Internal Controls - Associated Student Body Accounts ......• Students in organized ASBs are primarily responsible for their organizations; the student council and student club leaders

© 2017 Crowe Horwath LLP

Internal Controls - Associated Student Body Accounts Training

San Diego Unified School District


© 2017 Crowe Horwath LLP 22

General Overview

Management of ASB Funds

Don’t Be An Audit Exception


General Overview – Roles and Responsibilities

• State of California• Establishes the laws and regulations that govern the activities of school districts, including ASB

• California Department of Education• Develops policies regarding any legislation or regulations enacted as a result of the law

• Board of Education• Is responsible for everything that happens in the District• Education Code section 48930 - the governing board has the authority to approve the formation of a student body

organization within the district


General Overview – Roles and Responsibilities

• Superintendent• Responsible for ensuring that board policies are implemented and that staff follow those policies

• Business Services• Responsible for general oversight of student body activities

• Principal• Responsible for student body organization financial activities

• ASB Advisor• Must be a certificated employee ensure policies and procedures are followed

• ASB Bookkeeper• Responsible for ASB bookkeeping

• Student Council• Authorizes activities, approves expenditures, follows policies and procedures


General Overview – ASB

• Purpose• Promote the general welfare, morale, and educational experiences of the Students• Students learn how to operate a small business• Develop skills such as leadership



• General Principles• Funds derived from the Student Body must be expended in a manner approved by the Student Governing Body• Student Body funds must be expended for the benefit of those students currently enrolled in school who have contributed

to the accumulation of the funds• Prior approval by the Student Governing Body must be obtained in the raising of revenue and the expenditure of Student

Body funds



• Unorganized ASB• Students do not govern the ASB organization. • Usually there is only the primary student body organization and no additional clubs.• Adult education, continuation, special education, regional occupational programs (ROPs) and K-8 schools are also

considered to have unorganized ASBs.

• Students usually have limited involvement in making decisions about the fundraising events and how the funds are to be spent. The governing board delegates the authority to oversee the raising and spending of funds to the principal/school site administrator or another school employee, who is able to make all of the decisions related to the ASB operations and funds. Although authority is delegated to the principal/school site administrator, the rules and guideline regarding fundraising and allowable expenditures remain the same as those for organized ASBs.



• Organized ASB (Typically Middle/High School)• Students organize activities around student clubs and a student council.

• Students in organized ASBs are primarily responsible for their organizations; the student council and student club leaders hold formal meetings, develop budgets, plan fundraisers, decide how the funds will be spent, and approve payments. The students make the decisions and have primary authority over the funds; the school administrators, ASB bookkeeper and club advisor(s) assist, advise and co-approve student decisions.


General Overview – Organized ASB - Meeting minutes

• Minutes of Meetings • Because there is a formal process of student governance for organized student bodies, the student council and each club

must prepare and maintain a record of each meeting. These records are called minutes, and they serve as the record of each meeting and the actions taken, and demonstrate that the student council or club has followed ASB policies and procedures as well as current law.

• The minutes of each club meeting should document, at a minimum, the following:• Date, time and place of meeting• Name of those in attendance• What was discussed• What action was taken during the meeting


Fraud Risk


Management of ASB Funds – Cash Receipts

• Collections and Verification• The auditor’s determination will be based on the following question “Is all of the money that was deposited all of the

money that should have been deposited?”• All money collected from any source must be substantiated by auditable records

• Examples: pre-numbered receipts, class receipt records, ticket reconciliations, deposit forms, student lists, tally sheets, cash register tape reconciliations, etc.

• Overages and Shortages must be reported in detail



• Fundraisers• Governing board is responsible for approving fundraising events• Events must contribute to sound educational principles and must not be in conflict with the ideals of the educational

program• Revenue potential form – budget to actual• Games of chance (bingo) are prohibited



• Deposits• Cash receipts should be deposited timely. If daily deposits are not feasible, money should be secured in a safe, or other

locked place• Cash receipts should never be left in the school office over weekends or holidays• Never take cash home; don’t lock it in your car, etc.


Management of ASB Funds – Cash Disbursements

• Purchases• Purchase requisitions/orders must be submitted for prior approval by Student Body Organization• A Student Body Organization is not obligated to pay for an expenditure ordered by a teacher, student or other person who

has not first received a written purchase requisition/order• Payment must be made only after evidence of receipt of goods/services• Expenditures must be supported by invoices• Equipment Purchases – Student Body is responsible for repair, maintenance, upkeep and insurance• Insurance – responsibility for insurance should be delegated to District Office, as part of the District’s overall insurance

coverage


Management of ASB Funds – Other

• Balances at end of year• Review balances during the year to ensure the funds are spent for the benefit of the students enrolled when the funds

were raised, unless pre-approved• If club has a balance at end of year, students determine how they should spend the money, gift to another club, or donate

to general ASB fund


What to Look For…..

• Bank reconciliations and financial reports• Deposits that are outstanding for a long period of time• Unusual transactions • Clearing accounts are set up in accounting system

• Cash disbursements• Detail of invoices – are all the items on there for the purpose approved?• Invoices paid twice


What to Look For…..

• Student stores • Inventory shortages• Cash shortages

• Deposits• Cash count not done in dual custody when turning funds in• No reconciliation of cash sales and cash on hand• Deposit form not matching bank statement deposit amount


Best practices

• For everyone’s protection, do the following:• Never leave money unattended• Always count all money with a witness• When possible, have two people transport deposits• Always sign and initial and have a witness sign and initial documentation in as many places as possible indicating the

status and amount of money that the two signers counted• Always retain duplicate cash count forms for the club’s records• Always protect the ASB bookkeeper by counting cash with them and obtaining signatures attesting that the cash counts

agree


Best practices

• For everyone’s protection, do the following (continued)• Safeguard user identities, passwords, combinations and other access controls• Double-check bank reconciliations, cancelled/cleared checks, and check endorsements• Obtain proper authorizations for all transactions including journal entries, transfers, reimbursements and advances• Always compare the advisors copies of club transactions with the financial report for the club• Ensure that all club advisors retain club-related records for as long as they have serve as club advisor• Ensure that the ASB bookkeeper is never afraid to say no

• The ASB bookkeeper should never be afraid to refuse an incorrect deposit or improper authorization for disbursement


Common ASB Audit Exceptions

• Fundraisers• No evidence of approval prior to fundraiser

• Cash receipts• Receipts is not issued when funds are turned into ASB• Tally sheets are not used to support the number of items sold/unit price per item• Cash not counted in dual custody• Timing of deposits.• Cash held over summer/winter/spring breaks


Common ASB Audit Exceptions

• Purchases• Unsupported expenditures• Lack of proper approval for expenditure

• Bank reconciliations• No review of bank transactions or financial activity reports by the site


Case Study


Case Study

It’s Friday night at ABC High School and they are playing against their biggest rival in the last basketball game of the season. The gymnasium is packed with spectators on both sides. Knowing this was going to be a big event Andy the Athletic Director made sure to have extra ticket sellers and ticket takers. To ensure he had adequate coverage he told teachers of the school that he would pay them each $25 for their time.

At the end of the night Andy paid 10 teachers who helped out $25 in cash from the door fee collections.

It was late when the game ended. ABC High School lost in the final seconds. Andy was tired and wanted to get on the road for his hour long drive home. He decided to take the money collected from door fees home and would give it to the site controller first thing Monday morning. He counted the money at home and prepared the deposit form for the site controller. Andy put the deposit in the schools drop safe before the site controller arrived at work on Monday.

Please discuss the following questions: 1. What type of potential audit exceptions are there with this scenario? 2. Are there other concerns?


Questions


In accordance with applicable professional standards, some firm services may not be available to attest clients.

This material is for informational purposes only and should not be construed as financial or legal advice. Please seek guidance specific to your organization from qualified advisers in your jurisdiction. © 2017 Crowe Horwath LLP, an independent member of Crowe Horwath International crowehorwath.com/disclosure 2525

Matthew Nethaway, [email protected]

Arthur Ngo, Senior [email protected]

Joe Trone, [email protected]

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Internal Controls - Associated Student Body Accounts ......• Students in organized ASBs are primarily responsible for their organizations; the student council and student club leaders