WESTERN NEVADA COLLEGE THEATER DEPARTMENT Internal Audit Report July 1, 2009 through January 31, 2011

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1 WESTERN NEVADA COLLEGE THEATER DEPARTMENT Internal Audit Report July 1, 2009 through January 31, 2011 GENERAL OVERVIEW The Western Nevada College (WNC) Theater Department falls administratively under the Communications and Fine Arts division at WNC. The department offers an associate of arts degree in musical theater and produces three to five musical productions a year through its Western Nevada Musical Theatre Company. The productions are open to the public and are held at the Carson City Community Center. All of the performers in the productions are WNC students. The Theater Department is responsible for ticket sales to the performances and the corresponding collection and deposit of revenue from this activity. During the fiscal year, the department collected approximately $149,000 from ticket sales. The department also rents costumes and backdrops owned by the college to individuals and various organizations. During the audit period, there were two Theater Department employees and one student employee. SCOPE OF AUDIT The Internal Audit Department has completed a review of the Theater Department for the period of July 1, 2009 through January 31, The scope of our review included tests of the accounting records and other procedures as we considered necessary. The tests included, but were not necessarily limited to, these areas. 1. Reviewing the business operations of the Theater Department and testing controls over the receipt and deposit of funds. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 1 of 21

2 2. Testing expenditures for reasonableness, supporting documentation, and proper signature approvals. 3. Reviewing leave records, timesheets and contracts for proper completion and approval. 4. Examining equipment inventories for proper accountability. 5. Reviewing employee access to the mainframe applications. In our opinion, we can be reasonably assured that the Theater Department is operating in a satisfactory manner. However, implementation of the following recommendations would further improve operations. CASH CONTROLS The Theater Department sells a variety of season tickets which allows ticketholders to attend one performance of their choosing for each production that is offered. The department also sells single performance tickets. For the 2010 season, we reviewed the department s season ticket sales records and single ticket sales records for one production. The records were reviewed for accuracy and proper recordkeeping procedures. The following exceptions were noted. Season Tickets 1. When season tickets are sold, the sales are recorded on a log. We noted the sales are not being reconciled to the ticket revenue that was collected and deposited from this activity. The department s ticket reconciliation procedures state that deposits will be randomly selected and reconciled to the sales log and that the total number of season tickets sold will be obtained from the sales logs and reconciled to the total tickets printed and the inventory of unsold tickets. We noted these procedures are not being performed. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 2 of 21

3 We recommend the department s ticket reconciliation procedures be followed. To improve this process, we recommend the receipt number from each deposit be recorded on the sales log. Receipt numbers will now be recorded on the sales log in order to facilitate the reconciliation of these transactions. Beginning with CY12, the department has explored and intends to transition to an on-line ticketing system provided by an outside vendor which will reconcile the sales of all tickets. The online ticketing procedure is complete using an outside vendor. No significant issues were identified during the transition period. 2. Of 251 season ticket sale transactions reviewed, we noted the incorrect price was charged for 32. We recommend greater care be taken to ensure the correct fees are charged for season tickets. Ticket sale transactions will cross-verified at the end of a sale and the correct amount will be charged to the purchaser. Beginning with CY12, the department has explored and intends to transition to an on-line ticketing system provided by an outside vendor which will reconcile the sales of all tickets. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 3 of 21

4 The online ticketing procedure is complete using an outside vendor. No significant issues were identified during the transition period. Single Performance Tickets 1. When single performance tickets are sold at the WNC Box Office, the sales are recorded on a log. We noted the sales are not being reconciled to the ticket revenue that was collected and deposited from this activity. The department s ticket reconciliation procedures state deposits will be randomly selected and reconciled to the sales log. We recommend the department s ticket reconciliation procedures be followed. To improve this process, we recommend the receipt number from each deposit be recorded on the sales log. We recommend the log include columns for various charges that are occasionally assessed on single performance tickets such as mail fees, reserved seating, and sales to performing arts students. The department s ticket reconciliation procedures will be followed and the sales log will be edited to include additional columns for other funds paid related to ticket sales. Beginning with CY12, the department has explored and intends to transition to an on-line ticketing system provided by an outside vendor which will be reconcile the sales of all tickets. The online ticketing procedure is complete using an outside vendor. In conjunction with the WNC Controller s office, a reconciliation process was implemented for the new online system. 2. Single performance tickets are provided to the Controller s Office, cast members, businesses, and individuals in the community to assist with ticket sales. The number of (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 4 of 21

5 tickets that is allocated to each of these groups and the number of unsold tickets returned is not documented by the department on the sales logs. As a result, the amount of ticket revenue that is earned from these sales cannot be verified. The department s ticket reconciliation procedures state that a record of tickets allocated to cast members will be maintained by the department. In addition, cast members are required to submit a signed summary of ticket sales activity including the number of tickets that were sold, the amount they were sold for, number of unsold tickets, and amount of receipts. The procedures also state that cast member sales documentation will be periodically verified to the deposits. We recommend the department s ticket reconciliation procedures be followed so that revenue received from allocated ticket sales is accounted for properly. We also recommend the department s ticket reconciliation procedures, in regards to cast sales, be revised to include all groups and individuals that are allocated tickets. The department s reconciliation procedures will be followed in order to accurately record revenue from tickets allocated to cast members. Beginning with CY12, the department has explored and intends to transition to an on-line ticketing system provided by an outside vendor which will reconcile the sales of all tickets. This change will eliminate sales by cast members, and the software includes a notes area which enables purchasers to give credit to the cast member who prompted them to buy tickets. The online ticketing procedure is complete using an outside vendor eliminating this issue. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 5 of 21

6 3. The ticket sales logs that are used by the Controller s Office, cast members, businesses, and individuals all vary in format and do not include a space to document charges for reserved seating and multi-passes. We recommend one log be created that could be used by all entities and individuals to which tickets are distributed for sale. We also recommend the log include columns to record reserved seating and multi-pass charges. The department s log will be edited to include the additional data. Beginning with CY12, the department has explored and intends to transition to an on-line ticketing system provided by an outside vendor which will reconcile the sales of all tickets, thus eliminating this issue. The online ticketing procedure is complete using an outside vendor. In conjunction with the WNC Controller s office, a reconciliation process was implemented for the new online system. 4. A log is used to record ticket sales at the Carson City Community Center Box Office in accordance with department procedures. The log consists of the number of each type of ticket sold, such as general admission, student, senior, and youth. In reviewing the log, we noted it was incomplete and did not contain an accurate count of the number of tickets of each type that were sold. We were informed that it is difficult to maintain the log and sell tickets at the same time. We recommend the department institute a method that will properly account for ticket sales at the Community Center Box Office. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 6 of 21

7 General The department s reconciliation procedures will be followed in order to accurately record revenue from tickets sold at the Community Center box office. Beginning with CY12, the department has explored and intends to transition to an on-line ticketing system provided by an outside vendor which will reconcile the sales of all tickets. Consistent with the new system, a new thermal printer for use at the Community Center box office will interact with the on-line software and record all sales as they are processed. The online ticketing procedure is complete using an outside vendor including the on-site sale of tickets at the Community Center box office. 1. The department s current ticket reconciliation procedures require ticket sales to be reconciled to deposits on a random basis. A procedure does not exist for reconciling each season s ticket sales and single performance ticket sales for each production to the total deposits and unsold tickets. We recommend the departmental policies be updated to include procedures for conducting end of season and end of production reconciliations in which all season and single tickets sales activity recorded on the sales logs is reconciled to the total ticket deposits and the remaining inventory of unsold tickets. Any significant variances should be researched and documented. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 7 of 21

8 The department s reconciliation procedures will be followed in order to accurately record revenue from end of season and end of production sales. This will ensure the accurate and timely reconciliation of deposits and remaining ticket inventory. Beginning with CY12, the department has explored and intends to transition to contract with an on-line ticketing system provided by an outside vendor which will reconcile the sales of all tickets. The online ticketing procedure is complete using an outside vendor. In conjunction with the WNC Controller s office, a reconciliation process was implemented for the new online system. COMPLIMENTARY TICKETS Complimentary tickets are printed for each production. We noted the department does not keep any records of the persons or entities to which the tickets were distributed. be maintained. For improved accountability, we recommend a record of complimentary ticket recipients The department s reconciliation procedures will be followed in order to accurately record the issuing of complimentary tickets. Beginning with CY12, the department has explored and intends to transition to an on-line ticketing system provided by an outside vendor which will reconcile the sales of all tickets. This will include the ability to record the issuance of complementary tickets. The online ticketing procedure is complete using an outside vendor. This new process eliminated this issue. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 8 of 21

9 PROPERTY RENTALS As previously mentioned, costumes and backdrops owned by the college are rented by the Theater Department to outside organizations. We reviewed five such rental transactions and noted that a rental agreement was not completed for two. We recommend greater care be taken to ensure a property rental agreement is completed for each rental transaction and that the appropriate evidence of liability insurance is obtained. During the time period of this audit, the department revised its process related to the rental of property and equipment. Consistent with college policy, rental agreements are completed for all such rentals. The Administrative vice president s office now monitors the application of the college contract policy to this functional area. No additional follow up is needed. GIFT SHOP AND CONCESSION SALES The department operates a gift shop and concession during performances at the Community Center. Department policies require a current inventory of all gift shop items to be maintained. During each performance, employees are to keep track of items sold and then reconcile the sales to the beginning and ending gift shop inventory. We noted a current gift shop inventory was not available. We also noted that a reconciliation was not being performed, as described above. We recommend the department comply with its gift shop policy. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 9 of 21

10 The department s office manager will inventory the gift shop inventory after each production and reconcile and discrepancies identified. The department will maintain a current inventory for the gift shop and report any discrepancies to the area s responsible division chair and the vice president for academic and student affairs. No additional follow up is needed. We noted that the purchase of concession and gift shop items were charged to a Theater Department account within the college s financial accounting system. However, revenue from sales was deposited at the WNC Foundation Office. We recommend the sales revenue be posted to the same account in which the expenditures were charged. The department s procedures and practices are amended to require that purchases and revenue are posted to the appropriate non-state account. The department implemented a revised process which will be monitors by the college s controller s office. No further follow up is needed. We also noted the money that is earned from gift shop and concession sales during weekend performances is being stored at an employee's home until the following Monday when (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 10 of 21

11 it is brought to campus. According to departmental policy, the night drops that are made after every performance should include money from gift shop and concession sales. We recommend the department comply with this policy., The department has developed a procedure to have the college s Public Safety staff pick up a deposit at the end of each performance and deposit it in the WNC Business office safe. The deposit will be completed by the Musical Theater staff on the next business day. This process was successfully implemented for the last production of the CY11 season. STUDENT TIMESHEETS We reviewed the timesheets of two students, who worked in the Theater Department during the audit period, for proper completion and compliance with student employment policies. The following exceptions were noted. 1. Timesheets were not available for one of the student employees. We were informed the student does not complete timesheets and that work hours are verbally communicated to the student s supervisor. For the other student, timesheets could not be located for two pay periods reviewed. We recommend timesheets be completed by all student employees for each pay period. Institutional Response The Financial Assistance office and Student Employment agree with the recommendation., The Student Employment Coordinator will meet with the Theater Department to review the Student Employment Handbook sections regarding record keeping, timesheets, and payroll procedures. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 11 of 21

12 Student Employee Handbook pages 13-14: Record Keeping, Timesheets, and Audits Departmental Records Federal regulations require that actual hours and days worked by students should be documented and signed by the supervisor and the student. Student Timesheets Both a paper timesheet and an Excel electronic timesheet are available; the supervisor should determine which type of timesheet they would like their student employee to use. Paper timesheets are available in the financial assistance office or online at If departments are interested in using the Excel electronic timesheet, contact the student employment coordinator. The following guidelines should be followed when filling out a timesheet: All sections of the timesheet must be completed All hours worked must be reported Hours worked should be reported to the nearest quarter hour Hours should be kept on a daily basis Any deletions or alterations to the form should be initialed or noted by the student and the supervisor If a student works during class hours, the reason must be noted Paper Student Timesheets must be signed by the student and the supervisor. The timesheets should be stored in a student specific file. Supervisors should be able to produce timesheets at the request of an audit. Excel Student Timesheets must be ed by the student to the supervisor. The will serve as the student s signature. The supervisor must initial the timesheet in the space provided that it has been review and is accurate. The supervisor must store in shared drive (i.e. a drive that other individuals can access if the student employee supervisor leaves the department). The timesheet should be saved using the student s last name and the pay date (e.g. if the pay date is January 25, 2010 save as student last name ). Supervisors should be able to produce timesheets at the request of an audit. 2. Two timesheets were not signed by a supervisor. 3. On one occasion, a student worked in excess of eight hours in a day but was not paid overtime. 4. On two occasions, a student worked more than six hours in a day without taking an unpaid 30 minute lunch break. 5. On one occasion, a student worked in excess of 20 hours in a work week. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 12 of 21

13 For items two through five above, we recommend the department comply with student employment policies. We also recommend the student noted in item three above be compensated for the overtime. Institutional Response to 2, 4 and 5 We agree with these recommendations. The Financial Assistance Office and Student Employment agree that all departments must comply with policies outlined in the Student Employment Handbook., Updated versions of the Student Employment Handbook will be ed to the entire campus. Additionally, supervisors and students are provided with pertinent information regarding working hours and recording of breaks on the student timesheet. Institutional Response to 3, Theater Department s Response The student offered to work on a theatre project from home where she had a sewing machine and more space. We were not able to monitor her hours. The project was poorly done, and it is highly suspect that she actually worked the hours she claimed. The student did take her required breaks when she worked in the office. The time sheet was not reviewed due to the peak work load in the office during performances. In future, the supervisor will more closely monitor the students, and be sure to review timesheets for accuracy. Financial Aid Office and Student Employment Response The Financial Assistance Office and Student Employment agree that students should be paid for all hours work. The FAO will also review with the Theater Department personnel the policies related to student work hours, completing and reviewing timesheets, and supervision. All audit issues are resolved and procedures are in place to prevent a reoccurrence. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 13 of 21

14 NON-CREDIT REGISTRATION The department offers non-credit courses that are not recorded in the college s student registration system. Records of students enrolled in these courses are maintained by the Theater Department. In reviewing the student roster for one of these courses, we noted the roster did not agree with the registration forms on file for the course. We recommend greater care be taken to ensure the department s enrollment records for non-credit courses are accurate. The roster and enrollment records were audited, and the missing enrollment was added to the roster. At the end of each production, reconciliation will be completed to ensure that roster accuracy is verified. Reconciliations are completed at the end of each non-credit course to ensure accuracy. EXPENDITURES A sample of 19 departmental expenditures was tested for proper approval, supporting documentation, reasonableness, and compliance with established purchasing procedures. Of the 19 transactions tested, no exceptions were noted with 17. We noted one purchasing card transaction for which adequate supporting documentation was not present. Only a credit card receipt was present that provided no detail of the purchase. For another transaction, the invoice was higher than a quote obtained from the vendor. We were (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 14 of 21

15 informed the quote contained pricing errors; however, a corrected quote was not requested by the department. We recommend greater care be taken to ensure expenditure documentation is accurate and provides a description of the goods or services that were purchased., The college s credit card purchasing policy was reviewed with department personnel with emphasis on the need for adequate supporting documentation. Business office personnel will double check the documentation provided. No additional follow up is needed. SENSITIVE EQUIPMENT During a review of the Theater Department s sensitive equipment inventory, a computer was observed that was not included on the department s sensitive equipment list and did not contain an inventory control tag. We recommend the computer be included on the sensitive equipment list and that an inventory tag be obtained from the Controller s Office and affixed to this item., Consistent with college policy, the computer has been inventoried and tagged. No additional follow up is needed. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 15 of 21

16 POLICIES AND PROCEDURES MANUAL The Theater Department has developed a policies and procedures manual that provides guidance for departmental operations. We noted the manual contains policies and/or procedures that are no longer in effect or have been changed. We also noted the manual does not include a policy for returned checks. We recommend the department s policies and procedures manual be updated to address the issues noted above. The department s policies and procedures manual is amended to reflect current practices. On a need basis, and at least once annually, the manual will be reviewed for currency. No additional follow up is needed. LEAVE RECORDS The leave records of one professional and one classified employee were reviewed for completeness and proper record keeping procedures. During this review, three occasions were noted in which sick leave request forms were not submitted in a timely manner. We recommend sick leave request forms be submitted and approved within two days after returning to work. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 16 of 21

17 , WNC s Leave Request Form provides that, This form must be completed in advance except in the case of unforeseen illness, in which case the leave request must be completed and transmitted within a reasonable period of time upon return to work. WNC HR will instruct supervisors to require that sick leave request forms be completed promptly upon the employee s return to work. Instruction was completed and employee(s) will submit leave forms in a timely manner. ADMINISTRATIVE SECURITY The Internal Audit Department reviewed the access that has been provided to Theater Department employees to the institution s mainframe applications. We noted one employee has access to Advantage that is not needed for the employee s job duties. OTHER We recommend the employee s access be removed., The employee s access to the applications identified is terminated. No additional follow up is needed. The following items were noted during this review; however, they are not the responsibility of the Theater Department. LEAVE RECORDS During a review of departmental leave records, two occasions were noted in which an employee s leave accrual was calculated incorrectly. As a result, the employee s ending sick and annual leave balances are not accurate. We also noted the employee took seven days of sick (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 17 of 21

18 leave which was designated as qualifying under the Family Medical Leave Act (FMLA). The college s FMLA form, which documents the circumstances of the leave and is approved by an appointing authority, was not completed. We recommend the necessary correction be made to the employee s leave record. We also recommend the Human Resources Department only designate FMLA if the employee has completed an FMLA form and the appointing authority has approved the leave. The employee s leave record has been corrected. When an employee is unexpectedly absent due to illness for longer than three days, WNC Human Resources mails the employee the FMLA notice and form, which the employee may or may not return. Human Resources may provisionally designates the leave as FMLA leave based on anecdotal evidence provided by the employee or the employee s family. Similarly, as the Leave Request Form indicates, An employer has the right to designate leave as FMLA for a qualifying event, even if the employee does not officially request FMLA. In most instances, and particularly in the case of lengthy absences, WNC Human Resources will only designate sick leave as FMLA leave if the employee has completed an FMLA form and the appointing authority has approved the leave. There may be situations where it is appropriate to designate sick leave as FMLA leave for a qualifying event, even if the employee does not officially request FMLA by completing the form. In that event, Human Resources will document why the leave is a qualifying FMLA event in the leave file. No additional follow up is needed. SELF SUPPORTING BUDGETS Board of Regents policy requires all self-supporting budgets that are projected to exceed $25,000 in expenditure activity to be included in the annual budget process. During the and fiscal years, one of the department s self-supporting budgets met the above threshold and was submitted to the System Administration Office. We noted, however, that the (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 18 of 21

19 expenditure budgets for the fiscal year and the revenue budgets for the and fiscal years were not recorded in WNC s financial accounting system. We recommend all self-supporting budgets in excess of $25,000 be included in the financial accounting system. We agree with this recommendation All self-supporting budgets in excess of $25,000 have been entered into the financial accounting system and are reviewed quarterly for budget variances in excess of the NSHE mandated reporting thresholds. Quarterly Advantage Focus reports run and any budget variances that meet the reporting thresholds are flagged and included in the quarterly NSHE reports. Budget forms are required for all self-supporting activities and those budgets over the $25,000 threshold are reviewed by the fiscal director and entered into the budget system for monitoring and tracking. No additional follow-up is needed. PRIOR AUDIT The prior audit of the Theater Department was conducted for the period of July 1, 1999 through March 31, During the audit, it was noted that ticket sales were not being reconciled to deposits and the remaining ticket inventory, that ticket sales documentation did not always reflect the total amount of tickets that were sold, that receipts collected from weekend performances were taken home by a Theater Department employee and were not deposited until the following Monday, that a reconciliation of gift shop sales was not being performed, and that budget information for one self-supporting account was not input into the financial accounting system. Similar items were noted in the current audit. (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 19 of 21

20 STATEMENT OF REVENUES AND EXPENDITURES The statement of revenues and expenditures provided below is based on the activity within the Theater Department s three self-supporting accounts. The revenue and expenditure information was obtained from the financial accounting system. The statement is provided for informational purposes only. Self Supporting Total Balance, July 1, 2009 $ 151,965 $ 151,965 Transfers In Revenues Tuition & Fees Unrestricted 1,252 1,252 Sales Educational Activities 1,907 1,907 Sales Auxiliary 148, ,996 Total 152, ,155 Expenditures Salaries 38,663 38,663 Travel Operations 114, ,335 Sensitive Equipment Scholarships 5,685 5,685 Total 159, ,928 Balance June 30, 2010 $ 144,282 $ 144,282 Balance July 1, 2010 $ 144,282 $ 144,282 Revenues Tuition & Fees Unrestricted Private Grants & Contracts Unrestricted Sales Educational Activities Sales Auxiliary 80,797 80,797 Total 81,397 81,397 Expenditures Salaries 26,632 26,632 Travel 1,537 1,537 Operations 47,921 47,921 Scholarships 2,767 2,767 Total 78,857 78,857 Balance January 31, 2011 $ 146,822 $ 146,822 (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 20 of 21

21 The Internal Audit Department appreciates the cooperation and assistance received from the Theater Department staff. Reno, Nevada May 23, 2011 Mary Stoltz Senior Internal Auditor Eric Wilber Internal Auditor II Scott Anderson Internal Audit Manager Sandra K. Cardinal Assistant Vice Chancellor for Internal Audit and Risk Management (AUDIT COMMITTEE 03/01/12) Ref. A-2e, Page 21 of 21