Student Activity FundsStudent Activity Funds

Procedures and FindingsProcedures and FindingsMGFOA October 22, 2015MGFOA October 22, 2015

Melanson Heath Melanson Heath

Certified Public AccountantsCertified Public Accountants

John J. Sullivan, CFEJohn J. Sullivan, CFE

Chapter 71, Section 47Chapter 71, Section 47

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

DESE Audit GuidelinesDESE Audit GuidelinesII. A.II. A.

““DESE recommends the audit be DESE recommends the audit be performed by an outside independent performed by an outside independent audit firm once every three years for audit firm once every three years for those activities greater than $25,000.”those activities greater than $25,000.”

““In the intervening years, the audit In the intervening years, the audit may be conducted by a responsible may be conducted by a responsible individual independent of the student individual independent of the student activities, with the approval of the activities, with the approval of the School Committee.”School Committee.”

Who is IndependentWho is IndependentInternallyInternally

Town Accountant/City AuditorTown Accountant/City Auditor

TreasurerTreasurer

School Business ManagerSchool Business Manager

If not involved in the administration or If not involved in the administration or

transactional processingtransactional processing

Walkthrough ofWalkthrough ofDESE GuidelinesDESE Guidelines

Seven sectionsSeven sections AdministrationAdministration Stewardship and Custodial Stewardship and Custodial

ResponsibilityResponsibility General Operating ProceduresGeneral Operating Procedures Revenues, Receipts and DepositsRevenues, Receipts and Deposits Purchasing and DisbursementsPurchasing and Disbursements Class, Inactive accounts and DeficitsClass, Inactive accounts and Deficits Student Travel Student Travel

AdministrationAdministration

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

Administration – cont..Administration – cont.. ““A student activity account may be used A student activity account may be used

for funds for funds raisedraised by student organizations by student organizations which will be which will be expended byexpended by those students those students for their benefit. Funds raised or donated for their benefit. Funds raised or donated that are governed by laws that are governed by laws other thanother than the the SAF laws cannot be deposited to a SAF SAF laws cannot be deposited to a SAF account”account” Obtain listing – Obtain listing – evaluate if funds have been evaluate if funds have been

properly deposited or if they should be another properly deposited or if they should be another type of fund (revolving, etc.).type of fund (revolving, etc.).

Administration – cont..Administration – cont.. ““Accounting system must be implemented Accounting system must be implemented

and in a sufficient manner to facilitate basic and in a sufficient manner to facilitate basic reconciliations and control procedures”reconciliations and control procedures” Through inquiry and observation, verify that the Through inquiry and observation, verify that the

accounting system will facilitate the following:accounting system will facilitate the following: Recording and reporting receipts and disbursements by Recording and reporting receipts and disbursements by

each SAF in the SAF ledgereach SAF in the SAF ledger Recording of cash and investment accounts that can be Recording of cash and investment accounts that can be

reconciled with the checking account (Principal) and reconciled with the checking account (Principal) and savings account (Treasurer)savings account (Treasurer)

General cash and investment accounts in aggregate General cash and investment accounts in aggregate can be reconciled to the aggregate detailed fund can be reconciled to the aggregate detailed fund accounts within the SAFaccounts within the SAF

Administration – cont..Administration – cont.. Through Inquiry:Through Inquiry:

Determine if all individuals who process, Determine if all individuals who process, record, and report SAF transactions record, and report SAF transactions possess the skills necessary to perform possess the skills necessary to perform the duties in and adequate mannerthe duties in and adequate manner

Determine if there is an ongoing process Determine if there is an ongoing process of training in placeof training in place

During our audit it usually becomes During our audit it usually becomes evident if individual is qualified or notevident if individual is qualified or not

Stewardship and Custodial Stewardship and Custodial ResponsibilitiesResponsibilities

Chapter 71 Section 47 requires and Chapter 71 Section 47 requires and agency account must be set up by the agency account must be set up by the City/Town TreasurerCity/Town Treasurer Generally interest bearing savings Generally interest bearing savings

accountaccount If authorized by School Committee, a If authorized by School Committee, a

checking account that acts as an imprest checking account that acts as an imprest (replenishment) account to be (replenishment) account to be administered by Principal administered by Principal or Designee?or Designee?

Stewardship and Custodial Stewardship and Custodial Responsibilities – cont..Responsibilities – cont..

Maximum check account fund levels Maximum check account fund levels establishedestablished

All deposits must be made into All deposits must be made into savingssavings account with City/Town Treasureraccount with City/Town Treasurer

Principal may replenish checking account Principal may replenish checking account “accompanied by invoices or other support”“accompanied by invoices or other support”

Bond coverageBond coverage ““There shall be an annual audit conducted in There shall be an annual audit conducted in

accordance with procedures based upon accordance with procedures based upon guidelines issued by DESE”guidelines issued by DESE”

Stewardship and Custodial Stewardship and Custodial Responsibilities – cont..Responsibilities – cont..

From an audit stand point we will From an audit stand point we will need to:need to: Obtain evidence of acceptance of MGL Obtain evidence of acceptance of MGL

(minutes or certification of vote)(minutes or certification of vote) Determine requests for replenishment of Determine requests for replenishment of

checking account are adequately checking account are adequately supportedsupported

Determine annual audits have been Determine annual audits have been performedperformed

General Operating General Operating ProceduresProcedures

Bank reconciliations done quarterly (monthly preferred)Bank reconciliations done quarterly (monthly preferred) Standardized forms for deposits and disbursementsStandardized forms for deposits and disbursements Periodic reporting timelines to School Committee, Periodic reporting timelines to School Committee,

School Business office, Town Accountant, Town School Business office, Town Accountant, Town Treasurer, SAF advisorTreasurer, SAF advisor

Maintain subsidiary accounts by program within the SAF Maintain subsidiary accounts by program within the SAF control accountcontrol account

Subsidiary accounts should be reconciled no less than Subsidiary accounts should be reconciled no less than quarterly to the total control accountquarterly to the total control account

Control accounts should be reconciled no less than Control accounts should be reconciled no less than quarterly to the quarterly to the combinationcombination of the Principals Checking of the Principals Checking account and the Treasurer’s Savings accountaccount and the Treasurer’s Savings account

Revenue, Receipts, and Revenue, Receipts, and DepositsDeposits

Control of all receipts should include at a Control of all receipts should include at a minimumminimum Use of pre-numbered receiptsUse of pre-numbered receipts Reconciliation of pre-numbered receipts or other Reconciliation of pre-numbered receipts or other

revenue documents to cash collectedrevenue documents to cash collected Cash collection and deposit function segregatedCash collection and deposit function segregated Monies collected should be turned over to Monies collected should be turned over to

Principal or designee within 24 hoursPrincipal or designee within 24 hours All money turned over to Principal should be All money turned over to Principal should be

accompanied by deposit formaccompanied by deposit form

Revenue, Receipts, and Revenue, Receipts, and Deposits – cont..Deposits – cont..

Control of all receipts should include at a Control of all receipts should include at a minimum – continued:minimum – continued: Principal should turnover all funds to Town Treasurer’s Principal should turnover all funds to Town Treasurer’s

account at least weeklyaccount at least weekly Interest earned by the student activity agency account Interest earned by the student activity agency account

(Treasurer’s account) shall be retained by the SAF. The (Treasurer’s account) shall be retained by the SAF. The use of aggregate earnings shall be at the discretion of use of aggregate earnings shall be at the discretion of the School Committee for the benefit of the studentsthe School Committee for the benefit of the students

A policy must be adopted by the School Committee that A policy must be adopted by the School Committee that specifies how undesignated receipts will be distributed specifies how undesignated receipts will be distributed and must be deposited into the agency account, not the and must be deposited into the agency account, not the Principals checking accountPrincipals checking account

Purchasing and Purchasing and DisbursementsDisbursements

DESE recommends the following at a DESE recommends the following at a minimum are in placeminimum are in place Advance of funds avoided (written approval Advance of funds avoided (written approval

advance deemed necessary)advance deemed necessary) Student advisors or others involved in Student advisors or others involved in

purchasing may not benefit personallypurchasing may not benefit personally SAF may not be used for any purpose SAF may not be used for any purpose

unrelated to student activities or for the unrelated to student activities or for the benefit of any staff personbenefit of any staff person

All disbursements should be made by checkAll disbursements should be made by check

Purchasing and Disbursements – Purchasing and Disbursements – cont..cont..

Policy should specify method or methods to be Policy should specify method or methods to be used to pay expenses, including how to handle used to pay expenses, including how to handle reimbursement of funds when credit card is reimbursement of funds when credit card is used (this is important because of the potential used (this is important because of the potential “reward” benefits)“reward” benefits)

Disbursements exceeding $600 in aggregate to Disbursements exceeding $600 in aggregate to any one individual or entity must be reviewed to any one individual or entity must be reviewed to determine if 1099 is requireddetermine if 1099 is required

Checks not written to “Cash”Checks not written to “Cash” Individual responsible for writing checks should Individual responsible for writing checks should

be segregated from the record keeping and be segregated from the record keeping and recon processrecon process

Purchasing and Disbursements – Purchasing and Disbursements – cont..cont..

All disbursements are required to have adequate All disbursements are required to have adequate external supporting documentationexternal supporting documentation

A standardized form should accompany all requests A standardized form should accompany all requests for check issuancefor check issuance

Standardized form should be accompanied by Standardized form should be accompanied by supporting documentationsupporting documentation

Checkbook recons will be performed monthlyCheckbook recons will be performed monthly ““All requests for replenishment to the School Principal All requests for replenishment to the School Principal

imprest checking account must be adequately imprest checking account must be adequately supported and processed through the Town warrant supported and processed through the Town warrant processprocess

Class, Inactive Accounts and Class, Inactive Accounts and DeficitsDeficits

DESE’s opinion that because graduates are no DESE’s opinion that because graduates are no longer students, monies for student class longer students, monies for student class grades that have graduated cannot be legally grades that have graduated cannot be legally maintained in the student activity accountsmaintained in the student activity accounts..

School Committee policy should specify how School Committee policy should specify how these funds shall be disposed of upon class’ these funds shall be disposed of upon class’ graduationgraduation Review PoliciesReview Policies Obtain listing and scan for graduated classesObtain listing and scan for graduated classes Determine is disposition is in accordance with policyDetermine is disposition is in accordance with policy

Class, Inactive Accounts and Deficits – Class, Inactive Accounts and Deficits – cont..cont..

Any student activity inactive for 3 years Any student activity inactive for 3 years shall require the following actions in order shall require the following actions in order to be closedto be closed Written notification by advisor that activity Written notification by advisor that activity

will cease to be viable. If advisor or student will cease to be viable. If advisor or student officer is not available, discontinuance shall officer is not available, discontinuance shall be by vote of the School Committeebe by vote of the School Committee

All assets of the student activity shall be All assets of the student activity shall be identified in writingidentified in writing

Review policiesReview policies Obtain list and scan for inactive accountsObtain list and scan for inactive accounts Determine if disposition follows policyDetermine if disposition follows policy

Class, Inactive Accounts and Deficits – Class, Inactive Accounts and Deficits – cont.cont.

Individual activity accounts should not be Individual activity accounts should not be permitted to be in a deficit position because permitted to be in a deficit position because such a position becomes a liability to other such a position becomes a liability to other individual activities or possibly to future individual activities or possibly to future classesclasses..

DESE recommends that the School Committee DESE recommends that the School Committee develop a policy for remedial action.develop a policy for remedial action.

Possible remedial action:Possible remedial action: School Committee appropriationSchool Committee appropriation Accumulated investment earningsAccumulated investment earnings Surpluses of inactive accountsSurpluses of inactive accounts Gift from any activity with a surplus through approval of Gift from any activity with a surplus through approval of

advisoradvisor Any other legal meansAny other legal means

Student TravelStudent Travel

Travel policy should be adopted and Travel policy should be adopted and should include:should include: Request prepared well in advanceRequest prepared well in advance Request should be submitted by the Request should be submitted by the

advisor or other person responsible for tripadvisor or other person responsible for trip Standardized Travel Authorization formsStandardized Travel Authorization forms Method used to pay travel expensesMethod used to pay travel expenses Statement of final accountabilityStatement of final accountability