Audit Committee - RCPS

Minutes of the Roanoke City School Board Audit Committee November 2, 2015 Audit Committee Members Present: Bill Hopkins, Committee Chair Laura Rottenborn, Committee Member Others Present: Suzanne Moore, Chairperson, Roanoke City School Board Steve Barnett, Assistant Superintendent for Operations Kathleen Jackson, Chief Financial Officer Donna Caldwell, Director of Accounting John Aldridge, Engagement Partner, Brown, Edwards & Company Chris Banta, Engagement Director, Brown, Edwards & Company Cari Spichek, Senior Auditor, City of Roanoke Drew Harmon, Municipal Auditor, City of Roanoke Sarah Gregory, Roanoke Times 1. Call to Order - The meeting of the Roanoke City School Board Audit Committee was called to order at approximately 10:02 A.M. by Chairperson Bill Hopkins. 2. Presentation of Audit Results for the June 30, 2015, Comprehensive Annual Financial Report Activity Funds - The auditor’s opinion was qualified based on inadequate internal accounting controls over receipts. Due to the decentralized nature of cash collections in school divisions, this is a commonly cited qualification. - One (1) deposit out of 367 tested was $100 less than the supporting receipt. A $3,800 deposit was made for a receipt showing $3,900 was received. - Four (4) of 367 receipts tested were remitted to the school office one to two days after received by the teacher. Teacher’s receipts should be submitted to the bookkeeper daily. - Ten (10) of 123 purchases tested exceeded the amount of the approved PO. Management allows for a 10% variance up to $25 as an efficiency measure and will formally document this procedure for future reference. - Many of the prior year comments appeared to have been remedied in the current year. However, auditors noted receipts were not consistently issued for money received. Four schools had not issued receipts in some cases. One additional school did not issue receipts for checks received. Comprehensive Annual Financial Report [CAFR] - The auditor’s opinion was unmodified and no material weaknesses were cited. - RCPS is one of the few school divisions that produces its own CAFR and receives the certificate of excellence in financial reporting from the Association of School Business Officials as well as from the Government Finance Officers Association. Page 1 of 4 Audit Committee Minutes November 2, 2015 - Management’s Discussion and Analysis summarizes the Division’s financial highlights. - Readers of the MD&A should be aware that the stark change in net position from 2014 to 2015 is largely due changes in how the liability for the pension is reported. The 2014 numbers were not required to be restated due to the challenge of estimating the liability. - The net position includes a $122,014,477 net pension liability causing a negative net position of $(102,360,673). - In Virginia, school divisions can’t issue debt and so localities report their buildings and land on the locality’s financial statements to keep the assets with the debt. The capital assets of $3,016,131 reported for RCPS only include vehicles and equipment costing more than $5,000. - Payments to the pension fund during the fiscal year were reported as deferred outflows and will appear as deferred inflows in next year’s statement of net position. - The balance sheet for governmental funds on page 31 shows a nearly $22 million unassigned fund balance. - Pages 45 thru 73 of the CAFR are new pages required by the pension reporting standards. - Page 104 shows how the division’s fund balance has grown over the last ten years. - Page 105 shows revenue and expenditure growth for the last ten years. - Page 124 shows the division spent ~ $18.5 million in federal funds in fiscal 2015. Programs accounting for 3% of more of the total are classified as major programs. Brown Edwards has audited all of the major programs in recent years, allowing them to limit single audit work to the child nutrition program this year. - There were no issues with non-compliance noted and no material weaknesses noted. Comments on internal controls - Amounts due to and from the City were not reconciled timely. Brown Edwards recommends a quarterly reconciliation of these amounts. Management noted that the reconciliation with the city is completed each year as part of preparing final statements and adequate processes are in place to confirm the accuracy of due to and due from amounts. - Bank reconciliations are carrying old reconciling items from the original implementation of the accounting system totaling $1,072,456. These differences derived from the school activity funds accounts during implementation in 2010. Management continues to work with the vendor to find a way to resolve this issue. - One conflict of interest statement was not filed by the June 15th deadline. This was the first year in which a semi-annual filing was required. Management will take steps to ensure Board members are given advance notice of the required filing. - Prior year comments were also reviewed o Reimbursement requests for monies expended by the division and due, primarily from the state, were again not considered timely. o Management accepted the risks related to certain employees having the ability to set up vendor accounts and approve purchase orders. This is a valid response since it is not deemed a material weakness in controls. o The accounting software vendor had not previously provided a service auditor’s report addressing the effectiveness of their controls over the system, data access and the software program. The vendor provided a SOC1 report this year. Page 2 of 4 Audit Committee Minutes November 2, 2015 - New accounting pronouncements were briefly mentioned. Required communications letter - Four corrected misstatements were mentioned. These arise in the normal course of discussion between the auditors and management. The standards require that these be communicated to the Board. - There were no uncorrected misstatements. - The signed representations letter is included and reflects management’s assurance that they’ve been forthcoming with the auditors and have fully disclosed all relevant facts known to them. 3. Audit Report – Student Health Services - The school board contracted with Carilion Clinic to provide school nurses beginning in 2011. - The scope of the contract evolved as the school division and Carilion learned from experience. - All elementary schools, middle schools, and high schools are assigned a full time nurse - Forest Park Academy and Noel C. Taylor Learning Academy share one nurse - There are two floating nurses who can cover for absent nurses - One full time preceptor and one full time nurse manager are also assigned to the school division - The school division employs a coordinator who is an RN, to oversee the services provided by Carilion and to ensure compliance with all applicable regulations - Payment history o 2011/12 = $1,455,126 o 2012/13 = $1,485,888 o 2013/14 = $1,825,140 [refund ~ $25,000] o 2014/15 = $1,861,737 [refund ~ $50,000] - Carilion also provides teen outreach services to RCPS students under a separate MOU. RCPS provides space at each high school, utilities and up to $3,000 for printing and mailing brochures to families annually. - Our specific audit objectives addressed controls over student medications, access to student health information, and contract administration. - Overall, we concluded that the Division’s Coordinator was very actively and effectively managing the nursing services provided by Carilion. Medication protocols were sound, as were security protocols. - We observed that annual payments were substantially in accordance with the agreements signed by the school division. However, a better understanding of the basis of the annual agreements and means of validating final costs were recommended. 4. Update on Current Audit Work - Workers compensation audit field work should be completed by November 11. This audit includes reviewing pre-employment processes, employee safety programs and training, incident reporting and investigation, case management, third party administration, and excess coverage. - The fixed assets audit planning phase has just been completed. Audit objectives will likely include Page 3 of 4 Audit Committee Minutes November 2, 2015 o Determining if management controls are adequate to ensure that obsolete and damaged assets are disposed of efficiently and economically. o Determining if the annual inventory process effectively accounts for all division assets costing $500 or more. - The time and attendance audit should be initiated by mid-November by Cari Spichek. 5. Other Business - Future Meetings o January 21st at 11:00 A.M. o March [to be determined] o June [to be determined] 6. Adjournment Mr. Hopkins adjourned the meeting at approximately 11:10 A.M. Page 4 of 4