GRANITE SCHOOL DISTRICT Cottonwood High School

Findings and Recommendations For the 2011-12 School Year

Report No. 12-SCH-B2

Financially Strong

Keeping Utah

AUSTON G. JOHNSON, CPA UTAH STATE AUDITOR

STATE OF UTAH

DEPUTY STATE AUDITOR:

Office of the State Auditor

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

Joe Christensen, CPA

AUDIT DIRECTORS:

Auston G. Johnson, CPA

UTAH STATE AUDITOR

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

REPORT NO. 12-SCH-B2 November 8, 2012 Granite School District Board of Education 2500 South State St. Salt Lake City, Utah 84115 Dr. Martin W. Bates, Superintendent Granite School District 2500 South State St. Salt Lake City, Utah 84115 and Alan Parrish, Principal Cottonwood High School 5715 South 1300 East Murray, Utah 84121-1099 As a result of issues/concerns noted in our investigation of Provo City School District/Timpview High School (see Report #12-SCH-A), we selected four other school districts in Utah (Canyons, Davis, Granite, and Weber) and selected one high school for review from each of the four school districts (Alta, Davis, Cottonwood, and Fremont). For Granite School District (the District), we then performed the procedures enumerated below to certain aspects of internal control and compliance over certain areas at Cottonwood High School (the School) for the 2011-2012 school year. The purpose of these procedures is to review the internal control and the policies and procedures at the School in order to determine whether there is an appropriate level of control and accountability over funds collected by and on behalf of the School for: 1) school related fees and costs, 2) fundraising activities, and 3) donations. We also performed these procedures to assist the District in evaluating its internal control. 1. We performed a review of the separation of duties and internal control over the Schools general cash receipting and disbursing procedures. We also reviewed the internal control over cash receipting procedures specific to the baseball, drill and football programs. We performed analytical procedures over revenues associated with certain activities (baseball, drill and football fundraisers and fees) and determined if revenues were deposited appropriately. We reviewed certain financial transactions for compliance with relevant State laws, District policies, and School policies related to issues such as cash receipting and fundraising.

2. 3.

4. 5.

We performed limited procedures specific to the cheer program. We performed other procedures as considered necessary.

Our procedures were more limited than would be necessary to express an audit opinion on compliance or on the effectiveness of the Districts and the Schools internal control or any part thereof. Accordingly, we do not express such opinions. Alternatively, we have identified the procedures we performed and the findings resulting from those procedures. Had we performed additional procedures or had we made an audit of the effectiveness of the Districts and the Schools internal control, other matters might have come to our attention that would have been reported to you. Our findings resulting from the above procedures are included in the attached findings and recommendations section of this report. We feel that findings 1 through 5 are key internal control weaknesses. See reports #12-SCH-B1, #12-SCH-B3, and #12-SCH-B4 on the Utah State Auditors Office website at http://www.sao.utah.gov/_finAudit/rpts/2012reports.html for findings and recommendations issued to the other three school districts and their sampled high schools. Additionally, we issued report #12-SCH-B5 to the Utah State Office of Education, which summarized the findings issued to the four school districts and their sampled high schools and recommended that the Office of Education develop guidelines for fundraising and donations to aid school districts in the development of adequate policies and procedures. This report is intended solely for the information and use of the District and the School and is not intended to be and should not be used by anyone other than these specified parties. However, the report is a matter of public record and its distribution is not limited. By its nature, this report focuses on exceptions, weaknesses, and problems. This focus should not be understood to mean there are not also various strengths and accomplishments. We appreciate the courtesy and assistance extended to us by the personnel of the District and the School during the course of the engagement, and we look forward to a continuing professional relationship. If you have any questions, please call Debbie Empey, Audit Director, at 801-538-1342. Sincerely,

Auston G. Johnson, CPA Utah State Auditor cc: Larry Shumway, State Superintendent of Public Instruction Natalie Grange, Internal Auditor, Office of Education Mike Fraser, Assistant Superintendent, Granite School District Paul Hansen, Director of High Schools, Granite School District David Garrett, Business Administrator, Granite School District Michael Mower, Deputy Chief of Staff, Governors Office Jonathan Ball, Director, Office of Legislative Fiscal Analyst Ray Bartholomew, Squire & Co., CPAs

GRANITE SCHOOL DISTRICT Cottonwood High School

FOR THE 2011-2012 SCHOOL YEAR TABLE OF CONTENTS Page FINDINGS AND RECOMMENDATIONS: 1. PUBLIC FUNDS COMINGLED WITH BOOSTER CLUB FUNDS 2. INADEQUATE SEPARATION OF DUTIES 3. INADEQUATE SUPPORTING DOCUMENTATION OF CASH RECEIPTING AND
FUNDRAISING

1 4 6 7 10 11 13 15

4. INADEQUATE INTERNAL CONTROLS OVER CASH DISBURSEMENTS 5. NONCOMPLIANCE RELATED TO CONSTRUCTION PROJECTS FUNDED BY DONATIONS 6. CONFLICTING DISTRICT POLICIES 7. NONCOMPLIANCE WITH DISTRICT POLICIES AND PROCEDURES 8. NONCOMPLIANCE WITH RULES RELATED TO A PRIVATE EVENT

GRANITE SCHOOL DISTRICT Cottonwood High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR 1. PUBLIC FUNDS COMINGLED WITH BOOSTER CLUB FUNDS Cottonwood High Schools (the School) funds related to fundraising activities for the baseball, cheer, drill and football programs were commingled with private booster funds. Fundraising proceeds were sometimes handled by and deposited with the School and sometimes with the boosters. Generally, funds raised by students were considered School or public funds and those raised by parents were considered booster or private funds. For the most part, this general guideline complied with District policy but became convoluted when School property and both students and parents were involved. As a result, public funds were deposited and held in private bank accounts for a period of time and were not properly subjected to Granite School District (the District) oversight and District policies and procedures. We noted the following: Baseball Program a. During the summer of 2011, the School hosted a summer baseball league on School property. Friends of Cottonwood, the baseball programs booster organization (booster club), collected all registration fees for this league, totaling $18,900. However, the School paid $7,575 for all costs related to this summer league. The boosters remitted $2,000 to the School to cover a portion of the expenditures; however, because this league was held on School property, and because expenditures were made by the School, the revenues are public funds, and all registration fee revenue should have been deposited at the School. b. From July 2011 to April 2012, the booster club received rental fees totaling $2,940 for use of the Schools baseball facilities. Because the fees were for use of School grounds, the rental revenues are public funds and should have been deposited at the School. As of April 2012, the rental revenue is being remitted to the School and in June 2012 an agreement was established in which the School will be renting out the use of the baseball facility. c. During the 2011-2012 school year, the booster club sponsored a number of fundraisers on School property, including a dinner auction, a car wash, and the selling of concessions at the baseball games. All proceeds from these events were deposited into the booster clubs bank account. Because these three fundraisers were held on School property, involved student participation, and used the Schools name, they should have been treated as School fundraisers, and the funds should have been deposited with the School. Additionally, the School paid $92 for rental expenses relating to the dinner auction fundraiser even though all proceeds from the event went to the booster club. The booster club should reimburse the School $92. d. The boosters and students sold small banners, which were hung up around the baseball facilities, to local businesses to raise money for the baseball team. The proceeds from the sale of the banners were deposited in the booster clubs bank account. The booster club then made checks payable to the School on behalf of the students who sold banners to cover the 1

GRANITE SCHOOL DISTRICT Cottonwood High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR students fees and overnight travel costs. Those students who had already paid their fees in full received a refund check from the booster club. We believe that this fundraiser should have been a School fundraiser (with all corresponding revenues deposited with the School and expenditures going through the Schools accounting system) since students actively participated in selling banners and all banners sold were hung on School property, including one of the banners which displays Proud supporter of Cottonwood High School. Additionally, the form used the Schools name to advertise the banners. Cheer Program e. The cheer program holds cheer competitions each year at the School involving School employees, and in past years, the proceeds were deposited into the booster club account. However, during the 2011-2012 school year, an assistant principal put the proceeds into the School safe believing they were School funds. The principal then gave authority for the funds to be taken from the safe and given to the boosters. We believe that the fundraiser should have been treated as a School fundraiser. Drill Program f. During the 2011-2012 school year, the booster club for the drill program sponsored a number of fundraisers which all involved student participation, including concession sales at a dance performance, School directory ad sales, and email donation requests. These fundraisers were held on School property and/or used the Schools name, and all involved student participation. Additionally, the School paid $270 for expenses related to the concessions even though the proceeds were all deposited with the booster club. Therefore, we believe the fundraisers should have been treated as School fundraisers and the proceeds deposited with the School. The booster club should reimburse the School $270. Football Program g. A vendors name is permanently displayed on the football scoreboard in exchange for $3,000 worth of merchandise to the booster club. The merchandise, such as T-shirts, sweatshirts, hats, etc. bearing the Schools name, is sold by the boosters in their concession stand at football games and the proceeds are deposited into the booster clubs bank account. If the boosters dont use the merchandise credit, it is carried over from year to year. There is no written agreement between the vendor and the booster club. More importantly, the scoreboard is School property, so any agreement should be with the School. Without a written agreement, there is no legal recourse should the vendor fail to provide the fair value of merchandise. In addition, the proceeds of the merchandise sold should benefit the School, but this cannot be assured if the boosters have control. We do not know the value of the associated revenue because of inadequate booster records.

GRANITE SCHOOL DISTRICT Cottonwood High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR h. A fundraising Luau was held at the School in connection with the Black and Gold football game. Proceeds from ticket sales for the Luau went to the School; however, proceeds for the silent auction conducted at the Luau went to the booster club. Because parents obtained the items auctioned, they believed the proceeds were private funds. However, most if not all the items auctioned were obtained in exchange for advertisements on the football teams poster. Because the name of the School was used in generating the proceeds, food for the event was purchased by the School, and the event was held at the School, we believe all Luau proceeds, including the silent auction proceeds, should have been considered public funds. We do not know the total amount of the proceeds from the Luau because of inadequate recordkeeping by the boosters. We do know at least 11 items valued at $35-$100 each (based on the cost of poster advertisements) were auctioned and that $4,548 associated with the Luau fundraiser was deposited in the boosters bank account. i. Banner, poster, and program advertisements were sold to benefit both the School and the booster club based on who sold the advertisements. Proceeds from student sales were deposited with the School, and proceeds from parent and coach sales were deposited with the booster club. The proceeds related to advertisements sold by the Schools coaches are clearly public funds and should have gone to the School. The booster club should pay the School the $1,600 which was collected for the coaches sales. The proceeds for two banners, totaling $1,000, went to the booster club; however, the School paid the printing costs for the banners. Because public funds were used to pay the costs of the banners, the booster club should pay the School the proceeds. j. Concession proceeds were retained by the booster club. We estimate concession proceeds to be around $9,500 based on booster club bank records; however, we do not know the amount of booster expenses related to concessions because of inadequate booster records. We believe the concession funds should be considered public because the concessions were sold at the football games on School property without paying rent, and the School paid vendors $1,651 for drinks sold as concessions. The booster club should at least reimburse the School $1,651. District policies are unclear and confusing (see finding No. 6), which made the determination of whether the funds raised were public or private difficult. Public funds should be deposited with the School and all parties involved should ensure that the commingling of public funds with private funds of booster organizations does not occur. When the funds are commingled, they can be spent without proper authorization and outside of District control and could result in the misappropriation of public funds going undetected.

GRANITE SCHOOL DISTRICT Cottonwood High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR Recommendation: We recommend that the School follow District policies and procedures and properly deposit and account for all funds related to fundraising activities that belong to the School in accordance with District policies and procedures. We also recommend that the District/School consider recovering the funds identified above from the booster clubs. Districts Response: We agree that public funds must not be comingled with booster club funds. The District will clarify in policy how schools are to determine which funds are considered public from those that are not. The School will follow District policies and procedures to ensure that all public funds are properly accounted for using the District approved accounting systems and according to District policy and procedures. Beginning on May 30, 2012, the District began providing specific training to all principals, athletic directors, and head coaches regarding this issue. The District will enhance its training materials and provide more timely and regular training to all staff responsible to account for public funds. The District is considering the propriety of recovering the funds identified in the audit from the booster clubs.

2.

INADEQUATE SEPARATION OF DUTIES We noted inadequate separation of duties at the School as follows: a. The financial secretary has access to cash/checks received, prepares/sends billings, approves or initiates write-offs, reviews expected receipts, signs checks, has access to blank checks, mails or handles signed checks, and records transactions in the general ledger. For example, the following procedures are occurring that increase the risk for errors and misappropriation to occur without detection: 1) The Close-out Summary Report was not independently reconciled to the cash/checks collected and deposited. The financial secretary counts the cash/checks received, ensures that the total amount agrees to the amount recorded in the general ledger as shown on the Close-out Summary Report, and prepares the bank deposit. An employee without access to cash/checks received should reconcile the Close-out Summary Report to the amount deposited in the bank. 2) Adjustments to the general ledger, including deletions, write-offs, voided checks, and waivers, were not reviewed and approved. All recorded adjustments should be reviewed by an independent person to ensure that the adjustments were proper, accurate, and approved.

GRANITE SCHOOL DISTRICT Cottonwood High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR 3) Fees and costs assessed (accounts receivable) and collected were not reviewed by a person independent of the cash receipting process. A review should be performed by a person independent of the cash receipting process to help ensure that fees and other costs are properly assessed, recorded, and collected. b. The principal has access to cash/checks received, approves or reviews disbursements, signs checks, reviews processed disbursements, and has the ability to record transactions in the accounting system. Inadequate separation of duties exists when the same individual has access to assets (including cash/checks received), access to the accounting records, and authorization and/or reconciling/ review responsibilities. Inadequate separation of duties could allow errors and fraud to occur without detection. In situations where it is impractical to separate duties due to the small number of employees, additional internal control procedures should be implemented to compensate for the separation of duties weaknesses. Possible controls that the School might implement to help compensate for some of the above conflicts include the following: Reviews of monthly general ledger detail by department heads or others responsible for the account. Restrict the principal from handling cash/checks received and from entering transactions in the accounting system in order to enable him to perform the necessary independent reviews noted in a.1)3) above. Recommendation: We recommend that the School separate the duties outlined above or implement appropriate reviews or controls to compensate for the weaknesses. Districts Response: We agree that separation of duties is a critical element of an effective internal control structure. The District has separated many duties specific to cash handling and accounting. Also, given the constraints on staffing, the District has several compensating controls prescribed in the School Accounting Manual. The School will follow District policies and procedures to ensure the prescribed compensating controls are in place and functioning. The District will also review the recommended additional compensating controls contained in the audit as well as those to be provided by the State Office of Education and will implement enhanced controls. The District will provide regular training on internal controls.

GRANITE SCHOOL DISTRICT Cottonwood High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR 3. INADEQUATE SUPPORTING DOCUMENTATION OF CASH RECEIPTING AND FUNDRAISING The School has inadequate internal controls over cash/checks received. For student fees, the students pay the Schools financial secretary or another secretary (who only handles cash/checks as the backup) directly. For fundraisers, coaches, teachers, or boosters collect cash/checks and give to the Schools financial secretary or other secretary for deposit and entry into the accounting system. We noted the following internal control weaknesses while reviewing fundraising and other activities related to the Schools baseball, drill, and football programs during the 2011-2012 school year: a. The financial secretary did not always require and/or retain supporting documentation for cash/checks received. District Policy (School Accounting Manual 3f) requires that 100% of the money coming into the School be documented. Remittance documentation, such as tally sheets or selling envelopes, and the purpose and person making the remittance, should be required and retained to document the amount remitted. b. Neither the School nor the boosters kept adequate records to determine the amounts raised for various fundraisers. Documentation should be kept of all transactions, such as merchandise sold, tickets sold, number of people attending, fundraising information by individual student name (i.e. items assigned/entrusted per items sold). In addition, for ticketed events, the School should use pre-numbered tickets and ensure that each attendee has purchased a ticket. This situation occurred because the School turned the fundraising over to the boosters in violation of District policy, and the boosters were not aware of the Districts cash receipting policies. However, had the School been following the Districts policy regarding remittance documentation, the School would have known that the boosters were not properly handling cash receipts and could have prevented future problems. Because of the lack of documentation, we were unable to determine that fundraiser and other revenue was properly collected, remitted, recorded, and deposited. However, we reviewed several fundraising and other activities in the baseball, drill, and football programs and conservatively estimated how much revenue should have been collected using the available records provided by the School and boosters. We compared those estimates to what was actually collected and deposited, but since adequate records were not kept, we found unexplained differences between our expected revenue calculations and actual deposits. For the activities reviewed, the differences between our calculations and the amounts deposited ranged from $2,400 more than our estimates to $1,490 less than what we estimate should have been deposited. Based on our conservative estimates, we were able to determine that a reasonable amount was received and collected and that differences may be considered somewhat minor; but

GRANITE SCHOOL DISTRICT Cottonwood High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR it is possible that revenue should have been higher than our estimates, resulting in the School not receiving or depositing all cash/checks. Without adequate supporting documentation, the School has inadequate internal controls over cash receipting and fundraising activities, making it impossible to determine that the proper amounts were collected, remitted, recorded, and deposited in the bank; therefore, fraud could occur without detection. In addition, lack of documentation results in noncompliance with District policies. Recommendation: We recommend that the District provide training on the cash receipting and fundraising policies and procedures. We recommend that the School require and maintain adequate supporting documentation for all cash/checks received. Districts Response: We agree that every receipt of public funds, including the collection of fundraising proceeds, must be supported by adequate backup documentation. The District currently requires such. The District will improve its training materials as well as provide regular training to principals and related staff responsible to support every transaction with adequate documentation. The School will ensure it complies with this and all other District policies and procedures.

4.

INADEQUATE INTERNAL CONTROLS OVER CASH DISBURSEMENTS The School does not have adequate internal controls over cash disbursements. The principal is to approve invoices, purchase orders, etc. for payment, then the financial secretary inputs the disbursements into the accounting system and prepares the checks, which the principal then signs. We noted the following internal control weaknesses: a. Disbursements are not always adequately reviewed and approved. 1) Of 34 disbursements tested for the football program, 4 did not have an approval on the supporting documentation (invoices, purchase orders, etc.). Disbursements should only be recorded in the accounting system if they have been approved based on the review of proper supporting documentation. This approval, which is required by District policy (School Accounting Manual), authorizes the financial secretary to record the disbursements in the accounting system and print the checks.

GRANITE SCHOOL DISTRICT Cottonwood High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR 2) The principal signs checks without ensuring information on the check agrees to previously approved supporting documentation. Supporting documentation should be reviewed at the time checks are signed to help ensure that payments are proper, authorized, and accurate. 3) The School made a duplicate disbursement to the District. The District makes payments on behalf of the School for services and the School reimburses the District. The Schools review and approval process failed to recognize the duplication despite both disbursements being approved on the same day. The District noticed the duplication and paid the vendor the correct amount. This error indicates a lack of either understanding or attention. When disbursements are not properly reviewed and approved, improper or fraudulent transactions could occur without detection. b. The School issues advance checks without always obtaining adequate documentation and approval. Advance checks are used to allow items to be purchased by employees who do not have purchase cards and from vendors who do not accept the Schools purchase cards. According to School employees, the issuing of advance checks started in late fiscal year 2012 at the advice of the District to prevent the issuing of blank checks, since issuing blank checks is always inappropriate. If advance checks are used, proper procedures should be implemented including: 1) requiring an advance check request form to be completed and approved prior to check issuance, and 2) obtaining supporting documentation of the purchase (such as a receipt or invoice) and reconciling to the amount advanced. We noted 8 blank checks and 12 advance checks issued by the School. For 2 of the advanced checks, the supporting documentation was never obtained. For another, the actual disbursement was less than the amount of the check, so change was given. The change was returned to the School, but the financial secretary recorded it as revenue rather than reducing the expenditure. The issuing of blank or advance checks could result in improper or fraudulent payments. Checks should only be issued based on adequate supporting documentation and approvals to ensure the payments are proper and accurate. Without adequate supporting documentation and approval, misappropriations could occur without detection. c. In at least one case, the boosters for the drill team netted expenditures incurred against an amount owed to the School. If the expenditures were indeed supposed to be paid by the School, the School should have recorded the expenditures in the Schools accounting system and subjected them to the applicable approvals to ensure they were appropriate. When expenditures bypass internal controls, it creates opportunities for improper or fraudulent payments to occur without detection. d. We could not determine that a disbursement for change funds was properly accounted for. An assistant principal was issued a disbursement of $700 without documentation. Per our 8

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FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR discussion with employees and our review of the records, the money was used to establish change funds for the drill and dance teams; however, we could not determine that the change funds were returned to the School for deposit. Therefore, the funds could be missing, or the funds could have been returned and incorrectly recorded in the records. Employees indicated that the School regularly disburses cash to various teams/departments as needed in order to give change for activities. Change funds should be set and maintained at a fixed amount and kept in the safe or deposited when not in use. When assets are not properly safeguarded, loss, theft, or misuse could occur. Also, adequate documentation should be maintained in order to determine the propriety of the transaction. e. An adjustment in the accounting system related to a voided check was not reviewed and approved by the principal. Without adequate review procedures, unauthorized, inaccurate, or inappropriate adjustments could be made allowing the potential for fraud to occur without detection. Recommendation: We recommend that the School implement adequate internal control procedures over disbursements including the following: a. Review and approve supporting documentation for all disbursements prior to entry into the accounting system, and sign only those checks with supporting documentation attached. b. Include adequate documentation and approval of advance checks. c. Prohibit the netting of expenditures with amounts owed to the School by boosters. d. Maintain adequate supporting documentation and properly handle change funds. e. Review and approve all adjustments. Districts Response: We agree that every disbursement of public funds must be supported by adequate backup documentation. The District currently requires such. The District will improve its training materials as well as provide regular training to principals and related staff responsible to support every transaction with adequate documentation. The School will ensure it complies with this and all other District policies and procedures.

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FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR 5. NONCOMPLIANCE RELATED TO CONSTRUCTION PROJECTS FUNDED BY DONATIONS Construction projects related to athletics at the School were not controlled properly to ensure compliance with all applicable laws, rules, guidelines, and accounting standards. We noted multiple projects from approximately 2000-2012, including a weight room, baseball practice facility, press box, and football field, which were constructed/renovated using donated funds. Because these projects were funded by and constructed under the direction of the donors, the District abdicated much of their responsibility for the projects to the donors. However, State law does not give any exemptions related to construction depending on the funding source; therefore, all State laws and rules apply to donated projects. Also, the facilities constructed were not accounted for as assets in the Districts accounting records or financial statements in accordance with accounting standards. As a result, the District did not have adequate involvement with the construction, renovation, and inspection process and the projects were not accounted for properly in the Districts accounting records. District policies and procedures require proper accounting for assets but include no details regarding construction, renovations, and inspection. In addition, the Utah State Office of Education was not notified of the projects as required by Utah State Office of Education guidelines. Failure to comply with appropriate laws, rules, guidelines, and accounting standards relating to the construction and accounting of projects can result in increased risk and liability to the District and noncompliance with accounting standards. Recommendation: We recommend that the District and the School follow State laws and rules, Utah State Office of Education guidelines, and accounting standards related to the construction of school facilities, regardless of the funding source, to ensure appropriate oversight and accounting. We also recommend that the District develop and implement adequate policies and procedures regarding donated construction of school facilities, as determined necessary, to comply with the State laws and rules, Utah State Office of Education guidelines, and accounting standards. Districts Response: We agree that State laws and rules, Utah State Office of Education guidelines, and accounting standards related to the construction of school facilities must be followed regardless of the funding source. The District did not assume proper and adequate responsibility for the construction projects funded by donations. In June 2012, the District implemented a Donations Policy to ensure such doesnt happen going forward. As for recording the donated facilities and/or upgrades as assets in the Districts accounting records, accounting standards require that such not be recorded in the governmental fund financial statements since donated capital 10

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FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR assets are not current financial resources. The standards require such assets to be reflected in the government-wide financial statements according to the Districts capitalization policies. The District is currently working to establish the fair market value of the donated capital assets on the date of donation. The District will apply that information to its capitalization thresholds to properly reflect the assets in the government-wide statements.

6.

CONFLICTING DISTRICT POLICIES The District has policies that conflict or are unclear, causing confusion and difficulty in determining the true intent of the policies. We noted the following conflicting and unclear policies:
District policy (Article V.C.10B.) allows each club, organization, and/or department to have an annual fundraiser as approved by the principal. conflicts with The Districts School Accounting Manual (Section 3r) states that secondary schools are allowed as many fundraisers as is practical given the schools patronage. However, the baseball, drill and football programs all had more than one School sponsored fundraiser. The statement that booster fundraising activities do not involve the school, club or team is inherently flawed and confusing since the purpose of a booster group is to support the school, club or team. District policy (Article V.C.10B.5) indicates that students cannot be required to participate in fundraisers. Certain employees indicated that the School did not require participation but encouraged it. However, it appears that in some situations there was at least the perception that students were required to participate.

District policy and practice document Booster Organizations School/Team Fundraisers Student Fees states Booster fundraising activities do not involve the school, club or team. District policy and practice document Booster Organizations School/Team Fundraisers Student Fees states Students wishing to travel with a team may be required to participate in a team fundraising activity where all team members are participating to cover travel expenses. District policy and practice document Booster Organizations School/Team Fundraisers Student Fees states When students are required to participate, the fundraiser is no longer a booster fundraiser, but a school or team fundraiser which must be approved by the principal and all proceeds must be collected by the school and accounted for in the schools financial records according to District guidelines and policies.

conflicts with

conflicts with

11

GRANITE SCHOOL DISTRICT Cottonwood High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR

District policy and practice document Booster Organizations School/Team Fundraisers Student Fees states School/team fundraisers are under the direction of the Principal/Coach/ Advisor while booster fundraisers are under the direction of the boosters or their organization. District Policy Article VI B. 2. requires school personnel who collect monies to turn in such money to the school bookkeeper. School Accounting Manual Section 3.g. allows coaches/teachers to handle cash/checks received when specifically authorized to do so for fundraisers under the alternate guidelines section of the Manual.

unclear

The distinction between booster and School fundraisers is unclear since the School turned over fundraising activities for the baseball, drill and football programs to the boosters.

unclear

The policies regarding handling cash/checks were unclear or were not adequately communicated to the coaches and teachers since they understood that district policies prohibited them from handling cash/checks received and, as a result, turned over cash/check handling to boosters.

As a result of the above, the principal, teachers/coaches, and boosters are unsure how many fundraisers are allowed, when a fundraiser is a booster vs. a school fundraiser, whether students can be required to participate, and when a fundraiser should be run through the School. Without clearly defined and communicated District policies, the School and boosters are unable to consistently comply with District policies and procedures. District policies should be clear, comprehensive, and nonconflicting. The District should revise their written policies to clarify policies and procedures over cash receipting and fundraising. The policies and procedures should be in accordance with guidelines set forth by the Utah State Office of Education. Also, the District policies should be incorporated into one comprehensive manual. When employees are aware of District policy, they can better follow those policies, resulting in the handling of cash/checks being more consistent between fundraisers; therefore, the District should ensure all employees involved in fundraising activities are adequately trained on cash receipting policies and procedures. Lack of adequate internal controls, including written policies and procedures, and lack of training could allow the misappropriation of funds to occur without detection. Recommendation: We recommend that the District clarify fundraising policies and procedures and combine all policies and procedures into one comprehensive manual. We also recommend that the District adequately communicate the policies to both School employees and boosters. The policies and procedures should be in accordance with guidelines set forth by the Utah State Office of Education.

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FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR Districts Response: We agree that District policies need to be clear and easy to understand. The District administration has prepared a new Fundraising Policy, as well as other related policies, that will be presented to the Board of Education for consideration in November, 2012 to address the inconsistencies cited in the audit. Additionally, the District will provide regular training to adequately communicate all relative policies to staff.

7.

NONCOMPLIANCE WITH DISTRICT POLICIES AND PROCEDURES a. Purchasing Procedures The School did not comply with District purchasing procedures as follows: 1) Competitive Bids: The School made 14 payments to a single vendor for multiple invoices totaling $27,677 without obtaining the proper competitive bids. The Districts School Accounting Manual requires the School to obtain written bids for purchases of $500 or more and telephone bids for purchases under $500. In addition, the School is required to send purchases of $5,000 or more to the District for bidding and payment. The purchases of baseball uniforms for $5,180 (not including the amount paid by boosters) and basketball uniforms for at least $8,860 should have gone to the District for bidding and payment since the purchases exceeded $5,000. For the other purchases ranging from $12 to $3,825, the School should have received and documented either phone or written bids; however, the School disregarded the policy. 2) Splitting of Invoices: The baseball uniform purchases appear to have been split into multiple invoices to possibly avoid the Districts involvement. The Districts School Accounting Manual notes that it is illegal to split purchases to avoid bidding requirements. Obtaining bids is necessary to help ensure fair competition and the lowest available costs. Purchasing from the same vendor without bids to support the selection gives the appearance that the School was biased towards the vendor. b. Written Request and Approval of Fundraisers District policies require school departments or programs wishing to conduct a fundraiser to submit to the principal a written request which delineates the expected participants, persons designated to account for collections, the intended uses, etc. The principal is then to approve the fundraising activity. None of the fundraisers conducted by the baseball, drill, or football programs had a written request which included the information and approval as required by 13

GRANITE SCHOOL DISTRICT Cottonwood High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR District policy. The School employees were unaware of the policies requiring written documentation and approval. The lack of written approval could result in inappropriate fundraising and improper handling of cash/checks received. c. Student Fundraising and Travel The School did not comply with District Policy regarding fundraising related to student overnight travel as follows: 1) Maximum out of pocket expenses exceeded: Students participating on the baseball team were assessed $585 for an overnight trip to California. District policy and practice document Booster Organizations School/Team Fundraisers Student Fees states that $400 is the maximum out of pocket expense that can be charged to students for overnight travel. Additional travel costs (beyond the $400 out-of-pocket fee) may come from donations, sanctioned fundraisers, the School or District, or from other appropriate sources. While some students participated in fundraisers to cover a portion of their travel costs, 11 of the 31 participants paid more than $400 out of pocket because they did not earn sufficient funds through ticket or banner sales. The baseball coach was unaware of this District policy. Not following District policy could put undue financial stress on families of students who participate in sports and other clubs at the School. 2) Inequitable allocation of fundraiser money: The baseball and drill programs conducted fundraisers where students received credit towards travel costs based on sales. Some of the students on the baseball team who sold items did not receive credit towards their travel costs (as did other students who sold items) because these students had already paid their baseball fees prior to the ticket sales and the financial secretary did not want to issue refund checks. In addition, some drill team members received more credit than others because the credits were applied based on participation. As a result, certain students received more credit towards their travel costs than others. The District policy and practice document Booster Organizations School/Team Fundraisers Student Fees states Fundraising proceeds [for school/team fundraisers] are to be shared equally among team members. The allocation of proceeds was a violation of the Districts policy. Those involved with the fundraisers were unaware of this policy. Since it is common practice to give individual students credit based on what they sell, the District should evaluate whether this policy is appropriate and then either revise the current policy or communicate the policy through training. Recommendation: We recommend that the District evaluate their policies and procedures regarding how to allocate fundraising proceeds and train employees on the policies and procedures. 14

GRANITE SCHOOL DISTRICT Cottonwood High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR We recommend that the School follow District policies and procedures related to purchasing/bidding and fundraising and educate all principals, teachers/coaches, other employees, and volunteers on District policies and procedures. Districts Response: The District has evaluated its policies and procedures regarding how to allocate fundraising proceeds. The proposed new Fundraising Policy cited in our response to Finding 6 addresses the issue specifically. Additionally, the District will provide regular training to adequately communicate all relative policies to staff.

8.

NONCOMPLIANCE WITH RULES RELATED TO A PRIVATE EVENT During the summer of 2011, the Schools football coaches held a football camp for kids but did not comply with State laws and District policies and procedures. The camp was held at the School but was not School sponsored and all registration, advertisements, and collections of revenue were handled by the boosters. Thus, the camp was considered a private event. The revenue was used to pay for all expenses of the camp and any profits were divided among the football coaches. Utah Administrative Code R277-107 states that an employees participation in a private, but public education-related activity shall be separate and distinguishable from the employees public employment. We noted the following problems related to the event: a. No rental fees were paid to the School or waiver of the rental fees documented for use of the Schools field as required by District Policy (Administrative Memorandum Number 42 Facility Use and Rental of School Facilities). b. No insurance information was obtained as required by District Policy (Administrative Memorandum Number 42 Facility Use and Rental of School Facilities). c. No written agreement was signed by the coaches and the School acknowledging that the activity was a private event, as required by Utah Administrative Code R277-107-7. The issues noted above occurred because the Schools employees were unaware of the State law and District policy. The District should include the State law and its requirements in the District policies and adequately train the Schools employees regarding District policies, thereby ensuring their awareness of applicable State laws. Recommendation: We recommend that the District include applicable State laws in its policies. We also recommend that the District adequately communicate the policies and procedures to the School employees. 15

GRANITE SCHOOL DISTRICT Cottonwood High School

FINDINGS AND RECOMMENDATIONS FOR THE 2011-2012 SCHOOL YEAR We recommend that the School follow State law and District policies and procedures. Districts Response: The District agrees that applicable State laws should be included in its policies and has begun to integrate them as appropriate. Additionally, the District will provide regular training to adequately communicate all relative policies to staff. The District agrees that all of its schools are to follow State law and District policies and procedures and has and will continue to take additional steps to help schools understand what they are to comply with. The District will also enhance its School Audit Program to test school compliance.

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