Audit of. Boynton Beach Community High School

Transcription

1 Audit of Boynton Beach Community High School January 19, 2007 Report

2 Audit of Boynton Beach Community High School Table of Contents Page PURPOSE AND AUTHORITY 1 SCOPE AND METHODOLOGY 1 INVESTIGATIONS BY SCHOOL POLICE & EMPLOYEE RELATIONS 2 CONCLUSIONS 2 1. Community School Payroll Expenses Out-of-Control 3 2. Irregularities in Leases of School Facility 5 3. Disbursements Not Properly Documented 6 4. Change Fund Not Properly Secured 6 5. Access To School s Drop Safe 7 6. Prenumbered Document Custodian 7 APPENDIX Management s Response 8 i

3 THE SCHOOL DISTRICT OF LUNG CHIU, CPA ARTHUR C. JOHNSON, Ph.D. PALM BEACH COUNTY, FLORIDA DISTRICT AUDITOR SUPERINTENDENT OFFICE OF THE DISTRICT AUDITOR 3346 FOREST HILL BLVD., B-302 WEST PALM BEACH, FL (561) FAX: (561) M E M O R A N D U M TO: FROM: Honorable Chair and Members of the School Board Arthur C. Johnson, Ph.D., Superintendent of Schools Chair and Members of the Audit Committee Lung Chiu, District Auditor DATE: January 19, 2007 SUBJECT: Audit of Boynton Beach Community High School PURPOSE AND AUTHORITY In response to the request of staff and pursuant to the School District s Audit Plan, we have audited Boynton Beach Community High School for the year ended June 30, The primary objectives of this audit were to (1) determine the causes of deficits in the Community School and Adult Education Programs, (2) determine the extent of compliance with School Board Policy for Community Leases, and (3) determine the extent of compliance with District guidelines in change fund process, documentation for disbursement, access to drop safe, and prenumbered document custodian. SCOPE AND METHODOLOGY On August 24, 2004, School Police received a request to review Boynton Beach High School s Community School and Adult Education Programs to determine if there were any criminal activities regarding certain shortfalls in their accounts. Police investigation was completed on November 9, Subsequently, the Police report was referred to us for a special audit. This audit was performed in accordance with Government Auditing Standards, during December 2004, through February This audit included: Review of payroll records Review of leasing files Review of disbursement file Interview with staff 1

4 Draft report and findings were sent to school staff for review and comments. Management response is included in the appendix. Final draft report was presented to the Audit Committee at its January 19, 2007, meeting. INVESTIGATIONS BY SCHOOL POLICE & EMPLOYEE RELATIONS Initial Police Investigation As indicated by School Police in the initial investigation report dated August 12, 2004, both the Community School and Adult Education programs at Boynton High had incurred extraordinary high payroll expenses. Most importantly, critical resource information for employee payroll calculations was missing. School Police also examined rental income from leases of school facilities and noted that the revenues were inappropriately used to fund other unrelated activities; and certain lessees were under-charged. Police s initial investigation concluded that there was no criminal wrongdoing, but stated that (1) there was a lack of documentation and accountability in payroll and disbursement of funds; (2) payroll records were incomplete and lacked dates, times, hours worked, duties performed, and employee signatures; and (3) payroll records for lease activities, Community School, and Adult Education were commingled and there was no documentation to determine the source of each revenue. Follow-up Investigation Due to the extent and nature of irregularities identified by this audit, our conclusions were referred to the Department of Employee Relations on March 29, 2005, for further action. After Employee Relations examined further into these irregularities and received additional new information, the report was further referred to School Police for a follow-up investigation. Employee Relations completed the investigations in April 2006, and on September 15, 2006, the results were forwarded to the Employee Investigation Committee for appropriate personnel actions. On December 21, 2006, Employee Relations informed us that personnel actions have addressed accordingly. CONCLUSIONS This audit produced six conclusions. The first two conclusions regarding community school payroll and leases of school facilities are most critical and were brought to the attention of staff during the audit. The remaining four conclusions are minor in nature, which are similar to Internal Funds audit findings in other schools. 2

5 1. Community School Payroll Expenses Out-of-Control $220,882 in Total Deficits. During school year , the Community School program collected a total of $44,437 in tuition fees and expended a total of $184,810 in personnel costs. The program s deficit started since July As of February 28, 2005, total cumulative deficit was $220,882, including $32,297 in supplementary payroll owed the District. $ Boynton Beach High School s Community School Program Cumulative Program Deficit 0 (50) 8 (4) (4) (7) (15) (19) (27) (24) (41) (40) (57) (100) (64) (75) (72) (81) (90) (106) (128)(127)(125) (150) (147) (145) (161) (200) (180)(178)(180) (185)(189)(192) (200) (208)(210) (221) Jun-02 Jul-02 Aug-02 Sep-02 (250) Oct-02 Nov-02 Dec-02 Jan-03 (Source: TERMS System) Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 School Year School Year School Year Month Balance Month Balance Month Balance 7/2002 ($3,842) 7/2003 ($71,671) 7/2004 ($180,183) 8/2002 (3,546) 8/2003 (81,004) 8/2004 (185,250) 9/2002 (7,498) 9/2003 (90,067) 9/2004 (188,997) 10/2002 (15,369) 10/2003 (105,978) 10/2004 (192,438) 11/2002 (26,897) 11/2003 (127,817) 11/2004 (200,349) 12/2002 (19,140) 12/2003 (126,849) 12/2004 (208,280) 1/2003 (24,001) 1/2004 (125,132) 1/2005 (210,403) 2/2003 (41,216) 2/2004 (147,114) 2/2005 (220,882) 3/2003 (39,811) 3/2004 (144,775) 4/2003 (56,686) 4/2004 (161,058) 5/2003 (74,597) 5/2004 (179,537) 6/2003 (64,082) 6/2004 (178,034) (Source: TERMS System) 3

6 As concluded by the police investigation, the Community School program has widespread problems in payroll accountability, payroll record keeping, supervisor review and approval, and legitimacy of payroll expenses. $101,884 Overpayments In Payroll. Our review of payroll records confirmed Police s conclusions that there were widespread inconsistencies and unaccountable overpayments to staff. Based on manual input of work hours keyed-in by the Community School secretary into the payroll system, the school s Community School program paid 8,511 work hours to 55 employees during However, according to the class schedules and course information, the school offered a total of 169 individual classes. The total maximum class hours for all 169 classes should not be more than 2,561 hours. According to the staff of three other community schools and the Office of Adult and Community Education, employees teaching the community school classes should only receive pay for the designated class hours. The actual hours should have been less than 2,561 hours because some classes could have been canceled. As a result, the actual payroll could have been overpaid by as many as 5,950 hours or 233%; i.e. $101,884. More Sampling Results. We sampled 22 Community School classes offered in Winter Each of these 22 classes should incur a total of three or less hours per meeting for the whole session, with a total of 388 work hours. However, payroll records indicated that a total of 812 work hours were paid to the instructors, with 424 hours or 109% unaccounted payments. Payroll Records Poorly Maintained. Due to insufficient payroll records maintained by staff and much of the critical payroll information was missing, we were not able to ascertain the accuracy and legitimacy of work hours performed by staff and input by the Community School secretary into the payroll system. Questionable Pay Widespread. As indicated by the Community School secretary, she input hours into the payroll system for staff without proof of hours worked and supervisor approval for time and hours. She stated that she knew which staff were working and how long they worked during the days. During the audit, the school bookkeeper indicated to the principal that she received questionable extra pay in her pay checks. Apparently, the extra pay was for certain hours she did not put in. The bookkeeper s extra hours were input by the Community School secretary. The following demonstrates some examples of questionable pay to employees: The instructor for a two-hour karate class was given eight hour pay because the other extra six hours were for performing security duties. The instructor for a two-hour tennis class was paid eight hours because the other six hours were for performing other administrative work. The widespread inconsistency, lack of support and documentation for payroll, and lack of supervisor review and approval for payroll should be stopped immediately. The School 4

7 District should consider recouping overpayments from employees for hours they did not perform. The Office of Adult and Community Education and the Department of Budget Services should monitor closely the spending patterns in community school programs, which should be self-sufficient as originally intended. Early warning should be provided to school staff so that repeated overspending can be stopped immediately. Management s Response: Please see attachment on pages 8 and Irregularities in Leases of School Facility District Requirements. As required by School Board Policy 7.18, all school facility leases should be pre-qualified by the School District (Treasury Department prior to school year , and Real Estate Department starting from school year ); only non-profit organizations are allowed to receive non-profit rates; all leases are to be signed by lessees; all lessees are to provide adequate liability insurance; and all lease payments should be made in full before the facility is used by lessee. Repeated Irregularities Widespread. During , the school executed 81 leases for community use of school facilities and collected $32,169 in lease revenue. Our audit identified repeated irregularities and noncompliance by staff in handling leases. Of the 81 executed leases, Six for-profit organizations underpaid $12,726 for their 29 leases because non-profit rates were applied, or utility charges were waived. Six of their leases were granted undocumented fee-waivers, although the utility charges (43% of rental) cannot be waived. 59 did not provide proof of adequate liability insurance. 42 were not signed by lessees. Five did not have the approved Rental Prequalification Request Forms. Consequently, these five leases were not pre-approved by the School District. 35 had not made the full payment before the use of facilities, as required by District guidelines. Other Irregularities $7,208 and $2,725 in rental income were incorrectly recorded in the Community School Course Fees Account and Community School Course Material Fees Account respectively. Because monies in the Community School Course Fees and Material Fees Accounts can be 5

8 expensed/disbursed by the Community School s director, a total of $9,933 could have been spent without accountability. As of June 30, 2004, $22,101 in utility fees collected from lessees was not transmitted to Accounting Services. This money should be transmitted to the Central Office promptly. Other instances of inappropriate use of lease revenues included the following: A total of $2,582, from facilities leasing accounts, was paid to three students for general labor work. However, payroll taxes were not withheld from these three students. Although the Chart of Accounts provides that revenues from leasing of school facilities are to be used to fund plant improvements or to benefit students, a total of $20,540 was spent on expenses such as covering Community School deficits. To protect the financial interests of the School District, staff should adhere to requirements of School District Policy 7.18 in handling all leasing activities. The school should recoup all rental underpayments from lessees. Management s Response: Please see attachment on page Disbursements Not Properly Documented Review of the 25 sample disbursements indicated that: Check #4703, in an amount of $225, for hotel reservation did not have the required staff s TDE Form. Check #5743, in an amount of $545, did not have adequate documentation to support the amount paid. The check requisition and supporting documentation for check #5994, in an amount of $180.94, could not be located. All disbursements should be adequately documented. Management s Response: Please see attachment on page Change Fund Not Properly Secured The review of the school s change fund procedures revealed the following deficiencies: The cash count performed on December 15, 2004, found a shortage of $70. 6

9 The general ledger account for the change fund was overstated by $200 due to an incorrect adjustment transaction recorded on May 14, The school did not require the sponsors to complete the required Change Fund Statement when issuing the change fund. Internal Accounts Manual (IAM) Section 9.10 requires the sponsor (i.e. the change fund custodian) to sign a written statement, either on a memo or on the back of the check requisition, and witnessed by the bookkeeper: I have counted the change in the presence of the school bookkeeper and have found no discrepancies. I accept responsibility for maintaining and securing this change fund and agree to return it intact when the event(s) is (are) over. The school should make necessary adjustments to the general ledger to reflect the correct balance of the change fund, and follow the procedures of the Internal Accounts Manual. Management s Response: Please see attachment on pages 9 and Access to School s Drop Safe The bookkeeper had the full combination for the school s drop safe. Bulletin #P-9303-AS/BA specifies that, To enable personnel to gain access to the drop safe without requiring to gain access to the drop safe without requiring the principal s involvement, part of the combination should be provided to two employees. One of these employees should be the school s internal accounts bookkeeper. As a backup, two other alternate employees can be provided part of the combination as well. The school should comply with Bulletin #P-9303-AS/BA. Management s Response: Please see attachment on page Prenumbered Document Custodian We found that the school did not have a document custodian assigned for prenumbered cash receipts. Also a perpetual inventory was not maintained for checks and cash receipts. Document custodians should be assigned for all prenumbered documents. Issuance and periodic inventory records for prenumbered documents should be documented in the Prenumbred Document Inventory Register (PBSD 0160) Management s Response: Please see attachment on page 10. End of Report 7

10 Appendix Management s Response 8

11 Appendix Management s Response 9

12 Appendix Management s Response 10