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Nantucket Schools AUP 2015TOWN 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, 2015 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, 2015 TABLE OF CONTENTS INDEPENDENT ACCOUNTANT’S REPORT ON APPLYING AGREED-UPON PROCEDURES…………………………………………… 1 FINDINGS (Schedule I)….………………………………………………………………….. 2-12 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 2015 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 October 17, 2015 Nantucket Public Schools Page 1 of 12 Student Activities Roselli, Clark and Associates 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. This report is broken up into four sections: Section 1 – General findings and discussion that relate to all 3 Schools in the Nantucket Public School District. Section 2 – Specific findings that relate to Nantucket Elementary School Section 3 – Specific findings that relate to the Cyrus Peirce Middle School Section 4 – Specific findings that relate to the Nantucket High School Nantucket Public Schools Page 2 of 12 Student Activities General Comments During fiscal year 2013 the schools underwent their first ever audit of the student activity accounts; resultant of this process was the observation of numerous findings and deficiencies reported to the School Committee in a report dated December 5, 2013. The Superintendent and School Committee have worked diligently to improve this process and this audit will serve as an update to communicate areas that have been improved since this last audit and areas that still require attention. Comment 1 – improvements In response to our comments included in our communication to management in our report dated December 5, 2013 the following summarizes those areas that have been addressed and improved: 1. The Superintendent engaged a consultant to provide training to all three student activity administrators as well as the principals, school office manager and superintendent himself. Resultant of this is a more informed, qualified and educated process of completing student activity transactions. This transition went well at the elementary school and high school however there have been some challenges at the middle school (see comments under middle school). All invoices appear to now be appropriate student activities, which are all supported by adequate backup. 2. In our prior report, we suggested that the Superintendent evaluate the possibility of appointing one individual to oversee the activities of all 3 schools. This seemed practical given the close proximity of the schools and the need to appoint a more qualified individual to administer the financial activities of these funds. We are happy to report that this has been evaluated and such an individual has been appointed, effective fiscal year 2016. In addition to this, in order to bolster the resources supporting the activities, we believe that the School Business Manager should also be involved in this process at least once on a monthly basis. 3. The activity administrators at the elementary school and the high school are currently reconciling internal records to the checking account on a monthly basis. 4.Requests for reimbursements from the Treasurer’s Agency account are now supported by backup documentation which is reviewed by the accounting department prior to receipting funds to the individual schools. 5. Subsidiary ledgers including amounts available for each club are maintained internally by the activity coordinators; a great improvement over the prior audit in which amounts were maintained lump sum of all activities. 6. Disbursements for curriculum items out of student activity accounts are now avoided and are paid from the school budget. Nantucket Public Schools Page 3 of 12 Student Activities 7. The lost books account balance has been transferred to the Treasurer and is now accounted for as a revolving fund in the Town’s general ledger in accordance with school revolving fund statutes. 8. Student activity policies and procedures have been adopted by the School Committee. 9. All activities are now approved by the School Committee prior to commencement of activities. 10. Attempts to return dormant class account money have increased and policies regarding the disposition of excess class funds in future years have been developed. 11. A consolidated effort was undertaken with the assistance of the consultant to close dormant accounts with balances and subsidize dormant accounts with deficits; the remaining balances were spread across the active accounts using a reasonable allocation methodology and approved by the School Committee. 12. Checking account balance limits at the individual schools have been reduced to more reasonable levels. Comment 2 – Treasurer’s reconciliation of Agency accounts to the General Ledger Presently, the Treasurer and the Assistant Town Accountant balance their respective records in total between the cash book and the general ledger. There is no effort to balance the individual student activity agency balances between the reconciled bank balance and the agency account in the general ledger. We prepared this reconciliation and it is summarized as follows: While the variance is not material to the overall balance, it is important under student activity regulations that these accounts are reconciled monthly. Since Treasurer’s cash in total is in balance, the variance most likely is an over or under fund to the checking account from the agency account. Comment 3 – School activities reconciliation from subsidiary records to the General Ledger Currently, there are no attempts by any of the schools to reconcile activity and balances at the school level to activity and balances at the Town level. This has resulted in activity recorded inconsistently, such as High Middle Elementary School School School Total Treasurer's records 259,200.37 21,311.80 33,000.80 313,512.97 General Ledger 242,197.37 21,311.80 31,446.80 294,955.97 Warrants payable 16,003.00 - 1,554.00 18,557.00 Adjusted general ledger 258,200.37 21,311.80 33,000.80 313,512.97 Variance 1,000.00$ -$ -$ -$ Nantucket Public Schools Page 4 of 12 Student Activities interest earned, void checks, bounced checks and other transactions. As a consequence the ending balances of the subsidiary ledger do not balance to the ending balances in the general ledger. Detail of this assertion is summarized in the individual sections by school later in this report. Comment 4 – Fidelity Bond ESE recommends, and the School Committee has it written into their policies, that all cash handlers are required to be insured against theft or loss of cash through a fidelity bond. We inquired of this requirement in all three schools and presently, principals and their assistants are bonded but none of the volunteers or other cash handlers. We understand the School Business Office is currently investigating blanket coverage for all cash handlers. Comment 5 – Form 1099 requirements We did not observe any vendors that exceeded the $600 limit for 1099 reporting requirement to the IRS however one vendor, the High School DJ was close. Despite this, a process needs to be put in place when engaging a vendor which would consist of receiving a form W9 from the vendor to avoid the need to initiate backup withholdings and also to accommodate 1099 reporting in the instance that a vendor exceeds the $600 threshold. The Schools could piggyback the Town in order for the process to be more efficient. Comment 6 – Dormant class accounts We discussed earlier that there has been a more aggressive approach to try to return dormant class money back to class officers. We are encouraged by this since the regulations specifically indicate that the student activities are for students only, and graduating students are not included. At June 30, 2015, there was still about $125,000 in those dormant class accounts, and we urge that these efforts to return this money is continued or disposed of in accordance with School Committee policy. Comment 7 – Photographer revenue Typically, students usually receive a stipend from the school photographer in return for allowing the photographer to perform their services at the school. We scanned the revenue ledgers for each of the schools and did not observe any of this revenue at any of the schools and consider this unusual. We suggest the schools investigate this and determine why this has occurred. Comment 8 - Online registration In order to improve efforts regarding cash handling, the School should evaluate whether an online registration process for year books and other high volume items makes most sense. In the instance of year books, an online process would keep track of who has purchased the book, keep kids from having to bring money to school, keep teachers from handling the money and place the money in the bank faster. In essence, it would go directly from the parents to the bank and remove at least 6 cash handling steps. Nantucket Public Schools Page 5 of 12 Student Activities Nantucket High School Comments Overall processes have improved dramatically at the High School. This was discussed under general comments. We are encouraged with the efforts and expect these to continue to improve under the control of the new bookkeeper. The following are comments that relate specifically to the High School that we observed during our procedures. Comment 1 – Excel spreadsheets The current activity administrator maintains subsidiary ledgers in Excel which includes a spreadsheet for each club. This is a common way to maintain such records; however the Excel spreadsheets used are not designed to utilize the spreadsheet formulas available and essentially operate as a word processing spreadsheet which defeats the purpose of maintaining in Excel since a calculator is required to perform calculations and clerical errors could easily occur. We suggest that these Excel spreadsheets are programmed such that a calculator is not needed and also reduce the risk of error. Comment 2 – Deficits in specific clubs The following clubs ended the year in a deficit balance. This is not allowed under ESE regulations for Student Activities. It appears that these deficits resulted due to inaccurate estimates at the time of consolidating all accounts at the beginning of 2015. The PSAT account could be the result of coding errors with the SAT Prep program since that account has over $5,000. We suggest those two accounts are consolidated since they are in the same family of transactions and the remainder deficit accounts are funded form Student Council balances at the authorization of the School Committee. Comment 3 – Reconciliation of subsidiary ledgers to the overall cash in the general ledger and checking account As previously discussed there are no efforts to reconcile cash between the subsidiary ledgers and the corresponding records at Town Hall. This is important to perform since the Treasurer’s accounts include interest earned, bank charges, bounced checks and other activity that the School may be unaware of in addition to assuring that all transactions are properly and consistently reported between the two sets of records. The table on the following page summarizes the reconciliation we prepared in detail. Overall, bank balances are $2,328 short of activity balances. We suggest this process is reviewed between the Town and the School to determine if this variance can be resolved. Activity Balance Class of 2004 (333.00)$ PSAT (1,793.00) Library (408.89) National Honor Society (166.60) (2,701.49)$ Nantucket Public Schools Page 6 of 12 Student Activities Unadjusted Adjusted Club Balance Bad check Interest Bad check charge Balance AP testing 2,396.00 2,396.00 Art Club 1,053.89 1,053.89 Building Club 3,008.08 3,008.08 Chinese Club 185.00 185.00 Class of 1990 950.00 950.00 Class of 1997 4,720.79 4,720.79 Class of 1998 6,465.04 6,465.04 Class of 1999 403.42 403.42 Class of 2000 2,314.00 2,314.00 Class of 2001 1,500.00 1,500.00 Class of 2004 (333.00) (333.00) Class of 2005 2,915.38 2,915.38 Class of 2006 4,511.07 4,511.07 Class of 2008 18,460.77 18,460.77 Class of 2010 12,770.40 12,770.40 Class of 2011 16,782.71 16,782.71 Class of 2012 14,519.13 14,519.13 Class of 2013 12,290.46 12,290.46 Class of 2014 27,629.03 27,629.03 Class of 2015 21,722.98 21,722.98 Class of 2016 6,998.90 6,998.90 Class of 2017 388.00 388.00 Class of 2018 2,893.00 2,893.00 College Fair Trips 343.30 343.30 Culinary Arts 2,553.03 2,553.03 Diversity Club 377.57 377.57 Drama Club 8,060.39 8,060.39 Envirnomental Club 1,113.20 1,113.20 French Club 869.66 869.66 GSA 500.98 500.98 Latin 338.27 338.27 Literature/Journalism 372.00 372.00 Library (408.89) (408.89) Mathletes 1,807.71 1,807.71 Music Department 13,824.40 13,824.40 National Honor Society (166.60) (166.60) Peer helping peers 3,043.04 3,043.04 PSAT (1,793.00) (1,793.00) SAT Prep program 5,688.64 5,688.64 School Career 8,129.20 8,129.20 Science Fair 235.41 235.41 Spanish Club 22,776.19 22,776.19 Student Council 3,296.89 514.82 (25.00) 3,786.71 Team Tanzania 126.69 126.69 Veritas 4,043.26 (106.25) 3,937.01 Yearbook 5,429.00 5,429.00 245,105.39 (106.25) 514.82 (25.00) 245,488.96 Agency balance 242,197.37$ Checking balance 1,003.38 Bank Balance 243,200.75 variance (2,288.21)$ Transactions recorded by the Treasurer and not by the School Nantucket Public Schools Page 7 of 12 Student Activities Comment 4 – Cash Handling Upon review of subsequent cash receipts at the Treasurer’s office it was determined that many checks in minor amounts had been held at the High School office for a number of months. These had been overlooked during the transition period. It is important that all deposits are made immediately in accordance with School Committee policies and reminders should be sent periodically in order to satisfy this. Nantucket Public Schools Page 8 of 12 Student Activities Cyrus Pierce Middle School Comments The Middle School had the most difficulty transitioning to the new system. Per our review there were numerous deficiencies that need to be addressed and improved upon and this should be made a priority for the new bookkeeper appointed by the Superintendent. Comment 1 – Excel spreadsheets The current activity administrator maintains subsidiary ledgers in Excel which includes a spreadsheet for each club. This is a common way to maintain such records; however the Excel spreadsheets used are not designed to utilize the spreadsheet formulas available and essentially operate as a word processing spreadsheet which defeats the purpose of maintaining in Excel since a calculator is required to perform calculations and clerical errors could easily occur. We suggest that these Excel spreadsheets are programmed such that a calculator is not needed and also reduce the risk of error. Comment 2 – Unauthorized disbursements Four payments were made from the yearbook account cash as it was collected. This money should have been deposited first and then a request for check made. The 4 disbursements were for staples $15.94 (includes tax); Fusaro’s Homemade Italian Pizza $37.45 (includes tax), Stop and Shop $13.74 soda (includes tax) and Stop and Shop $17.50 (includes tax). Comment 3 – Double paid disbursement The yearbook adviser was reimbursed an extra $16 as a duplicate invoice was submitted in the reimbursement sheet and paid out by the School. While this is not a significant amount and it appears this was an honest mistake; it still highlights the need to carefully review every disbursement package, particularly those in which numerous credit card receipts are involved. Comment 4 – Cash handling Yearbook money is not always brought to the principal’s office for safekeeping at the end of the night. In addition it is not always turned over timely and is kept in drawers by teachers. At the end of the year a deposit was made on July 7, and recorded by the Treasurer on July 13, despite school ending on June 25. Efforts should be undertaken to more properly safeguard cash and follow the policy of cash turnover. Comment 5 – Cash handling reconciliation While a reconciliation is prepared for the dance money received, formal documentation supporting the reconciliation is not maintained. Additionally, there is no reconciliation prepared for year book cash collected verse year books sold/distributed. Cash reconciliations are an important part of internal control. We suggest such policies are enforced immediately and documented. Nantucket Public Schools Page 9 of 12 Student Activities Comment 6 – Subsidiary ledger input errors As discussed previously, the middle school keeps track of each activity in a subsidiary ledger maintained in Excel. We discovered several input errors while reviewing the activity. 1. A deposit made on July 7 was recorded as $950. The actual deposit was $905. 2. Two checks totaling $1,039.42 were voided and replaced. When they were voided, an adjustment to reinstate cash was not made so cash was charged twice for these transactions in the subsidiary ledger. 3. Three deposits for dances and three disbursements for dance supplies were made to the Student Council activity despite a subsidiary account for dances being established. Since the activity balances are never reconciled, these errors were not discovered. Comment 7 – Reconciliation of subsidiary ledgers to the overall cash in the general ledger and checking account As previously discussed there are no efforts to reconcile cash between the subsidiary ledgers and the corresponding records at Town Hall. This is important since the Treasurer’s accounts include interest earned, bank charges, bounced checks and other activity that the School may be unaware of in addition to assuring that all transactions are properly and consistently reported between the two sets of records. The following table summarizes the reconciliation we prepared in detail. Overall, bank balances are $1,010.91 greater than activity balances. We suggest this process is reviewed between the Town and the School to determine if this variance can be resolved. Unadjusted Bounced Adjusted Club Balance Check Interest void check Balance Yearbook 401.74 401.74 Bookfair (278.61) (278.61) Class of 2019 1,464.15 1,464.15 Class of 2020 289.79 289.79 Class of 2021 1,479.00 1,479.00 Drama 91.79 91.79 Student Council 5,500.04 40.33 1,039.42 6,579.79 Honor Society 502.00 502.00 Student Assistance 6,298.17 6,298.17 Grade 6 Field Trip 1,000.75 1,000.75 Grade 7 Field Trip 1,150.00 1,150.00 Grade 8 Field Trip 1,293.00 1,293.00 Music Trip 20.00 20.00 Spanish Field Trip 409.32 409.32 19,621.14$ -$ 40.33$ 1,039.42$ 20,700.89 Agency balance 21,311.80$ Checking balance 400.00 a Bank Balance 21,711.80 variance 1,010.91$ a Since checking account is not properly reconciled due to errors, balance is estimated, based on bank balance and subsequent year activity. Nantucket Public Schools Page 10 of 12 Student Activities Nantucket Elementary School Comments The elementary school processes the least amount of disbursements; only 13 were processed through the checking account during 2015. Many improvements were noted in the processing as curriculum items have been eliminated, subsidiary accounts were set up, the checking account is reconciled and activity is processed through quick books. During our review we observed the following that the school should address: Comment 1 – Subsidiary Ledgers Despite the subsidiary ledgers being set up, activity is recorded through quickbooks and closes to one equity account. This defeats the purpose of setting up subsidiary accounts. Since there was very little activity we created an accounting spreadsheet in Excel to show roll forward activity by subsidiary ledger club using the beginning balances set up during the consolidation. A template was left with the principal and should be used to maintain balances moving forward. Comment 2 - Reconciliation of subsidiary ledgers to the overall cash in the general ledger and checking account As previously discussed there are no efforts to reconcile cash between the subsidiary ledgers and the corresponding records at Town Hall. This is important since the Treasurer’s accounts include interest earned, bank charges, bounced checks and other activity that the School may be unaware of in addition to assuring that all transactions are properly and consistently reported between the two sets of records. The following table summarizes the reconciliation we prepared in detail. Beginning Ending balance Revenues Expenses Transfers Interest balance Fifth Grade 500.00$ 44,468.00$ (37,174.90)$ -$ -$ 7,793.10$ Fourth Grade 549.00 9,380.00 (9,445.00) - - 484.00 Third Grade 500.00 - - - - 500.00 Second Grade 500.00 - - - - 500.00 First Grade 500.00 - - - - 500.00 Kindergarten 500.00 - - - - 500.00 Pre K 500.00 - - - - 500.00 Playground 1,000.00 - - - - 1,000.00 Children's incentives 5,016.23 4,504.53 (397.52) - 96.71 9,219.95 Fund raiser - 855.00 (855.00) - - - Breakfast Buddies 1,500.00 - (49.65) - - 1,450.35 Literacy events 4,000.00 - (62.94) - - 3,937.06 Guest Speakers 3,000.00 - - - - 3,000.00 School Council Events 500.00 - - - - 500.00 Student Assistance 5,550.00 - - - - 5,550.00 24,115.23$ 59,207.53$ (47,985.01)$ -$ 96.71$ 35,434.46$ Agency per School 20,838.44$ 59,207.53$ (39,011.50)$ (9,614.38)$ 96.71$ 31,516.80$ Checking per School 3,276.79 - (8,973.51) 9,614.38 3,917.66 24,115.23$ 59,207.53$ (47,985.01)$ -$ 96.71$ 35,434.46$ Per Agency General Ledger - Town 31,446.80$ Per Checking account - School 3,917.66 35,364.46 variance 70.00$ Nantucket Public Schools Page 11 of 12 Student Activities Comment 3 – Subsidiary ledger input errors As discussed previously, the elementary school keeps track of activity in a subsidiary ledger maintained in quickbooks. We discovered input errors while reviewing the activity. 1. A deposit made on February 18 varied from the actual deposit by $145. 2. A deposit made on June 22 for $1,000 was not recorded in the subsidiary ledgers. Since the activity balances are never reconciled, these errors were not discovered. Nantucket Public Schools Page 12 of 12 Student Activities