STATE OF DsLAWARE
OFFICE OF AUDITOR OF ACCOUNTS
R. THOMAS WAGNER, JR., CFE, CGFM, CICA
"AUDITOR OF ACCOUNTS
"302-739-5055
R-THOMAS. WAGNER@STATE.DE.US
June 29, 2016
Mr, Herbert Sheldon
School Lead
Delaware Academy of Public Safety and Security
801 N. DuPont Road
New Castle, DE 19720
Dear Mr. Sheldon,
‘As you know, my office began reviewing the use of petty cash accounts at various charter schools earlier
this year. Overall, we found that these charter schools were not following the State’s petty cash policy
as set forth in the State of Delaware’s Budget and Accounting Manual (BAM).
Petty Cash Account Approvals
‘The Division of Accounting must approve the establishment of petty cash fund and the Off
the State Treasurer must approve the opening of the bank account used.' ‘The names and signatures
of the authorized petty cash check signers must be on record with the Secretary of Finance.
We found no evidence that Delaware Academy of Public Safety and Security's petty cash account
‘was properly approved by any of these enti
Petty Cash Account Management Compliance
Petty cash, by definition, is a small amount of money kept in an office to pay for small value items.”
Itcan be maintained in the form of cash or a checking account, Petty cash allows the processing and
payment of expenditures to occur outside the normal accounting environment. However, while the
use of such an account is convenient, it is important to recognize that the overuse of petty cash
minimizes public transparency and increases the risk of control overrides, inaccurate accounting, and
misappropriation of funds.
Per the BAM, organizations‘ may use petty cash when acquiring and paying for small value
purchases. Generally, the maximum authorization is not greater than $2,000; however, amounts not
BAM, Section 7.12.1, v.4.26
2 BAM, Section 7.12.2, v.4.26 (5)
> Per http://www. merriam-webster.com/dictionary/Petty%20cash, on March 2, 2016.
“The BAM defines “organization” as State of Delaware agencies (both merit and non-merit), school distriets, charter schools,
and higher education. BAM, Section 1.7, v.29
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HUTP:/ /AUDITOR.DELAWARE.GOVMr. Sheldon
Page 2
June 29, 2016
exceeding $5,000 may be requested where exceptional circumstances exist.’ Section 7.12 of the
BAM also sets forth additional guidelines for the operation of petty cash accounts within the State,
including that all petty cash receipts and supporting documentation must be kept by the organization
for audit purposes.°
The following table summarizes Delaware Academy of Public Safety and Security’s compliance
with these requirements during the Fiscal Year ended June 30, 2015 (Fiscal Year 2015),
Delaware Academy of Public Safety and Security
Petty Cash Account Management Compliance
Written Policies and Procedures for Petty Cash
Checks were drawn in consecutive numerical order
(BAM, Section 7.12.2.1, 4.26)
We identified three months where the checks were not written in sequential
order. We also found one check that was written out of sequence by
approximately two months.
‘Account reconciliations were performed by the Account Custox
(BAM, Section 7.12.2.4, v4.20)
The school did not perform reconciliations
Checks were signed by two employees
(the Account Custodian may not be a check signer)
(BAM, Section 7.12.2.2, v4.26)
Only the Chief Financial Officer signed each check
No petty cash checks were drawn in exeess of $500.00.
(BAM, Section 7.12.28, v4.26)
The school processed 8 checks, totaling $6,440.11, that were in excess of the
$500.00 threshold.
Maintained a Petty Cash account within the $5,000 limit throughout the period
(BAM, Section 7.12, v4.26)
The average monthly balance was $1,433.57, with an ending balance of
$467.80 on June 30, 2015.
\ |X) x xX xX xX
Further, the school lacked support to demonstrate that any of the expenditures from this account
were for a valid school purpose.
5 BAM, Section 7.12, v4.26
® BAM, Section 7.12.3, v.4.26Mr. Sheldon
Page 3
June 29, 2016
In previous communications with my office, you stated the account was indeed a petty cash account.
We agreed since it was used for ongoing operational items, such as field trip costs and cadet graduation
expenses, for the school during Fiscal Year 2015.
As stated above, we caution the school’s overuse of a petty cash account since these accounts may be
viewed as a way of transferring funds from the State into external bank accounts that lack continual
State oversight. The petty cash restrictions in the BAM are meant to reduce the various risks associated
with the use of petty cash, and users of the State’s accounting system must abide by these restrictions, in
addition to developing and implementing entity-specifie petty cash controls.
While AOA recognizes that some charter school accounts may have been operating prior to the
implementation of these BAM guidelines, we encourage all charter schools to periodically review the
BAM to ensure compliance with all of its financial processes. We also recommend using a State-issued
procurement card (PCard) or direct claim through First State Financials when possible. Regardless of
the method of payment, supporting documentation must be maintained for all transactions.
Please feel free to contact me at (302) 739-5055 with any further questions you may have,
av
R. Thomas Wagner, Jr., CGFM, CICA, CFE
State Auditor
Sincerely,
ce: Dr. Steven H. Godowsky, Secretary, Department of Education
Mr. Charles Copeland, President of the Board of Directors