Hamburg Central School District - Continuing Education (2019M-11) (full text)

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY REPORT OF EXAMINATION | 2019M-11 Hamburg Central School District Continuing Education JULY 2019

Contents Report Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Continuing Education Cash Receipts . . . . . . . . . . . . . . . . . . 2 How Should the District Properly Account for Money Collected?. . . . 2 The District Can Improve Its Continuing Education Cash Receipts Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 What Do We Recommend? . . . . . . . . . . . . . . . . . . . . . . . 4 Appendix A – Response From District Officials . . . . . . . . . . . . . 6 Appendix B – Audit Methodology and Standards . . . . . . . . . . . 10 Appendix C – Resources and Services. . . . . . . . . . . . . . . . . 12

Report Highlights Hamburg Central School District Audit Objective Background Determine whether the District’s continuing education cash receipts are properly accounted for. The Hamburg Central School District (District) serves the Towns Key Findings of Boston, Eden, Hamburg and Orchard Park in Erie County. ll Incompatible duties were not properly segregated or monitored. The District is governed by an elected seven-member Board ll The Board and District officials have not established of Education (Board). The written policies and procedures regarding the Superintendent of Schools continuing education cash receipts process. (Superintendent) is the chief ll The District does not have assurance all continuing executive officer and is education cash receipts are properly accounted for responsible, along with other due to internal control weaknesses. administrative staff, for the District’s day-to-day management under the Board’s direction. Key Recommendations ll Segregate incompatible duties and properly monitor The District operates a cash receipt activities. continuing education department (Department) which provides ll Develop and adopt written policies and procedures annual continuing education for collecting, processing, recording and depositing programs for community members cash receipts. in the fall and spring semesters. ll Properly address internal control weaknesses noted The District Community Relations in the report. Coordinator (Coordinator) oversees the day-to-day District officials agreed with our recommendations and operations. The Coordinator also indicated they planned to initiate corrective action. supervises a part-time clerk (clerk) who assists with the Department’s day-to-day operations. Quick Facts Fall 2016 through Fall 2017 Semesters Revenue $56,000 Classes Offered 126 Audit Period July 1, 2016 – June 8, 2018 Of f ic e of t he New York State Comptroller 1

Continuing Education Cash Receipts How Should the District Properly Account for Money Collected? While the Board is responsible for providing adequate oversight of the Department’s operations, which includes adopting written policies over cash receipts, the Coordinator is responsible for overseeing the Department’s day-to- day operations. Department employees should maintain accurate and complete cash receipts records, using press-numbered, duplicate, itemized receipts which indicate the form of money collected (i.e., cash, check, money order) and the payer and date, to help ensure that all money collected is properly accounted for. The Department keeps the money collected in a locked cabinet until it is remitted to the Business Office. Both the Coordinator and the clerk have access to the cabinet. Deposits should be made in a timely manner and then subsequently reconciled to Department records (i.e., cash receipts documents) to ensure all of the money received was deposited intact. Oversight becomes particularly important in operations that do not have adequate segregation of duties. If one person, such as the Coordinator or the clerk, performs, or has access to perform, nearly all financial duties (e.g., receives or has access to cash, maintains the Department’s records, creates class rosters and prepares deposits), it weakens control over the cash receipts process. When it is not feasible to properly segregate incompatible duties among Department staff, sufficient mitigating oversight by District officials, such as the District Treasurer (Treasurer) who is the official custodian of all District money, should be performed to help ensure that cash receipts are properly accounted for. The District Can Improve Its Continuing Education Cash Receipts Process We examined the Department’s cash receipts activity and found weaknesses in procedures. We found no significant discrepancies when comparing participant registration forms to cash receipts recorded in the Department’s revenue ledger and to bank deposits. However, without duplicate press-numbered, itemized receipts, there is no assurance that all course registration fees paid to the Department were properly accounted for. Further, both the Coordinator and the clerk perform, or have access to perform, all of the same functions in the cash receipts process. As a result, incompatible duties (of receiving and having access to undeposited cash receipts and updating participant registrations and class rosters) were not properly segregated or mitigated by sufficient monitoring and oversight. These exceptions occurred because the Board did not establish a written policy and District officials did not develop detailed procedures to provide guidance 2 Of f ic e of t he New York State Comptroller

for the Department on how to properly account for and handle cash receipts. Because the Board has not clearly communicated appropriate methods for the Department to collect, record and deposit cash receipts, the Department did not have adequate internal controls to ensure that cash receipts were properly accounted for. While the Department did have press-numbered, duplicate, itemized cash receipts books on hand that could have been used, the books generally were not used. The Coordinator told us that the Department does not routinely use these receipt books because they consider the participant registration forms that payers submit to enroll in a course as a cash receipts record.1 However, this is an inadequate cash receipts record because, for example, it does not contain a sequenced numbering or provide for a duplicate copy to be retained by both the Department and the payer. As a result, from September 9, 2016 through October 10, 2017, a total of only 11 duplicate receipts were used in sequential order totaling $680. However, during this same time period, the Department’s revenues totaled approximately $56,000 as recorded by the Business Office in 22 bank deposits and revenue entries. We compared this amount in total, to amounts indicated as received on participant registration forms for the same time period and noted no significant exceptions.2 Due to the noted weaknesses, we sought to determine whether the amount of revenue reported in total for each course was reasonably similar to the actual class rosters upon which certain instructors were paid. We examined the Department’s registration records for all 34 courses offered in the spring 2017 semester for a fee and found that 14 courses were led by instructors who were paid based on participant registrations as identified on the class roster. We found that eight instructors were paid on vouchers which indicated approximately 140 participants attended those courses.3 We compared the enrollment headcount on the vouchers to the headcount on the registration forms in the Department’s records for each of those 14 courses and noted no exceptions. We further examined eight of these 14 courses to determine whether participant payments were deposited timely. There were 97 registration forms which indicated that participants paid course fees totaling $4,820; 78 by checks totaling $4,525 and six in cash totaling $295.4 We compared the receipt date indicated on the registration form by the Department to the date of deposit for the 78 checks and 1 The Department will use the press-numbered receipts when a payer requests them to do so. 2 We discussed certain minor exceptions with District officials. 3 Thirteen courses were led by Board-appointed instructors and paid by an hourly rate. Four courses were subsequently canceled and two courses were conducted without an instructor. Certain instructors led more than one course. 4 Certain participants paid for multiple courses using the same check, some of which were not courses we selected in our sample. We excluded those amounts from our review. Of f ic e of t he New York State Comptroller 3

found numerous untimely deposits. For example, we found that 52 checks totaling $3,055 were deposited between 11 and 30 days later than the receipt date. We then expanded this testing to include all 17 participant check payments totaling $985 deposited between March 1, 2017 and May 31, 2017 that were not already examined in the original eight courses. While we found no significant exceptions with the majority of these deposits, we noticed that two checks were received by the Business Office and subsequently deposited 73 and 84 days after the Department indicated they were received on the registration form. On further review, we found that the Department previously requested the Business Office to issue a refund to the payers for both of these items because the corresponding classes were canceled. However, the Department had not yet submitted the checks to the Business Office for deposit. As a result, the Business Office issued refunds for payments that had not yet been deposited. The Business Office maintains a spreadsheet containing an itemized description of all items the Department forwards to them for deposit including identification of the form of payment, (e.g., cash, check or money order) and if the payment was in the form of check or money order number, the date, payer name, amount and date the Business Office receives the item is also included. We traced all 253 items totaling $13,769 received by the Business Office from the Department back to the Department’s handwritten summary of total amounts of cash and checks that was forwarded for all 34 of the spring 2017 semester courses offered and noted no significant exceptions regarding the total dollar amounts or form of the cash receipt. The Department did not remit all receipts for deposit in a timely manner or record the collection of all receipts in a press-numbered, duplicate receipts book that was routinely reviewed by an individual outside of the collection process. As a result, the District has an increased risk that cash receipts could be lost or misappropriated without detection. What Do We Recommend? The Board and District officials should: 1. Develop and adopt written policies and procedures for collecting, processing, recording and depositing Department cash receipts. 2. Ensure that Department duties are adequately segregated or implement compensating controls such as increased supervisory review of the Department’s work and a periodic reconciliation of the Department’s cash receipts activity by someone independent of the Department’s cash receipts process, such as the Treasurer. 4 Of f ic e of t he New York State Comptroller

The Department should: 3. Issue press-numbered, duplicate receipts for all money collected and obtain a receipt from the Business Office for all money remitted for deposit. 4. Remit cash receipts in a timely manner to the Business Office for deposit, and do so in the same form and amount as received. Of f ic e of t he New York State Comptroller 5

Appendix A: Response From District Officials5 The District‘s response letter refers to recommendations that have been renumbered in the final report. 5 The District’s response also addresses findings and recommendations from a separate report of the District that we released, titled Hamburg Central School District – Information Technology (2019M-10). This audit report can be found at: https://www.osc.state.ny.us/localgov/audits/index.htm. The first five recommendations refer to the Information Technology audit report and the last four refer to this report. 6 Of f ic e of t he New York State Comptroller

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Appendix B: Audit Methodology and Standards We conducted this audit pursuant to Article V, Section 1 of the State Constitution and the State Comptroller’s authority as set forth in Article 3 of the New York State General Municipal Law. To achieve the audit objective6 and obtain valid audit evidence, our audit procedures included the following: ll We interviewed District officials including Department staff and reviewed Board meeting minutes to obtain an understanding of the Department’s cash receipts process and any related policies or procedures in place, including an evaluation of Department staff duties and whether the duties were properly segregated. ll We obtained the Department’s press-numbered, duplicate receipts book and evaluated its use from September 9, 2016 through October 10, 2017 to determine whether receipts were issued sequentially and intact. We chose this period to evaluate as it corresponded with the three semester sessions (fall 2016, spring 2017 and fall 2017) that were completed prior to when we were on site for our audit fieldwork. ll We obtained the Department’s revenue ledger from the Business Office for the fall 2016, spring 2017 and fall 2017 semesters. We compared the total amount of cash receipts reported as deposited ($56,000) and then reviewed the Department’s records to determine whether the total amounts were supported by amounts recorded as received on participant registration forms. We chose this period to evaluate because the activity for these semesters had been completed prior to the end of our audit fieldwork. ll We selected the spring 2017 semester to perform certain additional testing. We obtained the spring 2017 semester course offering catalogue to determine how many courses were offered for a fee (34). For the 14 courses which were led by eight instructors who were paid based on class roster headcount, we compared the actual class roster to the instructor’s payment voucher from the Business Office to determine whether the headcount was the same. We also compared this headcount to participant registration forms in the course folder to determine the headcount was also the same. ll We further examined eight of these 14 courses to determine whether participant payments were deposited timely by comparing the date the Department wrote the payment was received on the participant registration forms to the date of actual deposit as noted in the Business Office ledger detail, bank statements and composition of deposit images. We then expanded this testing to include all 17 participant check payments totaling $985 deposited between March 1, 2017 and May 31, 2017 that were not already examined in the original eight courses. We selected this time period as it was approximately halfway through the spring course semester. 6 We also issued a separate audit report, Hamburg Central School District – Information Technology (2019M-10). 10 Of f ic e of t he New York State Comptroller

ll We obtained the Business Office’s detailed spreadsheet which indicated itemized information the Department had submitted for deposit for the spring 2017 semester and compared the amount in total ($13,769) to the total of the Department’s handwritten summary of total amounts of cash and checks that was forwarded to determine whether the amounts and form were the same. We selected the spring 2017 semester because the total revenues reported were less than other completed semesters in our audit period and noted it could be indicative of higher risk factors for all cash receipts not being properly accounted for. We conducted this performance audit in accordance with GAGAS (generally accepted government auditing standards). Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. Unless otherwise indicated in this report, samples for testing were selected based on professional judgment, as it was not the intent to project the results onto the entire population. Where applicable, information is presented concerning the value and/or size of the relevant population and the sample selected for examination. A written corrective action plan (CAP) that addresses the findings and recommendations in this report must be prepared and provided to our office within 90 days, pursuant to Section 35 of General Municipal Law, Section 2116-1(3)(c) of New York State Education Law and Section 170.12 of the Regulations of the Commissioner of Education. To the extent practicable, implementation of the CAP must begin by the end of the fiscal year. For more information on preparing and filing your CAP, please refer to our brochure, Responding to an OSC Audit Report, which you received with the draft audit report. We encourage the Board to make the CAP available for public review in the District Clerk’s office. Of f ic e of t he New York State Comptroller 11

Appendix C: Resources and Services Regional Office Directory www.osc.state.ny.us/localgov/regional_directory.pdf Cost-Saving Ideas – Resources, advice and assistance on cost-saving ideas www.osc.state.ny.us/localgov/costsavings/index.htm Fiscal Stress Monitoring – Resources for local government officials experiencing fiscal problems www.osc.state.ny.us/localgov/fiscalmonitoring/index.htm Local Government Management Guides – Series of publications that include technical information and suggested practices for local government management www.osc.state.ny.us/localgov/pubs/listacctg.htm#lgmg Planning and Budgeting Guides – Resources for developing multiyear financial, capital, strategic and other plans www.osc.state.ny.us/localgov/planbudget/index.htm Protecting Sensitive Data and Other Local Government Assets – A non- technical cybersecurity guide for local government leaders www.osc.state.ny.us/localgov/pubs/cyber-security-guide.pdf Required Reporting – Information and resources for reports and forms that are filed with the Office of the State Comptroller www.osc.state.ny.us/localgov/finreporting/index.htm Research Reports/Publications – Reports on major policy issues facing local governments and State policy-makers www.osc.state.ny.us/localgov/researchpubs/index.htm Training – Resources for local government officials on in-person and online training opportunities on a wide range of topics www.osc.state.ny.us/localgov/academy/index.htm 12 Of f ic e of t he New York State Comptroller

Contact Office of the New York State Comptroller Division of Local Government and School Accountability 110 State Street, 12th Floor, Albany, New York 12236 Tel: (518) 474-4037 • Fax: (518) 486-6479 • Email: [email protected] www.osc.state.ny.us/localgov/index.htm Local Government and School Accountability Help Line: (866) 321-8503 BUFFALO REGIONAL OFFICE – Jeffrey D. Mazula, Chief Examiner 295 Main Street, Suite 1032 • Buffalo, New York 14203-2510 Tel (716) 847-3647 • Fax (716) 847-3643 • Email: [email protected] Serving: Allegany, Cattaraugus, Chautauqua, Erie, Genesee, Niagara, Orleans, Wyoming counties Like us on Facebook at facebook.com/nyscomptroller Follow us on Twitter @nyscomptroller