Guest sullinss Posted November 23, 2010 Report Share Posted November 23, 2010 Proceedings of the audit Committee School District No. 2, Yellowstone County High School District No. 2, Yellowstone County Billings, Montana November 12, 2010 Call to Order Chair Marcy Mutch called the Audit Committee or order at 10:35 a.m. on Friday, November 12, 2010 in Room 219 of the Lincoln Center. Committee members in attendance were Marcy Mutch, Jack Eagle, Laura Bailey, Joyce Weber, Lindy Graves, and Greta Besch Moen. Also attending were Chief Financial Officer Thomas Harper, Controller Sheri Weidinger, District Clerk Leo Hudetz, and Audit Senior Manager Susann Hartwig of Eide Bailly LLP. Communication From the Public There was no public comment. Staff Recognition for CAFR Awards Chair Marcy Mutch, on behalf of the Audit Committee, recognized the Finance Office staff and presented them with the Award of Financial Reporting Achievement by the GFOA to the individuals designated as instrumental in their government unit achieving a Certificate of Achievement for Excellence in Financial Reporting for fiscal year 2008-09. This Certificate is presented to those government units whose annual financial reports are judged to adhere to program standards and represents the highest award in government financial reporting. The Certificate of Excellence in Financial Reporting for its CAFR for year 2008-09 from ASBO will be presented to the District at the Board meeting. Review Draft Comprehensive Annual Financial Report (CAFR) for Year Ended 2010 Audit Senior Manager Susann Hartwig reviewed the Independent Auditors’ Report saying we had a clean opinion. Susann reviewed the SAS 115 report (Management Letter) saying this is a report to governance letting them know if they found any deficiencies in the internal control system. The letter describes what the deficiencies are and if they are a material weakness or a significant deficiency. This report will be mirrored in the Yellow Book report. This audit showed one significant deficiency of noncompliance with the Office of Public Instruction in testing ECA accounts as follows: • Two of 17 account custodians did not send in monthly cash reconciliations to the District during the entire year. • Two of 17 ECA account reconciliations did not agree to District records by approximately $16 and $14 for the two accounts. • One ECA account did not maintaining monthly reconciliations during the year. • Two ECA accounts did not perform periodic inventory for school stores during the year. Sheri Weidinger stated these 17 accounts had not been audited in the past, and it involved three schools. Susann reviewed the Yellow Book report “Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government auditing Standards.” Additional testing was done for OPI issues, audit journal entries that affect the financial statements, and any prior period adjustment. There were no deficiencies in internal control over financial reporting. The ECA account question is a significant deficiency under Compliance and Other Matters. OPI should review this and send a letter stating if they agree with these findings. Thomas noted the Dept. of Administration will review this report along with our responses and corrective action. Susann reviewed the A-133 Compliance report (Opinion on Single Audit) where the auditors checked for compliance with 14 requirements regarding federal grants that were tested. They also looked for internal controls over compliance. Several federal programs were noncompliant relating to cash management in Title I, Title II, IDEA Part B, and SFSF. The Federal Award Findings and Questioned Costs were: 2010-01: Title I: Funds were drawn in advance. The audit checked to see if the District was earning interest on money when they should be spending it. The total effect of these transactions indicated $62k was overdrawn. Reimbursement requests were not reviewed by a level above to determine if the request was appropriate. Title II: Five months of cash requests exceeded those same five months of expenditures; however, the fiscal total of expenditures exceeded the cost reimbursements by approximately $50k. Reimbursement requests were not reviewed by a level above to determine if the request was appropriate. IDEA Part B: Excess cash of $43,530 was reimbursed to the state after June 30, 2010. Reimbursement requests were not reviewed by a level above to determine if the request was appropriate. SFSF: Excess cash of $924,694. Reimbursement requests were not reviewed by a level above to determine if the request was appropriate. At the end of the fiscal year the expenditures and requests for reimbursement did not exceed the grant award. Requesting funds in excess of expenditures can result in interest and penalties and noncompliance. Lack of management of internal controls over cash management requirements resulted in the noncompliance issues noted above. The auditor recommends cash management issues be noted and supervisory review of cash reimbursement requests. Thomas advised the ARRA funds arrived before the guidelines and interpretation issues. ARRA reports are done quarterly. Instructions were to draw down all funds for the quarter. ARRA funding will end in another year and these issues will disappear. There was nothing fraudulent. 2010-02: Non Compliance; Significant Deficiency in Internal Over Compliance The District’s purchasing department and the District’s management did not perform the suspension and debarment requirements on contracts related to Title I and IDEA that were over the $25k threshold. The District did perform an EPLS check, after the fact, which indicated the vendor/contracts in question were not disbarred or suspended. Thomas advised the bidding process and our contracts will be revised to implement this procedure. 2010-03: Allowable Costs; Significant Deficiency in Internal Over Compliance The District was in compliance with costs, but internal controls were not in place to prevent or detect some issues. Auditors tested 60 payroll transactions. 10 were related to the SFSF grant and eight did not have proper approval for salaries paid. 40 non payroll expenditures did not follow the purchasing policy for ordering items through the warehouse. Two transactions were initiated verbally and documentation was not sufficient; nor, were purchases properly approved. The grant was properly charged. The auditors recommend proper oversight and training to ensure proper approvals are made on a timely basis. Thomas said the person responsible for Title funds must authorize the expenditure for purchase. Approval must be done by the custodian of those funds. 2010-04: ARRA Reporting; Significant Deficiency in Internal Over Compliance Certain ARRA fund grants require quarterly expenditure reports. In 4/4 ARRA reports tested there was no supervisory review of the information submitted by staff until after the report was submitted. The District should establish an effective system of internal control which requires a supervisory review of staff prepared reports for accuracy and provide training. Susann reported a Davis Bacon Act issue exists. It could be a significant deficiency and may become a material weakness. It relates to the IDEA Part B ARRA funds for building a fence. The Davis Bacon Act is not addressed in the contract. Rich Whitney was to contact the State of Montana to see if the mini Davis Bacon mirrors the federal requirement. Certified payrolls from the contractor must also be tested. Since Susann has not received any information from our District on this issue, she will be writing it up. Thomas explained Rich believes the state prevailing wages are higher than the Davis Bacon. The regular bid process was used for this project. 2009-01: Prior Year Finding; Significant Deficiency in Internal Control over Compliance A prior year finding was not fully implemented for Title I, so it appears again this year. The finding related to expenditures on procurement cards for federal grants without proper approval by the appropriate personnel. The District is considered a high risk auditee because of the federal ARRA funds, and testing was significant. The District will have ARRA funds FY2011 and will continue with jobs that are ARRA funded. Marcy asked if fiduciary funds should be reported in the CAFR. Susann stated they are looked at as a component unit inside of another fund. Committee members reviewed the CAFR page by page. Editing will be completed and another review will be determined at a later date. Members Affirm Standards of Independence Chair Mutch stated as community members on the Audit Committee we need to declare we meet the standards of independence as set forth by the District. Jack Eagle stated his wife has become a full time teacher at Arrowhead Elementary and acknowledges as a teacher she’s not in a position to materially affect financial outcomes of the District. Jack also believes it is necessary to disclose this information as pertains to a conflict of interest. Jack was asked to serve on the committee this year, but he is concerned with the perception; and, therefore, he does not wish to serve on the Audit Committee next year. Laura Bailey moved to state that Jack Eagle’s wife working as a full time teacher does not impair his independence; that she has no control over financial statements or influence on the financial statements. Joyce Weber seconded the motion. The motion carried unanimously. Chair Marcy Mutch affirmed that she meets the independence standards as set forth by the District. Laura Bailey affirmed that she meets the independence standards as set forth by the District. Thomas Harper stated only outside Committee members need declare this as Trustees on the Committee have their own standards to adhere to. Approve Minutes of September 17, 2010 Lindy Graves moved to approve the minutes of September 17, 2010. Joyce Weber seconded the motion. Voting in favor of the motion was Marcy Mutch, Laura Bailey, Joyce Weber, Jack Eagle, and Lindy Graves. Greta Besch Moen abstained. The motion carried. Review Written Responses to Comments from ASBO & GFOA on FY2008-09 CAFR Committee members reviewed responses to comments from ASBO and GFOA on the FY2008-09 CAFR. Adjournment There being no further business, the meeting was adjourned at 12:20pm. Marcy Mutch, Chair Sherrill Sullins, Recorder Link to comment Share on other sites More sharing options...
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