Audit of. Wellington Elementary School's Gasoline Purchases and Vending Machines

Transcription

1 Audit of Wellington Elementary School's Gasoline Purchases and Vending Machines February 20, 2008 Report

2 Audit of Wellington Elementary School's Gasoline Purchases and Vending Machines Table of Contents Page PURPOSE AND AUTHORITY 1 SCOPE AND METHODOLOGY 1 BACKGROUND 2 CONCLUSIONS 2 1. Questionable Request for Reimbursement 2 2. Vending Machine Revenue 4 APPENDIX Management s Response 6

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 Audit Committee Lung Chiu, CPA, District Auditor DATE: February 20, 2008 SUBJECT: Audit of Wellington Elementary School's Gasoline Purchases and Vending Machines PURPOSE AND AUTHORITY In response to the school principal's request, we have audited (1) reimbursement requests by a staff for purchase of gasoline and (2) vending machines sales revenue during July 1, 2006, through November 28, The primary objectives of the audit were to determine (1) the reasonableness of the requests for gasoline reimbursement and (2) whether sales revenue for the vending machines was properly accounted for. SCOPE AND METHODOLOGY The audit was performed in accordance with Government Auditing Standards by Toni Waterman, CPA, during November 2007, and included: Reviewing the receipts for gasoline purchases submitted by staff; Examining the school s accounting records for vending machines; Reviewing purchasing records for vending machines; and Interviewing school staff. Draft findings were sent to the school for review and comments. Management response is included in the Appendix. We appreciate the courtesy and cooperation extended to us by staff during the audit. The final draft report was presented to the Audit Committee at its February 20, 2008, meeting. 1

4 BACKGROUND On October 23, 2007, the school principal requested an audit of the school that: (1) A staff requested a $ reimbursement for purchases of 141 gallons of gasoline during July 16, through August 21, The gasoline was used to operate a leaf blower and a pressure cleaner. (2) Since July 2007, no sales revenue for the vending machines had been turned in for deposit, although resale items for the vending machines have been purchased. These vending machines were managed by the same employee who operated the leaf blower and pressure cleaner. On January 8, 2008, the school principal referred the audit conclusions to the School Police Department for further investigation. School Police completed the investigation without further actions. CONCLUSIONS 1. Questionable Request for Reimbursement 141 Gallons of Gasoline Purchased in Five Weeks. The school principal expressed a concern that an employee's reimbursement request for purchase of gasoline seemed unreasonable. The following exhibit shows these purchases: Gasoline Purchased During July 16, through August 21, 2007 Date Price Per Gallon #of Gallons Purchased Amount 7/16/2007 $ $ /23/ /25/ /26/ /30/ /1/ /6/ /8/ /9/ /14/ /15/ /16/ /20/ /21/ Total $

5 Average of 141 Gallons of Gasoline Purchased Annually During the Prior Three Years. During July 2004, through June 2007, reimbursement requests for purchase of gasoline averaged 141 gallons per year, with an average daily consumption of 0.54 gallons. Gasoline Purchased During July 1, 2003, through August 21, 2007 FY 2005 (7/2004 6/2005) Prior Three Years Summer 2007 FY 2006 FY 2007 July 16, 2007 (7/2005 6/2006) (7/2006 6/2007) August 21, 2007 Total Purchase ($) $ $ $ $ Average Price Per Gallon $2.045 $2.566 $2.646 $2.933 (actual) Number of Gallons 158 gallons 138 gallons 128 gallons 141 gallons Purchased Number of Workdays 260 days 260 days 260 days 23 days Average Daily Consumption 0.6 gallons 0.5 gallons 0.5 gallons 6.1 gallons Source of Information: (1) Manatee Accounting System and (2) Florida average gasoline price published on the Department of Energy Website Unreasonable Claims in Gasoline Purchases. Gasoline is needed in order to operate a leaf blower and a pressure cleaner at the school. According to staff, the leaf blower was not in operation during the summer of 2007, and was later put back in service in October The school only has two portable gasoline containers, one 1-gallon and one 2-gallon for storage purposes. Apparently, it was impossible for the two containers (total 3 gallons) to hold the quantity of gasoline purchased each time, ranging from 7 gallons to gallons. Moreover, it was impractical for the two equipment to consume a total of 140 gallons of gasoline during a 23 work-day period; i.e. an average consumption of 6 gallons per day for every day; or 1,100% of prior three years' average daily consumption. As such, the principal had justifiably denied the reimbursement request. Recommendation Although Internal Accounts Manual authorizes that, "teachers and sponsors who incur authorized out-of-pocket expenses on behalf of the school or for school sponsored activities are entitled to reimbursement," the principal has correctly denied the unreasonable reimbursement request. 3

6 Management's Response: All requests for purchase reimbursement must be authorized in advance by the Principal or designee. Gasoline usage will be monitor on a monthly basis during the regular school year, and more often during the summer or other periods when gasoline usage may be higher due to increased use of the pressure cleaning machine. Audit information will be reviewed to determine if there is need for further investigation by School Police or for any appropriate personnel action. (Please see Appendix on page 6.) 2. Vending Machine Revenue During July 1, 2006, through November 28, 2007, (1) the school purchased a total of $1, in soda and bottled water for the vending machines, (2) $2, in vending machine revenues was recorded in the revenue account; (3) $ in cash was found inside the vending machines; and (4) $ in ending inventory was maintained at the school. Estimated Revenues for Vending Machines During July 1, 2006 through November 28, 2007 Sales Revenues Recorded in Revenue Account $2, Cash in Vending Machines $2, Cost of Goods Sold Beginning Inventory n/a Add: Purchases $1, Less: Ending Inventory (448.14) 1, Estimated Net Income (assuming there was no beginning inventory) $ However, the school did not periodically verify inventory on hand and did not maintain a Sales Item Inventory Report. Due to the lack of information for beginning inventory, we were not able to determine (1) the total actual revenues generated by the vending machines, and (2) whether all revenues were account for. 4

7 Recommendation Unless the duties for maintaining the vending machines could be assigned to a different staff member, the principal should consider outsourcing the vending machine service. As we indicated in the Audit of Vending Machines (Report # ) dated September 14, 2007, based on 2004 through 2006 information, the performance of outsourced full-service vending machine was 57% to 153% more profitable than self-service machines. Other advantages of having full-service machines include: Eliminating the risk of inventories loss or loss in cash collections involved with self-service vending machines; Eliminating carrying cost for inventories; and Reducing staff time associated with maintaining vending machines. If the school should decide to operate the vending machines by in-house employee, fundraising through vending machines should be administered in accordance with Internal Accounts Manual and other related District guidelines. Specifically, Money should be collected and deposited more frequently such as at least once a week. Vending inventory should be placed in a secured location so that students will not have access to it. Periodic inventory should be performed and Sales Item Inventory Report should be maintained accordingly. Management's Response: Responsibility for maintaining the vending machines has been reassigned to different staff members. Money collection and deposit will be conducted on a more regular and consistent basis. Inventory storage has been moved to a more secure location and inventory levels will be monitored and recorded as appropriate. Consideration will be given to contracting with a full-service provider for future vending needs and services. (Please see Appendix on page 6.) End of Report 5

8 Appendix Management s Response Joint Response from Current and Former Principals 6