Allen Independent School District November 7, 2016

Internal Audit Process When engaged by the District, we performed a risk assessment to evaluate each area of the District based on financial, operational, compliance, and technology risks. A multi-year internal audit plan was then developed, prioritizing areas of higher risk to the District. We are now in the process of validating the remediation of prior year audit deficiencies and beginning the FY 17 audit plan. Internal audit is designed to be a continual, scalable, risk-based function that provides consistent monitoring, evaluation, and reporting of adherence to District policies and procedures. Internal Audit Process Strategic Analysis Risk Assessment Audit Plan Development Execution & Reporting

Internal Audit Timeline Q2 FY16 Information Technology Consultation Q3-Q4 FY16 Fine Arts Internal Audit Plan Q1 FY17 Review of FY14-FY15 Deficiency Remediation FY17 Internal Audit Plan Oct – Dec 2015 Mar – May 2016 Aug – Sep 2016

Prior Audit Remediation Results

PEIMS Material Weaknesses: None Significant Deficiencies: One Prior Audit Results: The Special Services department sent class rosters to diagnosticians and speech therapists on an ad hoc basis to verify coding accuracy. The response rate was approximately 50%. Remediation Results: Procedures have been developed for student data recorded during the ARD meeting. Student Services now performs the verification by reconciling the coding to ARD meeting source data.

Records Management Material Weaknesses: None Significant Deficiencies: Two Prior Audit Results: The District was not being billed according to contracted rates for record management services for 5 sampled invoices. Physical security controls over the warehouse were not stringent. Remediation Results: Services provided by the record management vendor were reduced and rolled in one MSA. Physical security controls were improved when the District moved its warehousing function to the new Service Center.

Activity Funds Material Weaknesses: None Significant Deficiencies: Five Prior Audit Results: District personnel did not exercise dual control over cash during the cash receipts process in some instances. Some sampled activity fund reconciliations, deposit log reconciliations, and cash log records contained errors/omissions. Remediation Results: Dual sign-off on all deposit forms is now required. Activity fund audit procedures were expanded to address errors/omissions listed above. Cash training has been enhanced, streamlined, and reinforced.

Athletics Material Weaknesses: None Significant Deficiencies: Three Prior Audit Results: District personnel did not exercise dual control over cash during the gate receipts process in some instances. Ticket to cash reconciliations were not performed for middle school athletic events. Inventory records were not being maintained for athletics equipment. Remediation Results: Dual sign-off on is now required on all deposit forms. Reconciliations are now performed for all events and training has increased. An inventory management solution was implemented and inventory counts/reconciliations are being performed annually.

Eagle Stadium Parking Material Weaknesses: None Significant Deficiencies: One Prior Audit Results: The District was being billed at rates higher than the interlocal agreement rate sheet for event management services for 5 sampled events. Remediation Results: A Contract Signature Routing Form is now used that requires Purchasing to review contracts before final execution.

Facilities & Maintenance Material Weaknesses: One Significant Deficiencies: Five Prior Audit Results: Lack of formal procedures for facilities rentals. Invoices for 8 of 15 sampled rentals had not been sent. An aging schedule of receivables was not maintained. Agreements for 8 of 15 sampled rentals were unsigned. Inventory records were not maintained for maintenance equipment. An excessive number of master keys had been issued. Remediation Results: Facilities rental procedures are now in place. School Dude is utilized to maintain rental agreements, billing, and receivables aging. Inventory management solution is now in place. Master keys have been reduced and procedures over the issuance, revocation, and recording of master keys have been formalized.

Finance & Operations Material Weaknesses: None Significant Deficiencies: One Prior Audit Results: During the audit, the Department was not adequately staffed to perform its responsibilities. Remediation Results: The District has increased staffing and restructured its cabinet to segregate the finance and operations functions.

P-Cards Material Weaknesses: None Significant Deficiencies: Three Prior Audit Results: P-Card procedures manual was outdated. P-Card check-in/check-out procedures were not formally tracked and controlled. Errors and missing support in one sampled P-Card account reconciliation. Remediation Results: P-Card procedures manual has been updated. Check-in/check-out procedures have been formalized. Reconciliations performed with greater precision. Non-compliance notice and escalation procedures have been enhanced.

Purchasing Material Weaknesses: One Significant Deficiencies: Three Prior Audit Results: The District made payments to 2 vendors that exceeded the threshold for competitive bidding requirements. Formal contract approval procedures were not in place. Purchasing procedures manual was outdated. A vendor master file review had not been performed. Remediation Results: Third-party firm was engaged to evaluate procedures and the use of purchasing commodity classes. Contract Signature Routing Form is now used. A Contract Specialist position has been added. Purchasing procedures manual has been updated. Stale vendors are being deactivated and formal review is scheduled to be performed.

Skyward User Access Material Weaknesses: Two Significant Deficiencies: None Prior Audit Results: Skyward user access was administered by the Interim CFO. There were multiple super users whose access was not commensurate with their responsibilities. Remediation Results: Super user access has been restricted. The user provisioning process is now segregated: the Director of Finance approves Skyward access and the PEIMS department administers Skyward access.

Executive Summary Over the course of FY14 - FY15, Whitley Penn conducted 12 audits that covered a significant amount of areas in the District. Throughout all phases of the internal audit process, District management has been highly cooperative, responsive, and active in remediating audit deficiencies. The District has undergone major efforts to improve its internal controls and its overall posture toward governance, risk management, and safeguarding of assets. These include but are not limited to: Implementing an inventory management solution Implementing new purchasing procedures to mitigate financial risk Implementing new cash management procedures to mitigate financial risk Restructuring its cabinet to better meet the needs of the District Leveraging technologies to allow staff to perform their responsibilities efficiently while improving internal control performance

Next Steps Allen ISD Audit Plan Contract Management Accounting & Budgeting Transportation FY 2017 Human Resources Fixed Assets Construction & Facilities Activity Funds FY 2018 Investments Payroll

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