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Nantucket Schools AUP 17 TOWN OF NANTUCKET PUBLIC SCHOOLS STUDENT ACTIVITY ACCOUNTS REPORT ON APPLYING AGREED-UPON PROCEDURES OVER COMPLIANCE IN RELATION TO THE STUDENT ACTIVITY ACCOUNTS GUIDELINES FOR MASSACHUSETTS SCHOOL DISTRICTS YEAR ENDED JUNE 30, 2017 TOWN OF NANTUCKET PUBLIC SCHOOLS STUDENT ACTIVITY ACCOUNTS REPORT ON APPLYING AGREED-UPON PROCEDURES OVER COMPLIANCE IN RELATION TO THE STUDENT ACTIVITY ACCOUNTS GUIDELINES FOR MASSACHUSETTS SCHOOL DISTRICTS YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS INDEPENDENT ACCOUNTANT’S REPORT ON APPLYING AGREED-UPON PROCEDURES…………………………………………… 1 OBSERVATION (Schedule I)….…………………………………………………………….. 2 - 6 INDEPENDENT ACCOUNTANT’S REPORT ON APPLYING AGREED-UPON PROCEDURES To the Superintendent of Schools And School Committee Nantucket Public School District: Dear Mr. Cozort: We have performed the procedures specified in the Agreed Upon Procedures and Audit Guidelines for Student Activity Funds issued in 2017 by the Massachusetts Department of Elementary and Secondary Education (the “Guidelines”), which was agreed to by the Office of the Superintendent of Schools of the Nantucket Public Schools (the District). The procedures were performed, solely to assist you in evaluating the District’s assertion that with regards to its student activity accounts of its elementary schools, it has complied with these Guidelines. This engagement to apply agreed-upon procedures was performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures performed, which are set forth in the Guidelines, either for the purpose for which this report has been requested or for any other purpose. We have attached to this report our findings as Schedule I. We were not engaged to, and did not conduct an audit, the objective of which would be the expression of an opinion on the District’s compliance with the Guidelines. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the District, its management, the School Committee and the Massachusetts Department of Elementary and Secondary Education and is not intended to be and should not be used by anyone other than the specified parties. However, this report is a matter of public record and its distribution is not limited. Roselli, Clark and Associates Certified Public Accountants Woburn, Massachusetts September 29, 2017 Nantucket Public Schools Page 1 of 6 Student Activities SCHEDULE I – FINDINGS AND OBSERVATIONS FISCAL YEAR ENDED JUNE 30, 2015 Introduction A student activity account shall be used for monies raised by students or student organizations and which will be expended by those students or student organizations for their benefit. Monies deposited to a student activity account are governed by Massachusetts General Law (“MGL”) Chapter 71 paragraph 47, as well as the policies of the School Committee. These provisions include procedures with respect to (1) the establishment of an interest bearing bank account and a checking account through the involvement of the Town Treasurer, (2) certain disbursement procedures, and (3) auditing and reporting requirements. Recently, the Massachusetts Department of Elementary and Secondary Education (ESE) issued a compliance supplement summarizing the major mandates of maintaining compliant student activity funds with appropriate checklists that are used for audit. We have used this checklist and conducted the suggested procedures contained within the document. Resultant of this process is a summary of our observations highlighted in this report. We are hopeful this will assist the District to gain further compliance with the applicable laws and regulations. Our observations are broken up into three sections: Section 1 – Specific findings that relate to Nantucket Elementary School Section 2 – Specific findings that relate to the Cyrus Peirce Middle School Section 3 – Specific findings that relate to the Nantucket High School Nantucket Public Schools Page 2 of 6 Student Activities Nantucket Elementary School The Elementary School activities are now limited to fund raising for a camp trip, field trip and some other minor activities. All disbursements greater than $5,000 are now processed at Town Hall and charged to the Agency account. This has limited the amount of disbursements at the Elementary School level to about 15 items. In our prior report we communicated to management that the process between fiscal 2013 and 2015 had improved significantly. Since 2015, we continue to see some improvements but we also made some observations which if implemented would improve overall efficiency, accuracy and safeguarding of assets. Improvements 1.Transactions are now recorded on a standard spreadsheet by the School Business Office. This spreadsheet reports activity to both the checking account and the savings account and is used as a reconciling tool to the records maintained by the Treasurer and the Accounting Office. 2.Cash collected is now brought daily to the Principal’s Office and maintained in a secure location. 3.Deposits are made to the savings account more frequently. 4.Cash handlers are now bonded thereby protecting the School from loss or misappropriation. Observations 1.The Elementary School would benefit from a filing system that is more organized than the current system in place. Supporting documentation is maintained in a folder along with documentation from gifts and other activities and is not easily reviewable. In addition it is not clear which transactions have been recorded in the checking account as opposed to those recorded in the savings account. 2.The activity with the most dollars and volume consists of Natures’ Classroom, an overnight camp, which is funded primarily from sales of Sunkist oranges and grapefruits. Almost $50,000 is collected in $30 and $60 transactions. Receipts are provided to those who purchase oranges and grapefruits and these receipts are turned in with the funds that are collected; however the receipts are never reconciled to the checks and cash prior to deposit. In order to add a stronger level of internal control, we suggest that a reconciliation process is put in place. Nantucket Public Schools Page 3 of 6 Student Activities Cyrus Peirce Middle School Similar to the Elementary School, the activities of the Middle School have also diminished; checks greater than $5,000 are processed through the Town warrant and many activities which were previously deemed curriculum activities, have been discontinued. The process at the Middle School is very good and has improved significantly since fiscal year 2015. Improvements 1.Transactions are now recorded on a standard spreadsheet by the School Business Office. This spreadsheet reports activity to both the checking account and the savings account and is used as a reconciling tool to the records maintained by the Treasurer and the Accounting Office. 2.Cash collected is now brought daily to the Principal’s Office and maintained in a secure location. 3.Deposits are made to the savings account more frequently. 4.Cash handlers are now bonded thereby protecting the School from loss or misappropriation. Observations 1.We observed that the outstanding student activity balances have increased significantly in size since 2015; the total balances which were barely over $20,000 have now reached almost $40,000. This is due to fund raising efforts exceeding the cost of these activities from year to year. For example, the yearbook cost is quoted at approximately $5,000 and this is how it is priced out to the students. However the School ends up obtaining many discounts and saves approximately $900. This savings is never passed back to the students and is just allowed to accumulate annually in the fund. We suggest the School increase its level of co-curricular activities using these excess funds as a source or return the funds to the class accounts and transfer them to the High School when the students leave the Middle School. Nantucket Public Schools Page 4 of 6 Student Activities Nantucket High School The administration of the Nantucket High School student activities has undergone the most critical changes over the past two years and these have been met with much success. The School’s filing system is very organized; all disbursements are supported by a copy of the check and an invoice; and all emails documenting any discussions with items that are not straight forward are also included in the files. The process has become well supported and transparent and we encourage the administrators to continue with this trend. This is particularly important since these activities support dozens of clubs, over 300 transactions and over $200,000 in annual activity therefore strong controls are critically important. Improvements 1.Transactions are now recorded on a standard spreadsheet by the School Business Office. This spreadsheet reports activity to both the checking account and the savings account and is used as a reconciling tool to the records maintained by the Treasurer and the Accounting Office. 2.Cash collected is now brought daily to the Principal’s Office and maintained in a secure location. 3.Deposits are made to the savings account more frequently. 4.Cash handlers are now bonded thereby protecting the School from loss or misappropriation. 5.All disbursements are documented. 6.All communication with the School Business Office and Principal regarding questionable disbursements are vetted and these discussions are documented. Observations 1.The standard spreadsheet we received listed 4 accounts that have deficit balances. These were for stagnant previously graduated class accounts in which the District was attempting to transfer funds back to the class. These deficits need to be cured in some manner; possibly by retrieving the overpayment or from a surplus account. (We understand this was corrected subsequent to year-end.) 2.In the standard spreadsheet it was observed that transfers required from the agency account to the Town’s checking account reimbursing the account for disbursements made on behalf of the student activities had not been made by the Treasurer’s Office. This amount approached $300,000 and was rolled forward as a reconciling item. This was a byproduct of the significant turnover in the Treasurer’s Office during fiscal year 2017 and it was the intention of the office to make the adjustment upon the conclusion of the audit. 3.In the standard spreadsheet there were 3 class accounts for graduating seniors that were still being carried. After further review it was determined that the money in these accounts had been disbursed but the entries had not been made on the spreadsheet and were carried as reconciling items to balance to the bank. These have since been adjusted. 4.A deposit made into the Student Activity accounts in June 2016 was made in error as it should have been posted to a gift account. The error was not corrected in the standard spreadsheet until June 2017 despite it being discovered much sooner and was carried as a reconciling item. This has since been corrected. 5.The Schools did not issue a 1099 to an individual who earned well in excess of $600; a W9 was not received for that individual either. Since the Schools are not set up to issue 1099s we suggest individuals vendors who are expected to earn more than $600 are processed through the Finance Department warrant process. Nantucket Public Schools Page 5 of 6 Student Activities 6.There are several accounts that have accumulated very large balances in relation to their annual activity. Spanish, Drama, AP tests, SAT tests, Music and School to Career have over $100,000 combined in these accounts at year-end. The District should evaluate these balances and determine why they have accumulated to such a large amount and evaluate the fees associated with these accounts. One option is to return funds to the class account if not used at year-end. Nantucket Public Schools Page 6 of 6 Student Activities