How to Avoid Pitfalls in Student Activity Accounting

PASBO 2015 Conference How to Avoid Pitfalls in Student Activity Accounting PASBO Conference March 12, 2015 Agenda and Purpose Review common pitfalls in student activity accounts Auditor perspective on internal controls Business Manager perspective on targeted, practical review procedures Sample forms/reports How to Avoid Pitfalls in Student Activities Accounting 1

PASBO 2015 Conference Common Pitfalls #1 - Deposits #2 - Ticket Receipts #3 - Expenses Example 1-Theft of Receipts Situations: In a Texas School District, a high school bookkeeper was accused of stealing more than $68,000 in student activity funds. The bookkeeper was responsible for collecting, accounting for, and depositing all cash and checks received for club and activity fees. In a Connecticut School District, an accounting clerk was charged with embezzling $114,000 collected for the prom, yearbooks, and a senior class trip. The clerk handled the student activity accounts and was responsible for submitting bank deposits. How to Avoid Pitfalls in Student Activities Accounting 2

PASBO 2015 Conference Example 1-Theft of Receipts What went wrong?: 1) No segregation of duties. 1) No oversight by management Example 1-Theft of Receipts Auditor Recommendations: 1) Anyone who handles money should maintain accurate and systematic records of all cash receipts. All amounts collected should be logged. Supporting documentation for all receipts should be maintained and attached to the log. 2) The log should allow for identification of the account number and activity name, and a description of exactly what the payments were for. 3) The log list every person from whom money was collected, and the amount collected from each individual. 4) The log should be signed by the sponsor collecting the money, the bookkeeper/secretary to whom the deposit is given, and the individual making the bank deposit. Each person should keep a copy of the log for their files How to Avoid Pitfalls in Student Activities Accounting 3

PASBO 2015 Conference Example 1-Theft of Receipts Recommendation #1 - Example Deposit Form Example 1-Theft of Receipts Auditor Recommendations: 2) Management should oversee the student activity funds. a) Activities tend to be cyclical. A monthly review of revenues and expenses, by activity fund, comparing the current year to the prior year may indicate unusual fluctuations. b) Randomly selecting a few days each month and reviewing the deposit logs and bank deposits helps to ensure procedures are being followed. c) Making inquiries of teachers/activity sponsors regarding certain deposits or activities, however random, makes it known that there is someone else actively examining transactions and activities. d) Review the bank statements and reconciliations How to Avoid Pitfalls in Student Activities Accounting 4

PASBO 2015 Conference District Recommendations Select random sample of deposits each month 3-10 per month Focus on one school or all schools Request documentation that supports deposit Check for proper signatures Review timeliness of deposit, cash handling Example 2-Theft of Ticket Receipts Situations: In Washington DC, $3,200 in football gate receipts were found during an audit, a year later, under an employee s desk. In Oregon, an employee was caught stealing cash from ticket money for a high school basketball game. Tickets were not numbered and the attendant worked alone. In New Jersey, a university production manager for the school theater department was found guilty of embezzling $87,000 from box office receipts. The individual was responsible for the receipts and deposit of funds. How to Avoid Pitfalls in Student Activities Accounting 5

PASBO 2015 Conference Example 2-Theft of Ticket Receipts What went wrong?: 1) Lack of a segregation of duties. 1) Lack of procedures to account for admission fees charged for event 1) Lack of oversight by management Example 2-Theft of Ticket Receipts Auditor Recommendations: 1) All admission fees for athletic events/ticketed events should be accounted for. Fees should be controlled through the use of sequential, prenumbered tickets for each event, with different colors and number series used for each different price group. 2) Ticket rolls should be secured and tracked 3) When funds are collected by a ticket seller, the event supervisor should then complete a receipt log, reconciling the pre-numbered tickets sold for each price group and the ticket price to arrive at the total collections. Unsold tickets should be reconciled to the log as well. How to Avoid Pitfalls in Student Activities Accounting 6

PASBO 2015 Conference Example 2-Theft of Ticket Receipts Auditor Recommendations (continued): 4) The receipt log should be signed by the ticket seller and event sponsor, with both indicating all ticket receipts are accounted for based on the log and ticket numbers. These deposits should then be given to a secretary/bookkeeper who records the deposit on the books and deposits the funds. 5) Management should oversee the activity funds a) Activities tend to be cyclical. A monthly review of revenues and expenses, by activity, comparing the current year to the prior year may indicate unusual fluctuations. b) Review the bank statements and reconciliations. Ensure deposits are being made when expected Example 2-Theft of Ticket Receipts Auditor Recommendations (continued): 6) Reports should be completed in duplicate. The coach or event sponsor managing the event should maintain one copy. Once copy should kept by the schools bookkeeper or secretary. A final copy should be sent to the business office. How to Avoid Pitfalls in Student Activities Accounting 7

PASBO 2015 Conference Example 2-Theft of Ticket Receipts Sample form - Gate Ticket Sales Report A gate ticket sales report should initially summarize the event, the gate name or number, the ticket sellers name, and the cash initially provided to the ticket seller for change. The ticket seller should sign the form to acknowledge these items are accurate. Example 2-Theft of Ticket Receipts Sample form - Gate Ticket Sales Report The report should reconcile total sales based on tickets issued, remaining, and price. This should be done for each different price group offered. How to Avoid Pitfalls in Student Activities Accounting 8

PASBO 2015 Conference Example 2-Theft of Ticket Receipts Sample form - Gate Ticket Sales Report The report should then add up total sales for any different price groups. This is added to initial gate funds to arrive at total expected cash on hand. Actual cash is reconciled to the expectation. All parties sign to acknowledge results. Example 2-Theft of Ticket Receipts Deposit Reconciliation A final report should be completed summarizing the results for the individual gates, if necessary. This report should reconcile to the total bank deposit. How to Avoid Pitfalls in Student Activities Accounting 9

PASBO 2015 Conference District Recommendations Hire a ticket seller AND ticket taker Purchase standard tickets (and destroy others) Gate receipts deposited the same night o o Obtain locking deposit bags from bank Night drop access Game reports turned in to Business Office next day Example 3 - Inappropriate Spending Situations: In California, student funds were used to fund a staff appreciation breakfast, repair a district golf cart, purchase teacher lunches, and for tile construction to prevent skateboarding. Lack of oversight and recordkeeping was blamed. In Illinois, a principal used activity funds to purchase high-end neckties, banquet and theater tickets for personal use, and other expenditures. In Washington DC, a principal spent thousands of dollars buying lobster, veal, a Palm Pilot and DVDs. In another instance, approx. $70,000 was raised for a chess club trip. After the trip $50-60,000 remained. Over the next 5 months, about $48,000 of these funds were withdrawn at bank windows and ATMs. Chaotic management, ineffective oversight, and lack of accountability were blamed How to Avoid Pitfalls in Student Activities Accounting 10

PASBO 2015 Conference Example 3 - Inappropriate Spending What went wrong?: 1) Lack of controls 1) No segregation of duties 1) No oversight by management 1) No one is held accountable Example 3 - Inappropriate Spending Auditor Recommendations: 1) Expenditures from school activity funds should be pre-approved by a designee appointed by the club/team, and the school principal. 2) A standard form or purchase order should be used to document the goods or services being purchased and amount to be spent, or indicate an amount that should not be exceeded. Form should also indicate the activity funds account to be used. 3) All disbursements should be made using pre-numbered checks after receipt of detailed invoices or other supporting documentation showing goods or services were received. 4) The secretary/bookkeeper should immediately post the the disbursement of funds to the accounting system 5) Petty cash use should be minimal and restricted to emergencies. How to Avoid Pitfalls in Student Activities Accounting 11

PASBO 2015 Conference Example 3 - Inappropriate Spending Auditor Recommendations: 6) Blank checks and ATM cards should be secured. If possible, the authorized check signer/atm card user should not have uncontrolled access 7) Bank reconciliations should be completed on a timely basis by the secretary/bookkeeper. They should then be reviewed by the principal. A copy of the bank reconciliation and statement should then be forwarded to the business office. 8) For each school activity account, the secretary/bookkeeper should provide a reconciliation of monthly activity to the activity designee/sponsor and to the school principal. The designee/sponsor should reconcile this report to their copies of receipt and disbursement documents. 9) A policy should exist outlining the outcomes and disciplinary action to be taken should procedures not be followed. Example 3 - Inappropriate Spending Sample Disbursement Form - to be completed before goods or services are received How to Avoid Pitfalls in Student Activities Accounting 12

PASBO 2015 Conference District Recommendations Conduct similar spot checking procedures as for receipts Select random sample of payments o o o Review checks cashed on bank statement Focus on teacher/employee reimbursements Obtain back-up documentation Student officer signatures? Sufficient supporting evidence (e.g., receipts)? Appropriateness of purchase? Other Audit Procedures Yearbook sales o o o Completeness test - online vs. school sales Allow for cash sales? Monthly account reconciliation How to Avoid Pitfalls in Student Activities Accounting 13

PASBO 2015 Conference Other Audit Procedures Cash boxes (e.g., athletics) o o o Surprise money counts Compare year-to-year receipts by sport Query AD about attendance trends Team performance Day and time of games Weather Final Thoughts During our research into real life examples and from actual experience, theft of activity funds most often happens when one person has a large amount of control over the process, with no supervision. Creating a process that involves 2 or 3 individuals, with each person signing off on receipts or disbursements, will greatly reduce the risk of misappropriation or theft. A written procedure that everyone in every activity has to follow will reduce confusion and allow for easier corrective action should the procedures not be followed. How to Avoid Pitfalls in Student Activities Accounting 14

PASBO 2015 Conference Final Thoughts Management, either the school principal or, more preferably, the business office, should be reviewing activity on no less than a monthly basis. That this review is conducted should be communicated to everyone involved in the process. Any questionable activity should be reported and investigated immediately. If they know you check, they may not misbehave Contact Info Chris Herr, CPA Manager Maillie LLP PO Box 680 Oaks, PA 19456 610-935-1420 cherr@maillie.com Bill Stone Director of Business Affairs Souderton Area School District 215-723-6061 wstone@soudertonsd.org How to Avoid Pitfalls in Student Activities Accounting 15

STUDENT ACTIVITY FUND DISBURSEMENT REQUEST PRIOR APPROVAL ACCOUNT # DISBURSEMENT NOT TO EXCEED $ ACTIVITY NAME PAYMENT TO BE ISSUED TO: NAME ADDRESS DETAILED EXPLANATION OF PURCHASE AND PURPOSE: DESIGNEE/SPONSOR SIGNATURE: PRINCIPAL SIGNATURE: DATE: DATE: FOR SECRETARY/BOOKKEEPER USE ONLY Note: before payment, all invoices or receipts should be attached to this request. DATE SUBMITTED FOR PAYMENT ACTUAL AMOUNT REQUESTED $ CHECK NUMBER AMOUNT $ DATE ISSUED BOOKKEEPERS SIGNATURE

Souderton Area High School Athletic Contest Ticket Record SPORT: DATE: OPPONENT: Gate: Lower Road Halteman Road Main Lobby TICKET SALES Number tickets @ $$$$ $ Amount Adult Ticket s Sold @ $5.00 $ Student Ticket s Sold @ $4.00 $ Total $ $ TICKET ACCOUNTING Adult Ticket 1 ST 1 ST Total $ in Ending Box Minus Starting Box Proceeds $ $ $ Game Worker Signature Game Manager Signature Fund Custodian Signature

SOUDERTON AREA SCHOOL DISTRICT ATHLETIC FUND CASH SETTLEMENT SHEET TICKET SALES Event: Date: Opponent: Ones: $ Fives: $ Tens: $ Twenties: $ Fifties: $ Hundreds: $ Coin: $ Checks: $ Total Cash: $ Total Checks: $ CASH Total Deposit: $ Fund Custodian s Signature:

GATE TICKET SALES REPORT EVENT TICKET SELLER NAME GATE CHANGE $ SIGNATURE OF TICKET SELLER RECEIVING CHANGE AND TICKETS GATE NAME/NO. Non student ticket sales 1. Tickets issued 2. Tickets remaining after event 3. Tickets sold (line 2 line1) 4. Price per ticket $ First # Ending # Ticket Color on roll on roll 5. Ticket Sales (line 3 X line 4) $ NOTE: Student ticket sales and other, differently price groups should be separately calculated, following the method above 15. Total ticket sales $ 16. Gate change provided $ 17. Total cash due (line 15 + line 16) $ 18. Total cash counted in box $ 19. Cash over/(short) (line 18 line 17) $ Ticket Seller Signature: Coach / Event Sponsor Signature: Secretary / Bookkeeper Signature:

TICKET CONTROL LOG TICKETS PURCHASED FROM: DATE: TICKET NUMBERS PURCHASED: FROM: TO: COLOR: Range of Tickets Date Issued Issued To Initial Issued Event Range of Tickets Unused

Yearbook Accounting Reconciliation For the month of: Beginning Book Balance in Yearbook Account Total Number of Yearbooks Ordered Additional Yearbooks Ordered/Received Provide documentation to support yearbooks ordered from publisher to be sold to students. Include any yearbooks that are "donated" to the school that can be sold to students. Sales Information Quantity Price Ext Cost Online Sales $0.00 School Sales $0.00 TOTAL 0 $0.00 Provide backup documentation to support sales information Payment Information Payee Date Invoice # Amount TOTAL $0.00 Ending Book Balance in Yearbook Account

STUDENT ACTIVITY FUND DISBURSEMENT REQUEST PRIOR APPROVAL ACCOUNT # DISBURSEMENT NOT TO EXCEED $ ACTIVITY NAME PAYMENT TO BE ISSUED TO: NAME ADDRESS DETAILED EXPLANATION OF PURCHASE AND PURPOSE: DESIGNEE/SPONSOR SIGNATURE: PRINCIPAL SIGNATURE: DATE: DATE: FOR SECRETARY/BOOKKEEPER USE ONLY Note: before payment, all invoices or receipts should be attached to this request. DATE SUBMITTED FOR PAYMENT ACTUAL AMOUNT REQUESTED $ CHECK NUMBER AMOUNT $ DATE ISSUED BOOKKEEPERS SIGNATURE

Souderton Area High School Athletic Contest Ticket Record SPORT: DATE: OPPONENT: Gate: Lower Road Halteman Road Main Lobby TICKET SALES Number tickets @ $$$$ $ Amount Adult Ticket s Sold @ $5.00 $ Student Ticket s Sold @ $4.00 $ Total $ $ TICKET ACCOUNTING Adult Ticket 1 ST 1 ST Total $ in Ending Box Minus Starting Box Proceeds $ $ $ Game Worker Signature Game Manager Signature Fund Custodian Signature

SOUDERTON AREA SCHOOL DISTRICT ATHLETIC FUND CASH SETTLEMENT SHEET TICKET SALES Event: Date: Opponent: Ones: $ Fives: $ Tens: $ Twenties: $ Fifties: $ Hundreds: $ Coin: $ Checks: $ Total Cash: $ Total Checks: $ CASH Total Deposit: $ Fund Custodian s Signature:

GATE TICKET SALES REPORT EVENT TICKET SELLER NAME GATE CHANGE $ SIGNATURE OF TICKET SELLER RECEIVING CHANGE AND TICKETS GATE NAME/NO. Non student ticket sales 1. Tickets issued 2. Tickets remaining after event 3. Tickets sold (line 2 line1) 4. Price per ticket $ First # Ending # Ticket Color on roll on roll 5. Ticket Sales (line 3 X line 4) $ NOTE: Student ticket sales and other, differently price groups should be separately calculated, following the method above 15. Total ticket sales $ 16. Gate change provided $ 17. Total cash due (line 15 + line 16) $ 18. Total cash counted in box $ 19. Cash over/(short) (line 18 line 17) $ Ticket Seller Signature: Coach / Event Sponsor Signature: Secretary / Bookkeeper Signature:

TICKET CONTROL LOG TICKETS PURCHASED FROM: DATE: TICKET NUMBERS PURCHASED: FROM: TO: COLOR: Range of Tickets Date Issued Issued To Initial Issued Event Range of Tickets Unused

Yearbook Accounting Reconciliation For the month of: Beginning Book Balance in Yearbook Account Total Number of Yearbooks Ordered Additional Yearbooks Ordered/Received Provide documentation to support yearbooks ordered from publisher to be sold to students. Include any yearbooks that are "donated" to the school that can be sold to students. Sales Information Quantity Price Ext Cost Online Sales $0.00 School Sales $0.00 TOTAL 0 $0.00 Provide backup documentation to support sales information Payment Information Payee Date Invoice # Amount TOTAL $0.00 Ending Book Balance in Yearbook Account

STUDENT ACTIVITY FUND DISBURSEMENT REQUEST PRIOR APPROVAL ACCOUNT # DISBURSEMENT NOT TO EXCEED $ ACTIVITY NAME PAYMENT TO BE ISSUED TO: NAME ADDRESS DETAILED EXPLANATION OF PURCHASE AND PURPOSE: DESIGNEE/SPONSOR SIGNATURE: PRINCIPAL SIGNATURE: DATE: DATE: FOR SECRETARY/BOOKKEEPER USE ONLY Note: before payment, all invoices or receipts should be attached to this request. DATE SUBMITTED FOR PAYMENT ACTUAL AMOUNT REQUESTED $ CHECK NUMBER AMOUNT $ DATE ISSUED BOOKKEEPERS SIGNATURE

Souderton Area High School Athletic Contest Ticket Record SPORT: DATE: OPPONENT: Gate: Lower Road Halteman Road Main Lobby TICKET SALES Number tickets @ $$$$ $ Amount Adult Ticket s Sold @ $5.00 $ Student Ticket s Sold @ $4.00 $ Total $ $ TICKET ACCOUNTING Adult Ticket Last unsold Ticket 1 ST Unsold Ticket Sub Total: -1 Total Sold: Student Ticket Last unsold Ticket 1 ST Unsold Ticket Sub Total: -1 Total Sold: Total $ in Ending Box Minus Starting Box Proceeds $ $ $ Game orker ignature Game anage ignature Fund ustodian ignature

SOUDERTON AREA SCHOOL DISTRICT ATHLETIC FUND CASH SETTLEMENT SHEET TICKET SALES Event: Date: Opponent: Ones: $ Fives: $ Tens: $ Twenties: $ Fifties: $ Hundreds: $ Coin: $ Checks: $ Total Cash: $ Total Checks: $ CASH Total Deposit: $ Fund Custodian s Signature:

GATE TICKET SALES REPORT EVENT TICKET SELLER NAME GATE CHANGE $ SIGNATURE OF TICKET SELLER RECEIVING CHANGE AND TICKETS GATE NAME/NO. Non student ticket sales 1. Tickets issued 2. Tickets remaining after event 3. Tickets sold (line 2 line1) 4. Price per ticket $ First # Ending # Ticket Color on roll on roll 5. Ticket Sales (line 3 X line 4) $ NOTE: Student ticket sales and other, differently price groups should be separately calculated, following the method above 15. Total ticket sales $ 16. Gate change provided $ 17. Total cash due (line 15 + line 16) $ 18. Total cash counted in box $ 19. Cash over/(short) (line 18 line 17) $ Ticket Seller Signature: Coach / Event Sponsor Signature: Secretary / Bookkeeper Signature:

TICKET CONTROL LOG TICKETS PURCHASED FROM: DATE: TICKET NUMBERS PURCHASED: FROM: TO: COLOR: Range of Tickets Date Issued Issued To Initial Issued Event Range of Tickets Unused

Yearbook Accounting Reconciliation For the month of: Beginning Book Balance in Yearbook Account Total Number of Yearbooks Ordered Additional Yearbooks Ordered/Received Provide documentation to support yearbooks ordered from publisher to be sold to students. Include any yearbooks that are "donated" to the school that can be sold to students. Sales Information Quantity Price Ext Cost Online Sales $0.00 School Sales $0.00 TOTAL 0 $0.00 Provide backup documentation to support sales information Payment Information Payee Date Invoice # Amount TOTAL $0.00 Ending Book Balance in Yearbook Account