October 15, 2018

On October 15, 2018, the District received its management letter from the audit ending June 30, 2018.  Within this letter, there are suggested corrective actions that the District may consider. Listed below are the open recommendations and the District’s response.

Policies and Procedures-
1.	Procurement Policy-the current policy does not state the number of quotes required for purchases below the bidding threshold, as required by GML Sections 103 and 104b.

District Response-The District is in the process of updating its Regulations to Board Policies.  The District does use an older purchasing manual but that is in the process of being revised and will be presented as a Regulation to the Procurement Policy as soon as complete.
2.	Investment Policy-the maximum amount that can be maintained on deposit at the approved depositories is not indicated, as required by GML, in the Investment policy or in the reorganizational minutes.

District Response-The District has approved this at the October, 2018 board meeting and will be put on the Reorganizational Meeting each July.

3.	Disbursements-The examination of disbursements revealed three instances where there was no purchase order to support a purchase made.  In addition, we noted thirteen instances where a receiving or approving signature was not included on an invoice approving it for payment.
In an effort to improve internal accounting controls, we recommend that purchase orders be issued whenever possible prior to a purchase being made.  In addition, all invoices should have an indication it is okay to pay from an appropriate individual prior to being processed.

District Response-The District strives to have proper process with purchasing, however, there are  times when emergency purchases are necessary and we will ensure a sign off is on those invoices.

4.	Trust and Agency-Flexible Spending-Currently, balances for the flexible spending and HRA accounts are being recorded in General fund as a liability, instead of the Trust and Agency fund.
We recommend the District review how payroll deductions are handled in the software and consider running these deductions through the Trust and Agency fund.

District Response-The District agrees to move these monies from the General Fund to the Trust and Agency Fund.

5.	Documentation of Internal controls-Auditing standards now require that management document in writing their understanding of the internal accounting controls that are in place in the business office.
In an effort to accomplish this task, we recommend the Administration continue the process to document the procedures performed for the various business office functions (Payroll, cash receipts, cash disbursements, bank reconciliations and monthly closing).

District Response-The District will continue the creation of procedure manuals in the business office and have completed by the end of the 2018-19 school year.

6.	School Lunch Program-As indicated in the financial statements, the School Lunch Program had an operating loss of $58,701. While the fund has $88,611 remaining in fund balance, it was noted that expenses increased 10.3%, whereas, revenue decreased 6%. 

We recommend the Administration review the program for possible cost savings and revenue enhancement items.

District Response-The District had re-bid the food service contract which indeed came in higher. Administration agrees to review program.

7.	Tax Levy Reconciliation-the District does not utilize the taxes receivable account, and instead, posts all receipts directly against the Real Property Tax (A-1001) revenue code.

We recommend that the taxes receivable account be utilized, and that collector’s reports be properly reconciled to ensure taxes and interest are being recorded accurately, and that all chargebacks and reassessments are properly reflected on the books.

District Response-The District has created a tax levy receivable for 2018-19 and will ensure full reconciliations are completed including all chargebacks and reassessments.

8.	Transportation Salaries-When reviewing the driver sheets completed by individual drivers for midday runs, the driver sheets did not completely identify the nature and purpose of these runs.

We recommend bus driver sheets include a description or reference that identifies the run. This process would allow for better tracking and improving efficiency when analyzing the expenditures related to transportation costs.

District Response-This process has changed, effective immediately, in which drivers are required to record their midday runs on their timesheets.

9.	Cyber Risk Management-The AICPA Center for Audit Quality recently issued a cyber security risk management document discussing cyber threats that face both public and private entities.  The District’s IT personnel routinely assesses cyber risk as part of their normal operating procedures.  We recommend the District continue to document their cyber risk process in writing which should include the risk assessment process, the frequency of the risk assessment, how findings are to be communicated to the appropriate level of management, and how the process will be monitored.
District Response-The District will work on documenting processes for cyber risk.
If there are any other questions, please feel free to contact me.

Sincerely,

Sharon Zacher
Assistant Superintendent for Business
Holley Central School District