Audit Committee - RCPS

Minutes of the Roanoke City School Board Audit Committee November 2, 2017 Audit Committee Members: Bill Hopkins, Committee Chair - Present Laura Rottenborn, Committee Member - Present Others Present: Steve Barnett, Deputy Superintendent Kathleen Jackson, Chief Financial Officer Donna Caldwell, Director of Accounting Sandra Burks, Executive Director for Human Resources John Aldridge, Partner - Brown Edwards & Company Justin Martin, Manager - Brown Edwards & Company Justin McLeod, Community Relations Coordinator Drew Harmon, Municipal Auditor, City of Roanoke Cari Spichek, Senior Auditor, City of Roanoke Sarah Gregory, Roanoke Times Reporter 1. Call to Order Mr. Hopkins called the meeting to order at approximately 11:03 AM. 2. Presentation of Audit Results John Aldridge handed out the following reports: • Roanoke City Public Schools School Activity Funds “Comments on Internal Control and Other Suggestions for Your Consideration” • Roanoke City Public Schools School Activity Funds “Financial Report” • School Board of the City of Roanoke, Virginia (A Component Unit of the City of Roanoke, Virginia) “Comments on Internal Control and Other Suggestions for Your Consideration” • Required Communication with those Charged with Governance – for the Statement of Cash Receipts and Expenditures for RCPS School Activity Funds • Required Communication with those Charged with Governance – for the Financial Statements of the governmental activities, each major fund, and the remaining fund information of the School Board of the City of Roanoke, Virginia Mr. Hopkins asked if Brown Edwards audits the internal controls of the school division. Mr. Aldridge responded that his firm reviews and tests internal controls as they relate to financial reporting. He referred the committee to pages 113 through 116 in the CAFR, which describes the firm’s work on internal controls. An opinion on internal controls is not provided as the audit is designed to opine on the financial statements. Mr. Hopkins asked Mr. Aldridge to define internal controls, which Mr. Aldridge discussed from the perspective of systems and processes. Page 1 of 3 Audit Committee Minutes November 2, 2017 Ms. Rottenborn asked about materiality thresholds and how they work. Mr. Aldridge responded that it is based on revenue levels and would vary by fund. He added that materiality thresholds for federally funded expenditures are usually lower. Procedures required by the State often don’t consider materiality. For example, conflict of interest disclosures by members of the Board are either filed by the deadline or are filed late. Mr. Hopkins asked Mr. Harmon if the Municipal Auditing Department looks at internal controls. Mr. Harmon responded that the department does audit internal controls on a function-by-function basis. The last audit of internal controls in Finance was in 2008 and included accounts payable and accounting. Mr. Hopkins asked that Mr. Aldridge and Ms. Jackson meet at a later time to discuss the cost and benefits of an audit of internal controls. Mr. Hopkins asked Mr. Aldridge if this year’s report was a good one and what issues he would like to highlight as being most important. Mr. Aldridge responded that it was a good report with no findings and an unmodified opinion. Consistent with past years, a material weakness was noted related to receipting cash collected at the schools (page 6) for activity funds. This is an inherent risk that would be costly to mitigate. Ms. Rottenborn asked if prior year issues with receipts at specific schools had improved. Mr. Aldridge confirmed that compliance was better this year. Mr. Aldridge discussed the control comment related to system administrator rights in AptaFund. Administrator rights were reassigned from staff with finance roles to a programmer in the Technology department. Ms. Jackson retained administrator rights so that she could serve as a backup. The vendor has been unable to produce an effective report for monitoring administrator activity. The Division is in process of developing a “statement of needs” and may explore alternative systems. Mr. Aldridge moved on to federal programs, noting that Title I was the only program that had to be audited this year. There were no findings. Mr. Hopkins asked how the program was identified. Mr. Aldridge responded that as a low risk auditee, only 20% of federal dollars spent must be audited. Major programs must be audited at least every three years. Programs with findings must be audited the following year. Based on these factors, Title I satisfied the division’s single audit requirements for FY17. Upon wrapping up his comments, Mr. Aldridge passed out three (3) charts: - Months in General Fund Unassigned Fund Balance - Funding by Year and Source - Funding by Source Across Years Mr. Aldridge noted there is no formally recognized standard for the number of months’ expenditures that should be in unassigned fund balance. Somewhere around five months is probably more common. As there were no further questions from the group, Brown Edwards was excused from the meeting. Page 2 of 3 Audit Committee Minutes November 2, 2017 3. Audit Report – Substitute Services Mr. Hopkins noted that Municipal Auditing’s estimate of increased costs was $178,000 compared to the administration’s estimate of $119,000. He asked Mr. Harmon if Auditing’s estimate adjusted for increased daily rates and utilization, which Mr. Harmon confirmed was the case. Mr. Hopkins asked if everything else checked out well. Mr. Harmon stated that the vendor performed well and overall results were good. Ms. Rottenborn stated that she was pleased with the outcome. Mr. Hopkins asked for any further questions. Hearing none, the report was received and filed. 4. Other Business Mr. Hopkins asked for an update on other audit work. Mr. Harmon responded that the Fixed Assets audit report should be completed by the end of the calendar year. An entrance meeting for the audit of Purchasing is being held immediately after today’s Audit Committee meeting. Follow-up audits of Time and Attendance and Worker’s Compensation are planned for the first of the year. The Information Technology audit may need to be reconsidered based on availability of the Information Systems Auditor and recent events in IT. There were no further questions or comments. 5. Adjournment Mr. Hopkins adjourned the meeting at 11:32 AM. Page 3 of 3