1. Student Activity Funds Procedures and Findings MGFOA October 22, 2015 Melanson Heath Certified Public Accountants John J. Sullivan, CFE

2. Chapter 71, Section 47 “There shall be an annual audit of the student activity funds which shall be conducted in accordance with procedures as agreed upon between the school committee and the auditor based upon guidelines issued by the department of education.” “There shall be an annual audit of the student activity funds which shall be conducted in accordance with procedures as agreed upon between the school committee and the auditor based upon guidelines issued by the department of education.”

3. DESE Audit Guidelines II. A. “DESE recommends the audit be performed by an outside independent audit firm once every three years for those activities greater than $25,000.” “DESE recommends the audit be performed by an outside independent audit firm once every three years for those activities greater than $25,000.” “In the intervening years, the audit may be conducted by a responsible individual independent of the student activities, with the approval of the School Committee.” “In the intervening years, the audit may be conducted by a responsible individual independent of the student activities, with the approval of the School Committee.”

4. Who is Independent Internally Town Accountant/City Auditor Town Accountant/City Auditor Treasurer Treasurer School Business Manager School Business Manager If not involved in the administration or transactional processing If not involved in the administration or transactional processing

5. Walkthrough of DESE Guidelines Seven sections Seven sections Administration Administration Stewardship and Custodial Responsibility Stewardship and Custodial Responsibility General Operating Procedures General Operating Procedures Revenues, Receipts and Deposits Revenues, Receipts and Deposits Purchasing and Disbursements Purchasing and Disbursements Class, Inactive accounts and Deficits Class, Inactive accounts and Deficits Student Travel Student Travel

6. Administration “The School Committee should adopt policies and procedures for the creation, operation, control and public reporting of student activity accounts” “The School Committee should adopt policies and procedures for the creation, operation, control and public reporting of student activity accounts” Amended for DESE Guidelines Amended for DESE Guidelines Provide to Bookkeepers and Advisors Provide to Bookkeepers and Advisors Annual Review, Inactive Accounts Annual Review, Inactive Accounts Segregation of Duties Segregation of Duties

7. Administration – cont.. “A student activity account may be used for funds raised by student organizations which will be expended by those students for their benefit. Funds raised or donated that are governed by laws other than the SAF laws cannot be deposited to a SAF account” “A student activity account may be used for funds raised by student organizations which will be expended by those students for their benefit. Funds raised or donated that are governed by laws other than the SAF laws cannot be deposited to a SAF account” Obtain listing – evaluate if funds have been properly deposited or if they should be another type of fund (revolving, etc.). Obtain listing – evaluate if funds have been properly deposited or if they should be another type of fund (revolving, etc.).

8. Administration – cont.. “Accounting system must be implemented and in a sufficient manner to facilitate basic reconciliations and control procedures” “Accounting system must be implemented and in a sufficient manner to facilitate basic reconciliations and control procedures” Through inquiry and observation, verify that the accounting system will facilitate the following: Through inquiry and observation, verify that the accounting system will facilitate the following: Recording and reporting receipts and disbursements by each SAF in the SAF ledger Recording and reporting receipts and disbursements by each SAF in the SAF ledger Recording of cash and investment accounts that can be reconciled with the checking account (Principal) and savings account (Treasurer) Recording of cash and investment accounts that can be reconciled with the checking account (Principal) and savings account (Treasurer) General cash and investment accounts in aggregate can be reconciled to the aggregate detailed fund accounts within the SAF General cash and investment accounts in aggregate can be reconciled to the aggregate detailed fund accounts within the SAF

9. Administration – cont.. Through Inquiry: Through Inquiry: Determine if all individuals who process, record, and report SAF transactions possess the skills necessary to perform the duties in and adequate manner Determine if all individuals who process, record, and report SAF transactions possess the skills necessary to perform the duties in and adequate manner Determine if there is an ongoing process of training in place Determine if there is an ongoing process of training in place During our audit it usually becomes evident if individual is qualified or not During our audit it usually becomes evident if individual is qualified or not

10. Stewardship and Custodial Responsibilities Chapter 71 Section 47 requires and agency account must be set up by the City/Town Treasurer Chapter 71 Section 47 requires and agency account must be set up by the City/Town Treasurer Generally interest bearing savings account Generally interest bearing savings account If authorized by School Committee, a checking account that acts as an imprest (replenishment) account to be administered by Principal or Designee? If authorized by School Committee, a checking account that acts as an imprest (replenishment) account to be administered by Principal or Designee?

11. Stewardship and Custodial Responsibilities – cont.. Maximum check account fund levels established Maximum check account fund levels established All deposits must be made into savings account with City/Town Treasurer All deposits must be made into savings account with City/Town Treasurer Principal may replenish checking account “accompanied by invoices or other support” Principal may replenish checking account “accompanied by invoices or other support” Bond coverage Bond coverage “There shall be an annual audit conducted in accordance with procedures based upon guidelines issued by DESE” “There shall be an annual audit conducted in accordance with procedures based upon guidelines issued by DESE”

12. Stewardship and Custodial Responsibilities – cont.. From an audit stand point we will need to: From an audit stand point we will need to: Obtain evidence of acceptance of MGL (minutes or certification of vote) Obtain evidence of acceptance of MGL (minutes or certification of vote) Determine requests for replenishment of checking account are adequately supported Determine requests for replenishment of checking account are adequately supported Determine annual audits have been performed Determine annual audits have been performed

13. General Operating Procedures Bank reconciliations done quarterly (monthly preferred) Bank reconciliations done quarterly (monthly preferred) Standardized forms for deposits and disbursements Standardized forms for deposits and disbursements Periodic reporting timelines to School Committee, School Business office, Town Accountant, Town Treasurer, SAF advisor Periodic reporting timelines to School Committee, School Business office, Town Accountant, Town Treasurer, SAF advisor Maintain subsidiary accounts by program within the SAF control account Maintain subsidiary accounts by program within the SAF control account Subsidiary accounts should be reconciled no less than quarterly to the total control account Subsidiary accounts should be reconciled no less than quarterly to the total control account Control accounts should be reconciled no less than quarterly to the combination of the Principals Checking account and the Treasurer’s Savings account Control accounts should be reconciled no less than quarterly to the combination of the Principals Checking account and the Treasurer’s Savings account

14. Revenue, Receipts, and Deposits Control of all receipts should include at a minimum Control of all receipts should include at a minimum Use of pre-numbered receipts Use of pre-numbered receipts Reconciliation of pre-numbered receipts or other revenue documents to cash collected Reconciliation of pre-numbered receipts or other revenue documents to cash collected Cash collection and deposit function segregated Cash collection and deposit function segregated Monies collected should be turned over to Principal or designee within 24 hours Monies collected should be turned over to Principal or designee within 24 hours All money turned over to Principal should be accompanied by deposit form All money turned over to Principal should be accompanied by deposit form

15. Revenue, Receipts, and Deposits – cont.. Control of all receipts should include at a minimum – continued: Control of all receipts should include at a minimum – continued: Principal should turnover all funds to Town Treasurer’s account at least weekly Principal should turnover all funds to Town Treasurer’s account at least weekly Interest earned by the student activity agency account (Treasurer’s account) shall be retained by the SAF. The use of aggregate earnings shall be at the discretion of the School Committee for the benefit of the students Interest earned by the student activity agency account (Treasurer’s account) shall be retained by the SAF. The use of aggregate earnings shall be at the discretion of the School Committee for the benefit of the students A policy must be adopted by the School Committee that specifies how undesignated receipts will be distributed and must be deposited into the agency account, not the Principals checking account A policy must be adopted by the School Committee that specifies how undesignated receipts will be distributed and must be deposited into the agency account, not the Principals checking account

16. Purchasing and Disbursements DESE recommends the following at a minimum are in place DESE recommends the following at a minimum are in place Advance of funds avoided (written approval advance deemed necessary) Advance of funds avoided (written approval advance deemed necessary) Student advisors or others involved in purchasing may not benefit personally Student advisors or others involved in purchasing may not benefit personally SAF may not be used for any purpose unrelated to student activities or for the benefit of any staff person SAF may not be used for any purpose unrelated to student activities or for the benefit of any staff person All disbursements should be made by check All disbursements should be made by check

17. Purchasing and Disbursements – cont.. Policy should specify method or methods to be used to pay expenses, including how to handle reimbursement of funds when credit card is used (this is important because of the potential “reward” benefits) Policy should specify method or methods to be used to pay expenses, including how to handle reimbursement of funds when credit card is used (this is important because of the potential “reward” benefits) Disbursements exceeding $600 in aggregate to any one individual or entity must be reviewed to determine if 1099 is required Disbursements exceeding $600 in aggregate to any one individual or entity must be reviewed to determine if 1099 is required Checks not written to “Cash” Checks not written to “Cash” Individual responsible for writing checks should be segregated from the record keeping and recon process Individual responsible for writing checks should be segregated from the record keeping and recon process

18. Purchasing and Disbursements – cont.. All disbursements are required to have adequate external supporting documentation All disbursements are required to have adequate external supporting documentation A standardized form should accompany all requests for check issuance A standardized form should accompany all requests for check issuance Standardized form should be accompanied by supporting documentation Standardized form should be accompanied by supporting documentation Checkbook recons will be performed monthly Checkbook recons will be performed monthly “All requests for replenishment to the School Principal imprest checking account must be adequately supported and processed through the Town warrant process “All requests for replenishment to the School Principal imprest checking account must be adequately supported and processed through the Town warrant process

19. Class, Inactive Accounts and Deficits DESE’s opinion that because graduates are no longer students, monies for student class grades that have graduated cannot be legally maintained in the student activity accounts. DESE’s opinion that because graduates are no longer students, monies for student class grades that have graduated cannot be legally maintained in the student activity accounts. School Committee policy should specify how these funds shall be disposed of upon class’ graduation School Committee policy should specify how these funds shall be disposed of upon class’ graduation Review Policies Review Policies Obtain listing and scan for graduated classes Obtain listing and scan for graduated classes Determine is disposition is in accordance with policy Determine is disposition is in accordance with policy

20. Class, Inactive Accounts and Deficits – cont.. Any student activity inactive for 3 years shall require the following actions in order to be closed Any student activity inactive for 3 years shall require the following actions in order to be closed Written notification by advisor that activity will cease to be viable. If advisor or student officer is not available, discontinuance shall be by vote of the School Committee Written notification by advisor that activity will cease to be viable. If advisor or student officer is not available, discontinuance shall be by vote of the School Committee All assets of the student activity shall be identified in writing All assets of the student activity shall be identified in writing Review policies Review policies Obtain list and scan for inactive accounts Obtain list and scan for inactive accounts Determine if disposition follows policy Determine if disposition follows policy

21. Class, Inactive Accounts and Deficits – cont. Individual activity accounts should not be permitted to be in a deficit position because such a position becomes a liability to other individual activities or possibly to future classes. Individual activity accounts should not be permitted to be in a deficit position because such a position becomes a liability to other individual activities or possibly to future classes. DESE recommends that the School Committee develop a policy for remedial action. DESE recommends that the School Committee develop a policy for remedial action. Possible remedial action: Possible remedial action: School Committee appropriation School Committee appropriation Accumulated investment earnings Accumulated investment earnings Surpluses of inactive accounts Surpluses of inactive accounts Gift from any activity with a surplus through approval of advisor Gift from any activity with a surplus through approval of advisor Any other legal means Any other legal means

22. Student Travel Travel policy should be adopted and should include: Travel policy should be adopted and should include: Request prepared well in advance Request prepared well in advance Request should be submitted by the advisor or other person responsible for trip Request should be submitted by the advisor or other person responsible for trip Standardized Travel Authorization forms Standardized Travel Authorization forms Method used to pay travel expenses Method used to pay travel expenses Statement of final accountability Statement of final accountability