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Seattle School District No.

1

General
Code: 03Seattle-AC13-SA13
Name: Seattle School District No. 1
Group: Central King County
Type: 03-School District
Location: King
Scope: Accountability, Financial, SA
Team
Lead: Heidi Wiley
Manager: Anastassia Efanova
Procedures

B.1.PRG - Accountability Planning - Local Govt

Procedure Step: Entity, Environment & COSO Evaluation
Prepared By: AB1, 12/3/2013
Reviewed By: AVE, 4/15/2014

Purpose/Conclusion:
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Purpose:
To identify potential accountability risks to consider in the planning conference brainstorm by gaining an understanding of the entity's operations,
environment and entity-wide COSO elements.
Conclusion:
Based on our understanding of entity operations, environment and entity-wide COSO elements, we noted the following potential accountability
risks to be discussed at our planning conference brainstorm.
Excessive turnover and transition in leadership
District has numerous large capital projects scheduled due to BEX IV levy funding.
Accountability over transportation including: failure to report personal use of district vehicle to IRS, lack of cross training resulting in
excessive OT costs, no allocation of transportation costs by school.
Safeguarding assets -- No centralized authority over use of fleet vehicles. No screening procedures to ensure statutory compliance with
DOL (auto license is current, no recent suspensions) No centralized fleet maintenance schedule.
Team SP recommends basic enrollment and transportation testing be performed at the local level.

Testing Strategy:
The following procedures are required to be done:
Review the applicable planning guide(s)
Update the "COSO Evaluation" step in the permanent file
Update the "Entity Operations" step in the permanent file
Maintain a current understanding of significant internal control systems.

To maintain a current understanding of significant internal systems, determine when systems were last reviewed and/or tested. Updates
may be done as part of planning procedures or may be addressed as part of the accountability plan when areas are selected for testing. A
significant internal control systems include controls over safeguarding significant public resources and managing significant compliance
requirements.
Auditors may also consider additional procedures, based on the entitys size, complexity and anticipated risk and the auditors
experience. Additional procedures may include:
Scan the entity's annual report, budget and/or comprehensive plan.
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Review recent Client Helpdesk questions submitted by the government. Any accounting and auditing questions and answers can be
viewed in Helpdesk tab of EIS.
Review list of resolutions passed during the period.
Review the entity's organizational chart.
Obtain a list of departments and/or programs.
Review the entity's website.
Tour facilities.
Inquire with management and other key employees as to any significant events or changes occurring since the prior audit (ex: new debt,
major construction, new software, etc).
Identify restricted funds held by the entity.
Review list of contracts awarded or contract activity reports.
Identify significant revenue and expenditure streams.
Identify cash receipting locations.
Obtain a list of petty cash, change funds and imprest funds.
Review permanent file documentation on controls over key systems.
Scan bank account and investment statements or financial statement notes to determine the types of investments and deposits the entity
is holding.
Review Public Disclosure Commission filings for elected officials or request information on personal or family businesses and land holdings
from appointed officials and/or key employees.
Inquire with management to determine whether the entity self-insures for any risks.

Policy/Standards:
SAO Audit Policy 4210 - Planning Accountability Audits

BACKGROUND
The purpose of planning procedures is to identify and assess risks of fraud, loss or abuse of public resources; non-compliance with laws and
regulations; and the internal controls over such matters. Selected risks to audit must be significant to the public and other users either
quantitatively or qualitatively. This is based on auditor judgment. To address those risks, auditors must develop effective audit tests and
strategies.

REQUI REMENTS
1. Auditors will perform the following planning procedures to identify and assess accountability risks:
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Review the planning guide.
Review meeting minutes of the governing body.
Gain an understanding of the entity and its control environment.
Maintain a current understanding of the relevant policies, procedures and internal controls over significant accounting systems.
Review the prior audit, the future audit work file (FAWF) and citizen hotline referrals.
Review fraud investigations (including in-process) and other relevant engagements.
Perform planning analytical procedures.

The nature, timing and extent of planning procedures vary with the size and complexity of the entity, and with the auditors experience
with the entity. Auditors will consider whether other planning procedures are necessary to identify risks.

2. Supervisory review of the results of planning procedures will be completed before the planning conference brainstorm.

Supervisors will ensure potential risks are specifically and clearly described to enable an effective discussion during the brainstorm and
provide the basis for developing testing strategies that appropriately respond to selected risks.

3. A planning conference brainstorm will be conducted to finalize the assessment, sort and prioritize risks, and develop
procedures to ensure risks are properly addressed.

The audit manager, supervisor, auditor-in-charge, among others, will hold a planning brainstorm to sort and prioritize risks identified during
planning and to strategize audit tests. The following factors will be considered:
Relevance, considering public sensitivity, the expressed concerns or questions of management and those charged with governance, as
well as the primary activities, systems or events occurring at the government.
Potential impact, considering the likelihood and magnitude of potential impacts such as fraud, abuse, loss or questioned costs
associated with noncompliance.

Sometimes a risk may be addressed by more than one type of engagement. Auditors must sort the risks to determine what audit type
would be most appropriate to address them.

The analysis of risks and decisions made during the brainstorm will be documented in sufficient detail to support the focus and scope of the
audit.

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4. An audit plan will be prepared from the results of the brainstorm, and a detailed budget will be developed to track budgeted
and actual audit hours.

Supervisory review is important to determine whether adjustments to the plan are needed based on changing circumstances. Significant
revisions to the audit plan must be approved and documented.

5. Auditors will communicate information about the planned audit to client management and those charged with governance.

Auditors must also ensure significant changes to the planned audit are communicated to the client in a timely manner. All communications
must be documented. Refer to Policies 2130 (Inviting Elected Officials to Entrance/Exit Conferences), and 2210 (Conducting Entrance
Conferences).

RELATED POLI CI ES
4110 Objectives and Authority for Accountability Audits

Record of Work Done:
Procedures Performed to Update Understanding

We reviewed the Entity, Environment & COSO Evaluation at G.1.PRG and G.1.PRG
We reviewed the 2012-2013 budget. See B.1.5 The district continues to face shortfalls in available resources with a $24.8M shortfall for
2012-2013 budget which is approximately 4% of the total general fund budget of $590M. Risks identified: Strained classroom funding
takes precedence over compliance issues. District staff will continue furlough days during 2012-13 school year. Senior management will
take four unpaid days; and the majority of staff will take two unpaid days.
We reviewed the District's organization.SPS_OrgChart_All Excessive turnover and transition in leadership poses uncertainties of the tone
at the top. The organization hierarchy is a work in process. In J une 2012 the District hired J ose Banda to replace interim Superintendent
Susan Enfield. The District hired Kenneth Gotsch as Assistant Superintendent Business & Finance, who will begin December 2nd 2013,
replacing Duggan Harman. Mr Gotsch has held positions in the Chicago and Los Angeles Public Sch Districts. In addition he has served
as Deputy Director for Chicago Dept of Revenue and as Bond Analyst for Illinois Economic and Fiscal Commission. In August 2012 the
District hired Charles Wright, J r. as Deputy Superintendent and Dr. Lester Flip Herndon J r. as Assistant Superintendent, Capital,
Facilities and Enrollment Planning. Mr. Wright is the former Chief Strategy Officer with Denver Public Schools, and Dr. Herndon was
Superintendant of Bremerton Public Schools.
In response to our audit recommendations the district created the Office of Internal Audit IAO and hired Andrew Medina as Director of
IA. IAO focus is on improvement opportunities and finding sustainable solutions. IAO reports to the Audit and Finance committee and
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results are reported directly to the School Board. We will review changes in significant positions to determine if accountability is clearly
defined by org and coordinate our efforts with Internal Auditor to ensure our accountability audit work does not overlap or duplicate the
work of the IA.
For informational purposes only, we obtained the total number of schools operated, by type (HS, MS, ES etc.). The District has a total of
95 schools which breaks out as follows: Elementary - 59, K-8 - 10, Middle -9, High - 12, and Service (Alternative) - 5.We obtained FY2013
enrollment report from Kathie Technow. See B.1.8 Overall enrollment is consistent with prior year. Gains in enrollment at the ninth grade
level are lost by grade 12 indicating students entering at the ninth grade level do not complete their eduction through the twelfth grade or
they leave the district prior to completion. Bilingual and special education combined enrollment increased by approximately 11% based on
adopted budget.
Significant Resources: State funding provides the largest portion of district funds at $305.7 million or 51.7% of total resources. Of this
amount $240 million is based on apportionment (no of attending students x legislative funding formula); and 66.1 million are state special
purpose funds for special ed, bilingual ed, student transportation, tutor programs etc. The second largest funding resource -- $154 million (
26% of resources) is a taxpayer supported levy for general education programs and operations. Federal funds provide $73.5 million or
12.4% of resources to fund Title I and Head Start programs and supplemental funding for Special Ed, free and reduced rate lunch
programs. Other revenue funding provides $31.1 million or 5.3% of budgeted resources from rental or lease of district property, investment
earnings, food service fees, and donations. Other resources account for $27.4 million or 4.6% of total resources and includes funds from
prior year school balances carried forward and reserve funds.
Significant Expenditures: Based on budgeted 2012-13 FY expenditures of $590 million, the district budgeted $468 million or 79% for
instruction; and $122 million or 21% for support services.
We reviewed the list of active employees as of 8/31/2013. We noted total employees of 9,712 is comparable to prior year and total
management staff and certificated employees is equal to the prior year. See B.1.9
The District has 100 buildings in current inventory; more than 1/3 are 40+years old. The District relies primarily on Levy funding for capital
improvement of its school buildings. There were two levy measures approved in 2013; both replace expiring levies. Operations Levy
(551.9 million) supports educational programs not fully funded by the state. Capital Levy -- Building Excellence IV (BEX IV) funds the
construction or renovation of 17 schools; retrofit improvements for 37 schools, security camera system at 19 schools and other major
maintenance and technology improvements throughout the District.
We reviewed the meeting minutes at B.1.3 including resolutions passed during the audit period.
Risks Noted from review of Planning Guide: G.2.1
Per review of the planning guide, we noted the following:
Required Risks to Assess
We reviewed the Planning Guide for school districts at G.2.1 with updates made by CKC audit team.
Alternative Learning Experience Programs -- ALE audits are being planned under a separate process. Team School Programs will conduct
all ALE audits. In 2012 Team schools performed a file review resulting in no significant issues that would impact our audit.
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Financial Condition We performed financial analysis in prior year audits and there were no indicators of substantial financial
distress. Taxpayers continue to support the District with levy funding for operations and capital improvements.
Evaluating the District's financial condition is required per SAO Schools Planning Guide. We evaluated the financial condition of the school
district using financial indicators posted on the OSPI website as of March 2013 for FY 2012. B.1.7 We summarized the fiscal score for SDS
and for other Districts in its peer group. Districts with higher scores generally have more ability to adapt to unforeseen budget cuts,
revenue losses, unexpected expenditures, etc. In comparion, SDS scores slightly higher than other districts in its peer group and the
score over the last three years has remained consistent. We will perform additional review in our accountability work at D.6.PRG
From the District's F-196, we performed a 3 year trend of non-voted debt to determine if there have been increases in non-voted
debt. For Debt Service Load, 20% is the benchmark given for a high debt load for school districts, according to the Handbook of Debt
Management, edited by Gerald Miller. The SSD averages 11.7% and has been consistent over the past three years.
F-196 Financial Statement FY11 FY12 FY13 $ Change % Change
Total Non-Voted Notes/Bonds $ 32,925,000 $ 32,030,000 $31,045,000 ($985,000) -3%
Red Flags:
Excessive turnover in management and staff positions. Uncertainty of tone at top. Interim Superintendant's contract is renewed and
extended quarterly until the position is permanently filled.
District has a number of large capital projects scheduled due to influx of BEX IV levy funds that will impact communities and result in
students being reassigned to other schools while construction is taking place.
Decentralized control environment resulted in a number of issues affecting accountability over transportation, including
undocumented personal use of fleet vehicles, failure of District to report benefit of district vehicle on employee's W-2, payment of OT not
authorized by Collective Bargaining Agreement, no cross training of transportation salaried employees resulting in excessive OT charges
by select employees, no allocation of transportation costs by school, no review of fuel costs for reasonableness.
No centralized budget/cost center for fleet management. Fleet manager does not have authority to question use of fleet vehicles by
management and staff or establish screening process for appropriate use of fleet vehicle. In addition, there are no screening procedures
in place to ensure statutory compliance with DOL (no review to determine if auto license is expired or currently suspended prior to
granting permission for use of fleet vehicle.)
No maintenance schedule for fleet vehicles. Maintenance is at the discretion of the employee currently assigned use of the vehicles.
Risks Noted from other procedures:
Based on other procedures performed, we noted the following:
We met with Andrew Medina, CPA and Internal Auditor for the District on 11/18/2013. Due to turnover of significant positions Mr Medina
indicated that although the District's internal audits result in a request for corrective action plans, the action plans are not completed within a 6
month framework but rather are pushed back and rescheduled due to management and staffing changes. The IAO continues to review control
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environment and ensure procedures are documented. For 2013-14 the IAO will review controls over capital projects, controls over special
education administration, staff mix, testing integrity -- addressing cheating scandals, and tone at the top to determine that District goverernance
and practices address COSO framework.

Apportionment - This is the largest revenue source for the District and is based on three funding drivers - Enrollment, Staff-Mix and
Transportation. The Schools Team suggests we audit basic enrollment for FY13. Enrollment was last reviewed in FY09 and errors were noted in
FTE calculations. Team SP suggests testing enrollment data from two schools (elementary and/or middle school) for September 2012. We will
perform testing at D.3.PRG
We will consider staff mix for review during our planning brainstorm. Transportation regulations and reporting requirements have changed
recently. Team SP suggests local teams plan transportation audits using the 6 step procedure outlined in TeamMate. We will perform testing of
transportation reporting at D.4.PRG.


B.1.PRG - Accountability Planning - Local Govt

Procedure Step: Other Engagements & FAWF
Prepared By: AB1, 12/9/2013
Reviewed By: AVE, 1/6/2014

Purpose/Conclusion:
Purpose:
To identify potential accountability risks to consider in the planning conference brainstorm from other engagements and the FAWF.
Conclusion:
Based on our review of other engagements and the FAWF, we noted the following potential accountability risks:
Payroll OT reporting was identified as a risk in the prior year.
Payroll benefit personal use of District vehicle and inadequate support of reimbursed fuel expense
Disbursements to personal service contractors prior to signed contract agreement.
Inadequate documentation for sole source determination for personal service contracts
Lack of sufficient and effective monitoring over transportation invoice payments, fuel accountability, personal use of District vehicles
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No cost allocation plan for fuel usage.
Insufficient controls over accounts receivable for use of facilities by third party
In prior year we identified exceptions in testing of staff mix; however, District verified that files contained required transcript data. We will
discuss in our brainstorm if staff mix should be included as a risk area.
PY audit identified new asset monitoring system for tracking capital as a risk area. We will consider including this FAWF item in our
brainstorm meeting.


Testing Strategy:
Auditors are required to review the following for information relevant to accountability audit objectives:

FAWF
Review Future Audit Work File (FAWF) items.

OTHER ENGAGEMENTS & STUDI ES
Identify other audits or engagements that may be relevant to accountability audit objectives. Check the Entity Information Suite (EIS) to identify
prior and in-progress SAO audits and special investigations. Auditors should specifically consider:
Prior accountability audit exceptions
Prior accountability audit scope (from plan, exit document or history/cycling matrixes)
Fraud investigations (note: open investigations must be coordinated with Sarah Walker)
Hotline referrals (note: open examinations must be coordinated with J eana Gillis)
Financial, single audit, performance or other SAO reports
Non-SAO audits, attestation engagements or studies that directly relate to accountability audit objectives (see Audit Policy 3530 related
to grant or oversight agency work)
Work of internal auditors (see Audit Policy 3520 for requirements on use of work of internal auditors)
Review identified audits that relate to accountability audit objectives for relevant work and exceptions.

Follow up on any relevant recommendations or findings to determine whether corrective actions were implemented. Follow-up procedures may
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be performed at this point or incorporated into the audit plan and referenced in this step.

Policy/Standards:
SAO Audit Policy 3410 Follow Up on Previous Audits (effective 6/ 3/ 08

BACKGROUND

Government Auditing Standards (Yellow Book) require auditors to consider the results of previous audits, attestation engagements and other
studies and follow up on significant findings and recommendations that directly relate to the objectives of the audit.

For example, when conducting an audit under the federal Office of Management and Budgets (OMB) Circular A-133, auditors must follow up on
prior audit findings relative to federal awards. If any uncorrected federal findings were reported in the prior single audit, auditors must then
perform procedures to assess the reasonableness of the summary schedule of prior audit federal findings prepared by the auditee, and report, as
a current year audit finding, when the auditor concludes that the summary schedule to prior audit federal findings materially misrepresents the
status of the prior audit finding. Auditors would also inquire about other reports or reviews on federal programs such as reviews done by
granting agencies and consider these as part of the auditors risk assessment or audit of that federal program.

REQUI REMENTS
1. In planning an audit, auditors will consider findings and recommendations from previous engagements.

Auditors will ask entity management to help identify previous audits, attestation engagements, performance audits or other studies directly
related to the objectives of the audit. This includes work done by other independent auditors, internal auditors, program or grant
auditors.

Auditors will then determine if any significant findings or recommendations were reported and use this information in assessing risk and
determining audit procedures. Refer to Policy 3530 for additional requirements on use of grant or program monitors work as audit
evidence.

2. Auditors will follow up on findings and recommendations from previous engagements that directly relate to the objectives of
the audit and evaluate whether appropriate corrective action has been taken.

Professional judgment is used to determine the level of work necessary to follow up on findings and recommendations.


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3. The status of prior audit findings will be reported according to the guidelines provided in the Audit Reports Standards
Manual.

RELATED POLI CI ES
3530 Use of Grant/Program Monitors Work
4210 Planning Accountability Audits
5210 Planning Single Audits
6210 Planning Financial Statement Audits
7210 Planning Performance Audits

REFERENCES
Government Auditing Standards (Yellow Book) 4.09, 7.36
OMB Circular A-133 Audits of States, Local Governments, and Non-Profit Organizations

______________________________________________________________

SAO Audit Policy 4210 - Planning Accountability Audits

BACKGROUND
The purpose of planning procedures is to identify and assess risks of fraud, loss or abuse of public resources; non-compliance with laws and
regulations; and the internal controls over such matters. Selected risks to audit must be significant to the public and other users either
quantitatively or qualitatively. This is based on auditor judgment. To address those risks, auditors must develop effective audit tests and
strategies.

REQUI REMENTS
1. Auditors will perform the following planning procedures to identify and assess accountability risks:
Review the planning guide.
Review meeting minutes of the governing body.
Gain an understanding of the entity and its control environment.
Maintain a current understanding of the relevant policies, procedures and internal controls over significant accounting systems.
Review the prior audit, the future audit work file (FAWF) and citizen hotline referrals.
Review fraud investigations (including in-process) and other relevant engagements.
Perform planning analytical procedures.
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The nature, timing and extent of planning procedures vary with the size and complexity of the entity, and with the auditors experience
with the entity. Auditors will consider whether other planning procedures are necessary to identify risks.

2. Supervisory review of the results of planning procedures will be completed before the planning conference brainstorm.

Supervisors will ensure potential risks are specifically and clearly described to enable an effective discussion during the brainstorm and
provide the basis for developing testing strategies that appropriately respond to selected risks.

3. A planning conference brainstorm will be conducted to finalize the assessment, sort and prioritize risks, and develop
procedures to ensure risks are properly addressed.

The audit manager, supervisor, auditor-in-charge, among others, will hold a planning brainstorm to sort and prioritize risks identified during
planning and to strategize audit tests. The following factors will be considered:
Relevance, considering public sensitivity, the expressed concerns or questions of management and those charged with governance, as
well as the primary activities, systems or events occurring at the government.
Potential impact, considering the likelihood and magnitude of potential impacts such as fraud, abuse, loss or questioned costs
associated with noncompliance.

Sometimes a risk may be addressed by more than one type of engagement. Auditors must sort the risks to determine what audit type
would be most appropriate to address them.

The analysis of risks and decisions made during the brainstorm will be documented in sufficient detail to support the focus and scope of the
audit.

4. An audit plan will be prepared from the results of the brainstorm, and a detailed budget will be developed to track budgeted
and actual audit hours.

Supervisory review is important to determine whether adjustments to the plan are needed based on changing circumstances. Significant
revisions to the audit plan must be approved and documented.

5. Auditors will communicate information about the planned audit to client management and those charged with governance.

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Auditors must also ensure significant changes to the planned audit are communicated to the client in a timely manner. All communications
must be documented. Refer to Policies 2130 (Inviting Elected Officials to Entrance/Exit Conferences), and 2210 (Conducting Entrance
Conferences).

RELATED POLI CI ES
4110 Objectives and Authority for Accountability Audits

Record of Work Done:
We will consider the following information in planning our accountability audit:
FAWF
The District implemented a new monitoring system for tracking assets and holding staff accountable for missing assets. The new system
was effective 6/2012. We will review the change in procedures and determine the effectiveness of controls in mitigating risk of lost or
misappropriated assets.
Risk identified: Policies for hiring substitute or special instructors were circumvented at Garfield High School. This was due to a lack of
timeliness for clearing background and fingerprint testing at the District level.

Kiro News summarized results of public records request and reported abuses in OT charges by exempt management. Per news report
dated 11/12/2013, Supervisor of Nathan Hale school radio station, Gregg Neilson made $70,000 in overtime and $80,000 in regular paid
wages during 2012-13 school year. Additional OT payments were made to exempt employees in Transportation Services, including
Transportation Analyst C. Martin, Transportation Mgr, M. Drorbaugh and Team Lead, S. Richard all earned OT during 2012-13 school
year.
In same news reporting of 11/12/2013, Kiro News reported abuse of IRS standards for personal use of the District's fleet vehicles. The
Kiro report is based on internal audit performed by Andrew Medina who was hired to review and report District activities directly to the
Board. In addition, the District does not track fuel use or require employees to keep mileage logs to support business use.
Kiro News reported in May 2013 that the District places students at risk by providing door to door cab services by drivers that work under
contract. Although all taxi drivers must have a valid taxi license and receive a background check by the City or King County, they are not
trained or screened by District standards.
SAO AUDITS
We noted the following weaknesses in internal controls in our prior year audit:
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Payroll procedures are not sufficiently documented.
Salary overrides performed in the SAP system are not supported and documented by authorized rate changes. Per PY audit payroll
transactions were also made outside the SAP system.
The payroll module PA30 allows edits to be made to the Master payroll file without an audit trail.
Additional risk that classified employees put on the displaced list continue to receive a paycheck after their position has been eliminated.
Access to the master file by payroll staff was unlimited in the prior year.
Approval of rate increases were made verbally and no confirmation of rate changes or overrides were made for the file or to the
employee.
There were no requests for exception reports or data from IT to identify staff edits to the payroll master file by IP address.
Edits made to the hourly rate in the payroll master file allow the annual salary to increase beyond the grade and step level identified per
the contract.
Adjustments to annual pay were not reported to the budget oversight committee and finance staff thus not ensuring sufficient funds were
available to cover additional payroll expenditures.
The District allowed personal service contract modifications without proper explanation or justification. In addition payouts were made
prior to contract approval.
Unnecessary contract procurement for tasks that could be performed in house by Facilities Dept staff.
The District lacked internal controls to ensure all revenue owed was collected for its numerous properties and facilities.
The District charged salaries to the incorrect fund resulting in improper coding of salaries to capital expenditures.
Overtime payments were issued without authorization by a supervisor with direct knowledge of the employee's work hours.
The District did not hold employees accountable to policy for inventory and return of tools upon termination, allowed employees to exceed
the maximum allowed for lost or damaged tools and allowed one employee to charge tool purchases to the District after being
terminated.
The District does not hold employees accountable for policies over use of fuel cards and fleet vehicles. Employees were not required to
sign a vehicle use agreement; fuel cost invoices were submitted for reimbursement without approval from an immediate supervisor or
review for reasonableness. Employees were not required to document business use via mileage logs and thus no allocation of business to
personal use was performed. In addition the District did not adjust inventory for vehicles acquired and did not mark new vehicles with the
District logo as required per District policy.
Prior audits noted risk of the District not providing after hours tutoring services to students although funding may be available.

FRAUD I NVESTIGATIONS

We will follow-up on our SAO fraud investigations at I.1.PRG

In February 2011, our Office issued a Special I nvestigation Report on the Districts Regional Small Business Development Program (RSBDP). We
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found the District paid $1,519,965 for services with a questionable public purpose and $280,005 for services it did not receive and that benefitted
a private company. In October 2011, the King County Prosecuting Attorney filed criminal charges against the former RSBDP Program Manager and
two other individuals who, according to Prosecutors Office documents, billed the District for little or no work.

On October 25, 2011, as required by state law (RCW 43.09.185), the District's Accounting Manager reported a suspected loss of public funds to
our Office. the District stated it had paid $83,430 on nine separate invoices to a vendor for cleaning at Garfield High School. During the period of
this investigation, the Small Works Program and the RSBDP Program were managed by the same individual. Based on the results of this
investigation, the Seattle School District incurred unnecessary costs of $1,279,310 due to a lack of adequate internal controls. These costs were
authorized by the small works program manager who was a part of our previous report. Many of the invoices lacked adequate supporting
documentation.
HOTLINE
We received multiple citizen concerns regarding the illegal occupation of the Horace Mann School building located in the Central district at 24th &
Cherry. We will refer to Hotline Ref Nos. H-13-498; 489;488; 485; and 491
as Hotline Ref No 13-487. We noted the following additional citizen concerns that were open as of the date of our audit: We reviewed details
at B.1.4. We will followup with the District as part of our accountability audit work located at H.1.PRG

Hotline Issue ID Status First Last Submitted Date Sent To Team
H-13-174 Open Chris J ackins 4/1/2013 4/1/2013
H-13-415 Open Chris J ackins 9/16/2013 9/16/2013
H-13-487 Open Anonymous

10/29/2013 10/29/2013
H-13-507 Open Rita Green 11/13/2013 11/13/2013
NON-SAO AUDITS & STUDIES
Internal audit reports are located at http://www.seattleschools.org/modules/cms/pages.phtml?sessionid=&pageid=249073
Based on the internal audit of disbursements by the Transportation Dept through November 2012, the District does not have sufficient and
effective monitoring over transportation invoice payments, fuel accountability, OT charges, use of take home vehicles and sole source justification
of personal service contracts.
Based on IA over accountability of maintenance of school property, the District does not have a systems in place to account for tools valued under
$1,000. The District receives one invoice for the fleets total fuel consumption. In addition costs associated with fuel usage is not charged to cost
center to which the vehicle is assigned.


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B.1.PRG - Accountability Planning - Local Govt

Procedure Step: Minutes
Prepared By: AB1, 11/18/2013
Reviewed By: AVE, 1/6/2014

Purpose/Conclusion:
Purpose:
To identify potential accountability risks to consider in the planning conference brainstorm by reviewing minutes of the governing body.
Conclusion:
Based on our review of minutes, we noted the following potential accountability risks
The District lacked internal controls to ensure all revenue owed was collected for its numerous properties and facilities.
Budget constraints, and decreases in funding present a risk of misuse of restricted funds for general fund expenditures
District signs contingency contracts with prospective employees -- risk of insufficient budget oversight and monitoring of resources to
ensure all program expenditures benefit the District.
New information system for student data collection (Power School)-- risk that enrollment/transfer activity will be under/overreported
during the transition process.
District has numerous public works projects resulting from BEXIV levy funds - risk of non compliance with statutory laws.


Testing Strategy:
Auditors should check with the AIC to determine if there are any known risks or items to look for.

Examples of common risk indicators and important information to note are as follows:
Resolutions, ordinances or policies relevant to accountability objectives.
Discussion of citizen, vendor or management concerns relevant to accountability objectives.
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Any actions that appear unreasonable, unexpected or outside the scope of the entitys authority.
Decisions in which board members are abstaining due to potential conflicts of interest.
Debt issuance.
Discussion of possible financial difficulties or business risks.
Significant awarded contracts or public works projects or risk indicators such as:
Governing body approval to waive bidding requirements for purchases or public works projects (ie: for sole source or emergency
reasons).
Use of alternative public works procedures such as design-build or general contractor / construction manager procedures.
Discussion of vendor protests or complaints about bid procedures or results.
Approval of large or numerous change orders.
Discussion of significant cost over-runs or other problems with public works projects.
New software or conversions.
Situations that may trigger major liabilities or impairments, such as disasters, significant losses of capital or infrastructure assets or major
lawsuits.
Transfers or interfund loans.
New grants, revenue sources or rate changes.
New cost allocation plans.
New entities, joint ventures, programs, or activities


Compliance with Open Public Meetings Laws:
During the review of minutes auditors should be alert for any apparent non-compliance with open public meetings requirements, such as:
Absence of quorum
Official actions of governing body do not appear to be documented in minutes
Actions or decisions known to have occurred are absent from minutes
Purpose of executive sessions not identified in minutes
Executive sessions appear to be for unallowable purposes
Minutes do not appear to have been taken for regular meetings, workshops and special meetings
Business conducted at special meetings was not for the published reason meeting was scheduled

Seattle School District No. 1
Policy/Standards:
SAO Audit Policy 4210 - Planning Accountability Audits

BACKGROUND
The purpose of planning procedures is to identify and assess risks of fraud, loss or abuse of public resources; non-compliance with laws and
regulations; and the internal controls over such matters. Selected risks to audit must be significant to the public and other users either
quantitatively or qualitatively. This is based on auditor judgment. To address those risks, auditors must develop effective audit tests and
strategies.

REQUI REMENTS
1. Auditors will perform the following planning procedures to identify and assess accountability risks:
Review the planning guide.
Review meeting minutes of the governing body.
Gain an understanding of the entity and its control environment.
Maintain a current understanding of the relevant policies, procedures and internal controls over significant accounting systems.
Review the prior audit, the future audit work file (FAWF) and citizen hotline referrals.
Review fraud investigations (including in-process) and other relevant engagements.
Perform planning analytical procedures.

The nature, timing and extent of planning procedures vary with the size and complexity of the entity, and with the auditors experience
with the entity. Auditors will consider whether other planning procedures are necessary to identify risks.

2. Supervisory review of the results of planning procedures will be completed before the planning conference brainstorm.

Supervisors will ensure potential risks are specifically and clearly described to enable an effective discussion during the brainstorm and
provide the basis for developing testing strategies that appropriately respond to selected risks.

3. A planning conference brainstorm will be conducted to finalize the assessment, sort and prioritize risks, and develop
procedures to ensure risks are properly addressed.

The audit manager, supervisor, auditor-in-charge, among others, will hold a planning brainstorm to sort and prioritize risks identified during
Seattle School District No. 1
planning and to strategize audit tests. The following factors will be considered:
Relevance, considering public sensitivity, the expressed concerns or questions of management and those charged with governance, as
well as the primary activities, systems or events occurring at the government.
Potential impact, considering the likelihood and magnitude of potential impacts such as fraud, abuse, loss or questioned costs
associated with noncompliance.

Sometimes a risk may be addressed by more than one type of engagement. Auditors must sort the risks to determine what audit type
would be most appropriate to address them.

The analysis of risks and decisions made during the brainstorm will be documented in sufficient detail to support the focus and scope of the
audit.

4. An audit plan will be prepared from the results of the brainstorm, and a detailed budget will be developed to track budgeted
and actual audit hours.

Supervisory review is important to determine whether adjustments to the plan are needed based on changing circumstances. Significant
revisions to the audit plan must be approved and documented.

5. Auditors will communicate information about the planned audit to client management and those charged with governance.

Auditors must also ensure significant changes to the planned audit are communicated to the client in a timely manner. All communications
must be documented. Refer to Policies 2130 (Inviting Elected Officials to Entrance/Exit Conferences), and 2210 (Conducting Entrance
Conferences).

RELATED POLI CI ES
4110 Objectives and Authority for Accountability Audits

Record of Work Done:
We reviewed the District's board meeting minutes for the period of 9/1/2012 through 8/31/2013 and through the most recent
Seattle School District No. 1
meeting of 10/2/2013 to gain an understanding of the District and its activities.
See minutes review at B.1.3

Based on our review of the meeting minutes the District is is compliance with the Open Public Meetings Act. Specifically we tested for
compliance with the following requirements:

For all meetings a quorum of 4 Board members were present.
Official actions of the governing body appear to be documented in the minutes.
Actions or decisions known to have occurred are not omitted from the minutes.
Purpose and length of executive sessions are identified in the minutes.
Executive sessions are held for allowable purposes.
Business conducted at special meetings is for reasons scheduled and publicly disclosed.
Minutes for regular, special meetings and retreats were approved at the next regularly scheduled meeting
Items noted in the minutes that may impact our accountability audit include:
Numerous public works contracts (both Design/Build and GC/CM contracts were awarded during the audit period. The
District notes increased enrollment and is planning to reopen and expand current inventory plus construct new schools to
meet capacity needs.
The District notes decreases in enrollment and funding for Head Start programs
District notes budget constraints that pose risk of misuse of restricted funds for general fund expenditures.
District must address retiring work force and high turnover of new staff.
Minutes of 9/18/2013 allude to non paying tenants at Horace Mann School facilities.
District rolls out a new system PowerSchool to replace the ESIS.


B.1.PRG - Accountability Planning - Local Govt
Seattle School District No. 1

Procedure Step: Planning Analytical Procedures
Prepared By: AB1, 1/14/2014
Reviewed By: AVE, 1/22/2014

Purpose/Conclusion:
Purpose:
To identify potential accountability risks to consider in the planning conference brainstorm by performing planning analytical procedures.
Conclusion:
Based on our planning analytical procedures, we noted the following potential accountability risks :
We identified vendors paid a significant increase in 2013. We will consider testing of these vendors in our brainstorm session.
We noted one hourly employee with a 40% increase in pay from the prior year and will include in our testing as follow-up to deficiencies in
internal control over payroll at D.5.PRG



Testing Strategy:
NOTE: Planning AP differs from AP used as a substantive test in that the purpose of the procedure is discovery rather than
substantiation. Although expectations of some sort are necessary for effective AP, expectations used for planning AP are often very general and
do not need to be documented. Expectations may be derived from events or changes in activity noted during other planning steps, budgets, prior
year figures, figures for comparable entities, or general understanding of relationships between activities and financial figures.
Auditors are encouraged to develop analytics to match the entity's circumstances, activities and risks. The following are examples of general
considerations for planning analytical procedures:
Trend analysis of revenues and expenditures
Auditors would generally start with high level analyticals (such as revenues by fund and 2-digit BARS or expenditures by fund and object)
before considering more detailed trends (ie: to sub-account) for certain high risk funds or accounts.
Total payments by vendor
Seattle School District No. 1
Total payroll by employee
Trend payroll by department or type of pay (ie: overtime, recognition leave, time loss, exchange time, etc)
Amount of expenditures passing through petty cash funds, imprest accounts and/or credit cards
Surprise cash counts

CAATS Considerations
When analytical procedures involve CAATS, the following documentation guidelines should be followed:
Databases should not be included in TeamMate. Only relevant query results should be included in audit documentation. This can be
done with imported report documents, copied query excerpts, narrative description of queries and results, or other means.
When used as audit evidence, auditors should document where and how they obtained data, how they verified or were reasonably
assured of the completeness and accuracy of the data, and results. NOTE: FAP data has not been validated by Team Local ISA. For
downloads from ASP, BIAS, BiTech, CompuTech, Eden, Springbrook and WSIPC software, data validation testing strategy workpapers are
available in the SAOStore in the Planning & Audit Plan | Accountability folder.

Policy/Standards:
SAO Audit Policy 4210 - Planning Accountability Audits


BACKGROUND
The purpose of planning procedures is to identify and assess risks of fraud, loss or abuse of public resources; non-compliance with laws and
regulations; and the internal controls over such matters. Selected risks to audit must be significant to the public and other users either
quantitatively or qualitatively. This is based on auditor judgment. To address those risks, auditors must develop effective audit tests and
strategies.

REQUI REMENTS
1. Auditors will perform the following planning procedures to identify and assess accountability risks:
Review the planning guide.
Review meeting minutes of the governing body.
Gain an understanding of the entity and its control environment.
Seattle School District No. 1
Maintain a current understanding of the relevant policies, procedures and internal controls over significant accounting systems.
Review the prior audit, the future audit work file (FAWF) and citizen hotline referrals.
Review fraud investigations (including in-process) and other relevant engagements.
Perform planning analytical procedures.

The nature, timing and extent of planning procedures vary with the size and complexity of the entity, and with the auditors experience
with the entity. Auditors will consider whether other planning procedures are necessary to identify risks.

2. Supervisory review of the results of planning procedures will be completed before the planning conference brainstorm.

Supervisors will ensure potential risks are specifically and clearly described to enable an effective discussion during the brainstorm and
provide the basis for developing testing strategies that appropriately respond to selected risks.

3. A planning conference brainstorm will be conducted to finalize the assessment, sort and prioritize risks, and develop
procedures to ensure risks are properly addressed.

The audit manager, supervisor, auditor-in-charge, among others, will hold a planning brainstorm to sort and prioritize risks identified during
planning and to strategize audit tests. The following factors will be considered:

Relevance, considering public sensitivity, the expressed concerns or questions of management and those charged with governance, as
well as the primary activities, systems or events occurring at the government.
Potential impact, considering the likelihood and magnitude of potential impacts such as fraud, abuse, loss or questioned costs
associated with noncompliance.

Sometimes a risk may be addressed by more than one type of engagement. Auditors must sort the risks to determine what audit type
would be most appropriate to address them.

The analysis of risks and decisions made during the brainstorm will be documented in sufficient detail to support the focus and scope of the
audit.

4. An audit plan will be prepared from the results of the brainstorm, and a detailed budget will be developed to track budgeted
and actual audit hours.
Seattle School District No. 1

Supervisory review is important to determine whether adjustments to the plan are needed based on changing circumstances. Significant
revisions to the audit plan must be approved and documented.

5. Auditors will communicate information about the planned audit to client management and those charged with governance.

Auditors must also ensure significant changes to the planned audit are communicated to the client in a timely manner. All communications
must be documented. Refer to Policies 2130 (Inviting Elected Officials to Entrance/Exit Conferences), and 2210 (Conducting Entrance
Conferences).

RELATED POLI CI ES
4110 Objectives and Authority for Accountability Audits

Record of Work Done:
CAATS Considerations Details:
We obtained G/L and Payroll data from SSD and imported the data into a Microsoft Access database. We verified the integrity of the data by
agreeing total revenues, expenses, and certain balance sheet account line items from the database to the F-196. Amounts were identical;
therefore, it appears the database is accurate and complete. We will use this information to analyze data and identify areas that have unusual
discrepancies based upon unusual items or large discrepancies between CY & PY. The MS Access "front-end" for the database is on the server in
our dedicated work space at the District's administrative offices (the path follows: \\SAOPSCKC003\TeamMate\SSD Share\FY13. The actual data
tables are located on secure servers in our Olympia offices, and the Access front-end pulls data from the database in Olympia.


We performed a four year trend analysis for:
Revenue AP B.1.10 No risks identified
Expenditure AP B.1.11 We identified vendors paid a significant increase in 2013. We will consider testing of these vendors as part of our
follow-up to PY issue re personal service contracts in our brainstorm session.
Payroll AP B.1.12 We performed payroll trend analytical procedures to identify risks to bring to the accountability brainstorm. Trend
results coincide with our understanding of high turnover of teachers due to the high percentage of new teachers that do not return the
following school year. We selected employees with a high percentage increase and verified current pay is within the pay scale of the
Seattle School District No. 1
position. We noted one hourly employee with a 40% increase in pay from the prior year and will include in our testing as follow-up to
deficiencies in internal control over payroll at D.5.PRG.


B.1.PRG - Accountability Planning - Local Govt

Procedure Step: AC Brainstorm & Audit Plan
Prepared By: AB1, 2/5/2014
Reviewed By: AVE, 4/15/2014

Purpose/Conclusion:
Purpose / Conclusion:
To evaluate accountability risks and develop an audit plan.

Testing Strategy:
EXPECTATI ON: The planning conference brainstorm should take place in person or on the phone after all planning steps have
been completed. The AI C should be prepared in accordance with team expectations - with a proposed priority of risks to
include in the audit. This will allow the brainstorming process to effectively evaluate and finalize scope decisions and design
further audit procedures.


STEP 1: Brainstorming Discussion (Planning Conference)
Professional judgment should be used in determining which audit team members should be included in the discussion. The brainstorm should
include, at minimum, the key members of the audit team. Normally, this would be the AIC, Supervisor and Audit Manager. This could also
include other members of the current audit team, the prior AIC, specialists or program manager or others. Managers should consider the
experience of the AIC and Supervisor and the size and risk of the audit in determining who should attend and the timing and extent of
brainstorming discussion.
Seattle School District No. 1

The auditor must document how and when the discussion(s) occurred and participants.


STEP 2: Overall Accountability Risk
Assess overall risk for safeguarding of public resources and compliance. When determining overall risk, auditors should consider risks that relate
pervasively to safeguarding and compliance as a whole and potentially affect many audit areas. For example:
Issues with overall COSO elements, such as the control environment or information systems
Use of the County Treasurer
Ability to segregate duties effectively
Major financial distress

Planning should reflect the overall risk assessment in staffing, supervision, audit budget and the overall level of testing.

STEP 3: Determine Accountability Audit Plan
Identify accountability areas selected for testing. The plan should describe each risk selected for testing (what could go wrong) and our planned
audit response (further audit procedures).

Changes to Audit Plan:
Document both the original plan and any changes made during the course of the audit. Changes to the original plan may be documented in the
"Changes to Audit Plan" step or in the Record of Work Done (ie: using a different font color for changes or listing changes in a separate section at
the end of the plan).
Staffing:
Identify the AIC and AAM of the audit in the Team tab of the Profile, considering the knowledge, skill, and ability of personnel assigned significant
audit responsibilities and the appropriate level of supervision.
Independence and Competence:
Determine whether assigned staff are independent with respect to the entity under audit (Policy 3110). Also, ensure the assigned staff
collectively possesses adequate professional competence for the tasks required (Policy 3140).
Reliance on Work of Others:
If the audit will require the use of outside specialists (Policy 3230) or rely on the work of other auditors (Policy 3510), internal auditors (Policy
3520), or grant monitors (Policy 3530), the plan should describe the anticipated nature of this reliance.
Budget:
Develop a detailed audit budget, considering risks, staffing and other circumstances. Initial budget information can be obtained from
Seattle School District No. 1
TABS. Inform your supervisor and audit manager if TABS is not correct so that changes can be requested.

STEP 4: Communicate risks or information relevant to other SAO audits
Information or risks identified in the planning may affect or be better addressed with a different type of engagement (for example, a financial
statement audit), a future engagement, an engagement of another local government or state agency, or by other parties, such as regulatory
bodies or law enforcement.

Policy/Standards:
SAO Audit Policy 4110 - Objectives and Authority for Accountability Audits

BACKGROUND
Our Office has statutory authority (RCW 43.09 and RCW 43.88.160) to audit financial information and compliance with state, federal and local
laws on the part of all local governments and all state agencies.

Under this authority, we conduct accountability audits. These audits are unique in that they are not required to follow professional auditing
standards although the general standards in Government Auditing Standards have been fully incorporated as policy for all engagements (including
accountability audits) in the Audit Policy 3100 series. A risk-based approach is used to provide meaningful and timely feedback about state and
local governments by focusing on significant risks that may not be material to a financial or federal compliance audit.

REQUI REMENTS
1. Accountability audits will be designed to detect and respond to areas of significant risk.

Accountability risks include fraud, loss or abuse of public resources; non-compliance with laws and regulations; and the internal controls
over such matters. These risks are considered significant when they matter to the public and other users quantitatively or qualitatively.
Fraud involves employees or contractors dishonestly or illegally taking public funds or assets.
Losses include frauds but may also result from a lack of prudent business practices such as inadequate insurance and inadequate financial
planning.
Abuse involves behavior that is improper or unethical when compared with prudent, reasonable and necessary business practices. For
example, creating unneeded overtime, making travel choices that are unnecessarily extravagant or expensive or making procurement or
vendor selections that are unnecessarily extravagant or expensive.
Non-Compliance with laws and regulations that have a public interest. For example, complying with the Open Public Meetings Act, conflict
of interest laws, the proper use of restricted funds, and requirements for investments and deposits.
Seattle School District No. 1

RELATED POLI CI ES
1210 State and Local Government Audits

REFERENCES
Chapter 43.09 RCW
RCW 43.88.160 (6)

------------------------------------------------------------------------------

SAO Audit Policy 4210 - Planning Accountability Audits

BACKGROUND
The purpose of planning procedures is to identify and assess risks of fraud, loss or abuse of public resources; non-compliance with laws and
regulations; and the internal controls over such matters. Selected risks to audit must be significant to the public and other users either
quantitatively or qualitatively. This is based on auditor judgment. To address those risks, auditors must develop effective audit tests and
strategies.

REQUI REMENTS
1. Auditors will perform the following planning procedures to identify and assess accountability risks:
Review the planning guide.
Review meeting minutes of the governing body.
Gain an understanding of the entity and its control environment.
Maintain a current understanding of the relevant policies, procedures and internal controls over significant accounting systems.
Review the prior audit, the future audit work file (FAWF) and citizen hotline referrals.
Review fraud investigations (including in-process) and other relevant engagements.
Perform planning analytical procedures.

The nature, timing and extent of planning procedures vary with the size and complexity of the entity, and with the auditors experience
with the entity. Auditors will consider whether other planning procedures are necessary to identify risks.

2. Supervisory review of the results of planning procedures will be completed before the planning conference brainstorm.
Seattle School District No. 1

Supervisors will ensure potential risks are specifically and clearly described to enable an effective discussion during the brainstorm and
provide the basis for developing testing strategies that appropriately respond to selected risks.

3. A planning conference brainstorm will be conducted to finalize the assessment, sort and prioritize risks, and develop
procedures to ensure risks are properly addressed.

The audit manager, supervisor, auditor-in-charge, among others, will hold a planning brainstorm to sort and prioritize risks identified during
planning and to strategize audit tests. The following factors will be considered:
Relevance, considering public sensitivity, the expressed concerns or questions of management and those charged with governance, as
well as the primary activities, systems or events occurring at the government.
Potential impact, considering the likelihood and magnitude of potential impacts such as fraud, abuse, loss or questioned costs
associated with noncompliance.

Sometimes a risk may be addressed by more than one type of engagement. Auditors must sort the risks to determine what audit type
would be most appropriate to address them.

The analysis of risks and decisions made during the brainstorm will be documented in sufficient detail to support the focus and scope of the
audit.

4. An audit plan will be prepared from the results of the brainstorm, and a detailed budget will be developed to track budgeted
and actual audit hours.

Supervisory review is important to determine whether adjustments to the plan are needed based on changing circumstances. Significant
revisions to the audit plan must be approved and documented.

5. Auditors will communicate information about the planned audit to client management and those charged with governance.

Auditors must also ensure significant changes to the planned audit are communicated to the client in a timely manner. All communications
must be documented. Refer to Policies 2130 (Inviting Elected Officials to Entrance/Exit Conferences), and 2210 (Conducting Entrance
Conferences).

RELATED POLI CI ES
Seattle School District No. 1
4110 Objectives and Authority for Accountability Audits

Record of Work Done:
Step 1: Brainstorm
Date: J an 7, 2014 we held a meeting at the District.
Attendees: Anastassia Kavanaugh, J im Griggs, Heidi Wiley, Annette Boulmetis
We prepared an index of audit risks at: B.1.13

Step 2: Overall Accountability Risk
We assessed the overall risk as HIGH and will conduct the audit accordingly.

Step 3: Accountability Audit Plan
Based on planning procedures and the planning conference brainstorm, we identified the following risks to be addressed by the accountability
audit, in order of priority:
Accountability Risk Audit Response
Financial Condition
We plan to perform procedures using the OSPI
financial indicators to determine if the District has a
healthy financial position. Financial Condition
Required Risk
Enrollment - This area is a significant funding driver
for the District's state apportionment. This area
was last reviewed in FY09 and errors in calculating
FTE were noted. Due to complex reporting
requirements, there is a risk of non-compliance that
puts the District at risk of significant repayments of
apportionment funding.

Special Education Enrollment Risks are that
evaluations and timelines will not be completed in a
timely fashion.

We plan to perform a review of enrollment in
accordance with Team SP's suggestions, to
determine if the District is in compliance with basic
enrollment reporting requirements.
See Enrollment

Team Schools Program will perform testing to
determine if the District is in compliance with
Special Education Enrollment requirements. See
work performed at Special Education Enrollment
Required Risk
Transportation This area was last reviewed in
2007 with exceptions in ridership reporting that

We plan to perform a review of transportation in
accordance with Team SPs suggestions to
Seattle School District No. 1
resulted in the District receiving an inappropriate
amount of funding for transportation ridership.
determine if the District is in compliance with
transportation reporting
requirements. Transportation

Facilities We noted a PY findingthe District does
not have adequate controls to ensure that it collects
all revenue for facilities usage. Due to the Districts
size and considerable number of assets there is a
risk that contract agreements for use of facilities are
not sufficiently monitored and that the expense of
operating these facilities is not being sufficiently
offset by potential revenue putting the District at
risk of financial hardship.

We plan to select contracts for testing to determine
if the District is monitoring contracts and is in
compliance with permitting and
insurance requirements for all parties concerned.
Also to verify the District has a collection process in
place to ensure timely invoicing and monitoring of
delinquent accounts and payment. Facilities
Payroll We noted several issues in the PY of
inadequate internal controls over access to HR and
payroll data files. I n addition we noted payroll costs
related to the general fund were charged to capital
and that changes made to the employee pay were
not adequately supported by Personnel Change
forms and authorization by Management and failure
to report personal use of district vehicle to IRS
We plan to follow-up on prior year issues and
determine if the District has made progress toward
addressing these issues and document if corrective
action is in process or is in draft form. Payroll
Ineligible Capital Expenditures We noted durring the
py audit the District continued charging non-capital
costs to Capital Project Fund.
We will follow up on management letter issue
regarding
charging of noncapital costs to Capital Project Fund
at Central Administrative Costs

Fleet Management -- How does the District
inventory
and perform maintenance on its fleet. To follow up
on a finding
that we issued for FY 2011 ( no follow up was done for
FY 2012).
We will obtain the District's current fleet inventory
to
determine if it is updated and maintenance
schedules
are being monitored. Fleet Management

Staffing - The auditor in charge and supervisor, as well as all assistants, are listed in the Team tab of the Profile. We have planned the audit
staffing to ensure that all staff are adequately supervised.
Seattle School District No. 1

Independence and Competence - Assigned personnel are independent and collectively have the technical knowledge, skills and experience
necessary to perform the audit.

Reliance on work of others - We considered the use of specialists and the potential for reliance on other SAO audits or the work other CPAs,
internal auditors or grant monitors. We do not plan to rely on specialists, other SAO audits, or work of others.
Budget -We developed a detailed audit budget as documented in 2013 Budget vs. Actual Audit Hours.


Step 4: I nformation to be considered in other SAO audits:
We identified no significant information that should be considered for other SAO audits or communication to outside parties.


B.1.PRG - Accountability Planning - Local Govt

Procedure Step: AC Entrance Conference
Prepared By: AB1, 1/28/2014
Reviewed By: AVE, 1/28/2014

Purpose/Conclusion:
Purpose / Conclusion:
To communicate our audit responsibilities and the planned scope and timing of the audit to management and the governing body.

Testing Strategy:
If no entrance conference was held, explain the situation in the record of work done (and the Entrance Conference Explanation
Field in the custom tab in the profile). The record of work done must describe how the required information above was
communicated to management and those charged with governance.

BEFORE the Entrance Conference:
Seattle School District No. 1
If not clearly evident from the governance structure, determine those charged with governance for purposes of audit communication
and document our conclusion.
Those charged with governance are those responsible for overseeing the strategic direction of the government and fulfillment of the
governments objectives and obligations. In some governments, multiple parties may be charged with governance, including oversight
bodies contracting for the audit, members or staff of legislative committees, boards or audit committees. The auditors evaluation would
consider how the government delegates authority and establishes accountability for management.
Communicate with management who will conduct and attend the Entrance conference.
Set up the Entrance conference at a time convenient for client and SAO staff.
Invite elected officials to the Entrance conference (see template letter available in the SAOStore).
Prepare the Entrance conference handout the using the required template available in the SAOStore. The template must be adjusted as
necessary for each audit.
The entrance document is normally used in lieu of an engagement letter to document our understanding with the client. However, if a
more formal agreement is needed (for example, to set firm deadlines for audit readiness), an engagement letter may be used - see Audit
Policy 2140 for details.

DURI NG the Entrance Conference:
Present and discuss information on the entrance conference handout to ensure there is a clear understanding of the following areas: Scope and
timing of the audit, including the month we expect to issue our report; reporting levels for audit recommendations; audit costs; audit staffing;
expected communications; and other information considered important to the audit.

AFTER the Entrance Conference:
Attach the entrance conference handout and any other documents that were presented.
Document the conference attendees (SAO and client) as well as the date of the conference.
Document any significant conversations that might result in a change in our risk assessment or audit plan.
Send copies of the entrance document to any elected officials who were not able to attend the conference, unless the governing body
uses a finance/audit committee for contact with the auditor.

Policy/Standards:
Seattle School District No. 1
SAO Audit Policy 2130 - Inviting Officials to Entrance and Exit Conferences

SAO Audit Policy 2210 - Conducting Entrance Conferences

Record of Work Done:
Invitations:
Invitations to the entrance conference were sent to board members and executive management via email.

Entrance Conference:
The entrance conference handout is documented at Entrance Conference Document - 2013 SSD Audits. The following people attended the official
entrance conference, held in accordance with Audit Policy 2210:
Charles Wright, Deputy Superintendent
Sherry Carr, Board member and Audit & Finance Committee Chair
Susan Peters, Board member and Audit & Finance Committee member
Harium Martin, Board member and Audit & Finance Committe member
Kathie Technow, Accounting Manager
Andrew Medina, I nternal Auditor
Ken Gotsch, Business & Finance Assistant Superintendent
Linda Siebring, Budget Manager
Kimberly Fry, Internal Audit employee
J im Griggs, SAO Audit Manager
Anastassia Kavanaugh, SAO Assistant Audit Manager
Heidi Wiley, SAO Auditor in Charge
In addition to the topics shown on the entrance conference handout, the following items were also discussed:
The reason why Head Start was selected as a program for the single audit when the feds came in and did a thorough audit. We explained
the feds did a program audit and because of the program is a major program that we needed to select it to meet certain requirements.
Does SAO and the District have a contract since the audit cost is more than $250,000 since District policy is that any cost above that
amount is required to be approved by the Board with a contract. Sherry Carr explained to Ken Gotsch that SAO is a different case as the
District is required to have the audits done. But Charles Wright will follow up with legal to make sure the District is following their policy.
Seattle School District No. 1
Board and Superintendent's office offered their assistance in making sure the District cooperates and information is provided. I f we run
into any problems we can contact them directly.
We also sent copies of the entrance conference handout via email to the following people:
'schoolboard@seattleschools.org'; 'superintendent@seattleschools.org'; 'kcgotsch@seattleschools.org'; 'paapostle@seattleschools.org'; kcorrigan@
seattleschools.org; 'lmsebring@seattleschools.org'; 'pmcevoy@seattleschools.org'; 'mftolley@seattleschools.org'; 'lherndon@seattleschools.org'; 'c
wright@seattleschools.org'


D.1.PRG - Concluding Accountability Audit Procedures

Procedure Step: Changes to Audit Plan
Prepared By: AVE, 6/18/2014
Reviewed By: JWG, 6/18/2014

Purpose/Conclusion:
Purpose:
To document changes in the audit plan and determine whether changes caused audit objectives not to be met.

Conclusion:
After documenting and analyzing changes in the audit plan, we determined that these changes supported audit objectives.

Testing Strategy:
Document any changes to the original audit plan.

Changes made during the course of the audit should be differentiated from the original audit plan. These changes may be documented in
the Record of Work Done below or as part of the original audit plan (ex: using a different font color or listing the changes in a separate
section of the original plan).

Seattle School District No. 1
Determine whether changes to the original audit plan support audit objectives.

Auditors should consider whether permanent file information needs to be updated to capture any significant new information discovered during
the course of the audit.

Policy/Standards:
SAO Audit Policy 4210 - Planning Accountability Audits

Record of Work Done:
During the course of the audit we identified two additional risks:
1. Procurement of technology purchases. We became aware of the risk is that SSD does not comply with the law when awarding contract to
Apple, Inc. after phone conference with Team School Programs on 2/5/2014.
See D.10.PRG
We determined that the District appropriately procured technology purchases.
2. Self-Insurance - during our audit we noted that this area was not reviewed in the past five audits. We performed initial risk assessment to
determine if SSD self-insures for any risks and if SSD uses ESDs.
See D.11.PRG
We determined that the District does not use ESDs. The district self-insures for worker's comp, liability and potentially for health - vision only.
During initial risk assessment we did not notice any apparent signs of noncompliance. We did not have sufficient resources to perform detailed
examination, so we will consider this area when planning next audit.


D.1.PRG - Concluding Accountability Audit Procedures

Procedure Step: Letter of Representation - Local Govt
Prepared By: AVE, 6/25/2014
Reviewed By: JWG, 7/2/2014

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Purpose/Conclusion:
Purpose:
To confirm the continuing applicability of managements explicit or implicit representations and reduce the possibility of
misunderstanding.

Conclusion:
We confirmed the continuing applicability of managements explicit or implicit representations and reduced the possibility of misunderstanding.

Testing Strategy:
To confirm managements representations, auditors are required to perform the following procedures:

STEP 1:
Using the TeamMate template letter located in the SAOStore (Audit Administration | Audit Wrap-Up folder), determine the applicable written
representations needed from management for all periods covered by our audit report. Auditors should use one of the following templates:
GAAP use for all GAAP presentations (including ESDs and GAAP basis school districts)
BARS Cash Basis use for all governments that are reporting on a BARS Cash Basis or that do not prepare financial statements.
School F196 use for all school districts that report using the F196 on a cash or modified accrual basis.

The template should be modified as needed to reflect the audit scope and situation.

The "general representations" section should be included in all situations; other sections should be deleted if unneeded. For example,
auditors should delete the "additional representations related to the financial statements" section if a financial statement audit is not done
or when issuing an opinion on single audit work at a later date than the financial statement opinion.


STEP 2:
Consider whether any additional representations need to be obtained beyond the standard representations included in the template. Contact TAS
if you need assistance regarding any additional representations that may be needed.

The following are common examples of additional representations (see also AU-C 580, Exhibit B):
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The entity has used the work of a specialist, such as for determining environmental remediation, pension, OPEB, self-insurance or landfill
obligations.
The entity has changed accounting principles.
Short-term debt is being reported as long-term based on managements ability and intention to refinance it.
Financial circumstances are strained and we are reporting either an emphasis of a matter or going concern paragraph.

STEP 3:
Obtain and review the representation letter to ensure 1) all representations were properly made and are consistent with expectations; 2) it is
dated as of our report date, and 3) signed by appropriate members of current management. Attach a scanned copy of the letter into TeamMate.

The representation letter must be dated as of the report date. However, the letter may be received after the report date so long as it is
obtained before issuing the report.

The letter should be signed by members of management with overall responsibility of financial and operating matters who are responsible
and knowledgeable about, directly or through others in the entity, the matters covered in the representations. Generally, the letter is
signed by the chief executive officer (e.g. city manager, mayor, superintendent) and the chief financial officer (e.g. finance officer,
business manager, clerk/treasurer).

When such persons were not present during all periods referred to in the letter, they may assert that they are not in a position to provide
some or all of the representations; this fact, however, does not diminish managements responsibilities and would not be reason for the
auditor to accept this risk or responsibility.

Policy/Standards:
SAO Audit Policy 3420 - Obtaining Management Representation Letters

Record of Work Done:
STEP 1:
We selected the appropriate representation letter template from the Store.
We obtained letter of representaion on May 28, 2014 for AC and SA audits. We obtained AC only Management Representaions Letter in adition to
cover period from May 28th to J une 19th.
STEP 2:
We considered whether any additional representations were needed beyond the standard ones included in the template. We determined that no
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additional representations were needed. The template was provided to the entity and a list of uncorrected misstatements was included as an
attachment .

STEP 3:
We obtained the representation letter and reviewed it to check that:
All representations were properly made and consistent with expectations;
It was dated the same as our report date; and
It was signed by appropriate members of management.

See full letter at F.4.9
See updated rep letter at D.1.8


D.1.PRG - Concluding Accountability Audit Procedures

Procedure Step: AC Quality Control Assurance Certification
Prepared By: AVE, 6/25/2014
Reviewed By: JWG, 7/2/2014

Purpose/Conclusion:
Purpose / Conclusion:
To review and certify adherence to applicable audit standards and policy with regard to the Accountability audit.

Testing Strategy:
This step should be signed-off by the Auditor-in-Charge, the Assistant Audit Manager, and the Audit Manager. The Quality Control Assurance
Certification should be signed-off before the Accountability audit report is issued.
Seattle School District No. 1

If a requirement does not apply, it should be noted on the certification. If a requirement was not met an explanation needs to
be documented and approved by the Audit Manager. No other modifications to the form should be made. It is not necessary to reference
applicable sections of the certification to the audit documentation.

Policy/Standards:
SAO Audit Policy 3430 Quality Control Assurance Certification

Record of Work Done:
Quality Control Assurance Certification
The certification must be signed-off before the Accountability audit report is issued.

Auditor in Charge Statements
1. I am free, both in appearance and in fact, from personal and external impairments to objectivity and independence in matters related to this
audit (Audit Policy 3110).

2. I informed assistants, if any, of responsibilities and objectives of the procedures they were planned to perform (Audit Policy 3160).

3. I monitored the audit budget compared to actual audit hours and requested approval in advance from the supervisor and Audit Manager if
additional audit hours were needed (Audit Policy 3160).

4. I promptly informed my supervisor of potential audit issues encountered (Audit Policy 3160).

5. I informed my supervisor of modifications to the audit plan (Audit Policy 3160).

6. Work performed was documented in accordance with Audit Policy 3310.

7. I reviewed audit documentation prepared by assistants to ensure work was adequately performed and properly documented (Audit Policy
3160).

8. I promptly resolved any coaching notes (Audit Policy 3160).

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9. Sufficient and appropriate audit evidence was obtained and evaluated to ensure that specific audit objectives were achieved (Audit Policy
3210).

10. An entrance conference was conducted in accordance with Audit Policies 2130 and 2210.

11. An exit conference was conducted in accordance with Audit Policies 2130 and 2220
Assistant Audit Manager (Supervisor) Statements
1. I am free, both in appearance and in fact, from personal and external impairments to objectivity and independence in matters related to this
audit (Audit Policy 3110).

2. I reviewed audit documentation to ensure work was adequately performed and evaluated whether the results are consistent with the
conclusions presented in the engagement report. My review was completed prior to the exit conference and report issuance (Audit Policy 3160).

3. I ensured that all coaching notes were resolved (Audit Policy 3160).

4. I informed the Audit Manager of significant problems or audit issues (Audit Policy 3160).

5. I agree with the certification statements made by the auditor-in-charge.

Audit Manager Statements
1. I am free, both in appearance and in fact, from personal and external impairments to objectivity and independence in matters related to this
audit (Audit Policy 3110).

2. I reviewed audit documentation to ensure work was adequately performed and evaluated whether the results are consistent with the
conclusions presented in the engagement report. My review was completed prior to the exit conference and report issuance (Audit Policy 3160).

3. I requested approval for audit budget changes from the Director of State and Local Audit or delegate (Audit Policy 1220). Also, I
communicated audit budget changes to Team Financial Services.

4. In my opinion, the staff assigned to conduct each engagement collectively possess adequate professional competence for the tasks required
(Audit Policy 3140).

5. I immediately informed the Director of State and Local Audit or delegate if the report was anticipated to be issued 30 days or more after the
timeliness goals established in Audit Policy 2320.

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6. The protocol for findings and management letters as outlined in Audit Policy 2310 was followed.


D.1.PRG - Concluding Accountability Audit Procedures

Procedure Step: AC Summary & Report
Prepared By: AVE, 6/18/2014
Reviewed By: JWG, 6/18/2014

Purpose/Conclusion:
Purpose:
To (1) determine if the Accountability audit has been properly completed and (2) to prepare the audit report.

Conclusion:
We determined that the Accountability audit has been properly completed and prepared the audit report.

Testing Strategy:
Auditors are required to perform the following procedures to determine whether the Accountability audit has been properly completed and to
summarize results to be included in our audit report:

(1) Accountability Audit Procedures
Check that all accountability work is completed.
Evaluate whether procedures and documentation were sufficient to address major risks identified in planning and to support any findings.
If certain areas or risks were cycled to a future audit, ensure this expectation is documented in a FAWF note.
(2) Accountability Report
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Determine the reporting level of audit exceptions.
Prepare the audit report using ORCA and the ARS manual.
Check the Description of Entity and Officials sections with the entity.
Route Findings and Management Letters to the appropriate personnel.
All files sent to OS should be kept at AS3: Reports for OS.

Policy/Standards:
Refer to ARS manual for details regarding audit report contents and preparation.

SAO Audit Policy 4410 Accountability Reporting

SAO Audit Policy 2120 Notification of Audit Reports with Findings

Record of Work Done:

(1) Accountability Audit Procedures
To determine if the Accountability audit has been properly completed, we:
Checked that all accountability work was complete.
Evaluated whether procedures and documentation were sufficient to address major risks identified in planning and to support any
findings.
Filed notes for future audits in the FAWF.


(2) Accountability Report
To prepare our accountability audit report, we:
Determined the reporting level of audit exceptions.
Prepared the audit report using ARS Manual templates or the ORCA program.
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Checked the Description of District and Officials sections with the entity.
Routed Findings and Management Letters to the appropriate personnel.
See AS3: Reports for OS for final documents sent to OS.


D.1.PRG - Concluding Accountability Audit Procedures

Procedure Step: AC Exit Conference
Prepared By: AVE, 6/25/2014
Reviewed By: JWG, 7/2/2014

Purpose/Conclusion:
Purpose / Conclusion:
To communicate the results of our audit with management and those charged with governance.

Testing Strategy:
I f no exit conference was held or if the report was issued prior to the date of the exit conference, explain the situation in this
step (and in the Exit Conference Explanation field in the Custom tab of the Profile) and document how the auditor ensured that
adequate communication with management and elected officials occurred.

Pre-Exit Meetings:

If pre-exit or departmental exit conferences are held, the official handout (if any) should be attached and the meeting documented in this
step. Attachments for pre-exit or departmental exit meetings should be clearly labeled to distinguish them from the official exit conference.

BEFORE the Exit Conference:
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Communicate with management as to who will attend the exit conference and arrange for a convenient time and location for the exit
conference.
Invite elected officials to the exit conference (approved invitation letter templates are available in the SAOStore).
Prepare the exit conference handout using the template available in the SAOStore. Note: management letter, finding and status of prior
audit finding templates are also available in the SAOStore, if needed.
Prepare a separate handout for exit items and share these items with management prior to the exit conference along with any draft
management letter or finding issues.
Exit items are referenced, but not included, in the exit conference document. Auditors should bring the handout to the exit and be
prepared to discuss exit items if requested.
For financial statement audits, print a schedule of uncorrected misstatements from the Aggregation of Misstatements spreadsheet to
attach to the exit handout. Also attach a copy of the Management Representation Letter.
Plan the presentation of audit results by considering the following:
Who will attend from SAO?
Who will present each section?
Detail of audit scope?
DURI NG the Exit Conference:
Present Exit conference handout. The conference must include discussion of significant audit results, such as:
All non-trivial uncorrected misstatements. Auditors should attach a schedule of uncorrected misstatements by following the printing
instructions on the Aggregation of Misstatements spreadsheet.
Any material corrected misstatements, if not already reported as part of a significant deficiency or material weakness finding.
Representations requested from management. A copy of the Management Representation Letter should be attached.
Significant disagreements with management and their resolution.
Significant difficulties encountered during the audit.
Our views on significant questions that management consulted with other CPAs about.
Any other significant issue related to the governing bodys financial reporting responsibilities.

AFTER the Exit Conference:
Document the conference attendees (SAO and entity) in the Record of Work Done.
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Send copies of the exit document to any elected officials who were not able to attend the conference (do not include the handout of exit
items).
Include the official exit document and handout of exit items in the AS2 Team Reports folder.
Ensure that exceptions documented in TeamMate match the official handout of exit items, management letter and findings, as applicable.
The final exit conference document, handout of exit items, management letters and findings should be attached at AS2: Team Reports.

Policy/Standards:
SAO Audit Policy 2130 - Inviting Officials to Entrance and Exit Conferences

SAO Audit Policy 2220 - Conducting Exit Conferences

SAO Audit Policy 2310 Protocol for Findings and Management Letters

Record of Work Done:
Invitations:
We invited all the Board Directrors to our accountability audit exit conference in person during our May 28th financial statements and federal
single audit exit conference. Our accountability conference will take place during Audit and Finance committee meeting.
Exit Conference:
The exit conference handout is documented at D.1.3. Attachmets documented as follows:
Management Letter D.1.4
Exit ItemsD.1.2
Audit Memorandum Draft D.1.7
The following people attended the official exit conference, held in accordance with Audit Policy 2220:
SSD Members of Audit and Finance Committee - Director Martin-Morris and Director Peters
Ken Gotsch, Assistant Superintendent for Business and Finance
Kathie Technow, Accounting Manager
Mark Rapozo, Deputiy Director
Heidi Wiley, AIC
Anastassia Kavanaugh, Audit Supervisor
members of the public and SSD employees
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D.3.PRG - Enrollment

Procedure Step: Enrollment
Prepared By: AB1, 3/14/2014
Reviewed By: JWG, 6/13/2014

Purpose/Conclusion:
Purpose:
To review controls over enrollment reporting and test FTE reported by the District.
Conclusion:
Based on our review the District has adequate controls to ensure accurate FTE reporting and is in compliance with its policies and procedures. We
tested FTE reported by the District and found no issues.

Testing Strategy:
See also Enrollment Summary step; this step is required whether using the Team SP program or local audit team procedures.

Contact Team SP and they will provide you with the District specific Audit Program, Risk Analysis, and Enrollment Worksheet.

In recent years, the cause of most Enrollment reporting errors has been:
o Not generating and saving required enrollment and attendance reports I f district does not retain report they may not be able to
generate it at a later date. If district uses WSIPC we know they cannot.
o Not calculating partial FTE based on actual minutes of enrollment
o Running reports on dates other than count dates
o Counting students who did not participate in the first four days of September
o Some districts think September does not count I T DOES!
o Counting students absent > 20 consecutive count days at count date
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o Incorrect FTE calculations
o Double counting students who attend more than one school
o Counting students in juvenile detention
o Counting running start students college class time as college FTE and H/S FTE
o Lack of written plans for alternative experience learning program students
o Voc Ed classes not taught by voc certified instructors
o Voc Ed classes not approved by OSPI
o Clerical errors
o Not testing Bilingual students
o Counting Bilingual students after they achieve test proficiency
o Not retaining or reconciling Work Based Learning records
o Not obtaining release from Home District prior to enrolling in ALE Internet Program


Perform analytical procedures over enrollment in order to select one grade and month at one school for detailed testing.
a. Review risk analysis for this district to see if particular grades, months, or years were identified as problematic. If so,
recommendation is to key in on those months/grades/years (if multi-year audit) to determine cause of fluctuations.
b. If risk analysis did not identify particular grades/months/years, recommendation is made to select 12
th
grade at a high school
grade since risk of errors is higher due to students attending less than full time.
c. If this is a multiple year audit (2 year or 3 year audit cycle) and risk assessment did not identify problems in a particular school
year, recommendation is to select your month from school year 2008-09 as it will provide the best indicator of current controls.
d. If errors appear to be pervasive, consult with your Team Management to determine if testing should be carried into the current
year (FY10).
e. Do Not include students the district identifies as Alternative Learning Experience students, or Work Based
Learning students. They are outside the scope of this audit program
f. If your local team has other methods to select the test population for basic enrollment follow their suggestions.

Obtain the P223 report for grade/month/school selected and gain an understanding of the internal controls over the compilation at
the District level.
a. The P223 report identifies the number of FTE reported for funding by the school for each grade level. You will be verifying
the number of FTE on this report for the grade/ month/ year you selected.
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b. Obtain a brief description of how the district employee compiles the enrollment reports from all of the individual schools.
c. Inquire whether district office staff makes any changes to the P223 submitted by the individual school. I f so, obtain a copy of all
additions or deletions made at the district office and the reason for the adjustments.
d. Note: I f the district has more than one high school, select one of the high schools for detail testing based upon local team
knowledge of risks within the district.

Obtain an understanding of the internal controls over the P223 compilation at the individual school level selected for testing. They may
have a worksheet that you can use as the basis of performing the remaining audit steps.
a. With the P223 for the individual school you obtained at the district office go to the school you selected for
testing. Obtain a brief explanation from the individual who prepares this monthly report of how they arrive at the FTE number.

Obtain the detail roster of students counted for the selected month/grade/school to ensure controls are in place to support counts.
a. If the District uses the WSI PC system, this will be the Student Roster by Grade report which identifies students by headcount not
FTE. Subsequent audit steps will describe how to make adjustments to the number of students on this report to arrive at audited
FTE.
b. If the District does not use WSIPC, the report will have a different report number or name.
c. If the District is unable to provide detail support of who specifically was counted, contact your AIC or Supervisor. In this event
Team SP may need to conduct expanded work.

Ensure that student count dates are the 1
st
school day of each month except September. September count date is the fourth school day
of the month, even if shool began in August.
a. Determine the count date for each month of the school year and the first four days of school for September in this district.
b. Determine the date the Student Roster by Grade report or equivalent report was run. Reports should be run on count date
(4
th
school day of September, 1
st
school day of October May).
c. For the month of September only, have the school identify what the first four school days of the month were (they are often split
up by weekends and Labor Day).
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d. If the monthly enrollment report was not run on the proper dates, this increases the likelihood of errors due to students who
withdrew or enrolled around count date. In addition to not running reports on the proper date, it is possible not all enrollments
and withdrawals were input prior to running the report.

Determine the method the district uses to track students who attend less than full time and obtain a copy of the report for the month and
grade selected for audit.
a. If the district uses WSIPC this will be the FTE Warnings report. If the district does not use WSIPC they must have some method
to track the less than full time FTE students.
b. Inquire what parameters the district uses to generate the FTE Warnings report or equivalent. (i.e.) How many classes does the
district consider to be full time?
c. Also obtain a brief explanation of the course coding used. Often districts specifically identify when students are in running start or
are signed up for courses that they are not counting toward FTE.
d. FTE for any student who attends less than 25 hours per week or 300 minutes per day, (grades 4-12) or 20 hours per week
(grades 1-3) must be pro-rated downward accordingly (i.e.) a 10
th
grade student who is scheduled for 16 hours per week may
only be counted as 16/25 or 0.64 FTE.

Evaluate the accuracy of the FTE Warnings report by calculating the time and FTE that should be reported for each period.
a. Obtain the bell schedule that was in place for the month under review and calculate the FTE that should be reported for each
period.
b. Inquire if the district has calculations in minutes per week they used to calculate FTE per period. If they do, allocate pass times
between periods in the same manner as the school did (if their method is consistent with the rules). If they do not have a
method of allocating pass time you may use your own judgment on how to allocate it to individual periods. (For WSIPC districts
weekly minutes will be converted to hours).
c. Using the bell schedule worksheet, enter the beginning and ending times for each period and calculate the number of minutes of
instruction time for each period. Do not count lunch or any time that does not produce credit, other than pass time.
d. Add the pass time to the appropriate periods and calculate total minutes per period per week. Divide total weekly minutes per
period by 1,500 to obtain audited FTE per period. Pass time rules:
1. Up to 10 minutes of scheduled pass time per 50 minutes of instruction time
2. Pass time before or after school may be included IF: (1) the time is on a published schedule and/or other communication
to students, staff and community; AND (2) students are expected to be present during the scheduled passing times AND;
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(3) Normal operations of school buses are completed before the morning passing time begins or do not start until after
the end of the day passing time is over.
3. Scheduled pass time before or after lunch, if scheduled, may be included.
4. To The extent that a school does not schedule the full 10 minutes of passing time for each 50 minutes of instruction, the
school may utilize this unused passing time elsewhere in the school day for other scheduled services to students (silent
sustained reading, advisory, etc.). This time may be allocated to the class periods with the limit of 10 minutes of total
pass time and allocated pass time per 50 minutes of instruction.

Compare the amount of FTE the district uses to calculate reportable FTE for students by period to the calculations you arrived at.
a. If there are differences you will need to recalculate reportable FTE for all students on the FTE warnings report (and probably
students not on the FTE Warnings report. (See next bullet).

Ensure the FTE Warnings Report is generated based on the correct number of classes required per auditors calculated FTE.
a. If you determine the FTE Warnings report is generated based on the incorrect number of classes required for 1.0 FTE (i.e. district
set parameters at 4 classes, you determined 5 classes required for 1.0 FTE) obtain the student schedules for each student on the
monthly Student Roster by Grade report and identify all students who should have been included on the report.
b. Recalculate FTE for each of the affected students. The difference between reported and audit calculated FTE for each student
will be questioned.

Ensure Student Roster by Grade includes only actively enrolled students.
a. Obtain the monthly enrollment and withdrawal list from the school. Compare to the Student Roster by Grade report and
determine if students included on enrollment and withdrawal list should be included on the Student Roster by Grade report based
on enrollment or withdrawal dates.
b. If any errors are noted identify the specific students by student number, grade, month, and year. Students who enroll on or
before count date may be included. Students who withdraw on or before count date may not be counted.
c. Note - Your local audit management may require that you trace to enrollment cards (hard copy) rather than to rely on the data
in the computer reports. This will be used in bullet 14, below.
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Ensure that students in juvenile facilities on count dates are not counted by the school they normally attend.
a. Obtain a copy of the juvenile detention report for the month. The district/schools should be receiving these from the local
juvenile facilities.
b. Students in juvenile facilities on count date should not be counted by the school they normally attend because they are counted
by the juvenile facility.
c. Compare names of students in detention to students counted by the district on the Student Roster by Grade report. If any
students were in detention and were counted by the district, identify the students by student number, grade, month, and
year. This will be used in bullet 14, below.

Ensure that skill center students FTE is split between the school district and the skills center based on the inter-local agreement, and that
combined is 1.6 FTE. . Beginning in the 07-08 school year the resident district may count a student for up to 1.0 FTE and the sckills
center may count the student for up to 0.6 FTE.
a. Determine whether the school participates in a Skills Center. Skills centers create the risk that students may be counted in both
their home district and the skills center district in excess of 1.0 FTE statewide.
b. If district does participate, the district that hosts the skills center should provide a roster of students to each participating home
district to inform them of who is enrolled in the skills center. Obtain a list of students who attended the skills center during the
month(s) of audit. Identify any students on the Student Roster by Grade report that are identified as attending a skills center.
c. The district should have an agreement with the skills center identifying how the students FTE shall be split between the host
district and participating district.

Ensure that running start students are only being counted for high school FTE for high school classes and not college classes.
a. Obtain a copy(s) of the college report to the school district (P223RS) of who was enrolled in running start for the month and year
(11
th
and 12
th
grade only). Colleges generally report running start FTE to the school district which then reports the FTE for
funding and reimburses the college.
b. Although students in running start may be counted for over 1.0 FTE in total (high school seat time and college credits) the college
credits should not be counted toward high school FTE. If students are reported as running start, assure each student is only
being counted for high school FTE for high school classes, not college classes.
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Verify that each student included on the September roster attended one of the first four days of September. (September review
month only)
a. For districts that start in August, we can also accept participation in any day in August. The student only has to participate in one
class to be considered as having met the requirement for active participation.
b. If documentation is not available to support attendance this is a serious deficiency, notify your AIC or Supervisor.
c. A quick method to identify students counted in September who probably should not have been is to obtain the October Student
Roster by Grade report and compare the two rosters, even if the district does not have attendance records for
September. Identify anyone on the September roster who is not on the October roster. There is a good chance the student
never showed up and should not have been counted. If you identify any students in this manner request the district provide
some method of proving the students attended one of the first four days of the month. I f they cannot, question the enrollment of
the student.

Ensure students were not included in the count who were absent 20 consecutive days or more at count date. (October May review
months)
a. Request evidence students included on the Student Roster by Grade were not absent 20 consecutive days at count date. If
school cannot provide such a report, inquire how they provide this assurance on a monthly basis. Notify your AIC if this process
does not appear to be in place.
b. If report is available identify any students on the Student Roster by Grade report who were absent 20 consecutive days at count
date for your month and should not have been counted. Record the student number, grade, month and year for each student
identified.

Count the number of students (headcount) claimed for the month substantiated on the Student Roster by Grade report or
equivalent. Adjust to the audited FTE by adding or subtracting students:
a. Who enrolled or withdrew prior to count date and should have been included or excluded on the roster depending on report run
date
b. Were in juvenile detention on count date
c. Were enrolled in a skills center in another district
d. Were absent 20 consecutive days at count date (October May)
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e. Did not participate in one of first 4 school days (September only)
f. Were less than a full FTE

Policy/Standards:
See the School District Guide for details on basic enrollment.

WAC 392-121-106 Enrolled Student As used in this chapter, enrolled student means a person residing in Washington state who: ( 4) Actually
participated on a school day during the first four school days of the current school term (semester or quarter), or on a school day during the
current school term on or prior to the date being counted.

WAC 392-121-108 Enrollment Exclusions (1) Absences .a student whose consecutive days of absence from school exceed twenty school
days shall not be counted as an enrolled student until attendance is resumed.

WAC 392-121-119 Enrollment Count Dates As used in this chapter, enrollment count dates means the fourth school day of September and the
first school day of each of the eight subsequent months of the school year

WAC 392-121-122 Definition Full Time Equivalent Student

Secretary of State Disposition Authority Number GS51-01-02-03: Retention period for enrollment reports that generate apportionment funding is
3 years or until completion of audit.

Secretary of State Disposition Authority Number GS51-04-04: Retention period for attendance reports that support enrollment reports is 3 years.



Record of Work Done:
We noted in our planning at B.1.PRG Team Schools Program recommends local teams audit basic enrollment for FY13. Enrollment was last
reviewed in FY09 and errors were noted in FTE calculations. We will test enrollment data from two schools (elementary and/or middle school) and
high school for September 2012 and verify the reported FTE for one grade in each building
Source:
Seattle School District No. 1
Enrollment Handbook updated December 2013 by Team Schools Program
Electronic Student I nformation System (ESIS) FTE reports provided by Sylvia Shiroyama
P223 Reports submitted to OSPI obtained from the District's website
http://www.seattleschools.org/modules/groups/homepagefiles/cms/1583136/File/Departmental%20Content/siso/enroll/2012/p223.htm
Data files and worksheets prepared by Steve Wright and Virginia Pfleuger

Audit Procedures:
1. Team SP performed risk analysis and suggested a review of enrollment data for September 2012 Elementary and/or middle school grade. We
determined one high school grade be selected due to the higher probability of part time status at the 12th grade level. Per Steve Wright, IT
Specialist for SPS, Running Start correspondence from Community Colleges was submitted as of October 2012. Therefore, for HS testing we used
October enrollment data. For Elementary/Middle School testing, we randomly selected 6 elementary/middle schools to review for enrollment
fluctuations. Of the six we selected one, Aki Kurose, Middle School, which had the highest rate of enrollment fluctuation. For the High
School testing, we learned that there were staff changes in the registrar office at Franklin HS, which would place this school at a higher risk for
inaccurate FTE reporting.
We did not include students identified as ALE. Per Team SP, ALE is not included in the scope of our school year 2013 accoutability audit.

We met with Sylvia Shiroyama, Data Analysis Manager to obtain an understanding of how the district compiles enrollment data for state reporting.
Sylvia explained that she is new to this position and is still learning about the job duties of her employees. Sylvia indicated enrollment fluctuates
significantly from Sept to Oct count dates due to parents disputing the assigned school, or removal of students from an assigned school to a
private school or a home school setting. She also explained the District migrated to a new student tracking system known as Power School in
September 2013. We agreed that our review would focus on the process and system used for FY13 (Sept 2012 through May 2013 which is based
on eSI S system. We recommend enrollment reporting be tested for School Year 2014 as the District migrated to Power School in Fall 2013. FAWF

2. We obtained the P223 reports for grade level 8 Aki Kurose students and grade level 12 Franklin HS student. The report includes head count
and FTE count. Virginia Pfleuger, Business Analyst, provided us with an understanding of the reporting process. Enrollment is reported to the state
based on admission status (# hours a student receives class instruction in one week) as recorded in the eSI S system. Students are registered
when they arrive at their scheduled classes. Attendance is tracked by the School Registrar and schedule changes must be approved by the
Counselor or Advisor. Consecutive Absence Report (ATT605P) tracks all students who are absent for 20 or more consecutive days (excused or
unexcused). A partial day absence does not count in the 20 consecutive day rule. A student is withdrawn as of the 21st absence date. Exceptions
are allowed only by written and signed agreement between parent and school administrator, or if student receives home/hospital care. The
monitoring performed at the District level is to extract data from eSIS by the cutoff date and to adjust FTE to account for data provided by 3rd
parties (community colleges and vocational institutes). The analysis performed by DoTS is District wide and provides the total adds/deletes and
adjustments to head count and FTE counts by month to OSPI.

3. The District does not use the WSIPC system and there are no student rosters per se. We obtained the head counts for the grades/schools
Seattle School District No. 1
selected by requesting the data extract from eSIS of students enrolled as of the 1st count date
(Sept 5th). On the first school day of Sept the data by student in eSIS is updated to account for FTE based on each student's registration status
as of 7:00 p.m. New students may be registered as they arrive and registration is reversed for students who do not arrive. Note: a registration
reversal does not cancel a student assignment to a class or classes. The reverse registration merely accounts for the absence to the Home Room
or the student's first class period. If a student does not register but arrives at school the student is added to the Enrolled/Not Registered
(STU705P) report and is subsequently registered.
Key Control: The Data Analyst reviews Consecutive Absence Report (ATT605P) to determine if the attendance information
provided by the Registrar is correct.
Virginia provided us a copy of an absence report she ran in November 2012 (saved to her hard drive) of the total consecutive absences by
student. I f any student has 20 or more absences and is not shown as withdrawn, Virginia will send a notice to the school registrar to confirm the
enrollment status. If the student has an education plan in process the student is able to keep their enrollment status. I f not, the student is
withdrawn. Virgina showed us the Enrollment Accounting Adjustment Form received from Laurie Cepa, Registrar at Franklin HS. The Accounting
Adjustment form shows the current FTE, the amount that should be reported, and the reason for the adjustment. We noted one Grade level 12
Franklin student was deleted (no longer enrolled) and 8 Franklin student FTE's were adjusted to allocate enrollment credits as skills center credits.
Vocational credits are equal weighted to HS credit; however. OPSI requests that the District track vocational educ credits separately and total HS
and voc ed credits may not exceed 1.6FTE. The adjustment was dated 11/21/12. See worksheet at 0203_Franklin Gr 12 P223 Sept 2012.

4. We verified with Virginia Pflueger the first four count dates of September (Sept 5th, Sept 6th, 7th, and Sept 10th.) and these dates coincide
with the dates reported to OSPI. The data Sept data was extracted as of Sept 11th. Virigina was knowledgeable of the procedures for counting
enrollment. She verifies that the student was present on one of the first 4 count days of September to be included in the September count. The
data extraction reports are reviewed by the School Registrars to verify the data in eSIS reconciles to the student's registered class schedule. We
reviewed the extraction report dates and noted the data was extracted on Oct 2nd; Nov 2nd and Dec 4th, 2012, which is one day after the
respective count date. Key Control:Registrar at each school verifies the data extracted from eSIS reconciles to student course
schedule. This ensures that enrollment is not based on a rollover of hours from the prior school year but is based on current data from the eSIS
student tracking system.

Due to the decentralized nature of the school district we would expect FTE Admission procedures to be well documented and accessible. Virginia
provided us with the Start of School Procedures document that is used as a training and monitoring tool for determining admission status. See -
StartOfSSchoolProcedures and eSIS_enroll_0560_admissionStatusFTE. The procedures outline the sequence of monitoring duties to be performed
prior to school start date and for each of the first 4 days of September. The report was current and referenced the first count date of FY 2013 i.e.
Wed Sept 5th, 2012 etc. I n addition we noted the Start of School document is linked to various QRD's or Quick Reference Documents for more
detailed information of key areas. The QRD's are username and password protected and available from the District's inweb.

5. We obtained the eSIS raw data support for the grade/month and schools selected for testing. Steve Wright provided us with a spreadsheet
of adjustments by student, including Running Start FTE status reported by participating community colleges: (North and Central Seattle
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Community Colleges). Steve adjusts the college FTE as needed to ensure total FTE does not exceed 1.2 We reviewed Steve's spreadsheet and
noted HS FTE status was correctly adjusted to account for Running Start classes and that all students with RS credits were adjusted so that the
total RS and HS credit did not exceed 1.2FTE. We designed a reconciliation of Head Count to FTE by student and we were able to arrive at the
adjusted amount reported to OSPI -- within an acceptable variance. See 0203_Franklin Gr 12 P223 Sept 2012

6. We verified the FTE reported for Grade level 8 students at Aki Kurose using the FTE calculator from the Team Store. We obtained the published
bell schedule for Aki from Amber Kemp, Registrar for Aki Kurose. Based on the testing of Aki Kurose school grade level 8 all students were
enrolled for 7 periods for a total of 1.1 FTE per student. See workpaper at D.3.1 Allocated Bell Schedule Calculation Boilerplate. Based on our
discussion with Amber Kemp daily attendance and schedule changes are entered directly into eSIS. Any changes made after the count date are
submitted to Virginia on the Monthly Enrollment Accounting Adjustment form. See Allocated Bell Schedule Calculation Boilerplate

We obtained the Franklin High School grade level 12 students' course schedules from Terese Machmillan, Data Analyst. The data range for each
selected student included the courses attended, the number of minutes per course, the period, date, course description and the teacher assigned.
Using the bell schedule at Bell Schedules 2012 we calculated total pass time and course minutes attended per day. Using this data we were able
to confirm each student's FTE was accurately calculated based on the student's enrolled course schedule and that FTE counts reported to OSPI
were accurate and adequately supported.
See FTE test_Franklin Grade 12.

7. We reviewed Virginia's reporting of Franklin HS students registered for vocational education courses. The FTE must be allocated to HS and Voc
ed and may not exceed 1.6 FTE. Vocational ed courses are weighted the same as High School credit classes however OSPI requires the
District to track the total number of students district wide enrolled in vocational ed classes. There were 8 Franklin HS students identified as
enrolled in partial FTE at the skills center. The P223 was not impacted by the enrollment activity at the skills center and was reported for
information purposes only.

8. We verified with Virginia students assigned to the I nteragency Detention School (IDS) are excluded and thus are not reflected in the P223
FTE. Students in juvenile detention are exited from their current schools and enrolled in school #715, which is the location code for the
IDS. Virginia provided us with the E-672 report of students actively registered in school 715. The form was signed by the principal of I DS, Kaaren
Andrews. This report summarizes the total number of students in King County registered in school 715. Since all actively enrolled students are
identified by school code on the count date, the students mapped to 715 are not included in the P223 submitted to OSPI. Stated another way, the
SQL code used to pull data from eSI S on the count date lists all the District schools by school number to pull active registration and the data code
for school #715 is not included.

Based on our review of enrollment monitoring and reporting procedures the District has adequate controls in place to ensure FTE reports to the
state are accurate and that the District is in compliance with its policies and procedures.
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D.3.PRG - Enrollment

Procedure Step: Special Education Enrollment
Prepared By: (None)
Reviewed By: JWG, 6/13/2014

Purpose/Conclusion:
Purpose:
To document the special education enrollment audit work performed in Seattle School District.
Source:
November 2012 P223H Monthly Special Education Enrollment report
Selected student files
entry/withdraw report
Conclusion:
A total of 330 files were reviewed to ensure that special education compliance requirements were met during the 2012-13 school year. All special
education students must have a current evaluation, current IEP and be enrolled in the district to be counted for the monthly special education
count.
In 1 of 330 files, the student did not have an IEP completed on time. In this case, the student transferred in with an expired IEP that was not caught
by the district. A total of six months were over reported and will be included in an audit memorandum submitted to the audit resolution
department at OSPI.

Seattle School District No. 1
Testing Strategy:

Policy/Standards:

Record of Work Done:
Special Education enrollment work was performed by Team School Programs. Work is documented in TeamMate File 03Seattle-APPT13.


D.4.PRG - Transportation

Procedure Step: Transportation
Prepared By: AB1, 4/4/2014
Reviewed By: AVE, 4/7/2014

Purpose/Conclusion:
Purpose:
To review controls over reporting transportation ridership apportionment and test the District's compliance with state reporting requirements
and District policies and procedures.
Conclusion:

We reviewed controls over reporting transportation ridership apportionment and the District's compliance with state reporting requirements. Based
on our testing we noted a control deficiency which did not impact District funding. See recommendation at Transportation Allocation Reporting .
Based on our review the District is in compliance with state requirements for transportation financial reporting and with District policies and
procedures.

Seattle School District No. 1
Testing Strategy:
Ridership Testing
Obtain the transportation worksheet for this district from Team School Programs Share point site. http://saoapoly002.sao-
nt.wa.gov/TeamPortals/sp/Pages/default.aspx
Audit Steps:
Verify total ridership reported by season to district summary report totals.

You will be using Fall and Winter counts from 2012-13 school year and Spring count from 2011-12 school year.

Have district identify 3 consecutive days it used for winter count and confirm day with middle total ridership (basic plus special) was
selected for reporting.
Select 10 routes or bus numbers for testing. Verify daily driver log (1022D) or equivalent to district summary report. Document any
mathematical, ridership type, or data transfer errors.

Count AM and PM riders only. Do not include mid-day riders (look at bus route times and confirm with district).

Special Program Riders may not ride on a basic education route and be counted/included as Special Program Riders. EXCEPTION Special
education students requiring a lift or special aide may ride a basic education route and be counted/included in the special program
reporting numbers.

Verify mileage reported on Bus Mileage Report matches district summary supporting documentation.
Financial Testing
Program 99 should include only to-from transportation costs which should include supervision and transportation insurance costs.

Review FAP to assure Program 99 includes activity 51 (Supervision) and 56 (Insurance costs). If not inquire with district why costs are not
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included and document response.

For non-to-from transportation, inquire how district calculates costs of field trips and extra-curricular event transportation. These costs
should be transferred out of Program 99 to program receiving the transportation. Document district response.

Districts should be using the long or short form discussed in the Schools Accounting Manual Appendix E, or an equivalent method. Team
SP found most districts are using a cost per mile plus driver costs per hour. Costs transferred out should include fuel costs.

Policy/Standards:
See also the School District Planning Guide. Contact Team School Programs for assistance with Transportation testing or
questions about audit criteria.

RCW 28A.160 - Student Transportation

WAC 392-141-320 - District Reporting Requirements

WAC 392-141-330 - School Bus Driver Daily Logs

WAC 392-141-340 - Determination of Walk Area

WAC 392-141-350 - Authorization and Limitation on District Payment for Individual and In Lieu Transportation Arrangements

WAC 392-141-360 - Operation Allocation Computation

WAC 392-141-370 - Transportation and Hold Harmless Provisions

WAC 392-141-380 - Alternate Funding Systems for Low Enrollment Districts, Non-high Districts, Districts Participating in I nter-district
Transportation Cooperatives, and Educational Service Districts Operating Special Transportation Services.

WAC 392-141-400 - Efficiency Evaluation Review

Seattle School District No. 1
WAC 392-141-420 - District Recordkeeping Requirements


Record of Work Done:
We noted in our planning at B.1.PRGTeam Schools Program suggested local teams plan transportation audits using the 6 step procedure outlined
in TeamMate.

Source:
Cheryl Martin Transportation Analyst
Ellen Reyes, Assistant Mgr, Transportation Business Ops
Michelle Drorbaugh, Manager, Transportation Business Ops
Bob Westgard, Director, Transportation Business Ops

Ridership data for Spring 2012 and Fall and Winter 2013

1) We reviewed the Transportation testing strategy prepared by Team Schools Program at TRANSPORTATI ON OVERVIEW

We met with Cheryl Martin, Transportation Analyst to review procedures for providing eligible ridership counts to OSPI. Prior to the beginning of
count week, the Transportation Director meets with drivers to review procedures for completing driver logs which are generated from the Versa
Trans system. The data extract from Versa Trans identifies all student addresses and generates the route including the GPS location for each
stop. Drivers are provided preprinted logs generated from Versa Trans that lists the eligible student name and address outside the walk area or
areas inside the 1 mile perimeter of the school that are deemed unsafe pedestrian areas. At each stop the driver puts a check mark by
each student transported on the count day. At the conclusion of each route the Driver signs and dates the log sheet in ink and submits it to the
Transportation Analyst. Cheryl manually recounts the total basic and special ed students transported on each route and prepares a cover sheet
that shows ridership counts by category (basic ed, spec ed, gifted, etc.)
Reporting ridership counts to OSPI. 2) We selected Fall and Winter 2012/2013 and Spring 2011/2012 for testing. We verified the ridership counts
are due to OSPI on the 1st day of February and the 1st day of May for Winter and Spring respectively. The Fall report is to be submitted no later
than the last day of October. We noted the District submitted ridership reports by the scheduled due dates. We obtained the worksheets from
Cheryl Martin to verify the median ridership reported to OSPI for Spring and Winter reporting periods. See SeattleFY13TranWorksheet. These
Excel worksheets represent the accumulated total of all driver logs on the respective count date.

Seattle School District No. 1
For Fall 2012-13 the counts were taken October 9 -11, 2012. We noted the District over reported median ridership by 263 students. See -
SeattleFY13TranWorksheet.
For Winter 2012-13 the count week was Dec 3rd - Dec 7, 2012, We noted the District accurately reported median ridership of 25,260.
For Spring 2011-12 the count was taken March 19-21, 2012. We noted the District under reported median ridership by 155 students.
Based on our review we noted a control deficiency that resulted in inaccurate reporting to the state. See exception at Transportation Allocation
Reporting The net effect of over/under reporting resulted in an over reporting of 108 students. We reviewed the results of our testing with Dale
Sando from Team Schools and learned that the error did not impact SSD funding.

We noted from our discussion with Cheryl Martin that ridership data reported to the state during the audit period was not reviewed by a
Supervisor. We discussed this with the Transportation Operations Manager, Michelle Drorbaugh. Michelle concurred that staff would receive
training to address the reporting inaccuracies. As of Fall 2013/14 Michelle Drorbaugh reviewed all driver logs and the median count reporting to
OSPI. We corroborated this additional review process is now in place with Bob Westgard during our meeting with staff on 1/31/14 -
SeattleFY13TranWorksheet

2) We selected 10 routes from the District's Winter 2013 ridership data provided to us by Cheryl Martin. Based on the data, the District had a total
of 1,679 bus routes. Of this amount, 689 or 41% were "A" routes and 815 or 49% are "S" routes.
We were provided driver logs for all routes selected. Per Cheryl, in lieu of a form P 122D, the District prepares its own form for documenting and
reporting ridership by route to OSPI. We checked that the necessary elements were included in the cover sheet and that the log sheets were
accurately summed. The logs included the driver's name, bus number, route number, destination, and student count by destination. In some
instances the driver manually added students to the logsheet. These adjustments represented students that recently moved to the District
and were not entered in Versatrans. We verified the pick up and drop off times for all routes and noted all routes were full day routes and
therefore eligible for counting. The District ridership forms were completed and signed in ink by the authorized driver. We noted no exceptions
during our testing of the 10 routes. I n addition we verified all stops were located outside the walk area. Students manually added to the driver log
were confirmed to be basic ed students residing outside the walk area and were included in basic ed reported counts, which is consistent with
District protocol.

Versatrans is also used to generate the K-5 within one mile report. In Versatrans, the report preparer simply selects the school, sets parameters
(grade levels, distance one mile, etc.) and the system reports the number of students whose addresses are within one straight-line mile of the
school. Cheryl Martin showed us the 1 mile radius mile map for all the stops selected in our testing population to confirm that all students
counted were outside the 1 mile radius.

Financial testing of Transportation Costs:
The contract with First Student is for the period of 2012-2015, with renewal options for two additional years. The contract is $26,842,119 for the
Seattle School District No. 1
2012-2013 school year. Total transportation costs charged to Program 99 is $31,601,768.77. Of this amount $22,061,402.40 is charged to
account 7020 Chartered Bus Service.
The superintendent requires districts to separate the costs of operating the program for the transportation of eligible students to and from school
as defined by RCW 28A.160.160 (3) from extracurricular pupil transportation costs in the annual financial statement.

Kathie Technow, Manager of Accounting Services explained how transportation costs are coded. All to/from costs are charged to the general
fund using cc/org 34 under account 7020 -- Chartered Bus Services. Extracurricular activities are also charged to account 7020 but are charged
directly to the school or to the ASB fund. These costs do not hit program 99 cost center. Kathy explained the coding for to/from transportation
costs is a 10 digit code beginning with the cost code 34X99. The coding for extracurricular costs posted to the school are 10 digit codes beginning
with the alphabetical code assigned for each school. Costs charged to the ASB fund would be coded with a 7 digit number beginning with the
alpha code by school.

We reviewed the detail of extracurricular transportation activities charged to Chartered Bus Service Acct 7020. For Cleveland HS we noted the
program coding is preceded by alpha code CL. Transportation cost allocation. The total extracurricular transportation cost coded to Cleveland HS
for 2012/13 was $26,734. We noted all of these cost were coded to Programs: 01(Basic Ed); 21(Spec Ed); 31(Vocational Ed); and 79(I nstruct
Prog). Transportation cost allocation
We reviewed invoices for Transportation expenditures from December 2012 through March 2013. We noted on the invoices a credit was received
for fuel used on field trips. The invoices included a breakdown of all field trips charged for the period, total excess hours, miles and fuel cost.
The fuel cost paid for extracurricular events by Central Accounting is reimbursed by the School Program. I nvoice review is performed by Ellen
Reyes. Ellen reviews the rates charged are correct and the mileage billed reconciles to the daily driver logs. To verify the control is operating as
intended we reviewed gl detail under fuel account. See Transportation cost allocation We tied the credits per the invoice support to the credit
posted to Program 99 -- transportation operations. No exceptions noted. This confirms our understanding that all driver time and fuel costs for
extracurricular activity is tracked separately.
Transportation of Homeless Students
The District charges to Program 99 the cost of transporting homeless students to and from their school. Under the
McKinney Vento Act,...."if a homeless child's or youths living arrangements terminate and the child or youth begins living in an area served by
another local education agency, the local educational agency of origin and the local education agency in which the homeless child or youth is
living shall agree upon a method to apportion the responsibility and costs for providing the child with transportation to and from the school of
origin. I f the local educational agencies are unable to agree upon such method, the responsibility and costs for transportation shall be shared
equally (Section 722 (g) (J )(iii))
We noted the District arranged for transportation of over 2,000 homeless students at all grade levels and invoiced neighboring districts in
accordance with this guidance. Barry Tsoi provided us with the Accounts Rec status for shared transport expenses for school year 2012/13. Total
cost of $154,443.30 was shared by 6 neighboring districts. Total payments received was $149,835, with one outstanding balance of $4,608 owed
by Shoreline School District. Per Barry, the invoice was currently being reivewed by the Shoreline SD.
Seattle School District No. 1


D.5.PRG - Payroll

Procedure Step: Controls over Human Resource systems
Prepared By: AB1, 5/15/2014
Reviewed By: JWG, 6/13/2014

Purpose/Conclusion:
Purpose:
To determine whether HR controls are adequate to safeguard public resources.
Conclusion:
Based on our review the District responded to our recommendations to bolster HR written policies and procedures, and to maintain documentation
of authorized changes made in the Master Data file. Based on our review of edits made to the HR system there were no unauthorized changes
made to the HR Master Data file during the audit period.

Testing Strategy:
Refer to the Policy/Criteria tab for the primary control objectives and typical controls over 1) Wages and Salaries, 2) Employee Benefits, and 3)
Compensated Absences (Leave). This information should be reviewed prior to performing the payroll internal control work.

To determine whether payroll controls are adequate, consider the following procedures based on inquiry, observation, and review of employment
agreements and written policies and procedures:

Controls over Wages & Salaries
Review written payroll policies regarding wages and salaries. Among other items, we would expect these policies to establish: pay dates
and any mid-month draw or payroll advance options; salary/wage amounts and increase methods; award, incentive, merit, or bonus
programs; payroll disbursement methods (mid month draws, direct deposits, etc); and required authorization, approval, and reviews.
Seattle School District No. 1
Gain an understanding of internal controls over wages and salaries and document key controls and weaknesses. Consider the following
questions:
o When a new employee is hired, how are they set up in the system?
o Who is able to set up new employees or change employee information?
o How do you ensure that payroll and personnel functions are segregated? If not segregated, what monitoring procedures are in
place to ensure that personnel and payroll information is valid?
o How does the entity ensure that wages and salaries are charged to the correct timecode?
o Who enters monthly pay-period data (hours by account code)? How do you ensure accurate data-entry?
o How are errors corrected? How are corrections or changes made to the system?
Can changes be made to payee or amount fields after payroll warrants/checks are issued?
Who has access to make changes?
Who is responsible for making corrections/changes?
Who authorizes corrections/changes?How is monthly pay-period data supported (ie: timesheets)?
o How is overtime documented and approved?
o How are timesheets or other documents approved? Are there employees that dont have to complete timesheets?
o Is direct deposit available for employees? If so, how does it work?
o How are W-2 / W-3 forms created?
o Is payroll paid from a separate zero-balance account? If so, who reconciles this account?
o Who do employees complain to when they note errors?
o Does the entity have any award, incentive, merit, or bonus programs?
Are these established by entity policy/resolution?
Per the policy/resolution, are performance standards/goals clearly defined and measurable, and do these goals exceed
normal employee performance requirements?

Controls over Employee Benefits
Review written payroll policies regarding benefits (other than compensated absences). Among other items, we would expect these
policies to establish: eligibility for benefits, types of benefits allowed and how much the entity will pay for the benefits.
Gain an understanding of internal controls over benefits and document key controls and weaknesses. Consider the following questions:
o How does the entity ensure that benefits are only paid to eligible employees?
o Who handles benefit payments?
o Are benefit payments ever reconciled to employee deductions and expected employer contributions per the payroll module?
Seattle School District No. 1
o Are payment details or confirmations reviewed by an independent person to ensure the remittance does not include any non-
employees or incorrect amounts?
o Who do employees complain to when they note errors?
o How are errors corrected?


Controls over Compensated Absences (Leave)
Compensated absences includes accruals and usage of sick, vacation, comp, exchange time or other paid time in lieu of time actually
worked. Compensated absences are considered a benefit.
Review written payroll policies regarding compensated absences. Among other items, we would expect these policies to establish: leave
accrual methods, rates, and types; any leave accrual balance limits; leave donation procedures, if any; leave buyout procedures, if any;
and procedures, approval and documentation for using accrued leave.
Gain an understanding of internal controls over compensated absences and identify key controls and weaknesses. Consider the following
questions:
o How are leave balances tracked? Is the same tracking system used for all employees and all types of leave?
o How does the entity ensure that accruals or additions to leave balances are accurate?
o How does the entity ensure any leave balances limits are not exceeded?
o How does the entity ensure all leave usage is approved, documented and subtracted from the balance? Is the same tracking
system used for all employees (including managers and executive staff) and all types of leave?
o Who do employees complain to when they note errors?
o How are errors corrected?



Policy/Standards:
Wages & Salaries
Primary control objectives for wages and salaries are as follows:
Seattle School District No. 1
Employee information (salary/wage, default fund allocations, tax info, and deductions) used to calculate and record payroll is valid,
accurate and in accordance with entity policy.
Pay-period information (timesheets, actual fund allocations, leave records, etc) used to calculate and record payroll is valid, accurate and
in accordance with entity policy.
Award, incentive, merit, or bonus programs are established by policy/resolution and are in accordance with state law.

Typical controls over wages and salaries are as follows:
Employee personnel files are created for each employee before they are allowed to start work. A checklist is used to ensure all required
forms and information is included in the file.
Employment contract/notification document (which describes the position, wage, and benefit information) is signed by both the employee
and entity, and is included in the personnel file.
Personnel clerk enters employee information into the payroll module from source documents included in the personnel file. Any changes
must be supported by a signed document or official notification and can only be entered into the system by the personnel clerk.
Segregation of duties exists between personnel (employee information) and payroll (pay-period information) functions. Software
permissions can enforce this segregation.

Note: an appropriate segregation of duties should ensure that no individual can both create an employee and pay them. Failure to
segregate duties increases the risks of ghost employees, unauthorized pay changes, and/or continuing pay for a terminated employee.
Timesheets (which include hours worked by fund or project and any leave taken) are completed by employees. Timesheets are certified
by employees and supervisors, and indicate hours worked (by account code/activity) and leave used. Supervisor timesheets are signed by
other managers such that no employee approves their own timesheet.
The entity retains documentation justifying and approving all overtime/comp time recorded and paid
Software or payroll clerks ensure that timesheets are completed and approved.
Software includes pre-formatted screens and edit checks to help ensure accuracy of input (whether by payroll clerks from printed
timesheets or by employees in electronic timesheets).
Software automatically calculates payroll based on employee and pay-period information.
Exception reports are generated and reviewed by an independent person to identify potential problems with employee or period data.
The payroll module automatically posts to the general ledger or is reconciled to the general ledger.
Payroll is paid from a zero balance account that is reconciled each month by an independent person.
Department heads receive monthly reports that detail costs charged to their department.
Seattle School District No. 1


Employee Benefits
Primary control objective for employee benefits is as follows:
Benefit payments are supported by adequate documentation.
Benefits are only provided to eligible employees in accordance with entity policy.
Benefits are charged to the correct fund and account.

Typical controls over employee benefits are as follows:
Benefit information is based on source documents included in the personnel file. Any changes must be supported by signed documents
that are included in the personnel file.
Software automatically calculates eligibility for benefits based on employee and pay-period information.
To the extent that payroll software supports this function, benefits are only paid out of the payroll module (rather than accrued by the
payroll module and subsequently paid through the AP system, which could introduce discrepancies between accrued and paid amounts if
the accrual account is not independently reconciled).
Remittances or confirmations are reviewed by an independent person to ensure the remittance does not include any non-employees or
incorrect amounts.
The payroll module automatically posts benefit expenditures in same proportion as wage and salary expenditures for the employee.
The payroll module automatically posts to the general ledger.


Compensated Absences (Leave)
Primary control objectives for payroll systems are as follows:
Accruals of leave hours are applied in accordance with entity policy.
Leave buy-outs are accurately calculated in accordance with entity policy.
All leave usage, donations and buy-outs are properly documented and deducted from the accrued balance in accordance with entity
policy.
Employees are not paid for leave in excess of accrued balances (which would be a prohibited gift of public funds).
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Typical controls over compensated absences are as follows:
Regular leave accruals are applied by software based on employee information entered by personnel. See above for typical segregation
of duties between personnel and payroll functions.
Leave usage is documented on signed timesheets or leave slips which are also approved or reviewed by the employees supervisor.
Leave accrual balances are tracked in the payroll module software.
Software checks disallow accrual of leave beyond the set maximum or usage of leave that brings the balance below 0.
A report of all manual adjustments to leave balances is reviewed each month by an independent person.
Exception reports are generated and reviewed by an independent person to identify potential leave accrual, usage or balance issues.
Leave balances are reported to employees each month on paystubs.



Record of Work Done:
Key Employees:
Dan Dizon, Director, Human Resource Operations
Lynn Flekal, Manager, Compensation & Benefits
Laurel Moody, HR Supervisor
Ryan Seko, Database Administrator

In a prior year audit we identified weak I T controls over HR systems. Because we made recommendations in J une of 2013 and therefore will
focus our compliance testing on 2014 transactions.
In the prior year audit we noted the following weaknesses in internal controls:

(1) Insufficient documentation and monitoring of pay grade changes
(2) Independent review of changes made to employee information in the HR system.
(3) Maintain documentation supporting authoirzation for employee promotions and approval of temporary salary upgrades.
(4) Perform review of adjustments made to HR Master Data information prior to period when access was restricted.
(5) Limit HR Master Data system access of Nutrition and Facilities Operations administrators to only the employees within their departments.

To follow up on prior audit recomendations we performed the following:
Seattle School District No. 1

We met with Laurel Moody to obtain an understanding of the payroll process. We reviewed the payroll process at Understanding of payroll
process. Our accountability audit focuses on non represented employees and the authorization process and documentation of new hires and
promotions of current non represented employees. Authorization of increases for certified and classified represented staff is mandated by S275
reporting requirements whereby salaries are driven by the collective bargaining agreements and the credentials of the employees. Authorizations
for pay increases to represented staff are maintained in the respective employee file for annual audit by OSPI .

Our expectation is that all salary and grade level changes made for non represented employees must be made in accordance with established
procedures and that all actions are documented and adequately supported. To address (1) insufficient documentation
and monitoring, we reviewed the Districts updated Compensation Manual for non represented employees. See Comp Manual Dec 2013. We
noted Sect 5.6 outlines procedures of the Hire process which requires a Salary Placement form and a Personnel Change Request (PCR)
with authorized signatures prior to entry in HR system.
The Salary Placement form is prepared by Lynn Flekal to verify the job code and fund source of the position. The PCR form identifies the employee
who will fill the respective position. For positions at grade level 25 and above the authorization includes the Operations Committee in addition to
the HR Director, Dan Dizon.

All salary changes regardless of the level of salary grade must be approved by the budget manager in PCR tracking system before the change can
be submitted to HR for processing. The tracking system becomes locked at each review level. For instance the Administrator cannot make changes
unless the PCR is reviewed and rejected by the manager. This becomes problematic if a manager leaves the District while a PCR is in process. There
are only two District employees who can unlock and reset the PCR tracking system -- Laurel Moody and Database Administrator-- Ryan Seko. We
noted in our response to the prior year issue, the District requires all requests for a change in classification and/or compensation of non
represented employees be approved by the Director of Human Resources, Dan Dizon and Lynn Flekal, Compensation Mgr . (2) This serves as an
independent review by individuals that do not have edit rights to the HR Master Data file.

(3a) After the Salary Placement Worksheet and the PCR is complete, the process to add the position to the HR data file is done by the "Request for
FTE Position." This form references the PCR tracking number so that authorization history of a position change can be reviewed at any time. The
Request for FTE identifies the org and fund accounts assigned by the budget analyst to which the FTE is charged. Actual pay can be modified after
the FTE is authorized. Based on our understanding, if the pay rate exceeds the amount budgeted, the additional funds will be drawn from a
contingency reserve fund. We noted that stipends and extra payments are not included in the budget process. See our recommendation at -
ISS.6 Our understanding is that the budget process may be modified with the hiring of a new budget manager, Linda Sebring. We recommend
follow-up of budget monitoring in future audits. AS4.e

Seattle School District No. 1
To confirm our understanding of change in salary grade/title we reviewed the Request for FTE for the position Supervisor Accounts Payable. The
request was dated 11/1/13 (School year 2014). The employee recommended for the position was Allen Murdock; the position was also
advertised. Per the form, the salary cost was allocated to funds 1000, 2730 and 2600. Mr Murdock was promoted from a grade 22 to a grade 26
position. The promotion required authorization by Dan Dizon, Director of HR Operations. Additional review was performed by Lynn Flekal,
Compensation Analyst and Paul Apostle, Asst Superintendent of Labor Relations. Lynn Flekal told us that all job descriptions for non represented
staff are filed in SAP, no hard copies in the files. Lynn printed the job description for Allen Murdock. Per the description the job is a grade MS1-
026. MS1 refers to the 260 day work schedule. A schedule of the non represented is attached at 2013-14 MS1 (260 Day) Salary Schedule We
noted the Ops Committee increased the salary from a step 4 to a step 8 on 12/20/13. This was subsequent to budget approval for the promotion
dated 11/1/13.
We inquired how budget approval is quantified. Dana DeJarnatt, HR Manager indicated that budget approval consists of verifying that an FTE
position is open in the cost center. Each cost center has a fixed number of FTE positions included in the annual budget. The assumption is that if a
position is open there is funding available. Ken Gotsch indicated this is standard procedure in school districts. Linda Sebring indicated the
contingency reserve for salary expense in excess of budget is $635,000 for school year 2015.

(3b) In addition to salary/grade changes, non represented employees may be awarded a temporary upgrade. This change is documented per the
Temporary Upgrade and Extension Authorization form. We note the form requires a start and end date and the employee id and position that is
being replaced temporarily. The temporary upgrade must be authorized by the Department Supervisor, the HR Director and the Budget
Director. The Employee's job code is not changed in the Master Data file but the difference in the salary is calculated on a monthly basis and
added as a lump sum to the employee's pay by the payroll analyst for the duration of the temporary assignment . We reviewed Julie Davidson's
worksheet for Asst Manager, Faau Manu. The monthly supplemental payments were tracked in an excel spreadsheet with the date each monthly
payment was entered in the SAP system. Per Julie of the approximate 9,000 District employees there are only two currently (school year
14/15) receiving a temporary salary upgrade.

An employee who is assigned an upgraded position on an interim basis is entered in the HR Master Data file under the newly assigned job code.
The interim assignment is generally open ended but is renewed or canceled at the end of each school year. The budget for the interim assignment
is authorized per the Personnel Change Request form. As of May 15, 2014 there are 10 employees assigned an interim position. The term
"interim" is included in their job title. The interim title and pay is due to expire as of 7/1/2014. When the interim assignment terminates there will
be a PCR to reassign the employee to their previous job code. At the end of each school year Laurel Moody runs an accounting report of all interim
job assignments and distributes them to the Directors and Assistant Superintendents to confirm termination or extension of the interim
assignment.

(3c) This work was performed in response to anonymous citizen concern H-14-086.
Seattle School District No. 1
Supplemental assignments are granted at the District level and at the department level for represented and non represented employees
respectively. For represented employees the supplemental assignment may fall under the purview of the CBA contracts, which include
compensation awards for specific duties. We verified supplemental payments issued to employees acting as Assistant Principals that fall under the
purview of the PASS contract. We noted a stipend of $10,000 was paid to Farah Thaxton for accepting a transfer from Madrona School to Emerson
- a low performing district school. The stipend was supported by an internal change memo and a letter to the employee authorizing the payments.
Our audit noted the stipend process is driven by a Request for Supplemental Stipend Payment form. We reviewed two requests for stipend
payments for Assistant Principal, Ron Timmons. The forms were authorized by the Superintendent of HR, Paul Apostle. The form indicates the
funding source and an amount (which may relate to a one time payment or a monthly payment over a designated period. The ambiguity of the
frequency of payment resulted in the one time stipend of $876 to be issued monthly and resulted in an overpayment of $4,380 or $876 x 5
additional payments. A Request for Supplemental Stipend Payment for a separate assignment to be paid to the same employee resulted in a one
time stipend of $2,453 to be issued monthly over the course of six months. This resulted in an overpayment of $12,265 or $2,453 x 5. The total
overpayment is $16,645. See ISS.18 We noted this issue in our draft ML at D.5.12.
4) We met with Dan Dizon to inquire about exception reports that are run to review edits made to the HR Master Data file. Per Dan, the HR
Supervisor, Laurel Moody runs a report weekly that shows who has made edits to the system. Laurel also provided us a report to show edits made
to the HR Master Data file prior to our recommendation to restrict access issued in our Accountability audit of June of 2013. Based on our review
of this report (run for the period of 9/1/2012 through 8/31/2013 all edits were made by authorized HR Administrators. We verified the 3 employees
who made changes in the system and were not included in the current list of authorized users have separated from the district but were
authorized users at the time of separation. For future audits we requested SAO be provided access to SAP (read only rights) to facilitate our audit
of payroll.

(5) We followed up with Dan Dizon, Director of Human Resources to determine what procedure changes if any were made subsequent to our audit
recommendation to limit access to HR Master Data file. Dan provided us with a table of employees that had access to the Master Data file as of our
last audit. See worksheet at HR Master Data file. The employees that will have access after adjustments are complete are listed at HR Master
Data file. We noted the District followed up on our recommendation and reduced by 50% the number of employees with edit rights to the HR
Master data file (originally 66 employees reduced to 32) (These 30 employees have HR Administrator rights and 2 are System Administrators). We
followed up with Ryan Seko, Database Administrator, to verify the edit rights for Teresa Fields, Manager, Nutrition Services and Helen Jones,
Supervisor. Ryan verified these two individuals have edit rights in the HR system for employees in their respective departments only.

Based of the results of the procedures performed we determined that the District responded to our recommendations to bolster HR written
policies and procedures, and to maintain documentation of authorized changes made in the Master Data file. Based on our review of edits made
to the HR system there were no unauthorized changes made to the HR Master Data file during the audit period. However, we noted that the
District still does not have sufficient process in place to make sure that only authorized payments are made to principals and assistant principals.
We documented our recommendaitons at ISS.18
Seattle School District No. 1



D.5.PRG - Payroll

Procedure Step: Overtime and Extra Time Controls
Prepared By: AB1, 6/11/2014
Reviewed By: JWG, 6/13/2014

Purpose/Conclusion:
Purpose:

To determine in current controls are adequte to make sure that only authorized overtime is paid.
To determine whether overtime and extra time pay is valid and adequately supported.

Conclusion:
Based on the results of our audit we determined that the District does not have sufficient controls to ensure that overtime and extra
time compensation is adequately supported and authorized. The District anticipates that most errors in recording and authorizing overtime and
extra time pay will be detected at the departmental level by immediate supervisors when approving timesheets. The District does not have
policies or procedures in place for paying overtime or extra time to exempt employees. See ISS.17.

Testing Strategy:
To determine whether selected payroll salaries and wages are valid and adequately supported, consider the following procedures:

See the Payroll Analytical Procedures step for example analytical procedures to help identify risks or high risk employees/transactions. Staff
members who have access to the payroll system, such as HR, IT or management are typically considered high-risk, as well as employees who
received large amounts of extra pay (overtime or special payments).

Seattle School District No. 1

Salary or Wages
J udgmentally select hourly employees to test. For each selected employee, recalculate wages for the period based on timesheets and
personnel records or trace hours per the system to supporting timesheets. This test could be done for a selected month(s) or for the
entire period.
Compare actual compensation for salaried employees to the approved salary schedule and/or contracts approved by the legislative body.
Sum of the number of hours worked and claimed in a period does not exceed 24 hours per day or other unreasonable amounts.
Timesheets agree with security logs or observations.
Verify that mid-month draws are accurately calculated, in compliance with entity policy, and properly deducted from month-end
payments.
Check or re-perform the entitys reconciliation of the payroll clearing account for a selected month.
Match the details of the electronic file sent to the bank for electronic payments to payroll reports for that period. Any differences are a
fraud indicator and should be followed-up on.

Overtime / Compensation time
Ensure the entity retains documentation justifying all overtime/comp time recorded and paid.
J udgmentally select employees for testing (such as employees with excessive overtime/comptime amounts). For each selected employee,
consider performing the following tests to determine whether overtime and compensation time is reasonable, authorized, and supported
per entitys policies (these tests may be done for a selected month(s) or for the entire period):
o Compare overtime/comp time amounts paid per the payroll system to timesheets or other sources documents
o Ensure overtime/comp time accrual and payments (number of hours and rates) are accurately calculated
o Review the sum of the number of hours claimed in a period to ensure it does not exceed 24 hours per day or other unreasonable
criteria
o Verify that overtime/comp time accrual and payments are in agreement with entity policy (an example may be adequate support
of overtime approval/authorization prior to commencement of overtime worked)
o Where a work-week is split between two-months, verify that the overtime/comp time claimed is accurately calculated
o Ensure employees are not paid for overtime and standby pay for the same time

Bonus or Incentive Payments - see "Bonus & Incentive Payments" TeamMate step for testing strategy and criteria

Policy/Standards:
RCW 41.06 State Civil Service Law

RCW 41.06.070 Exemptions to state civil service law
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State Constitution, Article I I, Section 25 prohibits extra compensation to employees
"The legislature shall never grant any extra compensation to any public officer, agent, employee, servant, or contractor, after the services shall
have been rendered, or the contract entered into, nor shall the compensation of any public officer be increased or diminished during his term of
office. Nothing in this section shall be deemed to prevent increases in pensions after such pensions shall have been granted."
Overtime provisions for classified non-union staff are established in the applicable civil service rules (WAC 357-28-240 through 285).
Overtime eligibility must be identified in the compensation plan.

For purposes of computing OT -- paid holidays during the employees regular work schedule are considered time worked. Leave with pay during
the employee's regular work schedule is not considered time worked.

Positions that are overtime exempt may be granted overtime payment when:
an employee is assigned to work an excessive amount of time for an extended period with HR and Budget approval
the Supervisor approves compensatory time on a straight time basis.
HR Tool -- Employee Roster
SAP report to designate who is exempt/non exempt
Do Managers understand the classification of exemption?
Provide documentation and training
Admin guidelines
Admin procedures to be enforced by payroll
formalized by Board.
When duties differ significantly from primary responsibility
extraordinary circumstances -- employee with significant overpymt -- kim camara compensated for full year 260 day cycle; work additional
assignments.
want CBA'S
review by Asst Supr of HR

Record of Work Done:
Background
During our accountability audit planning we identified the risk of unauthorized OT and failure to report personal use of district vehicles to IRS. In
addition, a Seattle Times article published 11/12/13 cited SSD salaried employees receive overtime pay under special agreements with their
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Supervisors. We noted $1.7 million in overtime pay to classified (represented and non represented) staff under program 97 -- (District-wide
support), and $99,585 in overtime pay under program 99 --( transportation services.)
We performed the following procedures to determine what controls district has in place for overtime and extra time paid to
exempt employees:

We interviewed J ulie Davidson, Payroll Supervisor to review the overtime verification process. Per our discussions with J ulie, there are exempt
employees who receive overtime pay routinely and there are varying reasons for this, for examplean exempt non-represented employee holding
the an Accounting Manager position receives a premium rate for athletic coaching activities, and an exempt data analyst receives overtime for
work performed as a translator. Also, per District policy employees who work over 8 hours on their scheduled work days are allowed overtime
during the weeks in which they are furloughed.

In addition to overtime district pays extra time for duties outside regular. The District does not require written pre-authorization and justification for extra
time fromsupervisors. We noted in-sufficient documentation of extra duties and/or the duration of additional assignments. Extra time or supplemental pay is
awarded to non-represented employees on a case by case basis when an employee works outside the pay cycle or calendar days per the job function.
Based on our understanding, the employee should obtain permission to work overtime in advance; however the approval is
verbal. If overtime is charged to a separate fund source it is recorded and authorized manually on a separate timesheet rather
than in the payroll system. This creates numerous documents that must be tracked and verified by the payroll analyst before
entering the time in the payroll system.

We noted from our review of HR practices that "special arrangements" for overtime between the employee and supervisor that are
charged to the regular cost center are not documented and authorized in the payroll system. Also these special arrangements are not
included in the budget review process for a specific time period. We will include this in our verbal recommendation to the District at Reserve for
controls over HR systems

We met with the District Compensation Analyst, Lynn Flekal to review the District's policy for payment of overtime to exempt employees. Lynn
confirmed that there is no policy district wide that addresses overtime payments to exempt employees. Per Lynn the exempt or non
exempt status of the employee is included in the HR Module -- Master Data file. This file is restricted access and therefore not visible to
Supervisors during the time sheet review process. Since the exempt status is not immediately transparent to the Supervisor during the review
process, this may contribute to the confusion regarding overtime payments to exempt employees.

We examined District's time reporting system - ESS. Payroll supervisor showed us the ESS system. A triangle indicates unapproved time, an X
indicates rejected time and a checkmark indicates approved time. "Free text" or a note can be added by the supervisor to explain why the OT was
necessary. We noted during our testing that the "free text" field was not completed or did not include sufficient detail to support overtime
payments and/or additional compensation was owed for duties performed outside the job function. We did note that activity in the ESS
system has a date and time stamp to record edits by id code. We noted a high frequency of final payroll authorizations made by
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the payroll analyst. This indicates extensive review is performed by the payroll analyst without direct knowledge of the
employee's activities and that errors made on time sheets such as math errors and misallocation of regular and overtime hours
were not caught by the Supervisor in the review process. We noted recommendations to address these issues in our draft ML at D.5.11

Testing:
We obtained data extracts of exempt and nonexempt employees who received overtime and extratime. We determined 14 exempt employees
received overtime and 14 employees received extratime. See analysis at D.5.4
As a result of our analysis at D.5.4interviewes with Payroll Supervisor and HR analysts we noted 14 exempt level employees who received
overtime pay of 1.5 times their regular rate for a total of 1,659 hours. In 11 instances we noted that overtime was paid for immediate duties and
was not properly authorized. In three instances we noted employees were paid overtime for performing duties outside their immediate job
function. These employees were paid one and a half times their regular pay rate instead of the applicable rate for the job function. We also noted
nine non represented employees were paid extra time for a combined total of 509 hours for duties performed outside the assigned work days.
The payments were based on verbal agreements made at the departmental level.

We selected a total of 18 employees who received overtime of which seven were exempt and 11 nonexempt for testing at Payroll
wksht_2012_SSD

During our review we noted that all seven exempt employee were not eligible to receive overtime, in those case overtime did not have aduqute
documnetion and should not be authorized at all . We also noted that exempt employees were paid OT rate for hours that did not exceed the 40
hours in a 7 day work week and that extra time compensation was paid for duties that were not distinguished as being outside the routine job
duties.

In addition we noted that the review at the department level did not detect unsupported overtime and extra time payments to
exempt employees and over/ under payments to nonexempt employees that resulted from timesheet errors.

To Conclude:

Based on the results of our examination we noted that the District anticipates that most errors in recording and authorizing overtime and extra
time pay will be detected at the departmental level by immediate supervisors when approving timesheets. However, departamental supervisors do
not get enough training and often do not have knowledge if employee should receive overtime or extra time when approving time summaries. The
District does not have policies or procedures in place for paying overtime or extra time to exempt employees. See our issue at ISS.17

We recommend the District:
Establish a district wide policy for overtime payments to non-represented exempt employees and a policy for special assignments and/or dual
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assignments.
Require written pre-authorization and justification of extra time that would include a reason for an additional assignment, pay scale and
duration of duties.
Require supervisors to consult with the Human Resource Compensation Analyst for appropriate pay scales when allowing employees to
undertake additional job functions.
Provide training to Supervisors responsible for authorizing and approving timesheets.
Perform random payroll audits at the department level to bolster oversight and monitoring of overtime payments.

Additional testing to address citizen concerns:
During our audit we receive a concern from citizen that prior Deputy Superintended got paid over $300,000 during school year 2013. We reviewed
extra time payments for an employee Robert Boesche who was hired as an interim Deputy Superintendent per letter dated May 7, 2012 from the
Assistant Superintendent of Human Resources, Paul Apostle. The interim assignment extended through the audit period and beyond to J anuary
2014. Per Section 13(a)(17) of the FLSA an employee performing at the executive level with responsibility for decisions of weight and for
supervising others would be designated as a salaried position with predetermined pay regardless of the number of hours worked. We noted
regular pay and extra pay to this hourly employee over the course of three years amounted to approximately $800,000. We pass further review
based on the signed letter authorizing the hourly rate of $160 per the Asst Superintendent and believe this is an isolated incident prompted by
turnover of significant key positions, including the Chief Superintendent position during this time period.

To address citizen concern H-14-086 from H.6.PRG. We reviewed supplemental payments made to Principals and Assistant Principals. We noted
these are represented employees and that additional compensation may come under the purview of the PASS contract. We selected the three
highest supplemental contract payments and verified that the payments were made in accordance with PASS contract allowances D.5.13. Based
on our testing two of the three employees were paid in accordance with PASS negotiated contract amounts for additional compensation. The Asst
Principal Ron Timmons recv'd supplemental compensation based on additional hours worked as a second evaluator (not under the purview of the
PASS contract.) Ron completed two evaluations and submitted timesheets for the work performed. Based on the timesheets he was due to be
paid a lump sum of $3,329.27. Ron was not paid a onetime stipend payment but rather was paid six monthly payments for a total of $19,977.12
resulting in an overpayment of $16,647.85. This is the HR issue and we noted it at Controls over HR systems row.


D.5.PRG - Payroll

Procedure Step: Reporting of Fringe Benefits
Prepared By: AB1, 6/4/2014
Seattle School District No. 1
Reviewed By: JWG, 6/13/2014

Purpose/Conclusion:
Purpose: To review the District's compliance with federal reporting requirements and its own policies and procedures for reporting
the fringe benefit of commuting in a District vehicle.

Conclusion: Based on our audit the District does not have sufficient documentation to accurately account for and report employee
use of district vehicles per IRS guidelines. See Issue 17.

Testing Strategy:
(iii)Vehicle special valuation rules--

(A)Vehicle by vehicle basis. Except as provided in paragraphs (d)(7)(v) and (e)(5)(v) of this section, the vehicle special valuation rules of
paragraphs (d), (e), and (f) of this section apply on a vehicle by vehicle basis. An employer need not use the same vehicle special valuation rule
for all vehicles provided to all employees. For example, an employer may use the automobile lease valuation rule for automobiles provided to
some employees, and the commuting and vehicle cents-per-mile valuation rules for automobiles provided to other employees. For purposes of
valuing the use or availability of a vehicle, the consistency rules provided in paragraphs (d)(7) and (e)(5) of this section (relating to the
automobile lease valuation rule and the vehicle cents-per-mile valuation rule, respectively) apply.

(f)Commuting valuation rule
(1)In general. Under the commuting valuation rule of this paragraph (f), the value of the commuting use of an employer-provided
vehicle may be determined pursuant to paragraph (f)(3) of this section if the following criteria are met by the employer and
employees with respect to the vehicle:
(i) The vehicle is owned or leased by the employer and is provided to one or more employees for use in connection with the
employer's trade or business and is used in the employer's trade or business;
(ii) For bona fide noncompensatory business reasons, the employer requires the employee to commute to and/or from work in the
vehicle;
(iii) The employer has established a written policy under which neither the employee, nor any individual whose use would be taxable
Seattle School District No. 1
to the employee, may use the vehicle for personal purposes, other than for commuting or de minimis personal use (such as a stop for
a personal errand on the way between a business delivery and the employee's home);
(iv) Except for de minimis personal use, the employee does not use the vehicle for any personal purpose other than commuting; and
(v) The employee required to use the vehicle for commuting is not a control employee of the employer (as defined in paragraphs (f)
(5) and (6) of this section).
ii)Value per employee. If there is more than one employee who commutes in the vehicle, such as in the case of an employer-sponsored
commuting vehicle pool, the amount includible in the income of each employee is $1.50 per one-way commute. Thus, the amount includible for
each round-trip commute is $3.00 per employee. See paragraphs (d)(7)(vi) and (e)(5)(vi) of this section for use of the automobile lease valuation
and vehicle cents-per-mile valuation special rules for valuing the use or availability of the vehicle in the case of an employer-sponsored vehicle or
automobile commuting pool.

(5)Control employee definedNon-government employer. For purposes of this paragraph (f), a control employee of a non-government
employer is any employee
(i) Who is a Board- or shareholder-appointed, confirmed, or elected officer of the employer whose compensation equals or exceeds $50,000,
(ii) Who is a director of the employer,
(iii) Whose compensation equals or exceeds $100,000, or
(iv) Who owns a one-percent or greater equity, capital, or profits interest in the employer.
For purposes of determining who is a one-percent owner under paragraph (f)(5)(iv) of this section, any individual who owns (or is considered as
owning under section 318(a) or principles similar to section 318(a) for entities other than corporations) one percent or more of the fair market
value of an entity (the owned entity) is considered a one-percent owner of all entities which would be aggregated with the owned entity under
the rules of section 414 (b), (c), (m), or (o). For purposes of determining who is an officer or director with respect to an employer under this
paragraph (f)(5), notwithstanding anything in this section to the contrary, if an entity would be aggregated with other entities under the rules of
section 414 (b), (c), (m), or (o), the officer definition (but not the compensation requirement) and the director definition apply to each such
separate entity rather tha to the aggregated employer. An employee who is an officer or a director of an entity (the first entity) shall be
treated as an officer or a director of all entities aggregated with the first entity under the rules of section 414 (b), (c), (m), or (o). Instead of
applying the control employee definition of this paragraph (f)(5), an employer may treat all, and only, employees who are highly compensated
employees (as defined in 1.132-8(g)) as control employees for purposes of this paragraph (f).
Providing company vehicles for employees or business owners to use either while at work or while away from work can be very beneficial to the employer as
well as the employee. However, there are certain pitfalls to this arrangement if you are not aware of the tax consequences. Generally speaking, if the company
vehicle is used entirely for company business, there are no consequences to the
employee. The business is allowed a deduction for 100% of the vehicles expenses. If the company allows the employees or company owners to drive the
vehicle for personal business, there are a few complications. Because the employee or owner received a non-cash benefit from the company (i.e. free use of
Seattle School District No. 1
a company car), he or she will be subject to taxes based upon the value of the benefit.

The first problem to be aware of is what is personal use and what is business use of a company vehicle. Business use of a company vehicle is using the
vehicle to perform some aspect of your job required by your employer. It can be making deliveries, traveling, etc. On the other hand, personal use
encompasses anything that is not business related, including commuting. If you are using a company vehicle, you are required to keep a log to keep track of all
trips taken in the car. The log should include the date, mileage of the trip and purpose of the trip. At the end of the year you can determine what percentage of
the mileage was for personal use and what percentage of the mileage was for business
use. These percentages will be useful in determining the taxability of the personal use of the vehicle to the employee. If you did not complete a log during the
year, you may still be able to determine your business vs. personal use of a company vehicle by alternative means, however, this approach is not
advisable as it can be highly subjective and involves using estimates that may or may not be agreeable to the IRS. If you do not have a completed vehicle log
and can not determine your business vs. personal use through alternative means, it will be assumed by the IRS that you used the vehicle entirely for personal
use. According to IRS Publication 15-B, Any use of a company-provided vehicle that is not substantiated as business use is included in income.

The next problem that arises once you are aware of business vs. personal use is what is the value of the personal use of the company vehicle? As with all non-
cash benefits, the IRS requires your employer to calculate the fair market value of the benefit. For vehicles, you are required to use one of three methods
for the computation: Cents-Per-Mile Rule, Commuting Rule, and Lease Value Rule.

Under the cents-per-mile rule you simply multiply the current mileage rate ($.51 for January through June 2011; $.555 for July through December 2011) times
the personal use mileage. To use this method you must, among other requirements, use the vehicle more than 10,000 miles per year and the vehicle must be
valued at less than the maximum permitted value when placed in service ($15,300 autos,
$16,000 truck or van for 2010), and meet the regular use requirements.

Valuation for the commuting rule is based on $1.50 per one-way commute (per employee). To qualify for this method you must (1) provide the vehicle for
bona fide business purposes and require the employee(s) to commute in the vehicle, (2) establish a written policy under which you do not allow the vehicle to
be used for personal purposes other than commuting, (3) if the vehicle is an automobile it cannot be used by a control employee.

Most employees will qualify under the lease value rule based on the fair market value that is equal to what it would cost to lease a similar vehicle from a third
party, known as the annual lease value. To make this calculation easy, the IRS provides an annual lease value for vehicles based on the vehicles fair
market value. The vehicles fair market value can be determined from any number of websites or automobile appraisers. I like to use Kelley Blue Books
website: www.kbb.com. Once you have the vehicles fair market value, you can use the annual lease value table provided by the IRS in Publication 15-B.

Once you have determined the personal usage percentage and the annual lease value, you multiply the two items together to determine the taxable value of
the benefit. The taxable value of the benefit is subject to both income and payroll taxes. The value of the benefit must be increased to cover the payroll tax
liabilities which can easily become a tedious calculation. This increased value should be shown on the employees form W-2 at the end of the year, because the
employee will be subject to the tax due on the value of the benefit. In order to avoid any last minute surprises, the employee and employer should both be
Seattle School District No. 1
aware of the tax treatment of personal use of company vehicles far enough in advance so that if the employee needs to have additional income tax
withholding taken out of his or her check, he or she will have enough time to do so.

If you are self-employed, there are some differences on the rules mentioned above. The IRS still requires the substantiation you would have provided to your
employer. But you must report your business and personal mileage on schedule C of your tax return. Then, rather than determining the annual lease value of
the vehicle and including it in your income, you must reduce the business deduction for your vehicle by the personal use percentage.





Policy/Standards:
IRS regulation 26CFR, Section 1.61-21 See paragraphs (d)(7)(vi) and (e)(5)(vi) of this section for use of the automobile lease valuation and vehicle cents-per-mile
valuation special rules for valuing the use or availability of the vehicle in the case of an employer-sponsored vehicle or automobile commuting pool.
IRS Publication 15B 2014 Employer's Guide to Fringe Benefits

Record of Work Done:
Background
Per 26 CFR (1) Section 61(a)(1) provides that, except as otherwise provided in subtitle A of the Internal Revenue Code, gross income includes
compensation for services, (fees, commissions, fringe benefits, and similar items.) Examples of fringe benefits include: an employer-provided
automobile, free or discounted commercial airline flight, an employer-provided vacation, private club membership, etc.

We reviewed IRS Publication 15B 2014 Employer's Guide to Fringe Benefits
We noted the following:
Personal use of a District vehicle encompasses anything that is not business related, including commuting.
Business vs. Personal use of a District Vehicle must be substantiated by a mileage log. If business vs. personal use cannot be determined
it will be assumed by the IRS the vehicle is entirely for personal use. Any use of a company-provided vehicle that is not substantiated as
business use is included in income.
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To qualify for the lease value method the employer must provide a bona fide business purpose; require the employee to commute; and
establisha written policy which does not allow for personal use of vehicle. We noted from our discussion with Julie Davidson, Payroll
Manager,employees were encouraged to take the vehicles home originally because the vehicles were considered safer (lower chance of
vandalism) at the employees home versus the District lot. When the District HQ moved and a secure lot was available, the employees
continued to take the vehicles home and the District received the benefit of not paying the drive time required to return vehicles to
south Seattle from their worksites in the north end.

Procedures:
We recquested employee vehicle assignment records from the Fleet Management department and filtered the list to see vehicles assigned to
location -- "home" at end of the day. This would indicate the employee is using a District vehicle for commuting purposes. The District's
corrective action and revisions to its Policy and Procedures for use of District vehicles is further reviewed in our folder Fleet Management at -
Fleet Management.
From a payroll perspective we verified the District has a procedure in place to account for the use of District vehicles and accurately
report the fringe benefit amount to the IRS.

Roxanna Melville, Payroll Analyst prepares an excel tracking sheet of employees who take District vehicles home at the close of each work day. We compared
this list to the information provided by Fleets management and noted several employees recorded mileage for 6 mos of the year and 2 employees with
assigned vehicles reported no mileage for the 2013 school year. See D.5.9 . We noted this in our payroll issue at ISS.17

We noted for 11 of the 14 employees tested the salary threshold met the requirement for use of the commuter rule valuation method. Under this rule, the
value of a vehicle provided for commuting is determined by multiplying each one-way commute (that is, from home to work by $1.50 or $3.00 for each round
trip. The $3.00 per day times the number of days the vehicle is used for commuting is added to taxable wages and the tax is imputed on this amount. This
information is reported on the employee pay stub biannually in July and December.The District reviews vehicle assignments annually. We noted the
Fleets Management Dept did not maintain sufficient documentation which prevented complete and accurate reporting of the fringe benefit
amount and the imputed tax reported to the IRS. See our exception at ISS.17

We recalculated the taxable benefit for selected highly compensated employees at D.5.9 and noted the District underreported the fringe benefit amount for
three employees by $2,414. Per IRS regulations a salary threshold exceeding $115,000 does not quality for the commuter valuation method. We noted in our
review of IRS Publication 15B that highly compensated employees use the lease value rule to calculate the benefit from which tax is imputed. Julie Davidson,
Payroll Manager acknowledged the use of the commuter valuation for three highly compensated employees was an oversight and noted the lease value rule
would be used for calendar 2014 which will be reported to the IRS in 2015.
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Based on our testing of the 14 employees using District vehicles for commuter purposes only 3 were complete and accurately reported to the IRS. Of the
remaining 11 employees, the fringe benefit reported to the IRS was undervalued due to incomplete information and 3 employee benefit amounts were
undervalued due to the use of an incorrect valuation method.
Management Letter Recommendation is prepared at D.5.11 .




D.6.PRG - Financial Condition

Procedure Step: 2013 Required Risk - Financial Condition
Prepared By: HCW, 5/2/2014
Reviewed By: AVE, 4/29/2014

Purpose/Conclusion:
Purpose:
To evaluate the District financial condition for indications of substantial financial distress.

Conclusion:
We evaluated the District's financial condition for indications of substantial financial distress and determined there is no distress.

Testing Strategy:
Analysis Procedures
The following procedures are required in order to evaluate the Districts financial condition:

Review the three financial condition indicators on the Districts Financial Analysis spreadsheet.
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OSPI prepares a financial early warning system for all school districts. We will use this analysis as part of our evaluation of financial
condition. This same analysis will be available under FAP and also will have this data available in a 4 year trend and compared to logical
peer groupings for additional analysis/ discussion with District management. Districts that receive a financial warning are facing potential
financial difficulties. The data from this analysis is from the year ended 8/31 auditors will need to consider the actual position of the
District during the time of field work regardless of the score a District receives..

Determine from District information if there have been increases in non-voted debt (prepare a trend of the last 3 or 4 years if possible),
levy failures, unexpected or unplanned liabilities or contingencies, or other financial issues that might impact financial viability of the
District.

Auditors should consider the following in order to make a final decision regarding whether the District is in financial distress:

Mitigating or extraordinary circumstances that may have contributed to their score.
Enrollment that is declining or much lower than budgeted.
Capital facility needs (whether excess or inadequate).
Levy, union negotiations and other significant uncertainties.
Very low cash balance in the general fund or frequent interfund loans to the general fund in order to meet immediate cash needs.
Use of registered warrants, apportionment advances or budgeted receivables.

Teams will be notified by the School Program Manager if districts in their region received apportionment advances or budgeted receivables.

If the District appears to have financial stress, auditors should follow up by performing the following additional procedures:
Share your analysis with the District and inquire about any mitigating circumstances or additional information necessary for us to
evaluate the Districts financial condition.
Obtain managements plan for addressing its financial condition.
Check the Districts most recent budget status report to see whether the condition has improved, worsened or stayed the same
through the current date.

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Reporting
Financial distress may relate to a current financial emergency or the Districts long-term financial sustainability. If the district is in financial
distress, the auditor should discuss the situation with your Audit Manager and the School Program Manager.

If an accountability report is being issued:
If the District has a negative fund balance or if the District exhibits significant declines in fund balance or significant declines in other financial
health measurements (operating margin, fund balance sufficiency, or debt load), or if the District is in binding conditions with OSPI or taken
emergency advances on apportionment, it is expected that in most cases a management letter or a finding will be issued.

If your District has a policy on financial position, auditors should consider whether or not financial position is adequate using that criteria as well
as evaluating their position with our general measurements.

In situations where financial stress indicators exist, but appear to be consistent over time, auditors should consider reporting exit comments to
address the situation.

If a financial report is being issued:
Auditors should consider whether the District is able to consider in operations for one year from fiscal year end. Even if the District will likely be a
going concern for this length of time, auditors may still want to report an emphasis of a matter paragraph in our financial report for
sustainability issues not yet rising to the level of a going concern. See the Going Concern step for details.

Policy/Standards:
WAC 392-121-436
Emergency advance payments School district application.
The board of directors of a school district may apply for any emergency advance on the school district's basic education allocation. The application
shall take the form of a resolution adopted by the board of directors setting forth the following:

(1) The nature of the unforeseen condition requiring the advance;

(2) The amount requested to be advanced;

(3) The net cash and investment balance of the general fund as of the date of the resolution;

(4) A forecast of the general fund receipts, disbursements, and net cash and investment balance for each month remaining in the fiscal year; and

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(5) A disclosure of any existing or planned general fund revenue anticipation notes.

(6) A disclosure of any existing or planned general fund loan to or from another fund of the school district.

WAC 392-123-060
Petition to budget receivables collectible in future fiscal periods.
When a school district is unable to prepare a budget or a budget extension in which the estimated revenues for the budgeted fiscal period plus
the estimated fund balance or actual fund balance in case of a budget extension, at the beginning of the budgeted fiscal period less the ending
reserved fund balance for the budgeted fiscal year do not at least equal the estimated expenditures for the budgeted fiscal period, the school
district board of directors may deliver a petition in writing at least twenty days before the budget or budget extension is scheduled for adoption to
the superintendent of public instruction requesting permission to include receivables collectible in future periods beyond the fiscal period being
budgeted in order to balance the budget or budget extension for the fiscal period being budgeted. Said petition shall include a resolution of the
school board requesting permission to budget receivables collectible in future fiscal periods and other such information as the superintendent of
public instruction shall deem as necessary.

If such permission is granted, it shall be in writing, and it shall contain conditions, binding on the district, designed to improve the district's
financial condition.

Record of Work Done:
Analysis Procedures
The following procedures are required in order to evaluate the Districts financial condition:
We reviewed the three financial condition indicators (e.g., fund balance to revenue ratio, expenditure to revenue, and days cash on
hand) on the Districts Financial Analysis spreadsheet at D.6.1. The District was assigned a 2.85 overall financial health score based on the
data as of the end of FY13. This is an indicator that the District will have more ability to adapt to unforeseen budget cuts, revenues
losses, unexpected expenditures, or other extraordinary items that could occur.

We also compared the District to other peers within the same groups. We based our comparison on peer group 37 that Team Performance
Audit determined in 2011 using enrollment, free and reduced lunch eligibility, presence of a high school, and density. See our comparison
at D.6.2. We noted the District is performing at about the same level as other school districts in the same peer group. The District does not
appear to be in financial distress and the ratios do not indicate a financial warning.

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We performed a four-year trend of non-voted debt using the District's F-196 Schedule of Long-Term Liabilities (page 19), below, to
determine if there have been increases in non-voted debt. We noted there are no increases in the non-voted debt that might impact the
financial viability of the District.

F-196 Financial Statement FY10 FY11 FY12 FY13
2011/ 2012
$ Change
2011/ 2012
% Change
2012/ 2013
$ Change
2012/ 2013
% Change
Total Non-Voted Notes/Bonds $ 34,225,000 $ 32,925,000 $ 32,030,000 $ 31,045,000 $ (895,000)

-2.72%
$ (985,000)

-3.08%

Measurement of Financial Health
We considered the following that may indicate poor financial health in order to make a final decision on whether the District is in financial distress:

Mitigating or extraordinary circumstances that may have contributed to their score. - There does not appear to be any mitigating or
extraordinary circumstances that may have contributed to the District's score based on review of the Financial Analysis spreadsheet.
There were no major changes in the ratios that would indicate an extraordinary circumstance.
Enrollment that is declining or much lower than budgeted The upcoming years budget, including the number of teachers needed, is
developed based on enrollment projections. Enrollment is a major source of funding. Teacher salaries need to be covered from reserves if
actual enrollment is much lower than budgeted. It is very important that districts carefully monitor their enrollment numbers to enable
them to analyze whether budgeted revenues are in line with expectations. If enrollment projections are not met, districts with low cash
reserves may encounter financial difficulties, since this is a major source of funding.
Capital facility needs (whether excess or inadequate) -The District has a Facilities Master Plan covered through 2020 that identifies facility
requirements based on student enrollment and demographics, projected space requirements, commmunity use, and a facilities inventory.
The District has obtained voter approval for a series of major capital levies including the Building Excellence Levies (BEX) levies and
Buildings, Technologies and Athletics Levies (BTA) to help fund the District's capital facility building and remodeling as necessary based on
student growth and old buildings that need to be remodeled or new schools built. There are no concerns as the District plans ahead and
continues to receive large levy approvals.
Levy, union negotiations and other significant uncertainties - As noted above, the District has received several voter approved levies in
recent years. The District continues to work with unions to negotiate salaries and benefits for employees but there are no major concerns
for significant uncertainties with the unions.
Very low cash balance in the general fund or frequent interfund loans to the general fund in order to meet immediate cash needs We
considered the nature of any reserves or designations of fund balance as well as commitments or contingencies that are not reflected in
designated fund balance and determined this is not a risk for the District.
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Use of registered warrants, apportionment advances or budgeted receivables The Districts annual budget appears to be balanced and
the District is meeting the budget within reason. We have not been notified by the School Program Manager about the District receiving
apportionment advances or budgeted receivables.

The District does not appear to have financial stress. Therefore, we did not perform any more additional procedures.

Reporting
We determined the District is not in financial distress and therefore it is not necessary to report a management letter or finding for the
accountability report. In addition, we determined the District is able to operate for at least one year from fiscal year-end and there is no going
concern.

We reported the financial condition to the District Board of Directors, Assistant Superintendent of Business and Finance and the Accounting
Manager via email on May 2, 2014 at D.6.3.


D.7.PRG - Capital Projects Cost Allocation

Procedure Step: Capital Projects Cost Allocation
Prepared By: HCW, 5/30/2014
Reviewed By: AVE, 5/30/2014

Purpose/Conclusion:
Purpose:
To gain an understanding of the District's cost allocation controls to ensure District personnel charged in multiple funds are allowable.

Conclusion:
We gained an understanding of the District's cost allocation controls to ensure District personnel charged in multiple funds are allowable. We
found the District does not have sufficient documentation to support splitting the salaries of eligible employees between the General
Fund and the Capital Projects Fund. Also we noted that the District does not keep track of the actual payroll charges for split-funded
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employees. See ISS.12

Testing Strategy:

Policy/Standards:

Record of Work Done:
Contacts:
Kathie Technow, Accounting Manager
Linda Sebring, Budget Director
Victoria Ouk, Budget and Cost Accounting Analyst

Background/ Prior Audit ML:
In the prior audit the District received a mangement letter for charging salaries to the incorrect fund resulting in ineligible capital
expenditures. The District can charge employee salaries and direct expenditures to the Capital Projects fund if the employee is hired or assigned
to planning or construction management of capital projects. The District may split salaries of employees between the General Fund and the
Capital Projects fund based on percentage of time worked in each category. In nine of the last ten audits, we reported internal control
weaknesses in the Districts accounting for payroll expenditures.

We tested payroll expenditures for employees charged to the Capital Projects fund by reviewing employee job titles to see if they make sense.
We selected those that appear higher risk as we would not expect them to be charged to the Capital Projects fund. We found the District does not
document the reasoning for employees with split salaries charged to the Capital Projects fund and General fund.
In the prior audit we recommended the District:
Maintain documentation for employees that split their salaries between funds.
Perform a year-end reconciliation of estimated versus actual costs charged, or use a different, documented method, such as time sheets,
to determine the amounts to charge the Capital Projects fund.
Ensure salaries charged to the Capital Projects fund are only for eligible purposes.

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We will follow-up with the District, below, at "Capital Project Cost Allocation" to determine what the District has done since the prior audit to
ensure employees with split charges between the Capital Projects fund and General fund are documented as to how the charges are split.

In addition, the prior audit found the District charged ineligible costs to the Capital Projects fund including managing the technology line and
website, tracking student laptops, assisting with computer problems, and processing claims for employees who were over/under paid. We will
follow up with this below, at "Capital Projects Fund Ineligible Charges".

Capital Project Cost Allocation:
We met with Linda Sebring, Budget Director and Victoria Ouk, Budget and Cost Accounting Analyst to gain an understanding of the cost allocation
process for employees with split charges between the General fund and Capital Projects fund.

During the budget process before each new school year, Victoria works with the Director of the Capital Project Department, Department of
Technology, HR and Accounting Departments to help determine the percentage of funding for each employee that should be charged to the
Capital Projects fund. The Director of Capital Projects meets with the managers to help determine staff funding and what tasks they perform to
determine the level of funding should be charged to the Capital Projects fund and the rest to the General fund. Victoria stated she maintains a
spreadsheet of the employees with split fund charges that are included in the approved budget.

During the year, 100 percent of the payroll is charged to the Capital Projects fund even for those employees with split charges that should be
allocated to the General fund. At year-end, Kathie Technow, Accounting Manager moves the split funded employees General fund percentage
charges from the Capital Projects fund to the General fund in one large journal entry. Essentially, the General fund is reimbursing the Capital
Projects fund for charges they should have been paying for employees performing General fund tasks.

Because the Director of Capital Projects had just started with the District at the time of our meeting, we were unable to meet with him to discuss
the Capital Projects procedures for documenting percentage of time determined to be worked on in the Capital Projects fund. However, Linda
Sebring and Victoria Ouk confirmed that they do not receive anything from Capital Project department to show reasons of why the percentage of
payroll charges should go to the Capital Projects fund. As noted during planning at B.2.17 there are several employees charged to the Capital
Projects fund from the Accounting department. We inquired with Kathie Technow, Accounting Manager and she also confirmed there is no
documentation maintained for charges to the Capital Projects fund.

Based on the results of procedures performed, we found the District does not have sufficient documentation to support splitting the salaries of
eligible employees between the General Fund and the Capital Projects Fund. Allocations are based on estimates instead of actual charges.
Individual departments calculate an estimated workload of split-funded employees to be charged to the Capital Project fund during the annual
budget process. The Departments communicate the percent allocated to the budget office but do not keep documentation to justify the workload
on capital projects.
We also noted that the District does not keep track of the actual payroll charges for split-funded employees. During the year payroll costs are
charged to the Capital Projects fund. At year end the District reallocates part of the costs to the General fund using an estimated workload
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percentage. See ML: Cost Allocation between Capital Projects fund and General fund.
We recommend the District:
Allocate actual split salaries and benefits from the Capital Projects fund to the General fund monthly rather than once a year.
Keep track of the actual payroll costs of split-funded employees charged to the capital projects.
Maintain documentation for capital projects workload of employees who split their salaries between funds.
Management Letter = The District received a management letter in the prior audit. Although the District has not implemented any of our prior
audit recommendations, we recognize the District has undergone significant turnover in the past year, including a new Budget Director who
started December 2013 and a new Director of Capital Projects that did not start until March 2014.

Cost Allocation Testing
Although, there are inadequate controls for determining cost allocation of employees charged to the Capital Projects fund and ensuring the split
funds are charged to the correct fund timely, we will perform testing of select employees as part of our financial statement audit to ensure the
employees are correctly classified in CPF. We will also determine whether the District's budgeted allocation of Capital Projects fund agree to the
year-end actual charged during our financial statement testing at Capital Projects Fund Expenditures - Payroll and Non-payroll Testing. Based on
testing, we determined the employees tested are allowable to be charged to CPF and the actual amounts charged in the g/l met our expectation
compared to the District's budget prepared at the beginning of year. There were no exceptions.

Capital Projects Fund I neligible Costs Understanding:
As noted in the "Background" section, above, in the prior audit we found the District charged ineligible costs to the Capital Projects fund. This
included managing the technology line and website, tracking student laptops, assisting with computer problems, and processing claims for
employees who were over/under paid. During the financial statement audit we performed sample testing of non-payroll transactions at F.2.3. The
testing included technology purchases and technology professional services. We also scanned the non-payroll data and did not note any vendors
that relate to processing claims for employees who were over/under paid. There we no exceptions in our testing results.

We consider this part of the prior year management letter resolved and will not be included in the current year management letter.




D.8.PRG - Facilities

Seattle School District No. 1
Procedure Step: Joint Use Agreement with City of Seattle
Prepared By: AB1, 6/11/2014
Reviewed By: JWG, 6/13/2014

Purpose/Conclusion:
Purpose: To determine if the Seattle School District is in compliance with the terms of its J oint Use Agreement with the City of Seattle and to
follow-up on prior year issues.
Conclusion:
Due to insufficient documentation and monitoring were unable to verify the District and its fiscal agent are in compliance with the terms of the
joint use agreement. We recommend the District request data from the City of Seattle and perform a reconciliation of Athletic Facility net
collections to cash deposits to ensure fair and equitable use of District facilities per the terms of the J oint Use Agreement. ISS.19

Testing Strategy:

Policy/Standards:

Record of Work Done:
Background:
Forty-seven (47) of Seattles public schools adjoin Parks land or facilities. The School District and the City of Seattle Dept of Parks and Recreation
(DPR) have cooperated in planning and jointly using these separately owned facilities and grounds for the benefit of students and community
members. Per Memorandum of Agreement initiated in 2005, the DPR acts as a fiscal agent to schedule public use of the District's athletic sites
and collect District revenue for use of school facilities in accordance with a fee structure established by the District. The agreement with the City is
intended to be an equitable and fair exchange of resources.

Facility Rentals Accounts ReceivableWe noted in our prior year audit the District relied on City Parks Dept (DPR) to document and quantify how
much revenue the District should receive. Unsupported invoices submitted by Parks were paid by the District and as a result the District did not
receive all fee revenue owed. As follow-up to our report of this control deficiency, Kathy J ohnson obtained the detail of events scheduled by
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Parks for FY 2011 and noted a differential of underpaid fees by complex for each quarter. There has been no effort to determine the magnitude
of underpayment over the years the J UA was in effect. Going forward both parties have agreed to greater transparancy and have modified the
agreement to ensure a more equitable exchange of resources.

Revenue collected by DPR for use of District facilities is reported and paid to SPS quarterly. The City DPR now provides an upload of transactions
by complex and by day for each quarter to support the fee collection. I n exchange the District pays the Parks Dept a percentage of revenue
deducted from the gross revenue collected for scheduling services provided by Parks. Under the new agreement the expense paid to the City for
its scheduling service has increased from the prior agreement of $2,500 per quarter or $10,000 per year to 9% of gross revenue. The $2,500 per
quarter fee was originally established in 2005 per a Memorandum of Agreement. See 2005 Parks Fee MOU The revised Agreement was not
signed as of the date of our audit. We noted the J UA is scheduled to be renegotiated in 2015. The current joint use agreement is located at -
2010-2015 JUA and 2010-2015 J UA Appendices

The DPR and SDS have agreed to the following contract amendments executed on .
The amendment memorializes the agreement for DPR to act as fiscal agent and schedule public use of SPS athletic complexes, sports
fields and school fields and collect revenue for rental of these facilities. DPR will remit fees and a full accounting to SPS on a quarterly
basis.
The prior agreement called for DPR to deduct a scheduling fee of $2,500 per quarter from SPS revenue. The amended agreement calls
for SPS to reimburse 9% of total gross fees collected to cover the cost of scheduling service provided by DPR. The deduction calculation
will be shown on the quarterly accounting sent to SPS.
In addition, DPR will deduct the following items from rental revenue: NSF checks, underpayments, and credit card processing fees. DPR
will absorb the following expenses related to cash handling: cash shortages/overages, costs for transmitting revenue to SPS, deposit
reconciliations, and resolution of cash handling problems. Attachment 1 includes a schedule of the fee structure
Upon request, DPR will grant SPS reasonable access to City financial records related to revenue collection on behalf of SPS.
We performed an analysis of rental revenue received from Parks atD.8.8. We obtained the data upload files provided by City of Seattle DPR
of activities and prepared a worksheet of all event bookings and utility charges by facility and by quarter. (Note: we did not attach all data
uploads to our workpaper, only Q4 2013. See work paper at D.8.8 ) We noted the total checks disbursed by Parks acting as Fiscal Agent on
behalf of SPS did not reconcile to accounting support of all events scheduled by DPR by location and by quarter. The data was uploaded from the
City of Seattle database of bookings and utility fees. We also noted the deduction of fees was not evident in the material supplied by Parks. We
verified the charges of $2,500 by quarter is still being used as the revised contract has not been signed. We explained the importance of the
reconciliation to Kathy J ohnson and subsequent to our inquiries she obtained a revenue summary (booking fees & utility fees totaled by quarter
for 2014. The variance of 34,600 may be due to timing issues as we noted disbursements from DPR were not provided quarterly per the contract
terms.
Seattle School District No. 1

We recommend the District determine the reason for the variance of in school year 2013 bookings. We recommend the District request
appropriate data from the City of Seattle and perform a reconciliation of Athletic Facility net collections to cash deposits to ensure fair and
equitable use of District facilities per the terms of the Joint Use Agreement.





D.8.PRG - Facilities

Procedure Step: Facilities rentals
Prepared By: AB1, 5/29/2014
Reviewed By: JWG, 6/13/2014

Purpose/Conclusion:
Purpose: To determine if the Seattle School District has adequate internal controls over faclities rentals.
Conclusion:
We determined the District is in compliance with its own policies and procedures over Facility Rental Services with one exception. The District has
not sufficiently addressed our prior year recommendation for monitoring of delinquent accounts. ISS.15

Testing Strategy:
Purpose: To test controls over Facility rentals and to follow-up on prior year issues.

Policy/Standards:

Seattle School District No. 1
Record of Work Done:
Key Employees:
Eleanor Lockett, SSD Building Rentals Office
Fred Pamonag, Facilities Rentals Tech
Linda Pei, Accountant
Kathy J ohnson, Facilities Operation Program Manager
Bruce Skowyra, Director of Facilities Operations

Source documents: Superintendant policy 4260
Seattle Parks & Recreation J oint Use Agreement
School Dude database reports
Amendment to J oint Use Agreement

Risks identified: In our prior year audit we identified weaknesses in controls over collection of facility usage fees, lack of sufficient detail and
support for billing and lack of monitoring of delinquent accounts related to facilities revenue.
In addition we noted the District had insufficient staffing to manage Facility rental invoicing, insurance compliance and collection.
Auditor Note:
The District's School Community Use policy 4260SP (Superintendent Procedure) is currently being revised. Our audit addresses the policy in effect
during the audit period and through May 31, 2013. We note the District's long standing mission is to work collaboratively with communities and to
allow free use of District buildings to particular orgainizations such as the PTA or PTSA.
The District intends to be a steward of its facilities, and promote community use for the benefit of youth programs. The District does not perform
projections of rental revenue for use of its athletic fields and buildings. The primary focus is to recover cost for utility and custodial services only.
The District has a separate agreement with the City of Seattle to ensure fair value is received for events scheduled by the City and for which the
public is charged an admission fee. We will review the agreement with the City of Seattle in our folder J oint Use Agreement

Background: The Scheduling for student and community based events is done in the School Dude database system. The Program consists of
three separate databases: Facility Services Direct (FSD); Maintenance Direct (MD); and Preventative Maintenance Direct (PMD). Facility
scheduling, invoicing and collection is tracked in the FSD database. Each school facility (building) has assigned staff to schedule student
based events. The School Dude system access is restricted to school schedulers for approximately three weeks at the beginning of each school
year to reserve and prioritize facility for school's events. There is no charge for facility use to the School unless the event takes place after school
hours in which case custodial time is billed. Such events are billed as a work order in the Maintenance Direct program and invoiced to the School
requesting the service. School Dude is a paperless system so work orders are automatically generated in FSD or MD and transmitted electronically
to the requesting cost center once the event is registered and activated.
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In response to our prior year issue the District will better monitor its invoicing activity in the School Dude system by preparing monthly reports to
management of billings and past due invoices. Outstanding invoices over 90 days will be sent to collections.
Procedures:
We reviewed the the reports issued to management for September 2012 through March 2014. Our understanding is that all events are
invoiced however principals have the option to waiver rental fees. The fees waived by the school principals are retained in a separate data
file and delinquent accounts must be cross referenced to the waived events before the receivable can be considered delinquent. Kathy
J ohnson, Facility Rentals Manager admitted the report review process is very time consuming. We will review the reports and accounts
sent to collections to verify that review is performed and non waived accounts are pursued for payment.
Fred Pamonag provided us with a user account for the School Dude system. We performed an advanced search for the period of Sept
2012 through August 2013 of all billable and paid accounts. See Sch Dude AR report Based on our review the total billable
events invoiced from period Sept 2012 through August 2013 was $397,755.09
net of cancelations and voids. Of this amount $114,020.32 is outstanding as of Feb 2014. We reviewed the status of outstanding
receiveables as of April 2014 and noted a balance of of $101,231. (We will use the most current balance in our report of this issue.) The
District did not send any delinquent accounts to collections in 2012. This practice was initiated in November 2013 after our audit
recommendations and accountability report was issued in J une 2013. We recommend more communication between Facility Rental staff
and Central Accounting to monitor delinquent accounts. See AC_E: Facility Rental Delinquent Acct Receivable
Kathy J ohnson acknowledged that in the prior school year the District did not have adequate trained staff to follow-up on billings and
collections. I n response to our prior year recommendation the District has assigned 1 additional FTE to assist with facility rental invoicing.
Linda Pei, Accounting Specialist joined the Facilities Dept in 2014. Per Kathy J ohnson, billings for J anuary 2014 were being processed in
February 2014, indicating the District has reduced the 6 month backlog to one month. Kathy also noted that billable organizations with
delinquent accounts are flagged to disallow further activity until open accounts are paid and current. We verified this by viewing the
organizations flagged as "do not rent" status in the school dude system. Fred Pamonag, provided us with a list of 13 organizations
flagged. These organizations were identified as do not rent due to past unpaid invoices, lack of insurance documentation etc. We noted
at least three organizations with delinquent accounts that were not included in the this exception list and Fred acknowledged the "do not
rent" list should be updated. This list was updated in April 2014 per our audit inquiry. Auditor Note: Although PTA & PTSA's may utilize
school facilities with no rental fee, they still must pay for custodial and utility charges. Those who do not honor this agreement are
flagged as Do Not Rent until unpaid balances are reconcilied. See revised DN Rent list provided per our audit inquiry at D.8.3--DN Rent
tab. D.8.3
We asked Fred to address the issue of insufficient training of staff that was identified as a risk in the prior year audit. School Dude, a
company out of North Carolina offers training options via online help desk and trouble shooting for program users. Fred concurred that
the rollout of the School Dude FSD database in September of 2011 was initially met with resistance by school schedulers but that
feedback is now favorable and it appears that FSD and MD systems are used consistently district wide. In addition the District has
documented procedures for invoicing so that training of employees is consistent and accessible to new employees. See D.8.7
Seattle School District No. 1
To streamline procedures and minimize labor costs, the District requires all registrants to create a user profile and provide proof of
insurance to be eligible to schedule field events. Eleanor told us the community users register online and provide all insurance information
i.e. name of insurer, type, period of coverage etc. The applicant must enter the dates the insurance is in effect. School Dude system
tracks the insurance expiration dates and will suspend events registered past the expiration date. We reviewed the profile for the
organization "Let's climb with Purpose." There were 0 events scheduled with insurance expiration dates. We then reviewed the profile for
"Watts Basketball." There were 44 events scheduled with expired insurance status. None were paid. Eleanor explained that an event may
be scheduled in the School Dude system but it will not be activated unless all insurance documents are received. An activity will not be
invoiced until it is activated. We verified the Watts Basketball insurance form was received by using the home
page https://schooldude.com => organization => insurance tab. The insurance data on file was updated with coverage dates effective
through 7/26/14 through Essex Ins Co.
We verified billings for custodial and HVAC fees are monitored for use of facilities when school is not in session. Eleanor explained that a
custodian must be on site whenever a building is used on a non school day or after school hours. Eleanor showed us an invoice that she
processed for the organization "Let's Climb with Purpose" The invoice was processed on Feb 5th for an event scheduled on Sat Feb 15,
2014. The permit was issued for use of the W Seattle HS parking lot. We verified the correct amount of $109.4 based on 8 hr permit and
custodial fee of $321 @ $42.8/hr. We verified billings for custodial and HVAC fees are monitored for daily, weekly and monthly use of
facilities when school is not in session. This activity is tracked by Lewis Carlson, Lease Accountant. See PBC worksheet at D.8.4
We verified that PTA and PTSA organizations submit a waiver form for all rent free use of facilities and that the waiver form is authorized
by the Principal of the school hosting the event. Per invoicing procedures, these waiver forms are scanned and included in the School
Dude system by event identification number. We also addressed a citizen concern regarding waiver of fees at H.5.PRG and H.5.2
Based our our auditfollow-up we note thatFacility Rental Services management and staff have responded to our prior year recommendations
by improving documentation of procedures, providing additional training of staff, generating status reports, and establishing controls for liability
and insurance reporting requirements. Based on our audit results the District is in compliance with its policies and procedures with the exception
of monitoring delinquent accounts receiveables. We prepared follow up for prior year recommendation at D.1.1
We noted that the District has not sufficiently addressed our prior year recommendation for monitoring of delinquent accounts and
we recommend further improvement in this area. ISS.15







D.9.PRG - Fleet Management
Seattle School District No. 1

Procedure Step: Fleet Management Corrective Action of PY issue
Prepared By: TN, 6/10/2014
Reviewed By: AVE, 6/10/2014

Purpose/Conclusion:
Purpose: To follow up on prior exceptions related to the District's fleet management activities noted during the 2011 audit and
determine if the District has improved internal controls for fleet management.
Conclusion: Based on our testing, we found that the District's has made some improvements to its internal controls over fleet
management. However, we noted that controls are still not sufficient to prevent misuse of fuel cards; monitor vehicle assignment and
usage and timely recover missed vehicles and equipment. See EX_Fleet Management: The District's procedures over vehicle
assignment and usage lack oversight

Testing Strategy:

Policy/Standards:

Record of Work Done:

Background information:
During the 2011 Audit, we issued a finding to the District noting many issues related to fleet management activities at the District. See the list of
prior year issues below:

List of Prior Year Issues:
Fleet Inventory: During the 2011 Accountability Audit, an exception was filed related to the District's fleet management. One major issue noted was
Seattle School District No. 1
that the District did not take a physical inventory of its fleet as required by state law and District policy. As a result, the District is unable to ensure
it safeguards public resources. We will be following up to see if the District has since put proper fleet inventory procedures in place. See the
results of our follow up testing hereInventory. We found that the District has improved its inventory procedures since the issue was found during
the 2011 audit, however the current inventory procedure does not timely detect vehicles which have not been inventoried within the last two years
which is a District requirement. As a result, the District's current inventory system causes it to be out of compliance with its own policies.

Fuel Card Usage: During the 2011 audit of fleet management, it was determined that the District lacked oversight to ensure employees are
following fuel card policies and procedures. Specifically:
Accounts payable issues payments for some fuel card invoices without approval by department managers.
Supervisors are not monitoring fuel card purchases for reasonableness.
Employees are not accurately entering the vehicles mileage at the time of fill up, which is required by District policies.
See the results of our follow up testing here Fuel Card Usage
Based on our follow up testing, we found that the District has not implemented adequate controls over fuel card usage. As a result, there is
a more than remote possibility that misuse can occur.

Vehicle Assignment and Usage: In the 2011 audit of fleet management, it was determined that the District lacked internal controls to ensure
accuracy of fleet data and compliance with policies for vehicle assignment and use forms. See the results of our follow up testing here Fleet Data
and Vehicle Usage. Based on our follow up testing, we found that the District's procedures for monitoring vehicle assignment and usage is out-of-
date, inaccurate, incomplete, inefficient. As a result, the District's fleet data information can't be relied on to monitor vehicle assignment and
usage.

Vehicle Purchase: During the 2011 audit of fleet management, it was found that the District's weak internal controls over vehicle purchasing
procedures allowed for the purchase of vehicle outside of the Purchasing department. See the results of our follow up testing here Vehicle
Purchase, Surplus. Based on our testing, we found that the District's procedures for vehicle purchasing does not consists of steps or measures to
ensure that vehicle purchases are always included in its Fixed Assets Database. As a result the Fixed Assets Database is incomplete.
Conclusion:
We found that the District has made some improvements in its physical inventory procedures but the condition of its fleet management
procedures remains mostly unchanged. The District still does not adequately monitor vehicle assignment and usage, fuel card usage, and
procedures related to vehicle purchases. We noted these issues in AC_EX: Fleet Management. The District's does not adequately monitor vehicle
assignment, usage, fuel cards, purchases, and inventory procedures

Seattle School District No. 1

D.9.PRG - Fleet Management

Procedure Step: Inventory
Prepared By: TN, 4/29/2014
Reviewed By: AVE, 6/10/2014

Purpose/Conclusion:
Purpose: To determine if the District follows its policies for taking vehicle inventory

Conclusion: Based on our test results, we found the District's vehicle inventory procedures aren't adequate to ensure compliance to the District's requirement
of taking physical inventory every two years. The current procedure does not timely identify vehicles with inventory dates older than two years. We also found
that the District does not keep adequate records to show as evidence that a physical inventory of vehicles was completed. We noted the issue in ISS.16 AC_EX:
Fleet Management. The District's does not adequately monitor vehicle assignment, usage, fuel cards, purchases, and inventory procedures

Key People:
Allen Mardock, Supervisor Accounts Payable


Testing Strategy:

Policy/Standards:

Record of Work Done:
Background Information:
Seattle School District No. 1
During the 2011 Accountability Audit, an exception was filed related to the District's fleet management. One major issue noted was that the District did not
take a physical inventory of its fleet, see overview row here Fleet Management Corrective Action of PY issue. We will be following up to see if the District has
since put proper fleet inventory procedures in place.

Key People:
Allen Mardock, Supervisor Accounts payable, ajmardock@seattleschools.org, (206) 252-0278

Source Documents:
Equipment & Surplus Administrative procedures Equipment & Surplus Procedure

Policy:
Equipment & Surplus Administrative procedures, effective date 12/1/2012. We found the following policy applicable to vehicle inventory:
Inventory Time Schedule: Every district building can expect a physical inventory of district owned equipment once every two years.

Understanding of Inventory Procedures:
We met with Allen Mardock, Supervisor Accounts Payable, to gain an understanding of the Districts procedures for performing vehicle inventory. Allen
explained that normally physical inventory is performed at a site by scanning the bar codes on District equipment, however vehicles cant be scanned this way
and is tracked manually on paper. The physical vehicle inventory check starts with a printed list of all active vehicles in the Districts R-Base Fixed Assets
database. Allen performs a physical check for every vehicle on the list at a given site by looking for the vehicle with the same license plate number as on the
list. If the vehicle is located, it is later noted in R-Base with an L which stands for located. If the vehicle wasnt located at a site, it is notated this with an RL
which indicates that the location must be researched. To research the location, Allen checks to see if the vehicle is at the Districts Auto shop or if it is with a
driver by contacting fleet management to see who is assigned to the vehicle. If the vehicle is with a driver, Allen contacts the driver to arrange for a physical
check when the car is on site. If Allen is informed that the vehicle is parked at a different location than its parking site, he makes a note to check for the vehicle
when inventory is performed at that site.

It takes two years to complete a full inventory cycle for every site in the District. If after performing inventory at all the sites, the vehicle still wasnt located, the
vehicle is marked with the status of M in R-Base to denote that the vehicle is missing. Sometimes a vehicle isnt located after all the sites have been
inventoried because it was moving from site to site. Allen stated that he only declares a vehicle as stolen if it has a status of M for more than six years (over 3
inventory cycles). In this case, he would file a police report, however, he stated that he has never seen a vehicle declared stolen. Accordingly, he would update
R-Base by changing the site field to Inactive Record and modifying the Status, Date Retired fields to reflect that the vehicle is stolen. If the vehicles
original price was greater than $5,000, it would be included in the monthly journal entry to record all retired equipment in account R9300. If the original price
was less than $5,000, it is simply retired and no journal entry is made to record this event. District employees may also report stolen equipment to the Districts
Security department. In this case, the Security department will notify the Fixed Assets team and the vehicle will be updated in R-Base with the police and
security incident number.

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Testing:
We obtained a list of all active vehicles in the Districts R-Base Fixed Assets database from Allen Mardock, Accounts Payable Supervisor. We calculated the
number of days that have elapsed from the day the vehicle was lasted physically located (the INVDATE) to our test date of 4/3/2014. We determined whether
more than two years have elapsed. We noted all vehicles with an INVDATE which was over two years ago. We found nine vehicles out of 298 (approximately
3%) which had an expired INVDATE. See our testing here Vehicle Inventory Testing

We discussed our test results with Allen Mardock. He confirmed that he does not routinely monitor the INVDATE to ensure that a physical inventory of the
vehicle occurs inside of the two year time frame. Instead, he waits until the next time he takes vehicle inventory, at which point he places a priority on the
vehicles with older inventory dates. We asked if he keeps the paper list of the inventory when he takes physical inventory, he said no.

Based on our test results, we concluded that the Districts vehicle inventory procedures arent adequate to ensure compliance to the Districts requirement
that physical inventory of equipment take place once every two years. We found that the current procedure does not enable timely identification of vehicles
with expired Inventory dates. We also found that the District does not keep adequate records to show as evidence that a physical inventory of vehicles has
been completed.
Conclusion:
We gained an understanding of the District's procedures for taking vehicle inventory. We noted the following items:
(1) The District's vehicle inventory procedures aren't adequate to ensure compliance with the District's requirement of taking physical inventory every two
years. The current procedure does not timely identify vehicles with invetory dates older than two years. We also found that the District does not keep
adequate records to show as evidence that a physical inventory of vehicles was completed. We noted this issue in AC_EX: Fleet Management. The District's
does not adequately monitor vehicle assignment, usage, fuel cards, purchases, and inventory procedures


D.9.PRG - Fleet Management

Procedure Step: Vehicle Purchase, Surplus
Prepared By: TN, 6/10/2014
Reviewed By: AVE, 6/10/2014

Purpose/Conclusion:
Purpose: To determine if the District follows its procedures for vehicle purchase and surplus
Seattle School District No. 1

Conclusion: We found the District's vehicle purchasing/accounts payable procedures lack the steps to ensure the proper inclusion of all vehicle purchases and
leases in its Fixed Assets Database. We made a recommendation for this in AC_EX: Fleet Management. The District's does not adequately monitor
vehicle assignment, usage, fuel cards, purchases, and inventory procedures

Key People:
Craig Murphy, Purchasing Manager
Allen Mardock, Accounts Payable Supervisor
Helen Jones, Supervisor Facility Operations Admin


Testing Strategy:

Policy/Standards:

Record of Work Done:
Background:
During the 2011 Accountability Audit, an exception was filed related to the District's fleet management activities. One major issue noted was the Districts
weak internal controls over vehicle usage, including vehicle purchase and surplusing. See Overview row here Fleet Management Corrective Action of PY
issue. We will be following up to determine if the District has improved its internal controls for vehicle purchasing and surplusing.
Key People:
Craig Murphy, Purchasing Manager
Allen Mardock, Accounts Payable Supervisor
Helen Jones, Supervisor Facility Operations Admin

Documents:
Purchase Requisition (paper) form: Requisition form

Purchasing Process
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On 3/7/2014, we met with Craig Murphy, Manager of Purchasing, to gain an understanding of the procurement process, particularly vehicle procurements.
Craig stated that the Purchasing department handles all purchases that do not require formal bidding or the RFP bidding. The Purchasing department adheres
to RCW 28A.335.190 and Board policy 6220 which guide the soliction of quotes. Craig stated that the District hasnt made a large investment in its fleet for
many years. He estimated that there have been a handful of vehicle purchases in recent years and that the District has about a dozen or so leased vehicles
(with contracts that are between 1 to 3 years). He explained that the same general procurement process is followed for vehicle purchases and leases.
The process starts with the department or school filling out a general requisition form in the Districts SAP system (20% of requisition forms are still completed
manually when the requestor doesnt have access to SAP). The requestor enters the specifications, quantity, unit price, shipping site/building, fund, cost
center, and commitment item into the requisition form. The SAP system contains a check which requires that the requisition form be signed by authorized
personnel within the department. For paper requisition forms, Craig stated that he references a document called Authority Matrix which lists the ranges and
the individuals whose approvals are required at each range for each department.
For vehicle purchases the District will often purchase through a contract with the State due to convenience and better prices, however the District is not
required to purchase through the State contract.
When leasing a vehicle, the District goes through local dealers because the State does not lease vehicles. Craig stated that District policy requires the
Purchasing department to obtain three quotes for purchases between $40K to $75K. Quotes are obtained via phone, email or fax. Once a vendor is selected,
Craig works out the final pricing and budget requirements with the department before creating a purchase order in the SAP system.
When the purchased item is delivered, it typically goes to the Districts warehouse where the receiving department will enter the delivered item into the SAP
system. For vehicle purchases and leases, receiving is a manual step because the District's Automotive Shop isnt set up in the SAP system (for inventory).
Craig explained this is likely due to the fact that vehicle purchases do not occur on a regular basis and therefore it wasnt worth the investment.
The vehicle is delivered to the Districts Facilities Operations Automotive Shop. An authorized personnel in the Automotive shop will sign for the delivery. The
Auto Shop enters the vehicle information into their system and the School DUDE system to track work orders (for auto servicing and repair work). The Auto
Shop forwards the vehicle title/registration to Helen Jones, Supervisor Facilities Operations Admin to track in the Fleet Data worksheet. A copy of the receipt is
given to the Purchasing department. At the Purchasing department, the receipt is scanned and the original is sent to Accounting where it will be matched up to
the invoice from the vendor.
Craig stated that District policy requires all purchases be made through the Purchasing department. When asked how he detects unauthorized purchases, he
stated that he finds out about unauthorized purchases when the Accounting department receives invoices from vendors which cant be matched up to a
receipt. Craig keeps a spreadsheet that tracks all unauthorized purchases and updates it when he becomes aware of an unauthorized purchase. The
Purchasing Department reports this information to the School Board on a biennial basis.
Craig stated that roughly 100 unauthorized purchases happen every year, amounting to about $100 thousand, which is small percent of the $75 million in
total purchases for the department. We asked if he recalls an instance of a vehicle which was purchased without going through the Purchasing department. He
stated that he couldnt think of any except one incident that happened years ago. He recalled that the purchase was made for an international instructor.


Surplus Sales Process
The sale of a vehicle starts with the Districts Auto Shop. The Shop will inform Allen Mardock, Supervisor Accounts Payable when there is a vehicle that needs
to be sold. The shop will fill out a "Disposed Vehicles" form and send it to Allen in an email. Under RCW 28A.335.180, the District is required to advertise to
Seattle School District No. 1
public and private schools before selling to the public. To comply with this state law, Allen stated that the District publishes a reoccurring ad in the Seattle
Times each month. If he doesnt get any response, he will auction the vehicle online. Once the sale is final, Alan updates the Vehicle Details in the Fixed Assets
Database by changing the Site field to Inactive record, Status to SA to indicate it was sold, the Sale Amount, Sale Date and Acct. Retired date to be the end
of the current month. If the original price of any equipment sold was over five thousand, it must be included in a monthly journal entry that records a lump
sum of all retired equipment in account B1493. If the original price was less than five thousand, the proceeds of the sale is recorded in the equipment sales
revenue account R9300, taxes in account B2667. Allen notifies Helen Jones in Facilities Operations that the sale was completed by sending her all supporting
document so that she can verify that SSD has been removed from the title. With this information, Helen Jones will update her Fleet Data worksheet.
Testing:
1. Vehicle Purchase Procedures Testing
We obtained a list of all active vehicles during SY2012-2013 from Allen Mardock, Accounts Payable Supervisor. We filtered the list to find all vehicles with a
purchase date during SY2013. We found three vehicles that were purchased during SY2013. All three vehicles were from the same purchase order
document. We tested the transaction by verifying the supporting documents (1) purchase requisition form, (2) purchase order form (3) Signed receiving report
(proof of delivery receipt), (4) Title to vehicle. We then verified if the vehicles were included in the Facility Operations Fleet Data worksheet. See our test
results here Vehicle Purchase Lease Sale Testing. We noted no exceptions.

2. Vehicle Surplus Procedures Testing
We obtained a list of all vehicles that were sold during SY2012-2013 from Allen Mardock, Accounts Payable Supervisor. There were 20 vehicles on this list with
the status of sold. We haphazardly selected five vehicles to verify whether the District is following its procedures for vehicle sales and whether the sale of a
vehicle is updated in the Facilities Operations Fleet Data worksheet. See the results of our testing here Vehicle Purchase Lease Sale Testing. We noted no
exceptions.
3. Testing the Fleet Data work sheet and Fixed Asset Database for completeness:
We wrote down the license plate numbers of 81 District vehicles parked at the John Stanford Center for Educational Excellence (JSCEE). We obtained the
Facilities Operations Fleet Data worksheet from Helen Jones, Supervisor Facility Operations Admin. We obtained a list of all active District vehicles in the R-Base
Fixed Assets Database from Allen Mardock, Accounts Payable Supervisor. We looked for the physical license plate numbers we wrote down in the Fleet Data
worksheet and Fixed Assets Database and noted whether we found the vehicle in the data source or not. See our testing here Test District fleet data for
completeness. Four of the vehicles we jotted down did not appear in the R-Base Fixed Assets Database however these vehicles were found in the Fleet Data
worksheet. The license plate numbers for the four vehicles are 98066C, 98067C, 98068C, and A4300C. We looked in the Facilities Operations vehicle folders
and found the title and registration for all four vehicles with the issue date of 2/2013 and 1/2014. Based on the title documents, we learned that these
are leased vehicles because the "Registered Owner" is Seattle Public Schools however another entity is listed as the "Legal Owner".
We asked Allen Mardock, Accounts Payable Supervisor why these vehicles were not included in the R-Based Fixed Database. Allen stated that the District's
current business practice is to add leased vehicles to the R-Base Fixed Assets Database with the "Original Purchase Price" field set to "0". He said these vehicles
weren't added to the database because the event wasn't communicated to Fixed Assets team.
Allen Mardock says that many times, the proof of delivery receipt ends up on the department manager's desk. The Accounting procedure is to have the
department manager verify the expenditure amount before AP pays the vendor's invoice thus AP doesn't always have the details of the transaction.
Based on our testing, we determined that the District lacks procedures to ensure inclusion of all leased vehicle to its Fixed Assets Database.
Seattle School District No. 1
Conclusion:
We gained an understanding of the District's procedures for purchasing, surplusing, and tracking its vehicles . We noted the following items:
(1) The District's vehicle purchasing/accounts payable procedures lacks the steps to ensure the proper inclusion of all leased vehicles in its Fixed Assets
Database. We made a recommendation for this in ISS.16 AC_EX: Fleet Management. The District's does not adequately monitor vehicle assignment, usage,
fuel cards, purchases, and inventory procedures



D.9.PRG - Fleet Management

Procedure Step: Fleet Data and Vehicle Usage
Prepared By: TN, 4/29/2014
Reviewed By: AVE, 6/10/2014

Purpose/Conclusion:
Purpose: To determine if the District adequately monitors vehicle assignment and use.

Conclusion: We found the department responsible for fleet management activities, Facility Operations, does not adequately monitor vehicle assignment and
usage. Required forms are missing or not properly filled out all vehicles and drivers. As a result, Fleet Data isn't up-to-date or accurate enough to be relied
on. We noted this issue in ISS.16 AC_EX: Fleet Management. The District's does not adequately monitor vehicle assignment, usage, fuel cards, purchases, and
inventory procedures

Key People:
Helen Jones, Facilities Operations Administrative/Supervisor Facilities Operations Admin
Bruce Skowyra, Facilities Operations/Director of Facilities OperationsLarry Gottas, Maintenance Services/Assistant Manager Maintenance Services


Testing Strategy:
Seattle School District No. 1

Policy/Standards:

Record of Work Done:
Background:
During the 2011 Accountability Audit, an exception was filed related to the District's fleet management activities. One major issue noted was the
Districts weak internal controls over vehicle assignment and usage Fleet Management Corrective Action of PY issue. We will be following up to see if the
District has improved internal procedures to improve internal controls over vehicle assignment and usage.


Key People:
Helen Jones, Facilities Operations Administrative/Supervisor Facilities Operations Admin
Bruce Skowyra, Facilities Operations/Director of Facilities Operations
Larry Gottas, Maintenance Services/Assistant Manager Maintenance Services
Roxana Melville, Payroll Accountant


Documents:
District Vehicle Use Standards #F08-07 Vehicle Use Standards
Condition of Use Agreement Form Conditions of Use Agreement
Authorization for Assignment of a District Vehicle Form Vehicle Assignment form
Taking a Vehicle Home #F06-01 Taking a District Vehicle Home #F06-01
Helen Jones' Fleet Data worksheet Facilities Operations FleetData


Policy and Standards:
We reviewed the District Vehicle Use Standards Policy #F08-07 and identified the following key items:
SPS vehicles are to be operated only by authorized employees. You must have a current signed Conditions of Use Agreement form on file (renewed
each September)
You must be in possession of a current drivers license when you operate a SPS vehicle
You cannot drive a SPS vehicle home unless Fleet Management has your Directors approval on file. Per IRS regulation, Sec. 1.61-21, if you drive a vehicle
Seattle School District No. 1
home you will have $3 per day added to your reported income. This will result in a tax liability which will automatically be deducted from your wages
consistent with IRS rules.


Understanding of Current Conditions:
We met with Helen Jones, Supervisor Facilities Operations Admin, who is responsible for fleet management activities (overseen by Larry Gottas, Assistant
Manager Maintenance Services). Helen stated that the Fleet Coordinator position was eliminated in 2009 and fleet management responsibilities were handed
over to her. Helen stated that she has done her best to incorporate fleet management into her duties, however given the urgency of her other responsibilities,
fleet management is not a priority. Helen stated that each September, she sends out an email to all department managers asking them to complete the
Authorization for Assignment of a District Vehicle form for each one of their vehicles and the Condition of Use Agreement form for each driver assigned to
the vehicle. Helen stated that some departments are more responsive than others and that she tries to send out a reminder email or phone call but that she
doesnt have the time to continually follow up on those that dont comply. When the requested forms are completed and returned, Helen updates her Fleet
Data work sheet. She keeps the original Authorization for Assignment and Condition of Use Agreement forms in a three ring binder in a locked filing
cabinet.

Helen tracks the following information on her Fleet Data worksheet: Vehicle ID#, Cost Center, Make, Model, Year, VIN#, Plate#, Vehicle Parking Site,
Department, Dept Director, Assigned Drivers, Date Assigned, Fuel Type, Fuel Capacity, Purchase Price and other data about the vehicle. We asked Helen how
she keeps Fleet Data up-to-date, Helen stated that she relies on others to let her know when changes are needed. She finds out about a new vehicle purchase
when the Districts Maintenance Auto Shop sends her vehicle registration information and she finds out about a vehicle sale when Allen Mardock, Accounts
Payable Supervisor sends her a copy of the title/vehicle sellers report of sale. Helen doesnt delete a vehicle from the spreadsheet; instead she changes some
fields to Sold, Junk, or other inactive status. After speaking to Allen Mardock about inventory procedures, Allen noted that when he is unable to locate a
vehicle, he will contact Helen to determine who is assigned to the vehicle but that this information is sometimes insufficient. We asked Helen how she is
notified of new driver assignments, she stated that she relies on the department managers to keep her updated when new drivers are added (because she has
no way of knowing otherwise). There is no ongoing monitoring to make sure this information is up-to-date aside from requiring departments to submit fresh
forms each September.

Vehicle Take home (24/7 use) policy
The Authoriztion of Assignment of a District Vehicle form contains a checkbox indicating whether the driver is authorized to take a vehicle home. We spoke to
Bruce Skowyra, Director of Facilities Operations, to gain an understanding about this policy. Bruce stated that there is no District wide policy that guides the
practice of taking vehicles home, instead authorization to take a vehicle home is handled by the Director of the department. His department collects the
Authorization of Assignment of a District Vehicle form on behalf of other departments, but this form is a Facility Operations requirement, there is no District
policy that requires this form. Per IRS regulation, Sec. 1.61-21, if you drive a vehicle home you will have $3 per day added to your reported income. This will
result in a tax liability which will automatically be deducted from your wages consistent with IRS rules. We contacted Roxana Melville, Payroll Accountant, to
gain an understanding of how she identifies employees who receive the 24/7 vehicle use fringe benefit for payroll processing. Roxana stated that she requests
a list of employees identfied as taking a vehicle home from Helen Jones in Facilities Operations. Roxana emails the employees on the list to determine how
Seattle School District No. 1
many days the employee is taking the vehicle home in order to determine if IRS 1.61-21 applies to them.
We investigated on Take Vehicles home issue at D.5.PRG , see Fringe Benefits Row.

Vehicle servicing/repair
We spoke to Bruce Skowyra, Director of Facilities Operations, to gain an understanding about how vehicle servicing is handled at the District. Bruce stated that
once a vehicle purchase is delivered to the Facilities Operations Auto Shop, the vehicle is entered into the District's School DUDE system to track work
orders. Bruce stated that the District use to have a fleet coordinator position that monitored servicing/repair scheduling for the District but that position was
eliminated in 2009. Since then many of those responsibilities have been decentralized thus vehicle maintenance, repair, servicing is the responsibility of the
department and the drivers assigned to the vehicle. Since the fleet coordinator position has been removed, some administrative fleet management
responsibilities was handed over to his department, Facilities Operations (in large part because the department owns the majority of the vehicles in the
District's fleet). Many of the policies related to fleet management are Facilities Operations policies which have been applied to other departments but these
policies are not actually District policies.
Testing:
1. Test accuracy of vehicle assignment and use forms:
Each September, Facility Operations requests that departments return the Authorization for Assignment of a District Vehicle for each vehicle along
with the Condition of Use Agreement form for each driver permitted to drive the vehicle. Helen Jones, Supervisor Facilities Operations Admin
keeps the returned Authorization for Assignment of a District Vehicle forms in a set of three binders. The Condition of Use Agreement form for
each driver listed in the Assignment of a District Vehicle form is stapled underneath it. We obtained the binder for vehicle mumbers 301-520 to
test for accuracy, we found 55 form sets in this binder. We examined the Authorization for Assignment of a District Vehicle form to see if it clearly
lists all the drivers permitted to drive the vehicle and if it has the department manager's signature of authorization. For the Condition of Use
Agreement form, we tested to see if this form is present for all the drivers listed in the Authorization for Assignment of a District Vehicle form and
to see if it contains important information such as the driver's license number and the department manager's signature of authorization. We also
checked to see if the take home 24/7 use box is clearly marked. We found 13 out of 55 form sets did not list out each driver permitted to drive the
vehicle. This makes it hard to determine if the Condition of Use Agreement is completed and included for all the drivers (completeness), the
Condition of Use Agreement is required to drive a District vehicle. We found 9 out of 55 form sets was missing the Condition of Use Agreement for
drivers or was missing the driver's license number or department manager's signature of authorization. We found 8 out of 55 form sets did not
clearly indicate whether take home 24/7 use is allowed. See our test results here Vehicle forms testing Based on our test results, we determined
that the Facility Operations vehicle assignment and use forms aren't always properly filled out and can't always be relied on to track down vehicle
assignment and usage.

2. Testing accuracy of identification of employees who receive 24/7 vehicle use fringe benefit (per IRS 1.61-21). We filtered the Fleet Data worksheet that
Helen Jones, Supervisor of Facilities Operations Admin provided for all vehicles with the location of Home. We compared this list of employees to the list of
employees that the District's payroll department identified as receiving the 24/7 vehicle use fringe benefit. If the employee on the Fleet Data list is not getting
Seattle School District No. 1
the fringe benefit payroll tax liability applied to their paycheck, we confirmed with the department manager that IRS 1.61-21 does not apply. See our testing
here Vehicle Take home policy testing Based on our test results, we noted no exceptions. Note that we are not testing the payroll tax liability calculations,
that is being tested under the Accountability/Payroll/Fringe Benefit Use of Vehicle section of the audit, section D.6.8.

Conclusion:
We have gained an understanding of Facilities Operations procedures for tracking vehicle and driver information in hardcoopy forms and in its Fleet Data
worksheet. We noted the following items:
(1) Facility Operations lacks the internal control to ensure that Vehicle Assignment and Condition of Use forms are returned for all drivers and that the
pertinent information is provided. As a result, Fleet Data isn't up-to-date or accurate enough to be relied on. We noted this issue in ISS.16 AC_EX: Fleet
Management. The District's does not adequately monitor vehicle assignment, usage, fuel cards, purchases, and inventory procedures


D.9.PRG - Fleet Management

Procedure Step: Fuel Card Usage
Prepared By: TN, 4/29/2014
Reviewed By: AVE, 6/10/2014

Purpose/Conclusion:
Purpose: To determine if the District has internal controls over the issuance and use of fuel cards/PIN numbers for its vehicles and drivers.

Conclusion: We found the District's does not adequately monitor fuel card usage. Specifically we found:
(1) Accounts payable issue payments for Chevron fuel card invoices without approval by department managers
(2) Some departments are not charged for their fuel expenditures
(3) Some department managers are not monitoring and reconciling their fuel card expenditures for reasonableness
(4) Employees are not submitting the Fuel Mileage Log forms as required by Facilities Operations, the department in charge of fuel card/PIN number issuance
(5) Facility Operations is not filing Fuel Mileage Fuel forms in an organized manner and the filing system cannot be relied on to find information about fuel card
transactions
We noted this issue in ISS.16 AC_EX: Fleet Management. The District's does not adequately monitor vehicle assignment, usage, fuel cards, purchases, and
inventory procedures
Seattle School District No. 1


Key People:
Larry Gottas, Facilities Operations/Assistant Manager Maintenance Services
Helen Jones, Facilities Operations Administrative/Supervisor Facilities Operations Admin
Bob Westgard, Logistics/Director of Logistics
Gary Deitz, Warehouse/Manager Distribution Services
Larry Dorsey, Safety & Emergency Mgmt/Manager Safety and Emergency
Marlene Fuller, Comptrollers Office/Capital Projects Accountant
Patty Murray, Comptrollers Office/Accounts Payable Specialist


Testing Strategy:

Policy/Standards:

Record of Work Done:
Background Information:
During the 2011 Accountability Audit, an exception was filed related to the District's fleet management activities. One major issue noted was the Districts
weak internal controls over policies related to fuel cards Fleet Management Corrective Action of PY issue. We will be following up to determine if the District
has improve internal controls over fuel card policies.

Key People:
Larry Gottas, Facilities Operations/Assistant Manager Maintenance Services
Helen Jones, Facilities Operations Administrative/Supervisor Facilities Operations Admin
Bob Westgard, Logistics/Director of Logistics
Gary Deitz, Warehouse/Manager Distribution Services
Larry Dorsey, Safety & Emergency Mgmt/Manager Safety and Emergency
Marlene Fuller, Comptrollers Office/Capital Projects Accountant
Patty Murray, Comptrollers Office/Accounts Payable Specialist
Seattle School District No. 1

Documents:
Facility Operations-Vehicle Use Standards Vehicle Use Standards
Facility Operations-Condition of Use Agreement Conditions of Use Agreement
Facility Operations-APP Fuel Card and PIN form Facility Ops-Fuel Card and PIN form
Facility Operations-Fuel Mileage Log Form Fuel Mileage Log Form

Policy and Standards:
We noted the following Facility Operations policies related to fuel cards:
District Vehicle Use Standards:
(1)You must use the fuel card provided only for District vehicles and must not share your fuel PIN number with anyone. At each fueling you must record the
vehicle odometer reading both at the pump and in the vehicles logbook.
(2)"Fuel, servicing, and repair expense will be charged to your department."

District Vehicle Conditions of Use Agreement:
(1)I will use the fuel card provided only for this District vehicle and will not share my fuel PIN number with anyone. If I lose or misplace my pin number/fuel
card, I will report it immediately.
(2)At each fueling, I will record the vehicle odometer reading both at the pump and on the mileage form.


Background Information
In speaking with the Districts Accounts Payable staff, we identified the following fuel cards in use at the District:
Associated Petroleum- Facility Operations (Maintenance, Grounds, Custodial, Environmental Services, etc.), Security, Warehouse and many other departments
Chevron-Cleveland High School, Security, Special Education

Other fuel use at the District:
Schools might have employees who pay for fuel upfront and get reimbursed by the District at a later time
Ferrell Gas comes out to bus sites to fill up buses
Petro comes out to sites to fill up fuel holding tanks for diesel buses
*We will not be examining these scenarios because we are focusing on fuel cards.


Associated Petroleum (APP)
Departments under Facility Operations (Maintenance, Grounds, Custodial, etc.) incur the majority of APP fuel expenditures (over 80% for the March 15, 2014
APP statement). We spoke to Larry Gottas, Assistant Manager of Maintenance Services and Helen Jones, Supervisor Facilities Operations Admin to gain an
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understanding of policies and procedures related to APP fuel card.

Fuel card/PIN issuance Process
Currently, the Facility Operations department handles certain fleet management activities for the District. This includes procedures controling fuel card
usage. In April 2013, the Facility Operations department switched from PetroCard to Associated Petroleum (APP). With the switch to APP, the department
issued a new form for fuel card and PIN number issuance on Feb 2013, see form here Facility Ops-Fuel Card and PIN form. All drivers of District vehicles were
required to fill out the form in order to get an APP PIN number. The APP fuel card is only given to the main driver assigned to the vehicle (to be placed inside
the vehicle). When the driver signs the form, Helen Jones, Supervisor Facilities Operations Admin, writes in the vehicle number, PIN number, and card number
if the employee is the main driver. We did not see a line on the form where the employees department manager was required to sign/approve, however
Helen Jones stated that she checks the Authorization for Assignment of District Vehicle form for the Department managers authorization . After the form is
signed, Helen stores the hardcopy in a binder. When Helen finds out about a lost card she calls APP to deactivate the lost card. Typically, a lost card is
reported when a driver needs the card to fill up and the card cant be found in the vehicle.

Fuel Card Usage Process
Each vehicle is assigned one fuel card which is kept in the glove compartment of the vehicle or with the keys. A driver is assigned a PIN number which can be
used with any fuel card. The Districts APP fuel cards were set up with limits, cards are set to a per fill limit of 20, 30, 40, or 50 gallons. There is also a per day
limit of 250 gallons. Larry Gottas, Assistant Manager Maintenance Services, stated that the District can adjust to these limits with APP if necessary.In order to
complete a transaction, the driver is required to punch in the odometer reading at the pump, however APP does not validate odometer readings (thus any
number will do so long as a number is entered).

Helen Jones, Supervisor Facilities Operations Admin, stated that that the drivers are required to track their fuel transactions in the Fuel Mileage Log Form, see
form here Fuel Mileage Log Form. The form contains the vehicle number at the top and columns for date, first and last names, and the odometer reading at
each fill up. If filling gas cans or equipment, the values "111" and "222" are to be entered in substitute of the odometer reading. Every driver is expected to
return the Fuel Mileage Log Form two days after the end of the month. We asked if the Fuel Mileage Log Forms are reviewed by the department managers,
Helen said that the forms go straight to her and there isnt a requirement for the department manager to review it. When the form is returned, Helen adds it
to the vehicle folder where she keeps the title and registration for the vehicle. She does not review the Fuel Mileage Log Form for reasonableness nor does she
does track whether each and every driver has returned the form. We asked Helen how the Fuel Mileage Log form is used, she stated that that Larry might refer
to them to reconcile the APP fuel statements.

Payment Process
Marlene Fuller, Capital Projects Accountant, pays the APP bill promptly upon receiving the statement to avoid late payments. After payment, she sends the
statement to Larry Gottas, Assistant Manager Maintenance Services, for reconciliation. After Larry is done reconciling the statement, he returns it to Marlene
for storage.

The Warehouse department is set up in the District's financial system with an open purchase order number with the APP vendor (this allows Accounts Payable
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to record expenditures against the departments cost center). Marlene emails Gary Dietz, Manager Distribution Services, a copy of the invoice from APP for
reconciliation. Gary emails Marlene back with his approval to pay. Marlene attaches the email to the bill and records the journal entry to charge the
Warehouse cost center.

Reconciliation Process-Maintenance
Larry Gottas, Assistant Manager Maintenance Services, reconciles the APP statement by going through the statement and looking for unusual activity. The bill
contains a transaction details section that groups the fuel transactions by vehicle. Each transaction line identifies the driver, date, site, gallons purchased, and
total cost. To reconcile, Larry notes the fill up activity for the vehicle/driver, the total amount of gallons pumped, and the total amount of fuel cost. He checks
the information for reasonableness based on his experience and knowledge of his organization and circumstances. For instance a Grounds person will need to
fuel up more often and in smaller quantities for equipment such as lawn mowers. Also, there is more fueling activity during the summer when the District is
actively doing maintenance and repair work. Larry also checks the fuel type summary to see if Superunleaded fuel was purchased, which would be
unexpected. When asked if/how he keeps tracks of fluctuations in fuel costs, he said he performs a crude analysis and is mindful of current fuel prices. Larry
stated that he doesn't rely on the odometer information on the statement to reconcile. He also stated that he does not usually refer to the Fuel Mileage Log
Form to try to reconcile the odometer information on the statement, but that he might refer to it if he suspects there has been unusual activity.

Reconciliation Process-Warehouse
We met with Gary Deitz, Manager Distribution Services, to gain an understanding of the Warehouse department's APP fuel card reconciliation process. Gary
stated that the Warehouse vehicles are assigned a fuel card and corresponding PIN number. Warehouse drivers aren't assigned individual PIN numbers. The
Warehouse department reconciles the APP fuel statement by noting the time, frequency of fueling activity, odometer readings, and gallons purchased for each
vehicle. Gary pulled a random statement from a folder to look at. This statement contained transactions with questionable odometer readings. The
statement had notes next to the bad odometer readings indicating the issue was followed up with the driver (mistake keying in the data at the pump). Gary
stated that the department does not require his drivers to submit the Fuel Mileage Log form. Once the APP statement has been reconciled, Gary sends
Marlene an email to let her know that it's ok to pay the bill. Gary monitors total fuel consumption for his department on an annual basis for budgetary
purposes and says fuel consumption for his department doesn't vary by very much year to year.

Chevron
Understanding of Process
We identified the following departments with Chevron accounts, Cleveland (PO# 7600011646), Special Education (PO# 7600011744), and Security (PO#
7600011341). Patty Murray, Accounts Payable Specialist, stated that she writes the check as soon as she receives the Chevron statement. Patty stated that
she has been paying these accounts for years and checks the bill for reasonableness based on her familiarity with the accounts and knowledge of past
charges. We asked her what is normal, she says she compares it to last month's charges which is stated on the bill. We asked her what amount of increase
would cause her to be concern, she did not provide an answer. We noted that none of the statements we looked at had the department
manager's signature. We asked Patty if the department manager's authorization was required, she stated that there is no requirement for the department
managers to approve the charges with her though she said they would see the charges to their cost centers.

Seattle School District No. 1
We spoke to a few department managers to determine whether a review or reconciliation was occurring at the departmental level. We contacted Larry
Dorsey, Manager Safety and Emergency of Security. He informed us that the department has two Chevron cards which are mainly used for car washes. Cards
are checked out and returned to Larry promptly. He showed us the drawer where he keeps the receipts for the car washes. The department Chevrons
account has an annual budget of approximately $1,000. We asked him whether he routinely reconciles costs charged to the Chevron account, he said no. He
stated that he is able to go into the Districts financial system and drilldown on the costs but that he does not reconcile every statement. When we brought up
the late fees charged to his Chevron account, Larry had some awareness of it. He said he found out about the late fees coincidentally upon receipt of
misdirected mail from Chevron that ended up in Security. He said he spoke to Lloyd Wallace, who used to be the District's Accounts Payable Supervisor, about
the late fees.

We spoke to Zakkiyah McWilliams, Executive Director of Special Education. Zakkiyah was not aware of the Chevron account and directed us to Jennifer
Anderson, Senior Cost Technician from the Special Education department. Jennifer stated that the account is used for a landscaping program. She stated that
she just started this position in November 2013 and that as far as she knows, there was no one in the department reconciling the Chevron account.

Testing
Associated Petroleum (APP)
1. Odometer policy testing. Facilities Operations require that drivers enter the odometer reading at the pump and submit the Fuel Mileage Log Form for their
vehicle at the end of each month. We obtained the APP statement for the period ending 3/15/2014. We tested the odometer entry requirement by examining
the detailed transaction summary for each vehicle in the statement. We noted the transactions with questionable odometer entries. We considered invalid
odometer entries to be entries where odometer readings decreased, increased significantly (over 500 miles) and odometer entries which were nonsensical
such as 0. We then searched for the Fuel Mileage Log Forms that correspond to the questionable entries to determine if the forms were being submitted as
required. In testing for the Fuel Mileage Log Forms, we found that Facility Operations was not filing the forms in an organized manner which makes it difficult
to determine whether they were not submitted or just weren't filed correctly. Helen Jones explained that she hasn't had the time to file the Fuel Mileage Log
forms into the vehicle folders. We found three cases where there were questionable odometer entries without a corresponding Fuel Mileage Log Form on file
in order to reconcile. Based on our test results, we found that Facility Operations either does not consistently receive or file the Fuel Mileage Log Forms in
an organized manner so that they may be used to reconcile questionable odometer readings. We also determined that Facility Operations does not follow
up on fuel transactions with questionable odometer entries. See our test results here Odometer Policy testing

2. Reconciliation Key Control testing-Facility Operations. In the Facililty Operations District Vehicle Use Standards, it states that departments will be charged
for their fuel expenditures. We examined the APP fuel statement for the period ending 3/15/2014 and noted that the statement was reconciled and signed
off by Larry Gottas, Assistant Manager of Maintenance Services. We asked Larry whether the other departments were reconciling their fuel expenditures, he
said no. We asked him how he reconciles the other department's fuel expenditures, he says that he does a crude check for reasonableness but that he would
not understand other departments' business needs for driving. We asked how the other departments see their fuel expenditures, he stated that currentlly
Facility Operations is being charged for all APP fuel expenditures aside from Warehouse and Security (which both have an open purchase order number with
the APP vendor). He stated that Facilities Operations is currently working with the other departments to create open purchase orders so that the
departments can be charged directly for their fuel expenditures. When this task is completed, a correcting journal entry will be made to transfer the
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departments' fuel costs from Facility Operations to the correct department. Based on our testing, we found that Facility Operations is currently not following
its policy of charging the departments for their fuel expenditures.

3. APP Fuel Card/PIN form testing. The Facilities Operations department require APP fuel card forms before issuance of a fuel cards for vehicles or
PIN number for drivers. We examined the APP fuel statement for the period ending 3/15/2014 and noted the transactions with questionable
odometer entries. We judgmentally selected these vehicles/drivers to test for completeness for submission of the APP Fuel Card/PIN form. We
noted no exceptions. See our test results here APP Fuel Form Testing

4. Reconciliation Key Control testing-Warehouse department. We noted that Gary Deitz, Manager Distribution Services stated that his drivers
aren't assigned individual PIN numbers. We asked Gary if he was aware that Facilities Operations require each driver to fill out the APP Fuel
Card/PIN form. He stated that his department was set up with the APP account before Facilities Operations switched over to APP from Petro and
secondly, Facilities Operations policies are not District policies and thus he is not required to comply. We asked Gary how he reconciles the fuel
activity on the statement if the driver is not identified, he stated that he can tell who the driver is based on employees scheduled work time. We
took exception to this as this puts the department at risk of not being able to identify fueling activity for each driver.
Chevron
We obtained all hardcopy Chevron statements from Allen Mardock, Accounts Payable Supervisor for SY2013. We examined the statements to determine
whether there is evidence of a review or reconciliation from the department manager, we noted none of the statements were signed by the department
managers. Through interviews, we confirmed that neither the Security or Special Education departments were reconciling their Chevron statements. Based on
this knowledge, we examined the bills for unusual activities. We found statements for all three departments frequently had late charges, 3 of 7 statements for
Cleveland, 10 of 12 statements for Security, and 5 of 10 for Special Education. In total 18 out of 29 bills (62%) had late charges. We also found one bill for
Special Education which was a significantly higher than their average and assessed that there was a possibility of unusual activity. See our testing here -
Chevron Fuel Card Testing Based on our test results, we found that the departments with Chevron accounts are not reconciling their statements which
allowed frequent and reoccuring unusual activity to continue without being detected timely.

Conclusion:
We gained an understanding of the policies and procedures in place to monitor fuel card usage at the District. We noted the following items:
(1) Facilities Operations does not reconcile fuel transactions that have questionable odometer entries. They do not enforce the requirement of Fuel Mileage
Log Forms and do not file these forms in an organized manner so that they may be used for reconciliation.
(2) Facilities Operations currently does not follow their policy by charging other departments for their fuel expenditures or require the departments to
reconcile their fuel expenditures.
(3) Warehouse department drivers are not assigned individual PIN numbers
(4) Departments with Chevron fuel card accounts do not reconcile their statements which allowed frequent and reoccuring unusual activity to continue
wihtout being detected timely.
We note this issue in ISS.16 AC_EX: Fleet Management. The District's does not adequately monitor vehicle assignment, usage, fuel cards, purchases, and
Seattle School District No. 1
inventory procedures




D.10.PRG - Procurement of Apple Contract

Procedure Step: Procurement of Technology Purchases
Prepared By: AVE, 6/15/2014
Reviewed By: HCW, 6/16/2014

Purpose/Conclusion:
Purpose: To determine if the District appropriatly procured contract for technology purchases.

Conclusion:
We determined that the District appropriatly procured contract for technology purchases.

Testing Strategy:

Policy/Standards:

Record of Work Done:
This is an aditional risk that was identified after we planned the audit.
We will perform minimal procedure to mitigate the risk.
If any aditional risk will be noted we will forward those to future audit work file.
Seattle School District No. 1

Background:

During phone conference with Team School Programs on 2/5/2014 we became aware of the new emerging issue regarding procurement of
technology purchases by School Districts and Educational Service Districts.

From Team School Program handout for the phone conference:

Over the last several years, the State Auditors Office has encountered several sole source purchases of Apple products by school districts
and ESDs. Because there are many types of technology products that could potentially be used by school districts it is very difficult to
justify a technology purchase as sole source. Last year one school district issued a Request for Proposal (RFP) and awarded Apple, Inc.
the contract. Under RCW 39.34.030, a school district may piggyback off another districts contract, if all the piggybacking requirements
are met.

We recommend that the District comply with chapter 39.34 RCW, RCW 28A.335.190, and any other applicable statutes when making
technology purchases.

Seattle School District has been purchasing Apple devises for many years. Over the past several years SSD provided us with the letter from Apple
that stated that SSD can only buy Apple software and hardware from Apple Inc. In the past we agreed that this letter was satisfactory to justify
not issuing RFP process and awarding Apple, Inc. the contract as sole source provider.

Procedures:
We met with Craig Murphy, Purchasing Manager to inform SSD that we no longer can agree with their justification of Apple, I nc. to be a sole
provider of technology purchases.
Craig informed us that SSD use Lenovo and Dell state contracts for Windows OS devices. Apple is the only purchasing channel for education for
devices that support Apple OS and iOS. He stated that the decision to purchase Apple devises is made at the school level not dictated by
administrative office. Therefore he was not sure how else the procurement can be handled.
To identify appropriate strategy for procurement of technology purchase for SSD we met with Ron English, SSD Legal Counsel, Ken Gotsch,
Assistant Superintendent Business and Finance, Kathie Technow, Accounting Manager and Craig Murphy, Purchasing Manager. From SAO - J im
Griggs, Audit Manager, Anastassia Kavanaugh, AAM and Annetter Boulmetis, ASA.
Seattle School District No. 1
During our meeting we determined that it would not be reasonable or necessary for SSD to issue RFP and award contract for technology
purchases to Apple Inc., or piggyback on existing procurement to make purchases from Apple I nc. Because doing this will restrict the district to
make all purchases of technology from Apple Inc. SSD is not 100% Apple district and does not intend to limit the choices it teaches when it comes
to making technology purchases. We came to a mutual conclusion with SSD management that Apple Inc. still can be treated a sole source to
purchase Apple hardware and software based on the following justification provided by the district:
The two major commercial computer operating systems in the market are Windows and Apple. Our schools have made educational
decisions about the appropriateness of one version of OS over another based on program needs, existing software and equipment, and
local staff expertise on use and support. When purchasing computing equipment, we give schools a choice as to which they feel best
meets these educational needs.
In the mobile OS market there are additional options. The Seattle Public School District Department of Technology Services and
Curriculum and Instruction Department have invested a lot of staff time on the Apple mobile iOS platform to develop systems for setup,
purchasing of applications and support when Apple iOS was the first option to market. At this time we do not have the internal capacity to
add support for additional mobile OS platforms and consequently limit our choices to Apple iOS and full Windows OS on mobile tablets
since we have existing experience and established tools to support them.

See D.10.1 for complete sole source justification documentation.


D.11.PRG - Self-Insurance

Procedure Step: Review Insurance Coverage
Prepared By: AVE, 6/16/2014
Reviewed By: HCW, 6/17/2014

Purpose/Conclusion:
Purpose:
Seattle School District No. 1
To determine if insurance coverage is adequate to safeguard public resources.


Conclusion:
We determined that the district has adequate self-insurance to safeguard public resources. We noted some additional risks that we will consider in
the future audit. See AS4.h

Testing Strategy:
To determine if insurance coverage is adequate, consider the following procedures:
Review Schedule 21 from the entitys annual report for the following risk indicators:
Failure to complete the schedule in instances where the auditor knows or suspects that the entity is self-insuring certain property
or liability risks; or self-insures medical benefits.
New or significant changes to self-insurance programs
Stating that the entity allows other groups to join its program(s).
If this is the case for an entity that is not a risk pool, contact the Risk Pool Specialist for further guidance. This indicates the
program may be operating as a joint program and is subject to increased regulatory requirements.
Failure to obtain an actuarial analysis of program liabilities, or reliance on outdated actuary reports (ie: more than four years old, or
reports that were done prior to significant changes).
Failure to obtain an independent claims audit. This would be a risk indicator whether the entity processes their own claims or whether
claims are processed by a contractor/third party administrator.
Program liabilities substantially in excess of program resources (ie: unfunded liabilities).
Review the Risk Management Note from the draft or prior years Financial Statements for the following risk indicators:
Inconsistency with Schedule 21 or known facts.
Inadequate or confusing disclosure.
Inquire with Risk Management staff to gain an understanding of self-insured risks.
Consider confirming inquiry or Schedule 21 by reviewing significant terms (amount of coverage, deductibles, limits and exclusions) of
selected policies.
Evaluate the entity's insurance coverage (purchased insurance and reported self-insurance) and determine whether it
addresses all significant areas of risk. If not, it would imply unreported and unmanaged self-insurance. Contact the Risk
Pool Specialist if assistance is needed in making this evaluation.
Seattle School District No. 1
The need for insurance coverage will depend on the scope and extent of entity activities. Common coverage needs include property,
boiler & machinery, vehicle liability and environmental liability. Special insurance policies or specific additional coverage to property
liability may also be necessary for various unique activities (such as operating airports, marinas, terminals, or power plants).

NOTE: Fidelity or Performance bonds (protecting the government from the acts or omissions of its officials and employees) may be
required by statute see the Bonding of Officials and Employees step for details.

Contact the Risk Pool Specialists if assistance is needed in evaluating the adequacy of insurance.

Policy/Standards:
"Property and liability insurance" refers to coverage of damage to property and legal claims against the entity for negligence or strict liability torts
(that is, not intentional crimes). Property and liability risks can be managed either through purchased insurance or self-insurance

Adequate insurance coverage would typically be considered an internal control (safeguarding public resources). Also, RCW 48.62 requires
approval by the State Risk Manager to self-insure, which would imply that the entity would otherwise need adequate purchased
insurance. Entities may be considered to be self-insured due to:
Not purchasing insurance for a certain category of risk
Being exposed to loss from a certain cause due to policy exclusions (ex: natural disasters such as floods or earthquakes)
Being exposed to loss to certain property that is not covered by insurance
In addition to general expectations regarding adequate insurance and requirements for any self-insurance programs, there are also several entity-
specific statutory requirements related to adequate insurance coverage as follows:
ESDs - RCW 28A.310.310
Schools - RCW 28A.400.370
Ports - RCW 53.08.085 and 53.08.145

Record of Work Done:
This is an aditional risk that was identified after we planned the audit.
Seattle School District No. 1
We will perform minimal procedure to mitigate the risk.
If any aditional risk will be noted we will forward those to future audit work file.
School Districts are not required to submit Schedule 21 as the part of their annual report, so Seattle School District does not prepare one.

The District does not use ESD. SSD does self-insure for General Liability - first million and for Workers Compensation. According to Risk Manager
Richard Staudt SSD did not have any changes in self-insurance programs. SSD does not allow other's to join their self-insurance programs.

General Liability & Property
The Seattle School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors
and omissions; injuries to employees; and natural disasters.
In September 2001, the district joined the Washington Schools Risk Management Pool (Pool). Chapter 48.62 RCW authorizes the
governing body of any one or more governmental entities to form together into or join a pool or organization for the joint purchasing
of insurance, and/or joint self-insuring, and/or joint hiring or contracting for risk management services to the same extent that they
may individually purchase insurance, self-insure, or hire or contract for risk management services. An agreement to form a pooling
arrangement was made pursuant to the provisions of Chapter 39.34 RCW, the Interlocal Cooperation Act. The Pool was formed in
1986 when educational service districts and school districts in the state of Washington joined together by signing an Interlocal
Governmental Agreement to pool their self-insured losses and jointly purchase insurance and administrative services. Over 80
school and educational service districts have joined the Pool.

The Pool allows members to jointly purchase insurance coverage, establish a plan of self-insurance, and provide related services,
such as risk management. The Pool provides the following coverages for its members: property, liability, vehicle, public official
liability, crime, employment practices, machinery breakdown and network security.

Members make an annual contribution to fund the Pool. The Pool acquires reinsurance from unrelated underwriters that are subject
to a per-occurrence self-insured retention of $1 million. Members are responsible for varied deductibles for both liability and property
claims. Insurance carriers cover losses over $1 million to the maximum limits of each policy. Since the Pool is a cooperative program,
there is a joint liability among the participating members.

Members contract to remain in the Pool for a minimum of three years and must give notice two and one half years before terminating
participation. The Interlocal Governmental Agreement is renewed automatically each year after the initial three-year period. Even
after termination, a member is still responsible for contributions to the Pool for any unresolved, unreported, and in-process claims for
the period they were a signatory to the Interlocal Governmental Agreement if the assets of the Pool were exhausted.

The Pool is fully funded by its member participants.
Seattle School District No. 1
The Pool is governed by a board of directors which is comprised of one designated representative from each participating member.
An executive board is elected at the annual meeting, and is responsible for overseeing the business affairs of the Pool.
The insurance schedule is as follows:
Self Insured Retention
Property $100,000 per occurrence
Earthquake 5% of affected values at each location subject to
$1,000,000 Minimum per occurrence
Flood $250,000 per occurrence
Boiler & Machinery $25,000 per occurrence
Automobile and Bus Physical Damage $5,000 per occurrence
General Liability $1,000,000 per occurrence
Money, Security, Employee Dishonesty $5,000 per occurrence
Employment Practices Liability $1,000,000 per occurrence
Errors and Omissions Liability $1,000,000 per occurrence
Workers Compensation $600,000 per occurrence
Insurance Coverage Limits 2013-2014
General Liability $20,000,000 per occurrence
Sexual Abuse Liability $20,000,000 per occurrence $20,000,000 aggregate
Automobile Liability $20,000,000 per occurrence
Property $500,000,000 per occurrence
Earthquake $25,000,000 Pool wide aggregate
Flood $100,000,000 Pool wide aggregate
Workers Compensation Statutory
Employers Liability $1,000,000 per occurrence
Boiler &Machinery $500,000,000 per occurrence
Commercial Crime Money & Securities $50,000 per occurrence
Commercial CrimeEmployee Dishonesty $1,000,000 per occurrence
Employment Practices Liability $20,000,000 per claim
Errors & Omissions Liability $20,000,000 per occurrence
Workers Compensation
The district self-insures for workers compensation. CorVel Corporation has been processing on-the-job injury claims for SSD starting August 1,
2012.
SSD estimates Work Comp liability based on the prior data and sets aside reserve to pay claims. I n 2013 SSD set aside $2.5 million in Key Bank
for workers comp.
Seattle School District No. 1
The District did not state that it self-insures for health; however, we found from DES web site that the District was approved to
self-insure for Vision.
See http:/ / des.wa.gov/ SiteCollectionDocuments/ RiskManagement/ Approved%20HW%20Program%20List%2012%202014.p
df

We noted during our review that SSD appears to have sufficient insurance coverage and set aside reserves for property liability and workers
compensation. However, we did not examined Health insurance to determine if any parts of it is self-insurance. We will include this into FAWF to
consider during next year planning.


H.1.PRG - H-13-507 HSGI at Rainier Beach

Procedure Step: H-13-507 Examination
Prepared By: HCW, 1/27/2014
Reviewed By: JWG, 2/5/2014

Purpose/Conclusion:
Purpose:
To document the Examination of Hotline H-13-507, and conclude on whether the allegations/concerns in the hotline referral are substantiated.
Conclusion:
We documented the Examination of Hotline H-13-507, and concluded on whether the allegations/concerns in the hotline referral are
substantiated. The citizen's concern addressed is whether the High School Graduation Initiative grant funding is allowable to pay for the Family
Support Worker's salary at Rainier Beach High School. We determined the District was paying the Family Support Worker's salary using the grant's
Communities That Care mini-grant funds, which is not allowable. These funds are to specifically pay for approved Communities That Care grant
programs. As of J anuary 14, 2014 the high school had not applied for any of these specific grant programs. The District appropriately redistributed
these funds from Rainier Beach High School as the grant requirements were not yet made. Once the high school has applied for the Communities
That Care mini-grants, the District will allocate the necessary grant funds to the high school.

Testing Strategy:
Seattle School District No. 1
The Examination step is where to document the following:

The specific citizen hotline allegations/concerns by either copying the actual language in the web form or by scanning a copy of a written
letter.

The work performed to adequately address the hotline issue(s). Documentation should be sufficient to enable an experienced auditor
or investigator to ascertain that the information collected and the work performed support the significant judgments and conclusions. If
needed, additional steps may be added based on the size and complexity of the issue(s).


Policy/Standards:


SAO Audit Policy 1510 Citizen Hotline Referrals (effective 1/ 1/ 12)

BACKGROUND
Citizens who observe waste, inefficiency, abuse or efficiencies in state and local government may report such information to the Hotline
established under state law (RCW 43.09.186). We determine whether those issues are within our authority to review and whether they require
further examination.

Citizens who communicate concerns to our Office do not have the same legal protections as those contained in the state employee Whistleblower
Act, so confidentiality is protected only until the examination is complete. Correspondence between our Office and the citizen falls within the
scope of the Public Records Act.

REQUIREMENTS

1. Citizen hotline referrals will be processed and performed in accordance with the Citizen Hotline Protocols.

The protocols are located on the intranet page and in TeamMate.
Seattle School District No. 1

2. An initial review will be performed of all citizen hotline referrals to determine if issues raised are within the authority of
our Office and require further examination.

When concerns are not within the statutory authority of our Office to review, we will assist citizens in contacting the proper agency as
appropriate.

3. The Hotline Coordinator will work with the Audit Teams to ensure an acknowledgement is made to the citizen if contact
information is provided for in the referral.

Contact with the citizen will be made in a timely manner. Audit managers are not required to acknowledge the referral if it is made through our
website because the electronic submission process automatically creates the acknowledgement.

4. Results will be timely communicated to the citizen and entity. Professional judgment will be used in deciding the level of
reporting.

Refer to the Citizen Hotline Protocols for the reporting options and required level of review.


Citizen Hotline Protocols

Revised March 2010

In 2007, the Legislature voted unanimously to establish the Citizen Hotline Program in the State Auditors Office. Senate Bill 5513 (codified at
RCW 43.09.186) was designed to give citizens a way to recommend measures to improve efficiency in state and local governments and to report
waste, inefficiency, or abuse, as well as examples of efficiency or outstanding achievement by state and local agencies, public employees, or
persons under contract with state and local agencies.

The State Auditors Office takes very seriously the role of citizens in promoting accountability, fiscal integrity and openness in state and local
government. The Office also strive to ensure the efficient and effective use of public resources, therefore not every submission will result in an
examination by our Office.

Unless waived by the citizen, the law requires the names of those contacting the Hotline as well as any documentation to be kept CONFIDENTIAL
until cases are closed.

Seattle School District No. 1
Please contact the Hotline Coordinator if you have questions on the following protocols for the Citizen Hotline process.

Hotline Submissions

All citizen submissions will be logged into the Hotline database and assigned an individual referral number to allow for central tracking and
monitoring. Intake of citizen submissions can occur one of the following ways:
Web site- Citizen submission(s) will automatically populate the database.
Letter/mail - The Hotline Coordinaator will input information into database.
Fax - The Hotline Coordinator will input information into database.
Phone - Caller to the toll-free line will get a voice message requesting that he or she leave information or provide information using the
above methods. The Hotline Coordinator will oversee the input of the information into the database.
Audit Team Audit Managers should complete the intake form on the SAO Web site to ensure the submission is inputted into the
database.
Initial Assessment Process

The Hotline Coordinator will work with the Director of Legal Affairs, Deputy Director of Audit and the applicable Audit Manager to assess the
submissions to determine one of the following courses of action:

No Action FYI to the audit team.
No Action Refer to state or local entity
Audit team considers in next audit.
Audit team examines the concern immediately.
DSI examines the concern immediately.

Reporting Results

The results of hotline examinations should be reported timely to both the entity and citizen. Audit Managers should determine the appropriate
method of reporting based on the significance of the issue and the ability to timely report the results. Audit Managers should ensure the final
reporting is attached to the hotline in the database under the Supporting Documents tab and all fields in the database are complete.

If after completing the hotline examination, it is decided that contacting (i.e. phone call or meeting with them) the citizen to discuss their
submission(s) would be timelier, more effective or efficient then that contact should be documented in the Activity Log section for that hotline
and can replace sending a closure letter explaining the results of the examination.

Seattle School District No. 1
Audit Managers should consult the following decision chart to assess reporting for hotline submissions:

Are There Hotline Investigation Results with Significant Issues?

1. Yes - Significant Issues Are Audits Currently Being Completed?
a. Yes Issue as Finding in Audit Report
b. No Issue Hotline Report

2. No significant issues Are Audits Currently Being Completed?
a. Yes Issue as ML or Exit Item
b. No Issue Hotline Letter to the citizen

Hotline Related Work

Billing

Audit teams should charge investigations to the entitys audit using the project code CI TZ to enable SAO to track all time examining citizen
submissions.

Workpapers

- Audit Teams should document hotline examinations in TeamMate using a separate folder Special Services. Audit Managers should approve
workpapers prior to releasing final letters or reports.

Management of Hotline Submissions

Audit Managers should review the report available in the hotline database for their team and notify the Hotline Coordinator of any information that
needs to be updated in the database.

Phone Conferences - Quarterly the Deputy Director of Audit and the Hotline Coordinator will conduct phone conferences with the Audit Managers
to discuss the status of outstanding Hotline submissions.


Record of Work Done:
Seattle School District No. 1
Summary of Citizen Concern

Entity - Seattle School District No. 1

Please provide a detailed description of the assertion or outstanding achievement, including who, when, where, what, how and
how much.
In reviewing Report No. 1009771 there is no mention of the original grants guidelines. I have a concern that an FSW position that is specifically
focusing on achieving the goals of the HS Grant is not being funded 2013-2014 school year because of this report.

My question is if a position was not mentioned in the original grant, but specifically meets the goal of the HS Grant is it still possible to fund that
position? I need a response to this question ASAP as we are trying to get funds for this position from the District. The District is maintaining that
they cannot fund it and instead is funding a CTC position which is not addressing the needs of our school (Rainier Beach High School).

How did this issue come to your attention?
The District's first stating funding would be received in October only to later find out that they were not going to fund the position. The school
used funds the PTSA secured from the State and those funds were to be used to fund other pressing needs. Instead we are funding a position
that the district should be funding.

What employee(s), contractors, etc., were involved in the assertion or achievement? Please include employee titles if possible.
Family Support Worker assigned to Rainier Beach specifically to focus on helping our students stay in school by addressing issues that are
preventing them from excelling.

Please provide any additional details or comments that would help us understand your assertion or achievement.
District is withholding funds that I believe are perfectly allowable under the HS Grant. I need rolution ASAP prior to Year end so we can secure
funds for the second half of the school year.

Does your assertion relate to a current litigation? No

Additional Information
On J anuary 10, 2014 we received additional information from the citizen at Email with additional information from citizen The email includes the
following information that will be included in our review of the grant:

The District withheld the HSGI funding for the Family Support Worker (FSW) at Rainier High School because the position could be a
potential risk of having a violation.
Seattle School District No. 1
The objective of CFDA 84.360 is to fund positions to support school dropout prevention and provide at-risk students with services
designed to keep them in school.
The FSW positions is more valuable to the school than the Communities that Cares Mobilizer/Coordinator position.

Strategy and Testing
Strategy
We will obtain the High School Grant I nitiative (HSGI) grant application and award letter from J anet Blanford, HSGI Audit Liaison. We will also
meet with J anet and Lisa Sharp and Lisa Love, who are Co-Program Managers for the HSGI grant. We will then determine further documentation
needed to ensure the hotline is addressed appropriately.

Documentation Reviewed
J anet Blanford provided the grant application and notice of award. Due to the size of the application and notice of award, we scanned the most
important and relevant information for the hotline into one document at HSGI Scanned Application & Notice of Award:

Notice of Award: pages 1-14
Page three of the award states "If you have not already done so in your application, you will be developing project-specific
indicators for each one of your project's goals. Detailed information about the APR including: developing project-specific
indicators; establishing targets for Government Performance and Results Act and project-specific indicators...."
Grant period (page 5) - October 1, 2010 through September 30, 2015
Attachment J (pages 9-10) - No changes were made, except to the budgets between years; including revisions to personnel FTE
based on the project activities, supplies and contractuals between years.
We identified one change to note as the amount for the "CTC mini-grant program was reduced $600,000 to $500,000 for
years 1-4 and removed completely for year 5. The Department of Ed determined the CTC mini-grants to the Limited
English Proficiency communities are unallowable to the project.
Attachment T (page 11) - I dentifies the schools allowable for the grant activities. We noted Rainier Beach High School is included.
Abstract (page 12) - The District will use the HSGI grant to expand, enhance and link a three-tier model of: drop-out prevention,
truancy intervention and drop-out recover. The District will use HSGI to implement The Communities That Care (CTC) model to
assess each school's risk and protection profiles to identify effective strategies to addess each school's strengths and needs. The
CTC process will identify new evidence based programs from the CTC mini-grants to schools for funding.
Purpose of the Program (page 13) - To implement dropout prevention and reentry projects that undertake activities that are
scientifically based to provide support, enrichment and motivation to students at risk of dropping out or that seek to reenter
school. Such activities should raise standards and expectations for disadvantaged students traditionally underserved in schools in
order to ensure school completion.
Seattle School District No. 1
Application for HSGI grant: pages 15-53
District's Narrative for the HSGI grant (pages 21-50). We noted the following relevant information for this inquiry:
Quality of Project Services (page 22-26)
Goal 1 - To provide risk and protective factor data to inform Continuous School I mprovement Plan (C-SIP)
strategies, then implement evidence-based programs to reduce dropout rates. The CTC model is a developed
research system used along with student-filled needs-assessment surveys to determine each school's prevalence
rates of behaviors, risk and protective factors that impact academic performance and dropout rates. The District
uses hired employee CTC Community Mobilizers along with the University of Washington to analyze and the
results are analyzed by the District CTC Leadership Team. This team then prepares a scorecard and key
performance indicator to identify the appropriate CTC mini-grant applications and awards to best meet the needs
of the grant and increase graduation rates. The school staff, parents, volunteers and community agencies that
work in the school are provided training and professional development to administer the CTC mini-grant programs
and strategies effectively. The staff for the individual schools use the District's strong Professional Learning
Communities to systematically study the assessment data and use the data to prepare their instruction and work
with others to refine their teaching practices.


District Staff Inquiry
We met with J anet Blanford, Lisa Sharp and Lisa Love, Health Education Manager on December 20, 2013 and J anuary 10, 2014 to discuss the
hotline. The Notice of Award, Attachment T shows that Rainier Beach High School is included as part of the grant. We discussed the process of
how the grant funds are distributed and are determined allowable or unallowable. They explained that the grant has been slow to get started in
the first three years because the District has been unable to hire the 3 FTE required for the CTC Community Mobilizers; the District currently only
has 1.1 FTE filled for the mobilizers. The CTC Community Mobilizers are required because they go out into the schools allowable to the grant and
help determine the best CTC mini-grants for the particular schools. Each school is required to have established mini-grants at their school or at
least started the process to get the mini-grants in order to receive the grant funds. The purpose of the HSGI grant is to address each
school's graduation rates and have a program(s) in place to drive the graduation rates up through additional CTC mini-grant application and
approval. Additional information about the CTC mini-grants can be found at www.communitiesthatcare.net. Because the District has had difficulty
in finding qualified candidates for the CTC Community Mobilizers, there have only been eight schools that have gone through the CTC process and
training to receive the mini-grants. Lisa Sharp indicated she maintains a list of the status of each school allowed in the grant. We obtained this
status list at CTC Status Table Dec 13 and noted Rainier Beach has not met with a CTC Mobilizer and the mini-grant programs selected are TBD (to
be determined).

Per Lisa Sharp, after the prior year audit and SAO's determination of so many unallowable costs, that once the Program Manager was changed to
two Program Managers (Lisa Sharp and Lisa Love), that they went through each cost to ensure the costs were allowable. She also stated the
Seattle School District No. 1
Department of Education came in and also did a review. Their review noted concerns that the District wasn't at the full 3 FTE for the CTC
Mobilizer positions and because of this, were far behind in implementing the CTC mini-grants that are necessary for the grant. Because of this, the
Program Managers determined the funds being received at Rainier Beach for the Family Support Worker were unallowable as they had done
nothing to start the process of determining the mini-grants needed for the school. The funding to pay for the Family Support Worker was the
mini-grant funding portion of the grant. The Program Managers stated Pegi McEvoy, the prior Program Manager interpreted the grant as the
Family Support Worker is an allowable program (mini-grant) rather than having to go through the CTC mini-grant application and approval
process. The new Program Managers determined this is not allowable funding for the CTC portion of the grant. Once the school meets the
requirements for the grant, such as meeting with CTC Mobilizers to determine the mini-grants that best support the schools needs and
implementing them, the Program Managers will reallocate the CTC mini-grant funds back to the school. Until then, the District determined the
school is not meeting the grant requirements and the funds would best be met to pay for the other schools that have already implemented the
mini-grants. In addition, the Program Managers stated Rainier Beach High School does still receive other HSGI grant funding such as for a
Truancy Officer. The only funding that was determined not currently allowable was the CTC mini-grant portionl.

On J anuary 15, 2014 Lisa Sharp also provided us with an email string between the HSGI grant coordinators, Maggie Whicker, CTC Mobilizer
and Dwane Chappelle, Rainier Beach Principal. The email string goes back to December 9, 2013 when the District contacted the Rainier Beach
Principal to try to schedule a meeting to start the CTC mobilization process, training and mini-grant selection. We noted the meeting was
scheduled for J anuary 14, 2014. Lisa also provided us with an emailed meeting summary from the CTC Mobilizer. The meeting was the first initial
meeting to discuss the HSGI grant, CTC mini-grant application process, who is a part of the school team to select the grants, and the possible
target population of ninth-graders.

Results
The concern was "if a position was not mentioned in the original grant, but specifically meets the goal of the HS Grant is it still possible to fund
that position?" at Rainier Beach High School. There was funding originally charged for the Family Support Worker at Rainier Beach High School
that was later determined not allowable to the grant.
We met with District HSGI Program Managers, obtained the grant contract, grant application, notice of award and CTC school status list to
address the citizens concern. We determined the goals of the grant are to obtain data for the students to determine the Communities that Care
(CTC) mini-grants that will best help the school increase the high school graduation rate. The grant specifically states CTC Mobilizers must be
hired and used to meet with each school, obtain the student data, help the school select the best mini-grants to meet the specific needs of the
school, provide mini-grant training and follow-up to see how the grants are working.

Rainier Beach was not meeting the grant requirements going into the grant's year three. The District acted appropriately by moving the funds
away from the school back into the pool for those schools and employee pay allowable and already meeting the grant requirements. Rainier
Beach did not begin to meet the grant requirements until J anuary 14, 2014 when they first started the mini-grant application process by meeting
with a CTC Mobilizer. Now that the school is starting the process to meet the requirements of the HSGI grant, they will begin to receive HSGI
grant funding. These funds should only be used for the approved CTC mini-grants and fulfilling the HSGI grant requirements.
Seattle School District No. 1


H.1.PRG - H-13-507 HSGI at Rainier Beach

Procedure Step: Reporting
Prepared By: HCW, 2/6/2014
Reviewed By: AVE, 2/20/2014

Purpose/Conclusion:
Purpose:
To report the results of the hotline examination to the citizen (if named in the referral) and to determine the method of reporting to the entity.

Conclusion:
We reported the results of the hotline examination to the citizen (if named in the referral) by phone and provided the District with a hotline
letter.

Testing Strategy:
Reporting to Entity:

Determine the appropriate method of reporting to the entity based on the significance of the issue and the ability to timely report the
results. Refer to the protocols in the Policy/Standards tab for guidance in making this determination. I f assertions are not substantiated,
communication to the entity may not be necessary; however, Audit Managers must approve this decision and include it in the
workpapers.

Audit Managers must approve the reporting method. If a hotline letter is used to report the results to the entity, use the template in
TeamMate. Refer to ORCA and the ARS Manual if a hotline report is used to report the results.
Seattle School District No. 1

Ensure that the appropriate reviews of the reporting method are completed as outlined in the protocols in the Policy/Standards
tab. Attach the final hotline letter or report in TeamMate, as applicable. Audit Managers must approve workpapers prior to releasing final
letters or reports.

The final reporting should also be attached to the hotline in the database under the "Supporting Documents" tab in accordance with the
Citizen Hotline Protocols. This is done by the Audit Manager.

Reporting to Citizen:

Use the "Hotline Citizen Letter Template" document in TeamMate to draft a letter to the citizen explaining the results of the
investigation. The letter must be processed through the Audit I ssues Library for review and approval prior to issuance. Attach the final
letter in TeamMate.


Policy/Standards:

SAO Audit Policy 1510 Citizen Hotline Referrals (effective 1/ 1/ 12)

BACKGROUND
Citizens who observe waste, inefficiency, abuse or efficiencies in state and local government may report such information to the Hotline
established under state law (RCW 43.09.186). We determine whether those issues are within our authority to review and whether they require
further examination. Citizens who communicate concerns to our Office do not have the same legal protections as those contained in the state
employee Whistleblower Act, so confidentiality is protected only until the examination is complete. Correspondence between our Office and the
citizen falls within the scope of the Public Records Act.

REQUIREMENTS
Seattle School District No. 1

1. Citizen hotline referrals will be processed and performed in accordance with the Citizen Hotline Protocols.

The protocols are located on the intranet page and in TeamMate.

2. An initial review will be performed of all citizen hotline referrals to determine if issues raised are within the authority of
our Office and require further examination.

When concerns are not within the statutory authority of our Office to review, we will assist citizens in contacting the proper agency as
appropriate.

3. The Hotline Coordinator will work with the Audit Teams to ensure an acknowledgement is made to the citizen if contact
information is provided for in the referral.

Contact with the citizen will be made in a timely manner. Audit managers are not required to acknowledge the referral if it is made through our
website because the electronic submission process automatically creates the acknowledgement.

4. Results will be timely communicated to the citizen and entity. Professional judgment will be used in deciding the level of
reporting. Refer to the Citizen Hotline Protocols for the reporting options and required level of review.


Citizen Hotline Protocols

Revised March 2010



In 2007, the Legislature voted unanimously to establish the Citizen Hotline Program in the State Auditors Office. Senate Bill 5513 (codified at
RCW 43.09.186) was designed to give citizens a way to recommend measures to improve efficiency in state and local governments and to report
waste, inefficiency, or abuse, as well as examples of efficiency or outstanding achievement by state and local agencies, public employees, or
persons under contract with state and local agencies.

The State Auditors Office takes very seriously the role of citizens in promoting accountability, fiscal integrity and openness in state and local
government. The Office also strive to ensure the efficient and effective use of public resources, therefore not every submission will result in an
examination by our Office.
Seattle School District No. 1

Unless waived by the citizen, the law requires the names of those contacting the Hotline as well as any documentation to be kept CONFIDENTIAL
until cases are closed.

Please contact the Hotline Coordinator if you have questions on the following protocols for the Citizen Hotline process.
Hotline Submissions

All citizen submissions will be logged into the Hotline database and assigned an individual referral number to allow for central tracking and
monitoring. Intake of citizen submissions can occur one of the following ways:
Web site- Citizen submission(s) will automatically populate the database.
Letter/mail - The Hotline Coordinaator will input information into database.
Fax - The Hotline Coordinator will input information into database.

Phone - Caller to the toll-free line will get a voice message requesting that he or she leave information or provide information using the
above methods. The Hotline Coordinator will oversee the input of the information into the database.
Audit Team Audit Managers should complete the intake form on the SAO Web site to ensure the submission is inputted into the
database.
Initial Assessment Process



The Hotline Coordinator will work with the Director of Legal Affairs, Deputy Director of Audit and the applicable Audit Manager to assess the
submissions to determine one of the following courses of action:

No Action FYI to the audit team.
No Action Refer to state or local entity
Audit team considers in next audit.
Audit team examines the concern immediately.
DSI examines the concern immediately.


Reporting Results
Seattle School District No. 1

The results of hotline examinations should be reported timely to both the entity and citizen. Audit Managers should determine the appropriate
method of reporting based on the significance of the issue and the ability to timely report the results. Audit Managers should ensure the final
reporting is attached to the hotline in the database under the Supporting Documents tab and all fields in the database are complete. If after
completing the hotline examination, it is decided that contacting (i.e. phone call or meeting with them) the citizen to discuss their submission(s)
would be timelier, more effective or efficient then that contact should be documented in the Activity Log section for that hotline and can replace
sending a closure letter explaining the results of the examination.

Audit Managers should consult the following decision chart to assess reporting for hotline submissions:

Are There Hotline Investigation Results with Significant Issues?


1. Yes - Significant Issues Are Audits Currently Being Completed? a. Yes Issue as Finding in Audit
Report
b. No Issue Hotline Report


2. No significant issues Are Audits Currently Being Completed? a. Yes Issue as ML or Exit Item


b. No Issue Hotline Letter to the citizen Hotline Related Work



Billing Audit teams should charge investigations to the entitys audit using the project code CI TZ to enable SAO to track all time examining
citizen submissions.



Workpapers - Audit Teams should document hotline examinations in TeamMate using a separate folder Special Services. Audit Managers
should approve workpapers prior to releasing final letters or reports.

Management of Hotline Submissions

Seattle School District No. 1


Audit Managers should review the report available in the hotline database for their team and notify the Hotline Coordinator of any information that
needs to be updated in the database.
Phone Conferences - Quarterly the Deputy Director of Audit and the Hotline Coordinator will conduct phone conferences with the Audit Managers
to discuss the status of outstanding Hotline submissions.

Record of Work Done:
Reporting to Entity:

We met with District personnel who asked we provide a letter to upper management. We downloaded the hotline letter from the TeamStore and
prepared the letter at Hotline Letter Entity Template.

Reporting to Citizen:
We contacted the citizen by phone and explained the results of the investigation as approved by J im Griggs, Audit Manager.


H.2.PRG - H-13-415-Seattle Teacher Residency Program

Procedure Step: Examination
Prepared By: TN, 3/24/2014
Reviewed By: AVE, 4/18/2014

Purpose/Conclusion:
Purpose:
To document the Examination of Hotline H-13-415, and conclude on whether the allegations/concerns in the hotline referral are substantiated.

Conclusion:
Based on our examination of the concerns regarding the District's involvement in Seattle Teacher Residency program reported in Hotline H-13-
Seattle School District No. 1
415, we determined that the District did not violate Board Policies related to Grants (No 6114), related to Procurement (No 6220), related to
Recruitment and Employment (No 5000, 5005) or state laws related to employment and hiring (RCW 28A.400.300, 28A.405.210).

Key People:
Clover Codd, Exec Dir of Strategic Planning & Partnerships, clcodd@seattleschools.org, 252-0106
Dan Dizon, Director of Human Resources Operations, dsdizon@seattleschools.org, 252-0378
Ron English, Deputy General Counsel, renglish@seattleschools.org, 252-0651
Kathie Technow, Manager-Accounting Services, katechnow@seattleschools.org, 252-0274
Kevin Corrigan, Director Grants & Strategic Partnerships,kgcorrigan@seattleschools.org, 252-0222

Testing Strategy:
The Examination step is where to document the following:

The specific citizen hotline allegations/concerns by either copying the actual language in the web form or by scanning a copy of a written
letter.

The work performed to adequately address the hotline issue(s). Documentation should be sufficient to enable an experienced auditor
or investigator to ascertain that the information collected and the work performed support the significant judgments and conclusions. If
needed, additional steps may be added based on the size and complexity of the issue(s).


Policy/Standards:


SAO Audit Policy 1510 Citizen Hotline Referrals (effective 1/ 1/ 12)

BACKGROUND
Seattle School District No. 1
Citizens who observe waste, inefficiency, abuse or efficiencies in state and local government may report such information to the Hotline
established under state law (RCW 43.09.186). We determine whether those issues are within our authority to review and whether they require
further examination.

Citizens who communicate concerns to our Office do not have the same legal protections as those contained in the state employee Whistleblower
Act, so confidentiality is protected only until the examination is complete. Correspondence between our Office and the citizen falls within the
scope of the Public Records Act.

REQUIREMENTS

1. Citizen hotline referrals will be processed and performed in accordance with the Citizen Hotline Protocols.

The protocols are located on the intranet page and in TeamMate.

2. An initial review will be performed of all citizen hotline referrals to determine if issues raised are within the authority of
our Office and require further examination.

When concerns are not within the statutory authority of our Office to review, we will assist citizens in contacting the proper agency as
appropriate.

3. The Hotline Coordinator will work with the Audit Teams to ensure an acknowledgement is made to the citizen if contact
information is provided for in the referral.

Contact with the citizen will be made in a timely manner. Audit managers are not required to acknowledge the referral if it is made through our
website because the electronic submission process automatically creates the acknowledgement.

4. Results will be timely communicated to the citizen and entity. Professional judgment will be used in deciding the level of
reporting.

Refer to the Citizen Hotline Protocols for the reporting options and required level of review.


Citizen Hotline Protocols

Revised March 2010
Seattle School District No. 1

In 2007, the Legislature voted unanimously to establish the Citizen Hotline Program in the State Auditors Office. Senate Bill 5513 (codified at
RCW 43.09.186) was designed to give citizens a way to recommend measures to improve efficiency in state and local governments and to report
waste, inefficiency, or abuse, as well as examples of efficiency or outstanding achievement by state and local agencies, public employees, or
persons under contract with state and local agencies.

The State Auditors Office takes very seriously the role of citizens in promoting accountability, fiscal integrity and openness in state and local
government. The Office also strive to ensure the efficient and effective use of public resources, therefore not every submission will result in an
examination by our Office.

Unless waived by the citizen, the law requires the names of those contacting the Hotline as well as any documentation to be kept CONFIDENTIAL
until cases are closed.

Please contact the Hotline Coordinator if you have questions on the following protocols for the Citizen Hotline process.

Hotline Submissions

All citizen submissions will be logged into the Hotline database and assigned an individual referral number to allow for central tracking and
monitoring. Intake of citizen submissions can occur one of the following ways:
Web site- Citizen submission(s) will automatically populate the database.
Letter/mail - The Hotline Coordinaator will input information into database.
Fax - The Hotline Coordinator will input information into database.
Phone - Caller to the toll-free line will get a voice message requesting that he or she leave information or provide information using the
above methods. The Hotline Coordinator will oversee the input of the information into the database.
Audit Team Audit Managers should complete the intake form on the SAO Web site to ensure the submission is inputted into the
database.
Initial Assessment Process

The Hotline Coordinator will work with the Director of Legal Affairs, Deputy Director of Audit and the applicable Audit Manager to assess the
submissions to determine one of the following courses of action:

No Action FYI to the audit team.
No Action Refer to state or local entity
Audit team considers in next audit.
Seattle School District No. 1
Audit team examines the concern immediately.
DSI examines the concern immediately.

Reporting Results

The results of hotline examinations should be reported timely to both the entity and citizen. Audit Managers should determine the appropriate
method of reporting based on the significance of the issue and the ability to timely report the results. Audit Managers should ensure the final
reporting is attached to the hotline in the database under the Supporting Documents tab and all fields in the database are complete.

If after completing the hotline examination, it is decided that contacting (i.e. phone call or meeting with them) the citizen to discuss their
submission(s) would be timelier, more effective or efficient then that contact should be documented in the Activity Log section for that hotline
and can replace sending a closure letter explaining the results of the examination.

Audit Managers should consult the following decision chart to assess reporting for hotline submissions:

Are There Hotline Investigation Results with Significant Issues?

1. Yes - Significant Issues Are Audits Currently Being Completed?
a. Yes Issue as Finding in Audit Report
b. No Issue Hotline Report

2. No significant issues Are Audits Currently Being Completed?
a. Yes Issue as ML or Exit Item
b. No Issue Hotline Letter to the citizen

Hotline Related Work

Billing

Audit teams should charge investigations to the entitys audit using the project code CI TZ to enable SAO to track all time examining citizen
submissions.

Workpapers

- Audit Teams should document hotline examinations in TeamMate using a separate folder Special Services. Audit Managers should approve
Seattle School District No. 1
workpapers prior to releasing final letters or reports.

Management of Hotline Submissions

Audit Managers should review the report available in the hotline database for their team and notify the Hotline Coordinator of any information that
needs to be updated in the database.

Phone Conferences - Quarterly the Deputy Director of Audit and the Hotline Coordinator will conduct phone conferences with the Audit Managers
to discuss the status of outstanding Hotline submissions.


Record of Work Done:
Background:
The citizen reported multiple concerns regarding the District's involvement with the Seattle Teacher Residency Program. In May 2013, the District signed a
Partnership Memorandum of Agreement (MOA) to help design and support the Seattle Teacher Residency (STR) Program. The program is designed to recruit
and develop a pipeline of teachers specifically for Seattle Public Schools. The other partners in the program are Alliance of Education, University of Washington
College of Education, and the Seattle Education Association. The Alliance of Education is the fiscal agent for the STR Program. When the MOA was signed in
May, the District initially committed to providing up to $50,000 in expenditures to pay the cost of substitutes for District mentor teachers. In January 2014,
the District applied for and recieved a $225,455 Race to the Top (RTT) grant award from the Puget Sound Educational Service District which it subsequently
sub-granted to the Alliance of Education to support the Seattle Teacher Residency Program.


Key People:
Clover Codd, Exec Dir of Strategic Planning & Partnerships, clcodd@seattleschools.org, 252-0106
Dan Dizon, Director of Human Resources Operations, dsdizon@seattleschools.org, 252-0378
Ron English, Deputy General Counsel, renglish@seattleschools.org, 252-0651
Kathie Technow, Manager-Accounting Services, katechnow@seattleschools.org, 252-0274
Kevin Corrigan, Director Grants & Strategic Partnerships,kgcorrigan@seattleschools.org, 252-0222


Resources:
H-13-415 Citizen report H_13_415
STR MOA STR MOA
Seattle School District No. 1
STR initial budget (May 2013) STR initial budget May 2013
RTT application STR 2013-2014 budget STR 1st year budget
RTT application Seattle STR Grant App
RTT award (with amended amount) RTTT-D Project 1 1M52 Mod 1
Personal services contract with Alliance for Education Personal Service Contract Alliance of Education
Personal services contract with UW Educational Outreach Personal Service Contract STR TIF mentor teacher training
Ron English response Ron English response
Clover Codd response Clover Codd statement
Dan Dizon response Dan Dizon response
Kathie Technow response Kathie Technow response


Examination work:
We have listed the citizens concerns obtained from Hotline H-13-415 report and our examination of each concern in the order listed in the hotline report.

1. Do resources of the STR program intended to be expended for the benefit of the Seattle School District need to be reported in District budget documents,
whether or not the District directly expends the funds itself?

To obtain the answer/explanation for this question we intervied Clover Codd, Director of Strategic Plan and Partnerships.

-According to Clover Codd, Director of Strategic Plan and Partnerships, the Alliance of Education is the fiscal agent and administrator for the Seattle Teacher
Residency program. The District will only report expenditures it contributes to the STR program, the District will not report expenditures related to the STR
program that isnt provided by the District. We noted no exceptions regarding this concern.


Answer: For the school year 2013-2014 funds used for STR were initialy budgeted in TIF (Teacher Incentive Fund) under Career Ladder
Program (CLP). CLP has flexibility to use fund for the activities such as STR.


2. How much of the $1,094,569 2013-2014 resources of the STR program are intended to be expended for the benefit of the Seattle School District?
-The citizen pointed out that the MOA states that The Seattle Teacher Residency will focus on developing a diverse pipeline of teachers specifically for the
Seattle Public Schools. After examining this matter, it is our judgment that while the STR program was designed to benefit the Seattle School District, the
District itself benefits only indirectly from the program. The District receives no direct financial support, grants, services, supplies or equipment from the STR
Seattle School District No. 1
program and therefore this indirect benefit cannot be construed as "assistance" per Board Policy 6114. We noted no exceptions regarding this concern.
Answer: Even though all of the resources of the STR program are spent for SSD benift, this benefit is indirect. The District receives no direct
financial support, grants, services, supplies or equipment from the STR program and therefore this indirect benefit cannot be construed as "assistance" per
Board Policy 6114.

3. If the intended expenditures and/or acceptance of STR related resources exceed $250,000, did the District violate Board Policy and/or state law, by not
having the School Board approve the expenditure and/or acceptance of these STR resources?
-In regards to acceptance of resources exceeding $250,000 for the STR program:
-Board Policy 6114 states that Any gift of any type having a total value (including both the contribution and any district resources required to be contributed) of
$250,000 or greater will be subject to board approval.

The District applied for Race to the Top (RTT) funds and was awarded $225,455 in funding from Puget Sound Education Service District in January 2014. In the
Districts Race to the Top application which includes an updated of the STR budget for year 2013-2014, The District listed approximately $160,000 worth of in-
kind resources related to the STR program. If the in-kind resources are added to the awarded amount, this exceeds the $250,000 threshold required for
board approval. The citizen contends that the acceptance of RTT funds exceeds the $250,000 threshold based on this calculation. We spoke to Clover Codd,
Director of Strategic Planning and Partnerships, who oversaw the RTT grant application. She stated that the in-kind resources were not included in the award
amount because these expenditures were not required to obtain the grant. She forwarded us an email from Ron English, Deputy General Counsel, in which he
confirmed that in this case, the in-kind resources should not be included as part of the award amount because it was not required to obtain the RTT funds. We
followed up with Ron on this matter, Ron affirmed that the District did not violate Board Policy 6114 with the acceptance of RTT funds. See Rons response
here Ron English response . We accept the Districts position on this matter and noted no exceptions.

-In regards to expenditures exceeding the $250,000 threshold for the SRT program:

Board Policy No. 6220 states that All contracts for more than $250,000 initial value, excluding sales tax and contingencies, and changes or amendments for
more than $250,000, excluding sales tax and contingencies, must be approved by the School Board. Multiple changes and amendments which are for the same
or similar services at the same time and same location, or continuation of existing activity shall be considered a single action for approval purposes.

The District applied for Race to the Top (RTT) funds and was awarded $225,455 in funding from Puget Sound Education Service District. In the application, the
District stated that most of the funds that may be awarded through the proposal will be sub granted to the Alliance (to be used for the SRT program). In our
meeting with Kevin Corrigan, Director Grants & Strategic Partnerships, he stated that the District intends to use all RTT resources solely for the STR
program. Furthermore, Clover Codd, Director of Strategic Plan and Partnerships, confirmed that the entire RTT grant is earmarked for the SRT program. We
found that the District entered into a personal services contract with the Alliance for Education to implement the Seattle Teacher Residency project for
$202,405 in January 2014. In addition to this, we found that the District entered into another personal services contract with the University of Washington to
provide professional development training for mentor teachers amounting to $13,500. Clover stated these are the only expenditures that the District expects
Seattle School District No. 1
to spend on the STR program for SY2013-2014, no other District funds were earmarked or used towards the STR program for school year 2013-2014.

In the initial budget for the STR program in May 2013, we noted that the District was expected to fund 5% of the total cost of the STR program, amounting to
approximately $50,000. The language in the MOA also speaks about a commitment of the same amount, The District agrees for year 2 (the 2013-2014 school
year) to provide substitutes to District Mentor teachers for up to a maximum of 10 days per year (up to a $50,000 commitment). We also noted that in the
June 7, 2013 School Board Action Report, it states that The program design for 2013-2014 has been finalized and the total budget is estimated at
$1,094,569. Seattle Public Schools contribution is 5% and is paid in full by the TIF grant. We asked Clover why $50,000 in Teacher Incentive Fund (TIF) funds
werent included in the total expenditure for the STR program. Clover stated that the $50,000 comes from expenditures earmarked for the Districts Career
Ladder program and that Since the $50,000 expenditures are coded to the Career Ladder program, and were budgeted in the 2013-2014 school year, they
are not considered an additional expenditure that needed to be budgeted specifically for the STR program. See Clovers statement here Clover Codd
statement

We asked the Kathie Technow whether the District keeps a separate accounting of revenues and expenditures related to the STR program. Kathie said no but
that this could change in the future. She did, however, confirm that professional development expenditures are paid with the TIF grant are not segregated for
STR activities. See Kathies email response here Kathie Technow response

Based on the results of our examination, we determined that the only expenditures related specifically to the STR program is the personal services contract
with the Alliance for Education for $202,405 which is below the $250,000 mark required for board approval. We accept the Districts position and noted no
exceptions on this matter.

Answer: Our review indicated that the District did not have any individual contract over $250,000 in 2013-14 school year for STR Program that would
require Board Approval. There were two personal service contracts, one with UW for $13,500 and the other one with the Alliance of Education for $225,000
from the Race to the Top grant funds.

4. If the District did violate Board Policy and/or state law by not having the School Board approve the expenditure and/or acceptance of STR-related resources,
does this invalidate the MOA?
-The STR program is a five year program, with the expectation that the Districts financial contribution will be 5%, 20%, 30%, 40%, 51% in years 1 through
5. We noted that the MOA contains a withdrawal policy, however, the partners are automatically obligated to each year in the contract unless they file
paperwork to withdraw before Nov 30 before the start of next program year. It appears that it is the intention of the partners to commit 5 years to this
project. The citizen is concerned that the District has entered into a long term contract that obligates it to spend well over $250K over the entire term of the
contract without obtaining board approval for expenditures related to the program and questioned if this is a violation of board policy 6114. We contacted
Ron English, District Counsel to provide an explanation. Ron stated that the provision in board policy 6114 speaks to resources required to be committed and
that anticipated or expected contributions which are not required to be committed do not trigger Board approval. Please see Ron's response here Ron
English response We confirmed that while the initial STR budget and Board Action Report indicates the intention by the District to increase its contributions
Seattle School District No. 1
over the five years, the MOA itself contains no such binding language. We accept the Districts position on this matter and noted no exceptions.

Answer: The District did not violate Board Policy 6114.

5. Is the Memorandum of Agreement (MOA) a Memorandum of Understanding (MOU)?
-During the board meeting on Sept 4, SEA President Jonathan Knapp wanted to make it clear to the School Board that the contract is an MOA, not an MOU (An
MOU would require a SEA vote). The MOA that the District entered into on May 21, 2013 contains the wording Adapted from UTRU MOU template, Teach
Here MOU DRAFT, and Boettcher Teachers Program MOU. Since this MOA was adapted from other MOUs, the citizens concern appears to be that this
contract is in fact a MOU that has been called an MOA so as to avoid a SEA vote. We contacted Ron English to provide an explanation. He stated that is a SEA
matter that doesnt concern or have any implications for Seattle Public Schools (SPS), please see Rons response located here. Ron English response We accept
the Districts position on this matter and noted no exceptions.

Answer: This matter is outside of the scope of our authority to examine. We don not audit Seattle Education Association. Also it does not have
any implications on SSD.

6. Was the School Boards action on September 4, 2013, legal in granting pre-approval for contingency contracts, that is, approval in advance from the School
Board to allow the Superintendent to issue contracts to these students upon successful completion of the program?
- In the MOA, it states that Seattle Public Schools will provide a contingency teaching contract to all satisfactorily performing Residents (subject to SPS hiring
process approval). SPS will submit a separate document to its Board of Directors asking permission to give out contingency contracts to STR Residents accepted
into the Program. SPS has final decision making authority for all SPS staff assignments and evaluations.

-We contacted Dan Dizon, Director of Human Resources, to provide an explanation. Dan stated that the first cohorts of the Seattle Teacher
Residency program have not received a contingent contract at this time but that the long term goal is to have the School Board promise a job 18
months in advance. In an email response, he stated, even early offers must be approved by the board via the personnel action report before offer
is complete. Please Dan's response here Dan Dizon response. We determined that the District did not violate board policies in obtaining pre-
approval for contingent contracts because the District has not granted contingent contracts to STR cohorts and intend to gain board approval via
personnel reports before granting STR cohorts employment contracts.

The citizen also questioned the Districts need to offer cohorts contingent contracts in advance. To this end, Dan stated the STR program was designed to
improve issues around vacancies and retention for Elementary, Special Education, and English Language Learner teachers.

Based on our examination, we determined that the District did not violate Board policy because it intends to receive Board approval via the personnel report
when issuing contingent contracts, after the start of the residency for current cohorts and before the start of the residency for future cohorts. We noted no
exceptions.
Seattle School District No. 1

Answer: Based on the results of our examination we determined that the School Board did not concede its authority to approve STR residents for
employment.

7. Did the Boards action on SRT constitute an unfair employment practice? Does it give certain applicants an unfair advantage over other applicants?
-According to Dan Dizon, Director of Human Resources, the Residents are not employed upon completion of the residency. The District will require that they
obtain and pass a background check, complete and submit an application, interview, pass reference checks, and receive School Board approval among other
requirements. We determined that the District is not in violation of its hiring policies and noted no exceptions.
Answer: Same as above.


H.2.PRG - H-13-415-Seattle Teacher Residency Program

Procedure Step: Reporting
Prepared By: AVE, 4/23/2014
Reviewed By: JWG, 4/11/2014

Purpose/Conclusion:
Purpose:
To report the results of the hotline examination to the citizen Chris J ackins and to determine the method of reporting to the entity.

Conclusion:
Based on our examination of Hotline H-13-415, we did not find evidence to substantiate the concerns listed in the citizen hotline report. We
determined the appropriate method of reporting is through issuing a letter to the citizen.
Key People:
Clover Codd, Exec Dir of Strategic Planning & Partnerships, clcodd@seattleschools.org, 252-0106
Dan Dizon, Director of Human Resources Operations, dsdizon@seattleschools.org, 252-0378
Ron English, Deputy General Counsel, renglish@seattleschools.org, 252-0651
Kathie Technow, Manager-Accounting Services, katechnow@seattleschools.org, 252-0274
Kevin Corrigan, Director Grants & Strategic Partnerships,kgcorrigan@seattleschools.org, 252-0222
Seattle School District No. 1

Testing Strategy:
Reporting to Entity:

Determine the appropriate method of reporting to the entity based on the significance of the issue and the ability to timely report the
results. Refer to the protocols in the Policy/Standards tab for guidance in making this determination. I f assertions are not substantiated,
communication to the entity may not be necessary; however, Audit Managers must approve this decision and include it in the
workpapers.

Audit Managers must approve the reporting method. If a hotline letter is used to report the results to the entity, use the template in
TeamMate. Refer to ORCA and the ARS Manual if a hotline report is used to report the results.

Ensure that the appropriate reviews of the reporting method are completed as outlined in the protocols in the Policy/Standards
tab. Attach the final hotline letter or report in TeamMate, as applicable. Audit Managers must approve workpapers prior to releasing final
letters or reports.

The final reporting should also be attached to the hotline in the database under the "Supporting Documents" tab in accordance with the
Citizen Hotline Protocols. This is done by the Audit Manager.

Reporting to Citizen:

Use the "Hotline Citizen Letter Template" document in TeamMate to draft a letter to the citizen explaining the results of the
investigation. The letter must be processed through the Audit I ssues Library for review and approval prior to issuance. Attach the final
letter in TeamMate.
Seattle School District No. 1


Policy/Standards:

SAO Audit Policy 1510 Citizen Hotline Referrals (effective 1/ 1/ 12)

BACKGROUND
Citizens who observe waste, inefficiency, abuse or efficiencies in state and local government may report such information to the Hotline
established under state law (RCW 43.09.186). We determine whether those issues are within our authority to review and whether they require
further examination. Citizens who communicate concerns to our Office do not have the same legal protections as those contained in the state
employee Whistleblower Act, so confidentiality is protected only until the examination is complete. Correspondence between our Office and the
citizen falls within the scope of the Public Records Act.

REQUIREMENTS

1. Citizen hotline referrals will be processed and performed in accordance with the Citizen Hotline Protocols.

The protocols are located on the intranet page and in TeamMate.

2. An initial review will be performed of all citizen hotline referrals to determine if issues raised are within the authority of
our Office and require further examination.

When concerns are not within the statutory authority of our Office to review, we will assist citizens in contacting the proper agency as
appropriate.

3. The Hotline Coordinator will work with the Audit Teams to ensure an acknowledgement is made to the citizen if contact
information is provided for in the referral.

Contact with the citizen will be made in a timely manner. Audit managers are not required to acknowledge the referral if it is made through our
website because the electronic submission process automatically creates the acknowledgement.

4. Results will be timely communicated to the citizen and entity. Professional judgment will be used in deciding the level of
reporting. Refer to the Citizen Hotline Protocols for the reporting options and required level of review.

Seattle School District No. 1

Citizen Hotline Protocols

Revised March 2010



In 2007, the Legislature voted unanimously to establish the Citizen Hotline Program in the State Auditors Office. Senate Bill 5513 (codified at
RCW 43.09.186) was designed to give citizens a way to recommend measures to improve efficiency in state and local governments and to report
waste, inefficiency, or abuse, as well as examples of efficiency or outstanding achievement by state and local agencies, public employees, or
persons under contract with state and local agencies.

The State Auditors Office takes very seriously the role of citizens in promoting accountability, fiscal integrity and openness in state and local
government. The Office also strive to ensure the efficient and effective use of public resources, therefore not every submission will result in an
examination by our Office.

Unless waived by the citizen, the law requires the names of those contacting the Hotline as well as any documentation to be kept CONFIDENTIAL
until cases are closed.

Please contact the Hotline Coordinator if you have questions on the following protocols for the Citizen Hotline process.
Hotline Submissions

All citizen submissions will be logged into the Hotline database and assigned an individual referral number to allow for central tracking and
monitoring. Intake of citizen submissions can occur one of the following ways:
Web site- Citizen submission(s) will automatically populate the database.
Letter/mail - The Hotline Coordinaator will input information into database.
Fax - The Hotline Coordinator will input information into database.

Phone - Caller to the toll-free line will get a voice message requesting that he or she leave information or provide information using the
above methods. The Hotline Coordinator will oversee the input of the information into the database.
Audit Team Audit Managers should complete the intake form on the SAO Web site to ensure the submission is inputted into the
database.
Seattle School District No. 1
Initial Assessment Process



The Hotline Coordinator will work with the Director of Legal Affairs, Deputy Director of Audit and the applicable Audit Manager to assess the
submissions to determine one of the following courses of action:

No Action FYI to the audit team.
No Action Refer to state or local entity
Audit team considers in next audit.
Audit team examines the concern immediately.
DSI examines the concern immediately.


Reporting Results

The results of hotline examinations should be reported timely to both the entity and citizen. Audit Managers should determine the appropriate
method of reporting based on the significance of the issue and the ability to timely report the results. Audit Managers should ensure the final
reporting is attached to the hotline in the database under the Supporting Documents tab and all fields in the database are complete. If after
completing the hotline examination, it is decided that contacting (i.e. phone call or meeting with them) the citizen to discuss their submission(s)
would be timelier, more effective or efficient then that contact should be documented in the Activity Log section for that hotline and can replace
sending a closure letter explaining the results of the examination.

Audit Managers should consult the following decision chart to assess reporting for hotline submissions:

Are There Hotline Investigation Results with Significant Issues?


1. Yes - Significant Issues Are Audits Currently Being Completed? a. Yes Issue as Finding in Audit
Report
b. No Issue Hotline Report


2. No significant issues Are Audits Currently Being Completed? a. Yes Issue as ML or Exit Item

Seattle School District No. 1

b. No Issue Hotline Letter to the citizen Hotline Related Work



Billing Audit teams should charge investigations to the entitys audit using the project code CI TZ to enable SAO to track all time examining
citizen submissions.



Workpapers - Audit Teams should document hotline examinations in TeamMate using a separate folder Special Services. Audit Managers
should approve workpapers prior to releasing final letters or reports.

Management of Hotline Submissions



Audit Managers should review the report available in the hotline database for their team and notify the Hotline Coordinator of any information that
needs to be updated in the database.
Phone Conferences - Quarterly the Deputy Director of Audit and the Hotline Coordinator will conduct phone conferences with the Audit Managers
to discuss the status of outstanding Hotline submissions.

Record of Work Done:
After examining Hotline H-13-415, we did not find any evidence to substantiate the concerns listed in the hotline report submitted by the
citizen. We have followed procedures for reporting to citizen through issuing a letter using the Hotline Citizen Letter template document. We
drafted a letter Hotline H-13-415 Letter to Citizen to the citizen explaining the results of the investigation.


H.3.PRG - H-14-096 - SPED

Procedure Step: Examination
Seattle School District No. 1
Prepared By: AVE, 6/16/2014
Reviewed By: HCW, 6/16/2014

Purpose/Conclusion:
Purpose:
To document the Examination of Hotline H-14-096, and conclude on whether the allegations/concerns in the hotline referral are substantiated.
Conclusion:
We documented the Examination of Hotline H-14-096, and concluded that concerns in the hotline referral are not substantiated. This Hotline is
annonymous and therefore no official response is prepared.

Testing Strategy:
The Examination step is where to document the following:

The specific citizen hotline allegations/concerns by either copying the actual language in the web form or by scanning a copy of a written
letter.

The work performed to adequately address the hotline issue(s). Documentation should be sufficient to enable an experienced auditor
or investigator to ascertain that the information collected and the work performed support the significant judgments and conclusions. If
needed, additional steps may be added based on the size and complexity of the issue(s).


Policy/Standards:


SAO Audit Policy 1510 Citizen Hotline Referrals (effective 1/ 1/ 12)
Seattle School District No. 1

BACKGROUND
Citizens who observe waste, inefficiency, abuse or efficiencies in state and local government may report such information to the Hotline
established under state law (RCW 43.09.186). We determine whether those issues are within our authority to review and whether they require
further examination.

Citizens who communicate concerns to our Office do not have the same legal protections as those contained in the state employee Whistleblower
Act, so confidentiality is protected only until the examination is complete. Correspondence between our Office and the citizen falls within the
scope of the Public Records Act.

REQUIREMENTS

1. Citizen hotline referrals will be processed and performed in accordance with the Citizen Hotline Protocols.

The protocols are located on the intranet page and in TeamMate.

2. An initial review will be performed of all citizen hotline referrals to determine if issues raised are within the authority of
our Office and require further examination.

When concerns are not within the statutory authority of our Office to review, we will assist citizens in contacting the proper agency as
appropriate.

3. The Hotline Coordinator will work with the Audit Teams to ensure an acknowledgement is made to the citizen if contact
information is provided for in the referral.

Contact with the citizen will be made in a timely manner. Audit managers are not required to acknowledge the referral if it is made through our
website because the electronic submission process automatically creates the acknowledgement.

4. Results will be timely communicated to the citizen and entity. Professional judgment will be used in deciding the level of
reporting.

Refer to the Citizen Hotline Protocols for the reporting options and required level of review.


Citizen Hotline Protocols
Seattle School District No. 1

Revised March 2010

In 2007, the Legislature voted unanimously to establish the Citizen Hotline Program in the State Auditors Office. Senate Bill 5513 (codified at
RCW 43.09.186) was designed to give citizens a way to recommend measures to improve efficiency in state and local governments and to report
waste, inefficiency, or abuse, as well as examples of efficiency or outstanding achievement by state and local agencies, public employees, or
persons under contract with state and local agencies.

The State Auditors Office takes very seriously the role of citizens in promoting accountability, fiscal integrity and openness in state and local
government. The Office also strive to ensure the efficient and effective use of public resources, therefore not every submission will result in an
examination by our Office.

Unless waived by the citizen, the law requires the names of those contacting the Hotline as well as any documentation to be kept CONFIDENTIAL
until cases are closed.

Please contact the Hotline Coordinator if you have questions on the following protocols for the Citizen Hotline process.

Hotline Submissions

All citizen submissions will be logged into the Hotline database and assigned an individual referral number to allow for central tracking and
monitoring. Intake of citizen submissions can occur one of the following ways:
Web site- Citizen submission(s) will automatically populate the database.
Letter/mail - The Hotline Coordinaator will input information into database.
Fax - The Hotline Coordinator will input information into database.
Phone - Caller to the toll-free line will get a voice message requesting that he or she leave information or provide information using the
above methods. The Hotline Coordinator will oversee the input of the information into the database.
Audit Team Audit Managers should complete the intake form on the SAO Web site to ensure the submission is inputted into the
database.
Initial Assessment Process

The Hotline Coordinator will work with the Director of Legal Affairs, Deputy Director of Audit and the applicable Audit Manager to assess the
submissions to determine one of the following courses of action:

No Action FYI to the audit team.
Seattle School District No. 1
No Action Refer to state or local entity
Audit team considers in next audit.
Audit team examines the concern immediately.
DSI examines the concern immediately.

Reporting Results

The results of hotline examinations should be reported timely to both the entity and citizen. Audit Managers should determine the appropriate
method of reporting based on the significance of the issue and the ability to timely report the results. Audit Managers should ensure the final
reporting is attached to the hotline in the database under the Supporting Documents tab and all fields in the database are complete.

If after completing the hotline examination, it is decided that contacting (i.e. phone call or meeting with them) the citizen to discuss their
submission(s) would be timelier, more effective or efficient then that contact should be documented in the Activity Log section for that hotline
and can replace sending a closure letter explaining the results of the examination.

Audit Managers should consult the following decision chart to assess reporting for hotline submissions:

Are There Hotline Investigation Results with Significant Issues?

1. Yes - Significant Issues Are Audits Currently Being Completed?
a. Yes Issue as Finding in Audit Report
b. No Issue Hotline Report

2. No significant issues Are Audits Currently Being Completed?
a. Yes Issue as ML or Exit Item
b. No Issue Hotline Letter to the citizen

Hotline Related Work

Billing

Audit teams should charge investigations to the entitys audit using the project code CI TZ to enable SAO to track all time examining citizen
submissions.

Workpapers
Seattle School District No. 1

- Audit Teams should document hotline examinations in TeamMate using a separate folder Special Services. Audit Managers should approve
workpapers prior to releasing final letters or reports.

Management of Hotline Submissions

Audit Managers should review the report available in the hotline database for their team and notify the Hotline Coordinator of any information that
needs to be updated in the database.

Phone Conferences - Quarterly the Deputy Director of Audit and the Hotline Coordinator will conduct phone conferences with the Audit Managers
to discuss the status of outstanding Hotline submissions.


Record of Work Done:
This is an anonymous referral; citizen provided no information to reply.
See H.3.1 for the details of H-14-096.
In the referral citizen states that Seattle School District fails to provide "the least restrictive" accommodation for special education students. IEP
transportation requirements are not reviewed annually to determine if/when students should be:
1) Educated in the use of regular transit; and
2) Prepared for life beyond school by learning how to use public transit.
To examine this concern:

We e-mailed to Michaela Clancy, SPED Compliance Manager
Michaela informed us that:
There is a newly developed task force to review how I EP teams determine and set up developmentally appropriate IEP goals. Mary Perrigo-Decker
is our representative on that taskforce from special education, and Sherry Studley is facilitating our department professional development as
supervisor.

We met with Sherry Studley, SPED Manager to identify procedures in place to educate SPED students on how to use public transportation. Sherry
explained that Individual Education Plan (IEP) is created for each SPED student annually. IEP team that includes parents and teaches of the
student makes decision about transportation option for the student. I f IEP team decides that student can take public transportation, student will
be educated on how to take a bus and provided ORCA card.
Sherry explained that any interested party can call IEP meeting to re-evaluate student's ability to use public transportation. She also showed us
that IEP on line has a part where IEP team indicates transportation option.
Seattle School District No. 1
We met with Marie Perrigo-Decker, Special Education I nstructional Support and Resource Teacher to learn about a newly developed task force.
Marie explained that she is currently working with Department of Transportation to develop more specific guidance to IEP teams what needs to be
done when SPED student is deemed capable to take public transportation. Mary developed a draft of Transportation Rubric that she shared with
us. Transportation Rubric provides detailed instructions for transportation assessment and education.
Based on the results of our examination we noted that SSD SPED has procedures in place to make sure that SPED students provided appropriate
mode of transportation.


H.4.PRG - H-14-085 Renting out Properties

Procedure Step: Examination
Prepared By: AB1, 4/2/2014
Reviewed By: AVE, 6/9/2014

Purpose/Conclusion:
Purpose:
To document the Examination of Hotline H-14-085, and conclude on whether the allegations/concerns in the hotline referral are substantiated.

Conclusion:
We documented the Examination of Hotline 14-085 and concluded the allegations of illegal payment to the contractor could not be substantiated.
This Hotline is annonymous and therefore no official response is prepared.

Testing Strategy:
The Examination step is where to document the following:

The specific citizen hotline allegations/concerns by either copying the actual language in the web form or by scanning a copy of a written
letter.
Seattle School District No. 1

The work performed to adequately address the hotline issue(s). Documentation should be sufficient to enable an experienced auditor
or investigator to ascertain that the information collected and the work performed support the significant judgments and conclusions. If
needed, additional steps may be added based on the size and complexity of the issue(s).


Policy/Standards:


SAO Audit Policy 1510 Citizen Hotline Referrals (effective 1/ 1/ 12)

BACKGROUND
Citizens who observe waste, inefficiency, abuse or efficiencies in state and local government may report such information to the Hotline
established under state law (RCW 43.09.186). We determine whether those issues are within our authority to review and whether they require
further examination.

Citizens who communicate concerns to our Office do not have the same legal protections as those contained in the state employee Whistleblower
Act, so confidentiality is protected only until the examination is complete. Correspondence between our Office and the citizen falls within the
scope of the Public Records Act.

REQUIREMENTS

1. Citizen hotline referrals will be processed and performed in accordance with the Citizen Hotline Protocols.

The protocols are located on the intranet page and in TeamMate.

2. An initial review will be performed of all citizen hotline referrals to determine if issues raised are within the authority of
our Office and require further examination.

When concerns are not within the statutory authority of our Office to review, we will assist citizens in contacting the proper agency as
appropriate.
Seattle School District No. 1

3. The Hotline Coordinator will work with the Audit Teams to ensure an acknowledgement is made to the citizen if contact
information is provided for in the referral.

Contact with the citizen will be made in a timely manner. Audit managers are not required to acknowledge the referral if it is made through our
website because the electronic submission process automatically creates the acknowledgement.

4. Results will be timely communicated to the citizen and entity. Professional judgment will be used in deciding the level of
reporting.

Refer to the Citizen Hotline Protocols for the reporting options and required level of review.


Citizen Hotline Protocols

Revised March 2010

In 2007, the Legislature voted unanimously to establish the Citizen Hotline Program in the State Auditors Office. Senate Bill 5513 (codified at
RCW 43.09.186) was designed to give citizens a way to recommend measures to improve efficiency in state and local governments and to report
waste, inefficiency, or abuse, as well as examples of efficiency or outstanding achievement by state and local agencies, public employees, or
persons under contract with state and local agencies.

The State Auditors Office takes very seriously the role of citizens in promoting accountability, fiscal integrity and openness in state and local
government. The Office also strive to ensure the efficient and effective use of public resources, therefore not every submission will result in an
examination by our Office.

Unless waived by the citizen, the law requires the names of those contacting the Hotline as well as any documentation to be kept CONFIDENTIAL
until cases are closed.

Please contact the Hotline Coordinator if you have questions on the following protocols for the Citizen Hotline process.

Hotline Submissions

All citizen submissions will be logged into the Hotline database and assigned an individual referral number to allow for central tracking and
monitoring. Intake of citizen submissions can occur one of the following ways:
Seattle School District No. 1
Web site- Citizen submission(s) will automatically populate the database.
Letter/mail - The Hotline Coordinaator will input information into database.
Fax - The Hotline Coordinator will input information into database.
Phone - Caller to the toll-free line will get a voice message requesting that he or she leave information or provide information using the
above methods. The Hotline Coordinator will oversee the input of the information into the database.
Audit Team Audit Managers should complete the intake form on the SAO Web site to ensure the submission is inputted into the
database.
Initial Assessment Process

The Hotline Coordinator will work with the Director of Legal Affairs, Deputy Director of Audit and the applicable Audit Manager to assess the
submissions to determine one of the following courses of action:

No Action FYI to the audit team.
No Action Refer to state or local entity
Audit team considers in next audit.
Audit team examines the concern immediately.
DSI examines the concern immediately.

Reporting Results

The results of hotline examinations should be reported timely to both the entity and citizen. Audit Managers should determine the appropriate
method of reporting based on the significance of the issue and the ability to timely report the results. Audit Managers should ensure the final
reporting is attached to the hotline in the database under the Supporting Documents tab and all fields in the database are complete.

If after completing the hotline examination, it is decided that contacting (i.e. phone call or meeting with them) the citizen to discuss their
submission(s) would be timelier, more effective or efficient then that contact should be documented in the Activity Log section for that hotline
and can replace sending a closure letter explaining the results of the examination.

Audit Managers should consult the following decision chart to assess reporting for hotline submissions:

Are There Hotline Investigation Results with Significant Issues?

1. Yes - Significant Issues Are Audits Currently Being Completed?
a. Yes Issue as Finding in Audit Report
b. No Issue Hotline Report
Seattle School District No. 1

2. No significant issues Are Audits Currently Being Completed?
a. Yes Issue as ML or Exit Item
b. No Issue Hotline Letter to the citizen

Hotline Related Work

Billing

Audit teams should charge investigations to the entitys audit using the project code CI TZ to enable SAO to track all time examining citizen
submissions.

Workpapers

- Audit Teams should document hotline examinations in TeamMate using a separate folder Special Services. Audit Managers should approve
workpapers prior to releasing final letters or reports.

Management of Hotline Submissions

Audit Managers should review the report available in the hotline database for their team and notify the Hotline Coordinator of any information that
needs to be updated in the database.

Phone Conferences - Quarterly the Deputy Director of Audit and the Hotline Coordinator will conduct phone conferences with the Audit Managers
to discuss the status of outstanding Hotline submissions.


Record of Work Done:
Re: Construction delay claim for the Historic Horace Mann School addition and renovation project.


Background:
Seattle School District No. 1
The citizen questions a potential misuse of public funds paid for fines/penalties paid for construction delays caused by tenant issues. Were
the penalties a result of the District's failure to enforce contracts with tenants?
Further, the citizen questions the legality of SD employees acting as rental agents to locate rental alternatives for tenants.
Did the District pay employees overtime as a consequence of their failure to enfore contracts with tenants. See
also HotlineReferralDetails-H-14-085

We reviewed the construction contract between the District and Construction Services Inc.(CSI), the firm awarded the bid for renovation of the
Horace Mann School. We noted the NTP date of 9/3/13 documented in Section 3.03 of the contract is 23 calendar days prior to date contract
was signed (9/25) (considered a binding agreement between parties.) We met with Paul Wight, Capital Project Manager to verify the sequence of
events. The start date was initially determined when the contract was put out for bid in the Spring of 2013 with the intent that most of the
excavation would be complete prior to rainy season. The building was occupied by tenants and all tenants received the standard lease termination
notices, which most tenants honored in a timely manner. Tenants who refused to vacate forced the District to pursue legal alternatives in
accodance with City ordinances that resulted in an eviction process that was monitored by the Seattle Police Dept. This sequence of events
prevented the contractor from honoring the NTP date. Per Section 7.04 of the contract General Conditions -- the contractor may request an
equitable adjustment in the contract sum subject to the following:
1. The change in contract time shall be caused solely by the fault or negligence of the Owner, its agents, employees or contractors. As the
delays were of no fault or negligence on the part of the contractor, the District agreed to pay an equitable adjustment to the contractor.
Per Ron English, District Counsel, the District considered a rebid with a later start date and after review and cost analysis, it was determined that
the cost of re-bid could put the District at risk of losing 5% or more of the pricing model received from CSI . This could incur additional cost of of
$400,000 or more on a $8M contract. Further the contractor's bid was based on a start date prior to rainy season and additional cost of
excavation during the rainy season was not included in the original bid submission. Further, the contract signature was delayed due to funding
issues. Hence the District decided to honor the original contract agreement which stipulated the Notice to Proceed date of Sept 3rd.

The District and CSI negotiated an amount of consideration due to CSI via Change order #01. CSI contract_ CO 1The consideration was based
on labor hours for calendar days lost from the NTP date to the date the contractor was ultimately allowed access to the construction site. The
amount of consideration requested by CSI was $1,837.86 plus administrative and insurance cost per calendar day for the period of 9/26 through
11/18 plus a reduced rate of $!,490 per day for the NTP date of 9/3 to 9/25 (date contract was signed). The District disallowed the administrative
and overhead costs and reduced the full amount of consideration by approximately $20,000 to $82,011.76 or 1% of the contract value. The
change order was authorized by Flip Herndon, Dir of Capital Projects and authorized by Kenneth Gotsch, Deputy Director of Finance &
Administration.
We reviewed overtime charges during this time period and were not able to attribute OT costs to tenant issues at the Horace Mann building. We
Seattle School District No. 1
noted increased hours charged at 1.5 times regular pay rate was attributed to budget cuts of two hourly security positions and that the first
quarter of the school year typically includes OT payroll costs to provide security attendants for events held after school and weekends. Therefore
we were unable to conclude OT costs were attributed to additional security or custodial services provided at the Horace Mann Building. I n addition
the Facility Rental staff is knowledgeable of current market rental rates and may have provided suggestions of relocation options in the Seattle
area during the course of a normal work day. We noted no evidence during our review of overtime pay that facility rental staff acted as agents
outside the scope of their job description.
Based on our review, the District acted as a steward of the facility and in good faith to resolve the conflict with the tenants of the Horace Mann
building with minimal disruption to the community. The Notice to Proceed commencement and construction of the building dated September 3,
2013 and prior to the date the contract is not typicaly business practice and was prompted by extenuating circumstance. This date became the
baseline for determining consideration due to the contractor for unforeseen delays and prevented furthur cost of a rebid. Ultimately construction
did not commence until 11/19/13 due to tenant eviction issues and the District negotiated an adjustment for the delayed site access up to 11/18.
The adjustment of $82,011.76 for lost wages to the contractor is considered fair business practice and mitigated further cost of a rebid and delays
to the project. The additional cost of $82,011.76 or 1% of the award amount was documented as Change Order #1 and was within the allowed
15% threshold to resolve unanticipated and unavoidable construction costs.




H.5.PRG - H-14-067 Gifting of SSD Resources

Procedure Step: Examination
Prepared By: AB1, 6/4/2014
Reviewed By: AVE, 6/9/2014

Purpose/Conclusion:
Purpose:
To document the Examination of Hotline H14-067, and conclude on whether the allegations/concerns in the hotline referral are substantiated.
Conclusion:
Based on our examination of the concerns regarding the District's gifting use of its facilities for non district youth activities, we determined the
District did not violate its policies regarding facility rental and waiver of costs as documented in Policies 4260 and 4120 or state state laws related
Seattle School District No. 1
to gifting of public funds.

Testing Strategy:
The Examination step is where to document the following:

The specific citizen hotline allegations/concerns by either copying the actual language in the web form or by scanning a copy of a written
letter.

The work performed to adequately address the hotline issue(s). Documentation should be sufficient to enable an experienced auditor
or investigator to ascertain that the information collected and the work performed support the significant judgments and conclusions. If
needed, additional steps may be added based on the size and complexity of the issue(s).


Policy/Standards:


SAO Audit Policy 1510 Citizen Hotline Referrals (effective 1/ 1/ 12)

BACKGROUND
Citizens who observe waste, inefficiency, abuse or efficiencies in state and local government may report such information to the Hotline
established under state law (RCW 43.09.186). We determine whether those issues are within our authority to review and whether they require
further examination.

Citizens who communicate concerns to our Office do not have the same legal protections as those contained in the state employee Whistleblower
Act, so confidentiality is protected only until the examination is complete. Correspondence between our Office and the citizen falls within the
scope of the Public Records Act.

Seattle School District No. 1
REQUIREMENTS

1. Citizen hotline referrals will be processed and performed in accordance with the Citizen Hotline Protocols.

The protocols are located on the intranet page and in TeamMate.

2. An initial review will be performed of all citizen hotline referrals to determine if issues raised are within the authority of
our Office and require further examination.

When concerns are not within the statutory authority of our Office to review, we will assist citizens in contacting the proper agency as
appropriate.

3. The Hotline Coordinator will work with the Audit Teams to ensure an acknowledgement is made to the citizen if contact
information is provided for in the referral.

Contact with the citizen will be made in a timely manner. Audit managers are not required to acknowledge the referral if it is made through our
website because the electronic submission process automatically creates the acknowledgement.

4. Results will be timely communicated to the citizen and entity. Professional judgment will be used in deciding the level of
reporting.

Refer to the Citizen Hotline Protocols for the reporting options and required level of review.


Citizen Hotline Protocols

Revised March 2010

In 2007, the Legislature voted unanimously to establish the Citizen Hotline Program in the State Auditors Office. Senate Bill 5513 (codified at
RCW 43.09.186) was designed to give citizens a way to recommend measures to improve efficiency in state and local governments and to report
waste, inefficiency, or abuse, as well as examples of efficiency or outstanding achievement by state and local agencies, public employees, or
persons under contract with state and local agencies.

The State Auditors Office takes very seriously the role of citizens in promoting accountability, fiscal integrity and openness in state and local
government. The Office also strive to ensure the efficient and effective use of public resources, therefore not every submission will result in an
Seattle School District No. 1
examination by our Office.

Unless waived by the citizen, the law requires the names of those contacting the Hotline as well as any documentation to be kept CONFIDENTIAL
until cases are closed.

Please contact the Hotline Coordinator if you have questions on the following protocols for the Citizen Hotline process.

Hotline Submissions

All citizen submissions will be logged into the Hotline database and assigned an individual referral number to allow for central tracking and
monitoring. Intake of citizen submissions can occur one of the following ways:
Web site- Citizen submission(s) will automatically populate the database.
Letter/mail - The Hotline Coordinaator will input information into database.
Fax - The Hotline Coordinator will input information into database.
Phone - Caller to the toll-free line will get a voice message requesting that he or she leave information or provide information using the
above methods. The Hotline Coordinator will oversee the input of the information into the database.
Audit Team Audit Managers should complete the intake form on the SAO Web site to ensure the submission is inputted into the
database.
Initial Assessment Process

The Hotline Coordinator will work with the Director of Legal Affairs, Deputy Director of Audit and the applicable Audit Manager to assess the
submissions to determine one of the following courses of action:

No Action FYI to the audit team.
No Action Refer to state or local entity
Audit team considers in next audit.
Audit team examines the concern immediately.
DSI examines the concern immediately.

Reporting Results

The results of hotline examinations should be reported timely to both the entity and citizen. Audit Managers should determine the appropriate
method of reporting based on the significance of the issue and the ability to timely report the results. Audit Managers should ensure the final
reporting is attached to the hotline in the database under the Supporting Documents tab and all fields in the database are complete.
Seattle School District No. 1

If after completing the hotline examination, it is decided that contacting (i.e. phone call or meeting with them) the citizen to discuss their
submission(s) would be timelier, more effective or efficient then that contact should be documented in the Activity Log section for that hotline
and can replace sending a closure letter explaining the results of the examination.

Audit Managers should consult the following decision chart to assess reporting for hotline submissions:

Are There Hotline Investigation Results with Significant Issues?

1. Yes - Significant Issues Are Audits Currently Being Completed?
a. Yes Issue as Finding in Audit Report
b. No Issue Hotline Report

2. No significant issues Are Audits Currently Being Completed?
a. Yes Issue as ML or Exit Item
b. No Issue Hotline Letter to the citizen

Hotline Related Work

Billing

Audit teams should charge investigations to the entitys audit using the project code CI TZ to enable SAO to track all time examining citizen
submissions.

Workpapers

- Audit Teams should document hotline examinations in TeamMate using a separate folder Special Services. Audit Managers should approve
workpapers prior to releasing final letters or reports.

Management of Hotline Submissions

Audit Managers should review the report available in the hotline database for their team and notify the Hotline Coordinator of any information that
needs to be updated in the database.

Phone Conferences - Quarterly the Deputy Director of Audit and the Hotline Coordinator will conduct phone conferences with the Audit Managers
Seattle School District No. 1
to discuss the status of outstanding Hotline submissions.


Record of Work Done:
Citizen Letter is referenced at H_14_067[1]

Citizen Concern
The Citizen is concerned that the Superintendent approved changes to Policy 4260 in September 2013 to allow free use of district facilities to non
district youth enrichment groups. The questions the citizen raises are as follows:
What is the basis of authority used by the Superintendent to amend policy prior to a board voted and adopted amendment?
How many instances of free rental to non district youth occurred while the policy was in review and the Board approved the action?
Does the rent free activity identified during this period constitute gifting of public funds?



Procedures:
We reviewed School District policies identified as Series 4000, which are Board approved measures created to address community relations. As a
rule the District encourages public participation and public access to schools to further its mission and interpret the schools' performance and
effectiveness in addressing the needs of its diverse communities.
In addition to the aforesaid policies the District has a joint use agreement with the City of Seattle Dept of Parks and Recreation for paid use of its
facilities. Such events are scheduled through Seattle Parks Department and the revenue stream from these activities is reported and paid to the
District quarterly.
Policy 4120 School Support Organizations was adopted by the School Board in September 2011. Per this policy the School Board
encourages the formation of parent-teacher-student associations at each school building for the purpose of providing an opportunity for
families, teachers and students to join efforts and enhance school programs. I n schools where no such organization exists, booster clubs
and/or special interest organizations may be formed to support and strengthen activities conducted within the school or district. All such
groups must receive the approval of the school principal or Superintendent to be recognized as a booster organization. Under the original
policy these organizations, which support youth education shall not require payment of rent. Youth education includes but is not limited to
academics. See policy for additional explanation of youth education.
Seattle School District No. 1
Policy 4265 School and Community Partnerships was adopted by the Seattle School Board in September, 2011. The Board believes
it is vital to engage families and community members in the life of the school and create partnerships between SPS and the community
that further the District's mission, and serve the diversity of its districts. Such partnerships include academic and non-academic activities
such as the arts, social and emotional support groups, tutoring, mentorship, health, vocational experiences etc. Partnerships must be
documented and have the approval of the Principal of the school they serve. If the partnership is not demonstrating a substantial positive
impact or is determined to be unsatisfactory the SPS reserves the right to terminate the partnership.
Policy 4270 Lead Community Partner Policy adopted by the board in September 2011 addresses the District's initiative to work
collaboratively with the community and other partners in support of school and District goals by written agreements that meet or exceed
$250,000. Since the citizen's concern is with illegal gift of public resources no further review of this initiative is required.

The language of Policy 4260 was revised per meeting minutes of Feb 5, 2014 to better represent the District's intent to act as steward
of its resources and provide rent free use for non-district youth enrichment programs. The edits to the language do not deviate from the
board approved mission to work in partnership with organizations to build better communities provided the activity is youth oriented
and open to all interested participants on a first come first serve basis. Based on our review of the revisions and our discussions with
staff, the revisions address the reservation process and bolster the District's policy regarding utility usage, safety and insurance
requirements. Policy 4260SP is still in revision.

The District implemented a facility use and rental fee tracking system called Financial Services Direct in September 2012. I nitially there were a
number of for profit organizations registering for events under an affiliated sponsor name or organization such as the School's respective PTA. An
outcome of revised policy 4260 is that organizations must register under the legal and insured name of the organization and all current insurance
documents must be received by the District prior to the scheduled event. We noted from our discussions with staff these organizations were
initially billed which is not in accordance with District policy to provide free use for youth enrichment activities. Many of these billings
were disputed by the PTA's and may have contributed to a large unpaid accounts receivable balance, which is currently being addressed and
resolved on a case by case basis. Balances that remain unpaid are flagged in the reservation system as "do not rent" to avoid further payment
disputes.

The District now has a formal procedure for a waiver of rental fees. To ensure greater accountability over youth enrichment activity, each
organization must submit a rent waiver form signed by the school principal and assigned to each scheduled event by id number in the reservation
system. In addition, the representative of the organization must state that the event will be open to the public on a first come/first serve basis
and meet all criteria for use of school district space as outlined in Policies 4120 and 4260. The Superintendent is granted authority by the Board to
establish procedures including reserving space in accordance with priority among users and verify entitlement to rent-free use.
Seattle School District No. 1

Results:
Based on our review we are unable to conclude that unauthorized activity or gifting of district resources is evident. The District continues to refine
its procedures for waiver of rental fees and address delinquent billable accounts on a case by case basis.
What is the basis of authority used by the Superintendent to amend policy prior to a board voted and adopted amendment? Board policy
4120, 4260, and Superintendent procedures uphold the District's mission to work in partnership with organizations such as the
PTA and PTSA's provided these activities are open to all interested parties.
How many instances of free rental to non district youth occurred while the policy was in review and the Board approved the action? All
activities sponsored by PTA's and PTSA's are granted free use of space. Other organizations may have the rental fee waived if
the Principal creates a signed waiver authorization.

Does the rent free activity identified during this period constitute gifting of public funds? Based on our review the use of District facilities
free of charge is supported by current District policy.


H.5.PRG - H-14-067 Gifting of SSD Resources

Procedure Step: Reporting
Prepared By: AB1, 6/4/2014
Reviewed By: AVE, 6/9/2014

Purpose/Conclusion:
Purpose:
To report the results of the hotline examination to the citizen (if named in the referral) and to determine the method of reporting to the entity.

Conclusion:
We reported the results of the hotline examination to the citizen and determined the method of reporting to the entity.

Testing Strategy:
Seattle School District No. 1
Reporting to Entity:

Determine the appropriate method of reporting to the entity based on the significance of the issue and the ability to timely report the
results. Refer to the protocols in the Policy/Standards tab for guidance in making this determination. I f assertions are not substantiated,
communication to the entity may not be necessary; however, Audit Managers must approve this decision and include it in the
workpapers.

Audit Managers must approve the reporting method. If a hotline letter is used to report the results to the entity, use the template in
TeamMate. Refer to ORCA and the ARS Manual if a hotline report is used to report the results.

Ensure that the appropriate reviews of the reporting method are completed as outlined in the protocols in the Policy/Standards
tab. Attach the final hotline letter or report in TeamMate, as applicable. Audit Managers must approve workpapers prior to releasing final
letters or reports.

The final reporting should also be attached to the hotline in the database under the "Supporting Documents" tab in accordance with the
Citizen Hotline Protocols. This is done by the Audit Manager.

Reporting to Citizen:

Use the "Hotline Citizen Letter Template" document in TeamMate to draft a letter to the citizen explaining the results of the
investigation. The letter must be processed through the Audit I ssues Library for review and approval prior to issuance. Attach the final
letter in TeamMate.


Seattle School District No. 1
Policy/Standards:

SAO Audit Policy 1510 Citizen Hotline Referrals (effective 1/ 1/ 12)

BACKGROUND
Citizens who observe waste, inefficiency, abuse or efficiencies in state and local government may report such information to the Hotline
established under state law (RCW 43.09.186). We determine whether those issues are within our authority to review and whether they require
further examination. Citizens who communicate concerns to our Office do not have the same legal protections as those contained in the state
employee Whistleblower Act, so confidentiality is protected only until the examination is complete. Correspondence between our Office and the
citizen falls within the scope of the Public Records Act.

REQUIREMENTS

1. Citizen hotline referrals will be processed and performed in accordance with the Citizen Hotline Protocols.

The protocols are located on the intranet page and in TeamMate.

2. An initial review will be performed of all citizen hotline referrals to determine if issues raised are within the authority of
our Office and require further examination.

When concerns are not within the statutory authority of our Office to review, we will assist citizens in contacting the proper agency as
appropriate.

3. The Hotline Coordinator will work with the Audit Teams to ensure an acknowledgement is made to the citizen if contact
information is provided for in the referral.

Contact with the citizen will be made in a timely manner. Audit managers are not required to acknowledge the referral if it is made through our
website because the electronic submission process automatically creates the acknowledgement.

4. Results will be timely communicated to the citizen and entity. Professional judgment will be used in deciding the level of
reporting. Refer to the Citizen Hotline Protocols for the reporting options and required level of review.


Citizen Hotline Protocols
Seattle School District No. 1

Revised March 2010



In 2007, the Legislature voted unanimously to establish the Citizen Hotline Program in the State Auditors Office. Senate Bill 5513 (codified at
RCW 43.09.186) was designed to give citizens a way to recommend measures to improve efficiency in state and local governments and to report
waste, inefficiency, or abuse, as well as examples of efficiency or outstanding achievement by state and local agencies, public employees, or
persons under contract with state and local agencies.

The State Auditors Office takes very seriously the role of citizens in promoting accountability, fiscal integrity and openness in state and local
government. The Office also strive to ensure the efficient and effective use of public resources, therefore not every submission will result in an
examination by our Office.

Unless waived by the citizen, the law requires the names of those contacting the Hotline as well as any documentation to be kept CONFIDENTIAL
until cases are closed.

Please contact the Hotline Coordinator if you have questions on the following protocols for the Citizen Hotline process.
Hotline Submissions

All citizen submissions will be logged into the Hotline database and assigned an individual referral number to allow for central tracking and
monitoring. Intake of citizen submissions can occur one of the following ways:
Web site- Citizen submission(s) will automatically populate the database.
Letter/mail - The Hotline Coordinaator will input information into database.
Fax - The Hotline Coordinator will input information into database.

Phone - Caller to the toll-free line will get a voice message requesting that he or she leave information or provide information using the
above methods. The Hotline Coordinator will oversee the input of the information into the database.
Audit Team Audit Managers should complete the intake form on the SAO Web site to ensure the submission is inputted into the
database.
Initial Assessment Process

Seattle School District No. 1


The Hotline Coordinator will work with the Director of Legal Affairs, Deputy Director of Audit and the applicable Audit Manager to assess the
submissions to determine one of the following courses of action:

No Action FYI to the audit team.
No Action Refer to state or local entity
Audit team considers in next audit.
Audit team examines the concern immediately.
DSI examines the concern immediately.


Reporting Results

The results of hotline examinations should be reported timely to both the entity and citizen. Audit Managers should determine the appropriate
method of reporting based on the significance of the issue and the ability to timely report the results. Audit Managers should ensure the final
reporting is attached to the hotline in the database under the Supporting Documents tab and all fields in the database are complete. If after
completing the hotline examination, it is decided that contacting (i.e. phone call or meeting with them) the citizen to discuss their submission(s)
would be timelier, more effective or efficient then that contact should be documented in the Activity Log section for that hotline and can replace
sending a closure letter explaining the results of the examination.

Audit Managers should consult the following decision chart to assess reporting for hotline submissions:

Are There Hotline Investigation Results with Significant Issues?


1. Yes - Significant Issues Are Audits Currently Being Completed? a. Yes Issue as Finding in Audit
Report
b. No Issue Hotline Report


2. No significant issues Are Audits Currently Being Completed? a. Yes Issue as ML or Exit Item


b. No Issue Hotline Letter to the citizen Hotline Related Work
Seattle School District No. 1



Billing Audit teams should charge investigations to the entitys audit using the project code CI TZ to enable SAO to track all time examining
citizen submissions.



Workpapers - Audit Teams should document hotline examinations in TeamMate using a separate folder Special Services. Audit Managers
should approve workpapers prior to releasing final letters or reports.

Management of Hotline Submissions



Audit Managers should review the report available in the hotline database for their team and notify the Hotline Coordinator of any information that
needs to be updated in the database.
Phone Conferences - Quarterly the Deputy Director of Audit and the Hotline Coordinator will conduct phone conferences with the Audit Managers
to discuss the status of outstanding Hotline submissions.

Record of Work Done:
The citizen's concern regarding gifting of school district property was referred to CKC to be included as part of our accountability audit.
We have drafted a letter to the citizen explaining the results of our inquiry of this matter.
See H.5.3



H.6.PRG - H-14-086 Principals Professional Development Leave

Procedure Step: Examination
Prepared By: AVE, 6/16/2014
Seattle School District No. 1
Reviewed By: HCW, 6/16/2014

Purpose/Conclusion:
Purpose:
To document the Examination of Hotline H-14-086, and conclude on whether the allegations/concerns in the hotline referral are substantiated.
Conclusion:
We document the Examination of Hotline H-14-086, and concluded that $16,645 out of $116,205 supplemental pay was not earned. The Human
Resource department is responsible for processing supplemental compensation pay and assuring that it is authorized, approved and supported by appropriate
documentation. We noted that the procedures the department has currently in place are not sufficient to ensure supplemental compensation is paid appropriately.
We recommend the District:
Implement procedures sufficient to assure that supplemental compensation paid is for authorized activities and in proper amounts.
Provide training to Human Resource department employees on preparing and processing documentation for supplemental compensation.

Testing Strategy:
The Examination step is where to document the following:

The specific citizen hotline allegations/concerns by either copying the actual language in the web form or by scanning a copy of a written
letter.

The work performed to adequately address the hotline issue(s). Documentation should be sufficient to enable an experienced auditor
or investigator to ascertain that the information collected and the work performed support the significant judgments and conclusions. If
needed, additional steps may be added based on the size and complexity of the issue(s).


Seattle School District No. 1
Policy/Standards:


SAO Audit Policy 1510 Citizen Hotline Referrals (effective 1/ 1/ 12)

BACKGROUND
Citizens who observe waste, inefficiency, abuse or efficiencies in state and local government may report such information to the Hotline
established under state law (RCW 43.09.186). We determine whether those issues are within our authority to review and whether they require
further examination.

Citizens who communicate concerns to our Office do not have the same legal protections as those contained in the state employee Whistleblower
Act, so confidentiality is protected only until the examination is complete. Correspondence between our Office and the citizen falls within the
scope of the Public Records Act.

REQUIREMENTS

1. Citizen hotline referrals will be processed and performed in accordance with the Citizen Hotline Protocols.

The protocols are located on the intranet page and in TeamMate.

2. An initial review will be performed of all citizen hotline referrals to determine if issues raised are within the authority of
our Office and require further examination.

When concerns are not within the statutory authority of our Office to review, we will assist citizens in contacting the proper agency as
appropriate.

3. The Hotline Coordinator will work with the Audit Teams to ensure an acknowledgement is made to the citizen if contact
information is provided for in the referral.

Contact with the citizen will be made in a timely manner. Audit managers are not required to acknowledge the referral if it is made through our
website because the electronic submission process automatically creates the acknowledgement.

4. Results will be timely communicated to the citizen and entity. Professional judgment will be used in deciding the level of
reporting.
Seattle School District No. 1

Refer to the Citizen Hotline Protocols for the reporting options and required level of review.


Citizen Hotline Protocols

Revised March 2010

In 2007, the Legislature voted unanimously to establish the Citizen Hotline Program in the State Auditors Office. Senate Bill 5513 (codified at
RCW 43.09.186) was designed to give citizens a way to recommend measures to improve efficiency in state and local governments and to report
waste, inefficiency, or abuse, as well as examples of efficiency or outstanding achievement by state and local agencies, public employees, or
persons under contract with state and local agencies.

The State Auditors Office takes very seriously the role of citizens in promoting accountability, fiscal integrity and openness in state and local
government. The Office also strive to ensure the efficient and effective use of public resources, therefore not every submission will result in an
examination by our Office.

Unless waived by the citizen, the law requires the names of those contacting the Hotline as well as any documentation to be kept CONFIDENTIAL
until cases are closed.

Please contact the Hotline Coordinator if you have questions on the following protocols for the Citizen Hotline process.

Hotline Submissions

All citizen submissions will be logged into the Hotline database and assigned an individual referral number to allow for central tracking and
monitoring. Intake of citizen submissions can occur one of the following ways:
Web site- Citizen submission(s) will automatically populate the database.
Letter/mail - The Hotline Coordinaator will input information into database.
Fax - The Hotline Coordinator will input information into database.
Phone - Caller to the toll-free line will get a voice message requesting that he or she leave information or provide information using the
above methods. The Hotline Coordinator will oversee the input of the information into the database.
Audit Team Audit Managers should complete the intake form on the SAO Web site to ensure the submission is inputted into the
database.
Initial Assessment Process
Seattle School District No. 1

The Hotline Coordinator will work with the Director of Legal Affairs, Deputy Director of Audit and the applicable Audit Manager to assess the
submissions to determine one of the following courses of action:

No Action FYI to the audit team.
No Action Refer to state or local entity
Audit team considers in next audit.
Audit team examines the concern immediately.
DSI examines the concern immediately.

Reporting Results

The results of hotline examinations should be reported timely to both the entity and citizen. Audit Managers should determine the appropriate
method of reporting based on the significance of the issue and the ability to timely report the results. Audit Managers should ensure the final
reporting is attached to the hotline in the database under the Supporting Documents tab and all fields in the database are complete.

If after completing the hotline examination, it is decided that contacting (i.e. phone call or meeting with them) the citizen to discuss their
submission(s) would be timelier, more effective or efficient then that contact should be documented in the Activity Log section for that hotline
and can replace sending a closure letter explaining the results of the examination.

Audit Managers should consult the following decision chart to assess reporting for hotline submissions:

Are There Hotline Investigation Results with Significant Issues?

1. Yes - Significant Issues Are Audits Currently Being Completed?
a. Yes Issue as Finding in Audit Report
b. No Issue Hotline Report

2. No significant issues Are Audits Currently Being Completed?
a. Yes Issue as ML or Exit Item
b. No Issue Hotline Letter to the citizen

Hotline Related Work

Billing
Seattle School District No. 1

Audit teams should charge investigations to the entitys audit using the project code CI TZ to enable SAO to track all time examining citizen
submissions.

Workpapers

- Audit Teams should document hotline examinations in TeamMate using a separate folder Special Services. Audit Managers should approve
workpapers prior to releasing final letters or reports.

Management of Hotline Submissions

Audit Managers should review the report available in the hotline database for their team and notify the Hotline Coordinator of any information that
needs to be updated in the database.

Phone Conferences - Quarterly the Deputy Director of Audit and the Hotline Coordinator will conduct phone conferences with the Audit Managers
to discuss the status of outstanding Hotline submissions.


Record of Work Done:
Key People:
Paul Robb, Professional Development ProgramManager, (206) 252-0235
Terry Meisenburg, Director Labor/Employee Relations, (206) 252-0294
Wyeth J essee
Mark Starowsky
J ulie Breidenbach

Background Info:
The citizen submitted an anonymous report containing the following:
"School principals claimto work and are paid for working over school breaks when their buildings are closed but many are not working. Further, there is no
verification that they worked off-site.
Also, some school principals use professional (development) leave to fund vacations out of the country."

Examination work:
On 3/31/2014, we met with Terry Meisenburg, Director of Labor/Employee Relations, to discuss compensation for principals. We learned that principals are paid
Seattle School District No. 1
an annual salary based on 2080 hours of work per year. We confirmed this in the PASS bargaining agreement. (Q: Are all principals represented by PASS?). The
PASS agreement contains two provisions which allow principals to earn additional pay. There is a review and approval process that goes to committee. Once
approved, the principal is paid a stipend that is added to their paycheck.

On 3/31/2014, we met with Paul Robb to discuss professional development, specifically for PASS members. He confirmed that PASS members are allowed
$1,000 to use for professional development. PASS members must fill out a requisition formand submit it to Julie Breidenbach, Principal, Fairmont Park
Elementary School, for approval. Julie reviews the requisition form for reasonableness and forwards the reimbursement to the District's accounting
department.

Testing of additional pay:

We determined that Principals and Assistant Principals receive an additional pay that is coded as supplemental compensation. At H.6.1 we analyzed supplemenal
compensation and selected three principals for further review. We included the testing in Payroll/Human Resorses controls work. We noted that one of three
tested transacions resulted in overpayment over $16,000. See work at D.5.PRG and management letter recommendation at ISS.18.





H.6.PRG - H-14-086 Principals Professional Development Leave

Procedure Step: Reporting
Prepared By: AVE, 6/16/2014
Reviewed By: HCW, 6/16/2014

Purpose/Conclusion:
Purpose:
To report the results of the hotline examination to the citizen (if named in the referral) and to determine the method of reporting to the entity.
Conclusion:
The results of the examination were reported as a part of the Management Letter.

Seattle School District No. 1
Testing Strategy:
Reporting to Entity:

Determine the appropriate method of reporting to the entity based on the significance of the issue and the ability to timely report the
results. Refer to the protocols in the Policy/Standards tab for guidance in making this determination. I f assertions are not substantiated,
communication to the entity may not be necessary; however, Audit Managers must approve this decision and include it in the
workpapers.

Audit Managers must approve the reporting method. If a hotline letter is used to report the results to the entity, use the template in
TeamMate. Refer to ORCA and the ARS Manual if a hotline report is used to report the results.

Ensure that the appropriate reviews of the reporting method are completed as outlined in the protocols in the Policy/Standards
tab. Attach the final hotline letter or report in TeamMate, as applicable. Audit Managers must approve workpapers prior to releasing final
letters or reports.

The final reporting should also be attached to the hotline in the database under the "Supporting Documents" tab in accordance with the
Citizen Hotline Protocols. This is done by the Audit Manager.

Reporting to Citizen:

Use the "Hotline Citizen Letter Template" document in TeamMate to draft a letter to the citizen explaining the results of the
investigation. The letter must be processed through the Audit I ssues Library for review and approval prior to issuance. Attach the final
letter in TeamMate.

Seattle School District No. 1

Policy/Standards:

SAO Audit Policy 1510 Citizen Hotline Referrals (effective 1/ 1/ 12)

BACKGROUND
Citizens who observe waste, inefficiency, abuse or efficiencies in state and local government may report such information to the Hotline
established under state law (RCW 43.09.186). We determine whether those issues are within our authority to review and whether they require
further examination. Citizens who communicate concerns to our Office do not have the same legal protections as those contained in the state
employee Whistleblower Act, so confidentiality is protected only until the examination is complete. Correspondence between our Office and the
citizen falls within the scope of the Public Records Act.

REQUIREMENTS

1. Citizen hotline referrals will be processed and performed in accordance with the Citizen Hotline Protocols.

The protocols are located on the intranet page and in TeamMate.

2. An initial review will be performed of all citizen hotline referrals to determine if issues raised are within the authority of
our Office and require further examination.

When concerns are not within the statutory authority of our Office to review, we will assist citizens in contacting the proper agency as
appropriate.

3. The Hotline Coordinator will work with the Audit Teams to ensure an acknowledgement is made to the citizen if contact
information is provided for in the referral.

Contact with the citizen will be made in a timely manner. Audit managers are not required to acknowledge the referral if it is made through our
website because the electronic submission process automatically creates the acknowledgement.

4. Results will be timely communicated to the citizen and entity. Professional judgment will be used in deciding the level of
reporting. Refer to the Citizen Hotline Protocols for the reporting options and required level of review.


Seattle School District No. 1
Citizen Hotline Protocols

Revised March 2010



In 2007, the Legislature voted unanimously to establish the Citizen Hotline Program in the State Auditors Office. Senate Bill 5513 (codified at
RCW 43.09.186) was designed to give citizens a way to recommend measures to improve efficiency in state and local governments and to report
waste, inefficiency, or abuse, as well as examples of efficiency or outstanding achievement by state and local agencies, public employees, or
persons under contract with state and local agencies.

The State Auditors Office takes very seriously the role of citizens in promoting accountability, fiscal integrity and openness in state and local
government. The Office also strive to ensure the efficient and effective use of public resources, therefore not every submission will result in an
examination by our Office.

Unless waived by the citizen, the law requires the names of those contacting the Hotline as well as any documentation to be kept CONFIDENTIAL
until cases are closed.

Please contact the Hotline Coordinator if you have questions on the following protocols for the Citizen Hotline process.
Hotline Submissions

All citizen submissions will be logged into the Hotline database and assigned an individual referral number to allow for central tracking and
monitoring. Intake of citizen submissions can occur one of the following ways:
Web site- Citizen submission(s) will automatically populate the database.
Letter/mail - The Hotline Coordinaator will input information into database.
Fax - The Hotline Coordinator will input information into database.

Phone - Caller to the toll-free line will get a voice message requesting that he or she leave information or provide information using the
above methods. The Hotline Coordinator will oversee the input of the information into the database.
Audit Team Audit Managers should complete the intake form on the SAO Web site to ensure the submission is inputted into the
database.
Initial Assessment Process
Seattle School District No. 1



The Hotline Coordinator will work with the Director of Legal Affairs, Deputy Director of Audit and the applicable Audit Manager to assess the
submissions to determine one of the following courses of action:

No Action FYI to the audit team.
No Action Refer to state or local entity
Audit team considers in next audit.
Audit team examines the concern immediately.
DSI examines the concern immediately.


Reporting Results

The results of hotline examinations should be reported timely to both the entity and citizen. Audit Managers should determine the appropriate
method of reporting based on the significance of the issue and the ability to timely report the results. Audit Managers should ensure the final
reporting is attached to the hotline in the database under the Supporting Documents tab and all fields in the database are complete. If after
completing the hotline examination, it is decided that contacting (i.e. phone call or meeting with them) the citizen to discuss their submission(s)
would be timelier, more effective or efficient then that contact should be documented in the Activity Log section for that hotline and can replace
sending a closure letter explaining the results of the examination.

Audit Managers should consult the following decision chart to assess reporting for hotline submissions:

Are There Hotline Investigation Results with Significant Issues?


1. Yes - Significant Issues Are Audits Currently Being Completed? a. Yes Issue as Finding in Audit
Report
b. No Issue Hotline Report


2. No significant issues Are Audits Currently Being Completed? a. Yes Issue as ML or Exit Item


Seattle School District No. 1
b. No Issue Hotline Letter to the citizen Hotline Related Work



Billing Audit teams should charge investigations to the entitys audit using the project code CI TZ to enable SAO to track all time examining
citizen submissions.



Workpapers - Audit Teams should document hotline examinations in TeamMate using a separate folder Special Services. Audit Managers
should approve workpapers prior to releasing final letters or reports.

Management of Hotline Submissions



Audit Managers should review the report available in the hotline database for their team and notify the Hotline Coordinator of any information that
needs to be updated in the database.
Phone Conferences - Quarterly the Deputy Director of Audit and the Hotline Coordinator will conduct phone conferences with the Audit Managers
to discuss the status of outstanding Hotline submissions.

Record of Work Done:
The citizen did not provide name or contact information therefore we did not prepare a formal letter of response for this hotline. We included the
examination in our Payroll/Human Resources control work and included recommendations in the Management Letter.


H.7.PRG - H-14-210-MedicalBenefitsTermination

Procedure Step: Examination
Prepared By: AVE, 6/16/2014
Seattle School District No. 1
Reviewed By: HCW, 6/17/2014

Purpose/Conclusion:
Purpose:
To document the Examination of Hotline H-14-210, and conclude on whether the allegations/concerns in the hotline referral are substantiated.

Conclusion:

We will include review of H-14-210 in our 2014 SSD AC audit.



Testing Strategy:
The Examination step is where to document the following:

The specific citizen hotline allegations/concerns by either copying the actual language in the web form or by scanning a copy of a written
letter.

The work performed to adequately address the hotline issue(s). Documentation should be sufficient to enable an experienced auditor
or investigator to ascertain that the information collected and the work performed support the significant judgments and conclusions. If
needed, additional steps may be added based on the size and complexity of the issue(s).


Policy/Standards:

Seattle School District No. 1

SAO Audit Policy 1510 Citizen Hotline Referrals (effective 1/ 1/ 12)

BACKGROUND
Citizens who observe waste, inefficiency, abuse or efficiencies in state and local government may report such information to the Hotline
established under state law (RCW 43.09.186). We determine whether those issues are within our authority to review and whether they require
further examination.

Citizens who communicate concerns to our Office do not have the same legal protections as those contained in the state employee Whistleblower
Act, so confidentiality is protected only until the examination is complete. Correspondence between our Office and the citizen falls within the
scope of the Public Records Act.

REQUIREMENTS

1. Citizen hotline referrals will be processed and performed in accordance with the Citizen Hotline Protocols.

The protocols are located on the intranet page and in TeamMate.

2. An initial review will be performed of all citizen hotline referrals to determine if issues raised are within the authority of
our Office and require further examination.

When concerns are not within the statutory authority of our Office to review, we will assist citizens in contacting the proper agency as
appropriate.

3. The Hotline Coordinator will work with the Audit Teams to ensure an acknowledgement is made to the citizen if contact
information is provided for in the referral.

Contact with the citizen will be made in a timely manner. Audit managers are not required to acknowledge the referral if it is made through our
website because the electronic submission process automatically creates the acknowledgement.

4. Results will be timely communicated to the citizen and entity. Professional judgment will be used in deciding the level of
reporting.

Refer to the Citizen Hotline Protocols for the reporting options and required level of review.

Seattle School District No. 1

Citizen Hotline Protocols

Revised March 2010

In 2007, the Legislature voted unanimously to establish the Citizen Hotline Program in the State Auditors Office. Senate Bill 5513 (codified at
RCW 43.09.186) was designed to give citizens a way to recommend measures to improve efficiency in state and local governments and to report
waste, inefficiency, or abuse, as well as examples of efficiency or outstanding achievement by state and local agencies, public employees, or
persons under contract with state and local agencies.

The State Auditors Office takes very seriously the role of citizens in promoting accountability, fiscal integrity and openness in state and local
government. The Office also strive to ensure the efficient and effective use of public resources, therefore not every submission will result in an
examination by our Office.

Unless waived by the citizen, the law requires the names of those contacting the Hotline as well as any documentation to be kept CONFIDENTIAL
until cases are closed.

Please contact the Hotline Coordinator if you have questions on the following protocols for the Citizen Hotline process.

Hotline Submissions

All citizen submissions will be logged into the Hotline database and assigned an individual referral number to allow for central tracking and
monitoring. Intake of citizen submissions can occur one of the following ways:
Web site- Citizen submission(s) will automatically populate the database.
Letter/mail - The Hotline Coordinaator will input information into database.
Fax - The Hotline Coordinator will input information into database.
Phone - Caller to the toll-free line will get a voice message requesting that he or she leave information or provide information using the
above methods. The Hotline Coordinator will oversee the input of the information into the database.
Audit Team Audit Managers should complete the intake form on the SAO Web site to ensure the submission is inputted into the
database.
Initial Assessment Process

The Hotline Coordinator will work with the Director of Legal Affairs, Deputy Director of Audit and the applicable Audit Manager to assess the
submissions to determine one of the following courses of action:
Seattle School District No. 1

No Action FYI to the audit team.
No Action Refer to state or local entity
Audit team considers in next audit.
Audit team examines the concern immediately.
DSI examines the concern immediately.

Reporting Results

The results of hotline examinations should be reported timely to both the entity and citizen. Audit Managers should determine the appropriate
method of reporting based on the significance of the issue and the ability to timely report the results. Audit Managers should ensure the final
reporting is attached to the hotline in the database under the Supporting Documents tab and all fields in the database are complete.

If after completing the hotline examination, it is decided that contacting (i.e. phone call or meeting with them) the citizen to discuss their
submission(s) would be timelier, more effective or efficient then that contact should be documented in the Activity Log section for that hotline
and can replace sending a closure letter explaining the results of the examination.

Audit Managers should consult the following decision chart to assess reporting for hotline submissions:

Are There Hotline Investigation Results with Significant Issues?

1. Yes - Significant Issues Are Audits Currently Being Completed?
a. Yes Issue as Finding in Audit Report
b. No Issue Hotline Report

2. No significant issues Are Audits Currently Being Completed?
a. Yes Issue as ML or Exit Item
b. No Issue Hotline Letter to the citizen

Hotline Related Work

Billing

Audit teams should charge investigations to the entitys audit using the project code CI TZ to enable SAO to track all time examining citizen
submissions.
Seattle School District No. 1

Workpapers

- Audit Teams should document hotline examinations in TeamMate using a separate folder Special Services. Audit Managers should approve
workpapers prior to releasing final letters or reports.

Management of Hotline Submissions

Audit Managers should review the report available in the hotline database for their team and notify the Hotline Coordinator of any information that
needs to be updated in the database.

Phone Conferences - Quarterly the Deputy Director of Audit and the Hotline Coordinator will conduct phone conferences with the Audit Managers
to discuss the status of outstanding Hotline submissions.


Record of Work Done:
See H.7.1for details of referral.
Citizen provided name and contact information and asked for anonymity.

We can not include this employee into our regular review of HR because we were finished with testing when we received referral. Specific
investigaion will require to disclose citizen's identity to HR.

In order to proceed with this investigation we contacted HR. HR stated that it would be difficult to investigate the matter unless they knew the
specific details of employment. We attempted to contact the citizen on three different occasions via phone and e-mail in order to discuss if he is
comfortable with us providing his name to HR to get specific details on the matter. We left three voice mails and send two e-mails. We were not
able to get a hold of him.


We will include this matter into our next SSD audit that starts in November 2014.
To FAWF AS4.f


Seattle School District No. 1