We encourage you to read the entire report so that you may have a complete understanding of the subject and results of the audit.

Transcription

1 Office of Internal Audit Business Process/Turnover Audit Pulley Center May 2015 EXECUTIVE SUMMARY We performed a business process/turnover audit at Pulley Center, pursuant to the approved 2015 Internal Audit Work Plan. The audit covered procurement, reconciliation, revenues, and time and attendance. The audit included a review of appropriated and local school activity funds (LSAF) transactions related to procurement cards, FOCUS marketplace, purchase orders, non-purchase order payments, receipting, biweekly payroll, monthly payroll, and reconciliations for all accounts (bank, procurement cards, and FOCUS). We found that the school had effective procedures and internal controls in place for handling these procedures and had adequate evidence of compliance with applicable guidance and regulations. Transactions were reasonable and did not appear to be fraudulent. However, improvements in the documentation supporting disbursements and time and attendance data should be made. We encourage you to read the entire report so that you may have a complete understanding of the subject and results of the audit. BACKGROUND All departments and schools are responsible for business processes that support their core mission. These processes include procuring goods and services needed to meet their objectives, processing cash receipts, and processing time sheets and leave requests for employees. For departments, most of these processes are limited to appropriated fund transactions. However, in a school, there are both appropriated fund transactions and local school activity fund transactions. Business process audits will be conducted as part of the annual audit plan. In addition, the business process audit will be used to conduct turnover audits in schools where there is a change in personnel with finance related duties. There are numerous FCPS regulations and guidelines which address the business processes in a school. These regulations include, but are not limited to: Regulation 5810 School Activity Funds Management Regulation 5350 Procurement Card Management Regulation 5620 Time and Attendance Administration Procedures Regulation 5012 Purchasing Goods and Services Using Appropriated and Nonappropriated Funds Page 1 of 6

2 SCOPE AND OBJECTIVES This audit was performed due to a change in personnel at the school, pursuant to the approved 2015 Internal Audit Work Plan. The audit covered the period from July 1, 2014 through January 31, 2015, and was conducted in accordance with generally accepted government auditing standards, except for peer review. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Our audit objectives were to: Evaluate the effectiveness of office processes and compliance with applicable regulations and policies Perform audit tests to determine if internal controls are adequate and functioning as intended Determine if transactions are reasonable and do not appear to be fraudulent The audit population included transactions from procurement cards, FOCUS, Lawson, Great Plains, and financial reconciliations. For the period under review, tests were performed on monthly and bi-weekly payroll, procurement card transactions, FOCUS transactions, LSAF disbursements, LSAF procurement card transactions and LSAF receipts. Other areas may have been tested, as deemed appropriate. All transactions were reviewed and a sample was selected for detailed testing, as shown below: Area Tested Total Value of Population Number of Transactions Tested Total Value of Transactions Tested Percentage of Population's Value Tested Appropriated Fund Procurement Card $6, $6, % AAF Disbursements $ $ % LSAF Disbursements $7, $1, % LSAF Receipts $16, $16, % LSAF Procurement Card $ $ % Totals $31, $23, % In addition to the detailed testing outlined above, two FOCUS reconciliations, one monthly payroll, and one bi-weekly payroll were tested. Page 2 of 6

3 METHODOLOGY Audit methodology included a review of the school s business process procedures with an analysis of related internal controls. Our audit approach included an examination of expenditures, records, and statements; monthly reconciliations; interviews with appropriate employees; and a review of applicable regulations, guidelines, and internal procedures. We evaluated the processes for compliance with FCPS regulations and best practices guidance. Information was extracted from Payment Net, Great Plains, and FOCUS for sampling and verification to source documentation during the audit; however, our audit did not include an independent review of system controls. Our transaction testing did not rely on system controls; therefore, this was not a scope limitation. The FCPS Office of Internal Audit is free from organizational impairments to independence in our reporting as defined by government auditing standards. The office reports directly to the School Board Audit Committee. We report the results of our audits to the Audit Committee and the reports are made available to the public via the FCPS website. AUDIT RESULTS, RECOMMENDATIONS, AND MANAGEMENT S RESPONSE Time and Attendance Procedures 1. Employee time was not properly recorded and/or documented Time and attendance data should be properly documented by utilizing the correct time sheet/leave form and the data should mirror data in Lawson for accuracy. A detailed review of source documents to the entered data should be performed and corrections made to ensure the accuracy and integrity of the final payroll record. Time sheet/leave request forms were not properly completed and the information posted to the Lawson system did not agree with forms submitted as follows: Substitute reason codes listed on the Time Reports for Bi-Weekly employees were not indicated for 13 out of 13 employees One Time Report for a Substitute Bi-Weekly employee did not tie to the leave for the staff member on leave Forms were not properly approved for one employee Regulation 5620 Time and Attendance Administrative Procedures states, All time sheets, time reports, requests for shift differential, overtime, and correction memorandums shall be reviewed and signed by the principal or program manager, or his or her designee.at the end of each pay period (biweekly and monthly), personnel reporting time and attendance shall execute the time record reporting program. The report produced by this program, Time Records for TRS (T-2200), is used to verify the accuracy of time and attendance reported and is to be retained for audit review at the work locations. Proper preparation, approval, review, and reconciliation of employee time sheets and leave requests is critical to ensure time and attendance is reported accurately to reduce the risk of improper payments or loss of leave. Page 3 of 6

4 Management Response: Substitute reason codes will be indicated. This had not been done in the past. Is currently being done. Time reports will tie to the leave of staff member on leave. Forms will be properly approved for all employees. Appropriated Fund Transactions 2. Appropriated procurement card transactions All expenditures should be supported by a properly completed, preapproved purchase order, an original itemized receipt, and confirmation that goods or services were received prior to payment. Purchase orders were not properly completed for three disbursements totaling $2, Regulation 5350 Procurement Card Management states, All transactions shall be supported by documentation including original receipts that clearly indicate the justification and authorization for each purchase. Management Response: All disbursements will be properly preapproved. All disbursements will be supported by a properly completed purchase order. 3. Procurement card log All transactions should be recorded on the procurement card log, as they occur, to accurately reflect all transactions. The procurement card log was not properly completed for 2 of 20 transactions totaling $ Regulation 5350 Procurement Card Management states, The card custodian shall ensure that all procurement card transactions are recorded on the Procurement Card Log. The regulation further states, The reconciler shall ensure all transactions on the statement are reconciled to the procurement card log and properly posted in the financial system. The log provides an initial record of charges and credits, as well as card users, serving as a control reference for transaction activity. The log reduces the risk of unauthorized purchases and incorrect use of funds. The log should indicate the card number, the date the card was issued, vendor, item purchased, amount, card user, signature of user, the date the card was returned, and the date of the transaction. Without this information, it may be difficult to detect unintended charges. Management Response: The procurement card log will be properly completed for all transactions. The two entries were missing the amount charged. These were mistakes and not general practice. Page 4 of 6

5 4. Incorrect account usage A journal entry should be posted to move the expenditures to the appropriate commitment item to ensure proper expenditure classification. Purchases totaling $ were made using the instructional supplies procurement card, but the expenditures were not properly reclassified: One disbursement to Apple for $38.00 for purchase of USB cables for an ipad One disbursement to Best Buy for $ for a USB adapter, USB cable, and ipad One disbursement to Best Buy for $ for a wireless keyboard and widescreen monitor for principal s office According to the FOCUS Commitment Item Guide the instructional supplies category should include expenditures for instructional enhancement supplies at the school base level and classroom office supplies. The other equipment non-capitalized category includes furniture charges as an example of what should be included in this category. Management Response: A journal entry will be posted to move expenditures to the appropriate commitment item to ensure proper expenditure classification. 5. Improper Use of Vendor or Funds ipads should be purchased using the FCPS established procurement method or contract. An ipad purchased from Best Buy for $499.99, should have been purchased using the FCPS established procurement method or contract. Regulation 5021 Computer Hardware Standardization and Acquisition states, In partnership with other departments, schools, and offices, the Department of Information Technology (IT) and the Office of Procurement Services (OPS) are responsible for the standardization and acquisition of all computer hardware in the school system. IT is also responsible for maintaining the associated technology infrastructure and providing generally accepted levels of service. Therefore, it is imperative to have standardization of technology for purposes of supportability of computer hardware in the school system. Management Response: Principal did not have access to approve shopping carts in FOCUS. The principal of West Potomac could not approve shopping carts for two schools. It was a special circumstance and will not be an issue in the future. If possible, please remove from report. Audit Note: The purchase could not have been made with an FCPS procurement card or with the assistance of a buyer. While the cost of the ipad on contract would have been the same, the warranty and maintenance of the product is impacted when the purchase is made off contract. Page 5 of 6

6 Local School Activity Fund (LSAF) Transactions 6. Disbursements All expenditures should be supported by a properly completed, approved purchase order, an original itemized receipt, and confirmation that goods or services were received prior to payment. Appropriate documentation was not on file for 16 of the 21 expenditures tested, totaling $ The 16 stipend list reports were signed, but not dated, so preapproval could not be determined. Regulation 5810 School Activity Funds Management states, All purchases of goods or services made from school activity accounts, including advanced appropriated funds, shall be supported by the prior submission of an approved school purchase order. Management Response: The principal was signing, but not dating stipend list reports. This practice was corrected mid-year. 7. Voided checks Voided checks shall be clearly annotated as void and retained in the voided check file. Three voided checks retained on file were mutilated but not properly annotated as void. Regulation 5810 School Activity Funds Management states, Voided checks shall be clearly annotated as void and retained in the voided check file. If the check has been signed, the signature should be mutilated or otherwise rendered unacceptable. Mutilating the signature ensures the voided check cannot be negotiated. Management Response: She now annotates voided checks as void. Page 6 of 6