1. Financial Statement and Accountability Audit Updates
Spring BAR Meeting
June 13, 2019
Erika Davies
Assistant Audit Manager
Community and Technical College Expert
Erin Anderson
Assistant State Auditor

2. Statewide Community and Technical College Experts
Today’s Presenters
Statewide Community and Technical College Experts
Erika Davies
Assistant Audit Manager
Everett
Erin Anderson
Assistant State Auditor
Financial Audit

3. Agenda and Overview
Grays Harbor College

4. Agenda What we do as Experts Community College Audit Overview
Exception trends
State of Washington CAFR Relationship
Financial Related Themes
Capital Assets
Foundations
Accountability Related Themes
Selected Colleges
Cash Receipting
Cybersecurity
SAO Resources
Erin’s slide
Centralia College

5. 2,721 total Audits in 2018

6. Community and Technical Colleges: 67 total in 2018-2019

7. Highlights
22 Colleges met March 31 deadline this year- Congratulations!
Renton Technical
Cascadia
Seattle Colleges
Lake Washington
Bellevue
Highline
Bellingham Technical
Walla Walla
Centralia
Columbia Basin
Skagit Valley
Yakima Valley
Wenatchee Valley
Grays Harbor
Everett
Lower Columbia
Peninsula
Big Bend
Clark Olympic
Edmonds
Bates Technical

8. Subject Matter Expert Role
Walla Walla Community College

9. Community and Technical College Experts
What we do
Client & Auditor HelpDesk
Develop Testing Strategies and Internal trainings
Develop Planning Guide
Provide Information to College Employees
Peninsula College

10. Community and Technical College Experts
Auditor and Client HelpDesk
How it works
Client portal
Auditor portal
Common questions
Look for the HelpDesk button on our website at SAO.wa.gov!

11. Community and Technical College Experts
Testing Strategies and Internal Trainings
Testing strategies = audit procedures
Step by step guide helps ensure we meet audit standards
“Know Before You Go” training
Required for all auditors to take before auditing a community college
Green River College

12. Community and Technical College Experts
Planning Guide
Auditor Resource
What’s new for Current Year
Required Risks to Assess
System Understandings
Foundation Information
Updated Annually

13. Trends in Audit Exceptions

14. Let’s play Family Feud!

15. Family Feud
We surveyed audit reports of community and technical colleges for the most popular categories of financial statement findings last year…. The top 3 answers are on the board!

16. 2018-2019 Financial Audit Exceptions
7 Findings
Foundation Issues (3)
Financial Statement Preparation (3)
GASB Implementation (1)

17. Family Feud
We surveyed audit reports of community and technical colleges for the most popular categories of financial statement management letters last year…. The top 4 answers are on the board!

18. 2018-2019 Financial Audit Exceptions
8 Management Letters
Financial Statement Preparation (4)
Capital Assets (2)
Certificates of Participation (1)
GASB Related Balances (1)

19. 2018-2019 Financial Audit Exceptions
113 Exit Items
Financial Statement Preparation (49)
Pension/OPEB (10)
Capital Assets (16)
Tuition & Fees (12)
Risk Assessment (7)
Cash & Investments (15)
Payroll & Other expenses (4)

20. Family Feud
We surveyed audit reports of community and technical colleges for the most popular category of accountability finding last year…. The top answer is on the board!

21. 2018-2019 Accountability Audit Exceptions
1 Finding
Cash Receipting (1)

22. Family Feud
We surveyed audit reports of community and technical colleges for the most popular categories of accountability management letters last year…. The top two answers are on the board!

23. 2018-2019 Accountability Audit Exceptions
2 Management Letters
Procurement (1)
Cash Receipting (1)

24. 2018-2019 Accountability Audit Exceptions
13 Exit Items
Cash Receipting (4)
Disbursements (3)
Open Public Meetings Act (2)
Risk Assessment
(2)
Loss Reporting (1)
IT Controls (1)

25. Washington State CAFR

26. Higher Ed Planning & Coordination How do Colleges get selected?
Washington State CAFR
What is the CAFR?
Higher Ed Planning & Coordination
How do Colleges get selected?
How is this helpful?

27. Overview
The WA Comprehensive Annual Report (CAFR) is a detailed presentation of the state’s financial condition as a whole
Reports most significant activities and balances for the fiscal year
Prepared by the Office of Financial Management
Statewide Accounting Team
Presented in three sections:
Introductory Section
Financial Section
Statistical Section
Largest Financial Audit Performed in Washington

28. State of Washington CAFR
Higher Education Planning and Coordination
AFRS Queries are ran for all 34 Community and Technical Colleges for significant line items
College selections are based on risk and quantitative size of account balance
1 College selected for general audit cycle risk
Cash and Cash Equivalents
Depreciable Capital Assets
Charges for Services (Tuition)
Education Expenses
Operating Grants
Federal Grants in Aid

29. State of Washington CAFR
Selected in the FY19 CAFR Audit
Bellevue College
Seattle Colleges
Tacoma Community College
Community Colleges of Spokane
Clover Park Technical College

30. State of Washington CAFR
For Example: Bellevue College
Helps Local Teams focus on other areas
Reduced Budgets
No duplicative work
How is our CAFR audit work useful?
Bellevue College

31. Common Financial Statement Themes
Everett Community College

32. Net Investment in Capital Assets
Balance is a calculation, therefore auditors will most likely be checking to ensure the reported amount follows this equation:
Total capital and infrastructure assets (including land and construction in progress)
Less: accumulated depreciation
Less: outstanding principal of related debt

33. Net Investment in Capital Assets – Tips
Number one cause of errors is from formula errors in the financial statement template
To avoid misstatements:
Check and make sure the financial statement workbook is referencing the correct cells
Do a manual calculation of what you would expect the balance to be and compare it to the financial statement workbook
Save this for the auditors as evidence of your review!

34. Capital Assets – Reconciliation
Reconcile Capital Asset amounts throughout the year!
Ensure amounts in Direct line agree to the Capital asset balance reported on the financial statements
Investigate differences and make appropriate adjustments
Retain support of your reconciliation and adjustments for the auditors
Agree the Capital Asset balance on the statement to the notes to the financial statements

35. Capital Assets – Physical Inventory
Physical inventories help catch additions and deletions that were not entered or removed from the financial system
SAAM suggests performing a physical inventory once every other year
During the physical inventory process, ensure purchased assets were added to the system and depreciation has been started
Retain documentation of the physical inventory for the auditors

36. Capital Assets – CIP
Check that Construction in Progress (CIP) is properly moved to a depreciable asset balance when projects are substantially complete (SAAM )

37. Foundations
For most Colleges, we issue two opinions: one for the College as a whole and one for the related Foundation (discretely presented component unit)
Suggestions:
Communicate early and often
Include review of the foundation as part of financial statement preparation process
Consider updating your agreement with the Foundation

38. Common Themes in Accountability Audits

39. Planned Accountability Audits for the 19-21 Biennium
Seattle Colleges
Skagit Valley College
Big Bend Community College
Walla Walla Community College
South Puget Sound Community College
Wenatchee Valley College
Everett Community College
Shoreline Community College
Columbia Basin Community College
Lake Washington Institute of Technology
Bates College
Pierce College
Renton Technical College
Green River Community College
Grays Harbor College
Lower Columbia College

40. Cash Receipting
Segregation of duties – one individual should not have control over the entire accounting transaction (authorization, recording, custody)
The following duties should be segregated:
Cash receipts
Cash counts
Bank deposits
Deposit receipt reconciliation
Bank reconciliations
Posting of deposits
Cash disbursements

41. Cash Receipting
Security – It’s important to put safeguards in place over cash to protect against theft or loss.
Example controls:
Keep all cash in a safe until it is deposited
Consider using a drop safe for areas with regular cash receipts to limit access to the contents of the safe
Limit access to the safe to supervisory and authorized staff only
Change the combination to the safe on a regular basis, especially during times of high staff turnover
Consider installing a camera and alarm system
If cash boxes are used, ensure each staff is assigned his/her own cash box in order to readily assign responsibility in the event of a loss

42. Cash receipting
Reconciliation and documentation – SAAM requires cash to be deposited daily and reconciled on a daily basis. Investigate any differences and document their causes.
Monthly bank reconciliations should also be performed to ensure all amounts were properly deposited and appropriately credited by the bank.
Management review – Supervisors should initial and date all reconciliations to demonstrate that they reviewed and approved the reconciliations.

43. Cybersecurity

44. Cybersecurity
How robust is your cybersecurity training?

45. Cybersecurity “Scammers” target college employees who handle money
Are staff trained to make a phone call before wiring funds?
Is the wire request expected?
Any large and unexpected wire transfer requests should be treated with increased skepticism.

46. Cybersecurity: Recognizing attacks
Are staff taught how to spot real-world attacks?
Are staff taught how to spot red flags?
Do staff know that large wire transfers have been made at several public institutions already?
These were real fraudsters who got a hold of public funds.

47. Common IT security audit recommendations
Policies
Risk assessments of information system processes and policies should be routinely updated in consideration of industry standards
User access
Review user access privileges on a periodic basis to ensure unauthorized users do not have access to modify key components of the system.
Only users who need access to perform their job duties have access to systems for payroll, tuition, capital assets, etc.
Backups
Document and maintain a specific process for determining what data and systems to back up
Create a weekly backup that is kept for at least three weeks

48. Five Simple Things that Work!
Invest in a Modern Operating System
Install ALL Security Patches ASAP!
Never use computer as Administrator
Install Anti-Malware Software and keep it updated
Create ‘strong’ passwords, and don’t reuse them

49. Opening Email Attachments
Just a Few More Tips
Data Loss Prevention
Control use of removable media (flash drives, CD/DVDs)
Don’t let staff move data to ‘free’ Cloud File Shares
Take Charge
Set Policy
Enforce it
TRAIN YOUR STAFF!
STOP and THINK Before
Clicking links
Opening Attachments

50. Office Resources

51. SAO.WA.GOV – New Website!

52. SAO.WA.GOV – New Website!
Quick Links

53. Search SAO Website Feature
SAO.WA.GOV – New Website!
Search SAO Website Feature

54. SAO.WA.GOV – New Website!

55. SAO.WA.GOV – New Website!

56. SAO.WA.GOV – New Website!

57. SAO.WA.GOV – New Website!

58. SAO.WA.GOV – New Website!

59. SAO.WA.GOV – New Website!

60. SAO.WA.GOV – New Website!

61. The Audit Connection Blog

62. The Audit Connection Blog

63. SAO Online Services
The Audit Connection Blog

64. SAO Online Services

65. SAO Online Services

66. SAO Online Services

67. SAO Online Services

69. Keeping track of previous audit issues: The old way

70. Follow the status of audits with ease
Sample slide title
Issues and corrections in one place
Better prepare for next audit
Show quickly that an issue is resolved
Bring new staff up to speed quickly
Sample language

71. Tracker Response Pending Verification Pending N/A
Entity Reported Status
Audited Status
N/A
Response Pending
Verification Pending

72. The Future of Tracker
The information Tracker will show is already available – Tracker will just present it in a more user-friendly way
Improved transparency increases trust in government

73. Office of the Washington State Auditor
Thank you for the opportunity to present today!

74. Contacts Troy Niemeyer Assistant Director of State Audit
Higher Education Program Manager
(360)
Erika Davies
Community and Technical College Expert
(425)
Erin Anderson
Community and Technical College Expert
(360)