WEBER SCHOOL DISTRICT Fremont High School

Findings and Recommendations For the 2011-12 School Year

Report No. 12-SCH-B3

Financially Strong

Keeping Utah

AUSTON G. JOHNSON, CPA UTAH STATE AUDITOR

STATE OF UTAH

DEPUTY STATE AUDITOR:

Office of the State Auditor

UTAH STATE CAPITOL COMPLEX EAST OFFICE BUILDING, SUITE E310 P.O. BOX 142310 SALT LAKE CITY, UTAH 84114-2310 (801) 538-1025 FAX (801) 538-1383

Joe Christensen, CPA

AUDIT DIRECTORS:

Auston G. Johnson, CPA

UTAH STATE AUDITOR

Van H. Christensen, CPA Deborah A. Empey, CPA Stan Godfrey, CPA Jon T. Johnson, CPA

REPORT NO. 12-SCH-B3 November 8, 2012

Weber School District Board of Education 5320 Adams Ave. Pkwy. Ogden, UT 84405 Dr. Jeff Stephens, Superintendent Weber School District 5320 Adams Ave. Pkwy. Ogden, UT 84405 Dr. Rod Belnap, Principal Fremont High School 1975 North 4700 West Plain City, UT 84404 As a result of issues/concerns noted in our investigation of Provo City School District/Timpview High School (see Report #12-SCH-A), we selected four other school districts in Utah (Canyons, Davis, Granite, and Weber) and selected one high school for review from each of the four school districts (Alta, Davis, Cottonwood, and Fremont). For Weber School District (the District), we then performed the procedures enumerated below to certain aspects of internal control and compliance over certain areas at Fremont High School (the School) for the 2011-2012 school year. The purpose of these procedures is to review the internal control and the policies and procedures at the School in order to determine whether there is an appropriate level of control and accountability over funds collected by and on behalf of the School for: 1) school related fees and costs, 2) fundraising activities, and 3) donations. We also performed these procedures to assist the District in evaluating its internal control. 1. We performed a review of the separation of duties and internal control over the Schools general cash receipting and disbursing procedures. We also reviewed the internal control over cash receipting procedures specific to the choir, drill, and football programs. We performed analytical procedures over revenues associated with certain activities (choir, drill, and football fundraisers and fees) and determined if revenues were deposited appropriately.

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We reviewed certain financial transactions for compliance with relevant State laws, District policies, and School policies related to issues such as cash receipting and fundraising. We performed other procedures as considered necessary.

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Our procedures were more limited than would be necessary to express an audit opinion on compliance or on the effectiveness of the Districts and the Schools internal control or any part thereof. Accordingly, we do not express such opinions. Alternatively, we have identified the procedures we performed and the findings resulting from those procedures. Had we performed additional procedures or had we made an audit of the effectiveness of the Districts and the Schools internal control, other matters might have come to our attention that would have been reported to you. Our findings resulting from the above procedures are included in the attached findings and recommendations section of this report. We feel that findings 1 and 2 are key internal control weaknesses. See reports #12-SCH-B1, #12-SCH-B2, and #12-SCH-B4 on the Utah State Auditors Office website at http://www.sao.utah.gov/_finAudit/rpts/2012reports.html for findings and recommendations issued to the other three school districts and their sampled high schools. Additionally, we issued report #12-SCH-B5 to the Utah State Office of Education, which summarized the findings issued to the four school districts and their sampled high schools and recommended that the Office of Education develop guidelines for fundraising and donations to aid school districts in the development of adequate policies and procedures. This report is intended solely for the information and use of the District and the School and is not intended to be and should not be used by anyone other than these specified parties. However, the report is a matter of public record and its distribution is not limited. By its nature, this report focuses on exceptions, weaknesses, and problems. This focus should not be understood to mean there are not also various strengths and accomplishments. We appreciate the courtesy and assistance extended to us by the personnel of the District and the School during the course of the engagement, and we look forward to a continuing professional relationship. If you have any questions, please call Debbie Empey, Audit Director, at 801-538-1342. Sincerely,

Auston G. Johnson, CPA Utah State Auditor cc: Larry Shumway, State Superintendent of Public Instruction Natalie Grange, Internal Auditor, Office of Education Robert Petersen, Business Administrator, Weber School District Michael Mower, Deputy Chief of Staff, Governors Office Jonathan Ball, Director, Office of Legislative Fiscal Analyst James Schroeder, Wiggins & Co.

WEBER SCHOOL DISTRICT Fremont High School

FOR THE 2011-2012 SCHOOL YEAR TABLE OF CONTENTS Page FINDINGS AND RECOMMENDATIONS: 1. INADEQUATE INTERNAL CONTROLS OVER CASH RECEIPTING AND FUNDRAISING 2. INADEQUATE SEPARATION OF DUTIES 3. LACK OF POLICIES AND PROCEDURES RELATED TO FOOTBALL
SUMMER CAMP FEE DISMISSALS

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WEBER SCHOOL DISTRICT Fremont High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR 1. INADEQUATE INTERNAL CONTROLS OVER CASH RECEIPTING AND FUNDRAISING Weber School District (the District) has inadequate internal controls over cash/checks received. For fundraisers, the coaches and teachers collect cash/checks and give to the Schools financial secretary for deposit and entry into the accounting system. For student fees and camps, cash/checks received are paid directly to the financial secretary. We noted the following weaknesses while reviewing five fundraising activities as well as fees and costs related to the Fremont High School (the School) choir, drill, and football programs during the summer of 2011 and the 2011-2012 school year: a. Lack of supporting documentation 1) For the fundraising activities, camps, and fees examined, we calculated how much revenue should have been collected based on information provided by the School and compared it to what had actually been collected and deposited. We found differences between our expected revenue calculations and what was actually deposited at the School that could not be explained by supporting documentation or School staff. The differences between our calculations and the amounts deposited ranged from $300 more than our estimates to $1,425 less than what we estimate should have been deposited. For one choir program fundraiser, the amount deposited was $1,425 short of our estimate. For this fundraiser the students sold 50-lb. bags of potatoes for $20 each. The invoice indicated 410 bags of potatoes were purchased and no bags were leftover. Therefore, the expected revenue was $8,200; however, only $6,775 was deposited and recorded as revenue in the Schools accounting records. Upon our inquiry, the choir teacher found an additional $1,100 of undeposited cash and checks in his office that were up to 8 months old. The remaining $325 difference was unexplained. 2) For one fundraising activity (the Dickens Feast), we were unable to calculate an estimate of expected revenue because no one kept track of how many tickets were sold for the event. Although most of the differences were considered to be minor, the fact that the supporting documentation was either lacking in key detail, inaccurate, or in some cases non-existent represents an internal control weakness since it was impossible to perform a reconciliation between what was sold to cash/checks received, deposited, and accounted for in the Schools accounting system.

WEBER SCHOOL DISTRICT Fremont High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR b. Funds not Safeguarded or Deposited Timely Cash/checks received are not adequately safeguarded or deposited timely. The fact that the choir teacher had $1,110 in undeposited cash/checks up to 8 months old in his office (see a. above) illustrates the issue. Cash/checks should be adequately secured, preferably in a safe, until deposited. Also, schools are required to deposit funds daily, when practicable, but no later than 3 days after receipt, in accordance with Section 51-4-2 of the Utah Code. Teachers and coaches are held responsible for handling cash/checks received for fundraising activities; however, the District does not have written policies and procedures for cash receipting or accounting for fundraising activities. The District should develop written policies and procedures which address, at a minimum, the following: Maintaining reliable and complete records of cash/checks received (for program fees/costs as well as for fundraising proceeds); Safeguarding cash/checks received prior to deposit with the bank; Reconciling the original record of receipt to what was deposited and recorded in the accounting system by someone who does not have access to cash/checks received. Conducting fundraisers, including responsibilities of teachers, coaches, volunteers, and others. Receipting funds collected for after-school and summer activities; Accounting for booster club and other private-entity activities; Submitting to the main office monies collected outside the main office.

The policies and procedures should be in accordance with guidelines set forth by the Utah State Office of Education. The District should also ensure all employees and volunteers are adequately trained on cash receipting policies and procedures if they are involved in those activities. Lack of adequate internal controls, including written policies and procedures and lack of training could allow misappropriation of funds to occur without detection. Recommendation: We recommend that the District establish adequate internal controls over cash receipting and fundraising activities by developing written policies and procedures. The policies and procedures should be in accordance with guidelines set forth by the Utah State Office of Education. We also recommend that the District provide training on all cash receipting and fundraising policies and procedures.

WEBER SCHOOL DISTRICT Fremont High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR We recommend that the School: a. Require and maintain adequate supporting documentation for all cash/checks received. b. Adequately safeguard all cash/checks received and deposit all funds timely. Districts Response: We agree with the finding and we have aggressively taken steps to implement the recommendation. In September, the Weber School District Board of Education adopted a Secondary Financial Procedures Manual as a part of their Student Activity Funds policy. In this same meeting, the School Board approved and updated its Fund Raising Policy for schools and student activities. Both of these policies address the concerns related to this finding. In-depth training will occur related to these policies. The work and changes encapsulated by these policies were started well before the Fremont HS audit. However, this audit helped expedite the completion of these policy updates and it served to heighten the importance of having adequate internal controls over cash receipting and fundraising.

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INADEQUATE SEPARATION OF DUTIES We reviewed separation of duties at the School and noted that the financial secretary has access to cash/checks received, prepares/sends billings, can make adjustments to the accounting system (including deletions, write-offs, and waivers), reviews expected receipts, has access to blank checks, mails or handles signed checks, reviews processed disbursements, records transactions in the general ledger, and prepares the bank reconciliation. Inadequate separation of duties exists when the same individual has access to assets (including cash/checks received), access to the accounting records, and authorization and/or reconciling/review responsibilities. Inadequate separation of duties could allow errors and fraud to occur without detection. The School should have someone independent of the bookkeeper prepare the bank reconciliation, or the principal should perform a more detailed review of the bank reconciliation as well as other reviews below (the principal performs a limited review of the bank reconciliation; however, it appears that this review would not be adequate to detect issues, especially since the reconciliation is performed by the bookkeeper, who also maintains the general ledger). In situations where it is impractical to separate duties due to the small number of employees, additional controls should be implemented to compensate for the separation of duties weaknesses. Possible controls that the School might implement to help compensate for some of the above conflicts include the following:

WEBER SCHOOL DISTRICT Fremont High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR Reviews of accounts deleted, written-off, or waived by an independent person. Reviews of fees assessed and collected by an independent person. Reviews of monthly general ledger detail by department heads or others responsible for the account. Recommendation: We recommend that the School separate the duties outlined above, especially the bank reconciliation, or implement appropriate reviews or controls to compensate for the weaknesses. Districts Response: We agree with the finding and we have aggressively taken steps to implement the recommendation. We will ensure that appropriate separation of duties will occur and that compensating controls are put in place for instances where separation of duties is not practical. In September, the Weber School District Board of Education adopted a Secondary Financial Procedures Manual as part of their Student Activity Funds policy. Outlined in this updated policy are proper compensating controls to be implemented in schools. In-depth training will occur related to these policies.

3.

LACK OF POLICIES AND PROCEDURES RELATED TO FOOTBALL SUMMER CAMP FEE DISMISSALS The District does not have policies and procedures regarding the practice of fee dismissals for summer programs. During our review of the Schools summer football camps, we noted that the coach was able to dismiss certain fees at his own discretion with no other review and approval to validate the propriety of the dismissal, as follows: Youth Camps Participants in the youth camps are required to pay a $40 fee in order to participate; however, the coach has the ability to dismiss this fee. Based upon our review and discussion with the coach, it appeared that the coach dismissed 5 of the 151 participants fees due to the coachs assessment of economic hardship. Team Camps Team camp participants had fees dismissed in two different manners: Participants in the team camp are required to pay a $150 fee in order to participate. For 3 of 117 participants, the coach dismissed the fee and, instead, allowed the participant to work the fee off by doing things such as painting the football field, etc. Participants could purchase a $65 player packet, which included various types of gear. However, the coach dismissed this fee for senior students that volunteered to help run the 4

WEBER SCHOOL DISTRICT Fremont High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR summer youth camp. Based upon our review, we determined that 28 of the 34 senior football players did not pay this $65 fee. Based upon our review and discussion with the District, the dismissals appeared to be reasonable; however, without clear guidance regarding the propriety of fee dismissals and lack of review of dismissals, the coachs ability to dismiss certain fees at his discretion could cause fees to be dismissed inappropriately. Therefore, even though the coach does not have access to the cash receipts from the camps, the District still needs to establish a formal policy governing these types of dismissals. In addition, the policy needs to comply with Utah Administrative Code R277-407-6.A.1 which requires that at least one person at an appropriate administrative level be designated in each school to administer the policy and grant waivers. Recommendation: We recommend that the District establish appropriate policies and procedures governing the practice of fee dismissals for summer programs. The policies and procedures should be in accordance with Utah Administrative Code and the guidelines set forth by the Utah State Office of Education. Districts Response: We agree with the finding and we have aggressively taken steps to implement the recommendation. In September, the Weber School District Board of Education approved and updated its Fund Raising Policy for schools and student activities; included in this policy are procedures governing the practice of fee dismissals for summer programs.