtained and reviewed the Reimbursement Claim Form (or for non-travel expenditures, we obtained the Miscellaneous Payment Request Form) and supporting receipts and invoices or other supporting documentation and agreed the amounts and transaction information between the applicable documents and agreed the total amount to the Detail. 2. We verified that the proper approvals were obtained for the expenditure in accordance with the District s policies and procedures (authorized by the Superintendent or designee) and whether the travel expenses appeared to be necessary to the performance of a public purpose for the District. (Note: Policy 6.01 specifies Out-of-County travel by School Board members and the Superintendent for which reimbursement will be claimed shall be considered approved by the adoption of their expense budgets. Accordingly no specific approvals were reviewed for any such selections. In addition, per Policy 1.08, All expenditures incurred by board members including, but not limited to, travel expenses, the cost of supplies, communication costs will be charged against their individual budgets in accordance with district policies and practices governing such expenditures. Accordingly no specific approvals were reviewed for any such selections.) 3. We verified that the reimbursement was in compliance with the District s policy 6.01, Authorized Travel Expense Reimbursement, as follows (as applicable): a. Verified that any mileage charged appears to be calculated in accordance with policy parameters and at the approved reimbursement rate. b. Verified that subsistence/per-diem allowances were properly calculated/charged and reimbursed at the rates provided in the policy. c. Verified that lodging and transportation expenses were charged and reimbursed in accordance with policy provisions (i.e. single occupancy for actual lodging expenses charged, proper supporting invoices/receipts were provided).

6 Page 6 d. Verified that incidental travel expenses are of the nature specified in the policy and that appropriate documentation was submitted based on policy guidelines. e. For registration fees, verified that the registration receipt was supported by a copy of the program or agenda of the convention or conference, itemizing registration fees and any meals or lodging included in the registration fee. Also, based on the review of the registration information, EY confirmed that the main purpose of the conference or convention appeared to be related to the official business of the District, consistent with the lawful functions of district school systems, and directly related to the performance of the assigned duties and responsibilities of the traveler. f. Verified compliance with policies related to any advancements or direct payment transactions selected. 4. For board member expenditures, we verified that the expenditure appeared to be allowable based on select provisions covered in the District's policy 1.08, Expenditures of Board Members, such as for telecommunication devices, communication costs and travel expenditures pursuant to policy 6.01, Authorized Travel Expense Reimbursement, as applicable. This procedure did not apply to expenditures that were approved on behalf of the board office (and thus, not pertaining specifically to a board member) by an Administrative Assistant (designee). Findings Vendor Payments We noted two expenditures in our sample that did not contain a payment request or other form in place of a purchase order; however, these expenditures were made directly to a cellular provider for monthly cellular charges for a board member. The supporting documentation for these two expenditures, as well as one transaction for the purchase of a cellular phone for a board member, did not specifically identify the business purpose; however, the District s policy 1.08, Expenditures of Board Members, contains provisions specifically related to cellular telephones and communication costs of board members. We also noted the following exceptions: One expenditure for registration fees in which the Miscellaneous Payment Request form was used instead of the Hotel & Registration Prepayment form which is the form required by District policy for the prepayment of registration fees. The supporting documentation did not contain evidence of the educational purpose for nine transactions totaling $ to the same vendor for courier services to board member homes.

7 Page 7 P-Card Purchases For one employee we noted that the card number on the signed agreement did not agree to the card number indicated on the underlying receipts in our sample. We were informed that the original card was stolen and another card was issued as a replacement. We noted one instance where a signed copy of the receipt was not available as the transaction selected related to a credit issued for a return of items that were shipped backed to the vendor. However, we obtained the invoice from the original purchase with a handwritten note indicating the expected credit. We also noted the following exceptions: 15 instances where the receipts were not signed by the cardholder. Two instances in which there was no receipt and no Missing Receipt Form (or the Missing Receipt Form was signed as of the date we requested the support, not as part of the monthly reconciliation process). One instance in which the receipt was less than the transaction amount charged by $3.99 (this appeared to be related to shipping charges but could not be verified). Four instances where the corresponding Monthly Billing Statement was not signed by the cardholder (or was signed only when prompted by our information request). Two instances where the End-of-Cycle Checklist was not prepared until prompted by our information request. Three instances where the Department Head (Superintendent) did not sign the corresponding Monthly Billing Statement for purchases made by his designee. One instance where the Leave/Temporary Duty Elsewhere form (PBSD0032) was not signed in accordance with policy One instance in which the purchase was in excess of $1,000 and was not related to travel expenses. This transaction related to the prepayment of advertising costs in the amount of $1, Responsible officials indicated that special approval to exceed the $1,000 threshold was obtained prior to the purchase. According to correspondence provided, the purchase was necessary to comply with a legal deadline and therefore the normal requisition process was not completed due to the essence of time.

8 Page 8 Several instances where the educational or business purpose was not indicated per review of the supporting documentation and we were therefore unable to conclude that the purchase was not for personal use. These purchases are summarized as follows: Number of Type of Total Additional Description transactions merchant amount comments 1 Wireless vendor None available $ (a) 1 On-line retailer Book $ (a) 1 On-line retailer None available $ 7.50 (a) 1 Cleaners Dry-cleaning $ (a),(b) 1 Florist Sympathy arrangement $ (c) 1 Bookstore 5 books $ Toll collector Sunpass transponder and prepaid tolls of $100 plus $1 for toll previously incurred $ (d) (a) With respect to these board member transactions, we were also unable to determine whether or not they were allowable according to the District's policy 1.08, Expenditures of Board Members, based on the supporting documentation. (b) We were informed by responsible officials that the dry cleaning expenditure was for a graduation robe. Even though this was not indicated on the receipt, the date is consistent with the timing of graduation. (c) According to responsible officials, the funding source for this transaction is from auxiliary enterprises and per District policy 2.161, Expenditure of Proceeds from District-Level Fund- Raising, auxiliary enterprise funds may be disbursed for purposes deemed to be for the benefit of the District (a portion of such funds may be used for hospitality of business guests, promotion, and public relations, including provision of refreshments, related to but not limited to activities involving graduation, visiting committees, orientation and in-service seminars, recruitment and interviewing of prospective employees, official meetings and receptions, guest speakers, accreditation studies, and other developmental activities, awards, or occasions when persons are recognized for meritorious performance). (d) With respect to these transactions, we also noted that they do not appear to be in compliance with the District s policy 6.01, Authorized Travel Expense Reimbursement, as tolls should be submitted for reimbursement based on an after-the-fact determination on a per-trip basis and reported on the traveler's reimbursement claim form as an actual and necessary incidental travel expense.

9 Page 9 One instance where the selected transaction related to a credit for $ issued for a return of items that were shipped backed to the vendor. We obtained the invoice from the original purchase with a handwritten note indicating the expected credit. We noted that the original purchase of $ related to the prior year and was for 20 boxes of greeting cards (i.e. birthday, holiday, sympathy, etc.), of which 9 boxes were returned for a refund of 70% of the purchase price. The educational or business purpose was not indicated in the supporting documentation. One purchase of 100 Making a Difference pins totaling $ for which the educational or business purpose was not indicated on the supporting documentation reviewed. Responsible officials provided a copy of the catalogue containing the pins that were ordered and indicated that the pins were used for a themed meeting that is held every fiscal year. Two transactions totaling $82.68 for the purchase of blank DVDs/CDs from an on-line retailer. Although the educational purpose was not indicated on the documentation, according to responsible officials such purchases are considered normal operating supplies of the board office. Employee Reimbursements We noted the following exceptions: For one transaction totaling $45.92, there was no receipt or proper receipt equivalent for an item purchased from an on-line retailer in the amount of $ The educational purpose was not indicated in the supporting documentation for the following: Six transactions for DVD purchases/rentals totaling $ One transaction for DVD purchases/rentals totaling $23.07 for which the Miscellaneous Payment Request Form indicated the DVDs were obtained in preparation for a meeting. However, based on a review of the movie titles rented, they did not appear to be related to an educational purpose. One transaction for $5.94 for the purchase of sympathy cards. One transaction for $75.39 which included gasoline purchased for a rental car for the return portion of a trip from Tallahassee, however, a round-trip plane ticket had been obtained.

10 Page 10 We were not engaged to and did not conduct an audit or examination, the objective of which would be the expression of an opinion on the District s compliance with its policies and procedures related to the processing of the specified expenditure transactions. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the School Board of Palm Beach County and the audit committee and management of the District, and is not intended to be and should not be used by anyone other than these specified parties. EY 29 October 2009

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