Internal Controls Training for CFN and School-based Staff

1. Internal Controls Trainingfor CFN and School-based Staff Presented By: OFFICE OF AUDITOR GENERALupdated 02/18/14

2. Mission • To help the Department of Education meet its educational goals, the mission of the Office of Auditor General (OAG) is to: • identify the most critical functions performed by the Department, • analyze the risks to the effective performance of those functions, and • promote the alignment of resources to address those risks.

3. Training, Process Improvement and School Support • Monique Scales – Director • John Cruz - jcruz52@schools.nyc.gov • Wayne Vaughan - wvaughan@schools.nyc.gov • Lakiesha Williams - lwilliams49@schools.nyc.gov

4. Purpose of Internal Controls • Safeguard assets • Check accuracy & reliability of data • Promote operational efficiency • Encourage adherence to prescribed policies and procedures

5. Separation of Duties • No one person should… • Initiate transaction • Approve transaction • Record transaction • Reconcile balances • Handle Assets • Review reports

6. INTERNALCONTROL AREAS • Timekeeping & Per Session • Per Diem & Class Coverage • General School Funds • Parent/Parent-Teacher Association (PA/PTA) Funds • Purchasing • Inventory • Fire Drills & Safety • MetroCard In order to read pdf files, you must have Adobe Reader. Click here to download Adobe Reader

7. Timekeeping & Per Session

8. Timekeeping • Policies should be in writing, maintained and kept on file (sample of timekeeping policy) • Leave balances should be updated when a school employee is absent or late • Absence and lateness/early departure should be monitored • Original time records for itinerant employees must be forwarded to the payroll location, and must be maintained at the school/site where the services are performed (copies at the service site) NOTE Schools should maintain a complete employee listing (school organization sheet)and should correspond to the Galaxy Table of Organization (TO), except for new employees in process onto funded vacancies in the TO. This listing should be updated and include all personnel working at the school.

9. Timekeeping - Resources • Chancellor’s Regulations C-601 • http://docs.nycenet.edu/docushare/dsweb/Get/Document-73/C-601.pdf • Attendance and Service of School Staff

10. Timekeeping - Common Findings • No written timekeeping policies. • Absences/lateness/non-attendance are not posted in Employee Information System (EIS). • Poor recordkeeping e.g. absences are not indicated on time cards. • Employee listing is not maintained or updated. • Entries in EIS were not recorded timely. • Teachers were not moving their timecards from the in/out rack at the beginning and/or end of the day • Per the bell schedule teachers were assigned less than the required time. • Discrepancies were noted between program card, the School Organizational Chart and Galaxy.

11. Per Session Activities • Advertisement – at least 20 days prior to start date, and must include: • Posting Date • Start/End Dates of Assignment • Number of Hours to be Worked • Work Description • Application (OP175) • Individuals intending to work over 500 hours must request a waiver from their supervisor. • Time Clock must be used. • Hourly Professional Personnel Time Report must be completed. NOTE Time records must be maintained on file

12. Per Session - Resources • Chancellor’s Regulation C-175 • http://docs.nycenet.edu/docushare/dsweb/Get/Document-327/C-175%20%2012-3-08%20Final.pdf

13. Per Session -Common Findings • Time Clock was not used to punch in/out. • Per session time records/payments are not approved by the individuals’ supervisor or maintained on file. • Per session time records are not accurate, e.g. time card does not agree with service report. • There was a lack of documentation to support per session payments • Number of per session hours entered in TBNK was more than the individual’s time card. • Teachers were absent (sick) from their regular job assignment and also worked and were paid for a per-session assignment on the same day.

14. Per Diem & Class Coverage

15. Per Diem (Substitute Teachers) • Types of Per Diem Service & Payroll Status Code • Occasional per diem (O-status) - day to day substitute assignment • Long-term per diem (Z-status) – after 30 days (consecutive work days) or more in the same position covering the same absentee • Full/Part Time per diem (F-status) – working less than 5 days a week NOTE Use PDPS daily to check eligibility of substitutes, prior to calling anyone for service.

16. Class Coverage • Coverage log should be used and must include at a minimum, the following information: • Date of Coverage • Name of Absent Teacher • Per Diem Name • Names of Teachers who covered the class of the absent teachers, if per diem is not hired • Program cards should be updated and maintained on file • Teachers should be programmed for the minimum number of required periods per the contract (22 or 25 teaching periods per week based on the date of hire).

17. Per Diem/Class Coverage - Common Findings • Per Diem and class coverage payments were made for the same absent teacher on the same day. • Paid class coverage payments are made to an absent teacher covered by a per diem. • EIS is not updated to reflect the absent teacher and/or non-attendance. • Poor recordkeeping, e.g. logs are not maintained for paid class coverages. • Payments are made to F-status employees for services not rendered. • Teachers were assigned less than the contract minimum number of teaching periods and were paid for a class coverage(s). • Postings were not available for compensatory time positions. • Program cards did not accurately reflect the teacher’s schedule.

18. GENERAL SCHOOL FUNDS & CASH TRANSACTIONS

19. General School Funds & Cash Transactions • The accumulated funds (not tax levy or reimbursable funds) donated to and/or raised by the students and/or school to support extracurricular and co-curricular student activities. • Funds must be spent on items necessary for the proper functioning of student extracurricular and co-curricular activities, or for the direct benefit of students. NOTE Proper recordkeeping and appropriate internal controls will help ensure that there are no irregularities within the account

20. New GSF Bank Accounts Account must be titled: New York City Department of Education In Trust For (School Name and/or Number) General School Fund Account The City's Dept of Finance (DOF) has changed its position on bank accounts (school accounts that are not lunch monies). They now want all accounts using the City of NY tax ID number to be opened thru them. Schools are to obtainsignature cardsand then submit to DFO along with a "Letter to the Bank" and theapplication form. DFO will approve and forward to DOF, who opens an account on behalf of the schools. DOF will only use one of the designated banks. Schools may have an advantage of free or discount services. Send all three to: Division of Financial Operations Financial Management & Reporting – Banking Unit 65 Court Street, Room 1802 Brooklyn, NY 11201 (718) 935-3544

21. Bank Account Survey Schools are required to report their year-end “Reconciled”June 30th reconciled balances(non-PTA bank accounts) for inclusion in the Department of Education's financial statements. This annual reporting, known as the Bank Account Survey, can now be submitted directly to the Division of Financial Operations via the web on the Bank Account Survey. “Reconciled” Year end balances must be submitted on-line each year. For questions, contact DFO’s Banking Unit at (718) 935-2654. Bank Account Survey https://dfoforms.nycenet.edu/BankSurveyUser/UserLogin.aspx

22. GSF Controls-Segregation of Duties • Treasurer– full-time regular staff member of a school selected by the principal to manage the GSF account. • Signatories– employees authorized to sign checks drawn against the GSF account. Two (2) must sign the check. NOTE The treasurer cannot be one of the authorized signatories. An individual who is an authorized signatory cannot sign a check that is made out to him/herself. There should be at least three (3) authorized signatories.

23. GSF Controls - Fundraising Activities • Principal approved “Authorization to Collect General School Funds” • “Request for Expenditure” • “Final Statement at Conclusion of Revenue Producing Activity”

24. GSF Controls Journals/ledgers must be maintained for cash receipts and cash disbursements Cash Receipts (Monies Collected) • Duplicate treasurer’s receipt (pre-numbered) must be utilized and maintained • Cash receipts must be deposited on a regular and timely basis in a checking account & must be recorded in the checkbook for that account. Cash Disbursements(Monies Expended) • “Request for Expenditure” form must be maintained • Vendor’s invoices/receipts & other pertinent documentation should be maintained on file and cancelled (Stamped “Paid”) to help prevent duplicate payment

25. Limit access to authorized personnel Blank checks stored in a secure/locked area A running balance maintained in the checkbook Checks signed by two (2) authorized signatories Checks issued in sequential order Neverpre-sign checks Never write a check payable to “Cash” Check signatories should review documentation prior to signing the check Ensure the signature area of a voided check is torn/cut off. Checkbook Controls

26. Other Controls • Bank reconciliations should be performed on a monthly basis • - Bank Reconciliation Statement • Bank statements, cancelled checks and reconciliation must be reviewed by someone other than the individual responsible for preparing the reconciliation and documented • Follow-up on checks outstanding for more than 60 days • Follow-up discrepancies on the bank statements

27. Gifts School personnel must report on-line all gifts of $1,000 or more Non-monetary Gifts Valued by donor $1,000 - $9,999 (FOR REPORTING ONLY) FOR REPORTING ONLY 1. Copy of donor’s letter 2. Letter of request or proposal Monetary Gifts* $1.00 - $9,999 To be used for Personnel Expenses 1. Original check 2. Copy of donor’s letter 3. Letter of request or proposal 4. Requirement for use of gifts Monetary & Non-monetary Gifts $10,000 or more School Based Gifts and Grants Reporting System http://nycboe.net/schools/giftsgrants *If gifts are to be used only for OTPS, school personnel enters on-line and may deposit the funds in School’s Bank Account (GSF) SGO (Senior Grants Liaison) DFO’s On-line Gifts/Grants Tracking System FAMIS DFO Receivable Accounting GALAXY School DFPM

28. Grants School Based Gifts and Grants Reporting System http://nycboe.net/schools/giftsgrants All Grants • Copy of Grant Award Letter • Copy of School’s proposal or letter of Request School SGO (Senior Grants Liaison) DFO On-line Gifts/Grants Tracking System GALAXY DFO Receivable Accounting FAMIS DFPM

29. General School Funds & Cash Transactions - Resources • Chancellor’s Regulation A-610 • http://docs.nycenet.edu/docushare/dsweb/Get/Document-26/A-610.pdf • Fundraising Activities and Collection of Money from Students • Division of Financial Operations-SOP • http://dfoapps.nycenet.edu/SOP/Default.aspx?c=1024 • General School Funds & Cash Transactions

30. General School Fund - Common Findings • GSF monies are spent on non-student related activities such as flowers, staff meeting refreshments, parking, office equipment. • Gifts with a value of $10,000 or more are not reported to management for public disclosure. • PA/PTA funds, sunshine funds are co-mingled with the GSF account. • Cash collected from fundraising activities are used to pay for expenses, and therefore not deposited in the checking account for proper accountability. • Bank accounts are not reconciled monthly which may result in checks being outstanding for more than a year and discrepancies going undetected. • Significant balances of funds collected by the school are unused and kept in various accounts, without detailed documentation for their future plan of use. • Potential gross sales for all fundraisers were not determined to measure against actual sales. • Distribution and sales logs were not maintained for fundraising activities. • There was no evidence of goods/services received. • Lack of internal controls which could result in a financial misstatement or in a misappropriation of funds

31. Parent/Parent-Teacher Association (PA/PTA) Funds

32. Introduction • The Department of Education acknowledges the invaluable support that Parent Associations/Parent-Teacher Associations (PA/PTAs) provide to our schools and to parents and families through their advocacy on behalf of parents and students and through their fund raising efforts. Many of these resources are used to purchase instructional materials, equipment and to provide training opportunities for parents and families. • Through this vital collaboration, PA/PTAs build, support and enhance the learning environment for the entire school community. • Fundraising proceeds are used to supplement or complement the educational, social and cultural programs of the school. • Governing rules for PA/PTAs are Chancellor's Regulations A-660.

33. New PA/PTA Bank Accounts • To open a Bank Account PA/PTAs must obtain an Employer identification Number (EIN). • The EIN must be maintained on school premises and in the principal’s office. • DO NOT use the DOE Federal Tax Identification Number. • Keep PA/PTA funds separate and independent from school funds (GSF) and the school budget (Galaxy). • Funds/records must be stored in a secure location in the school.

34. Fundraising Activities • Principal has to approve all activities on-school premises and involving students during school hours. • Limited to 2 per school year involving students during instructional hours • Prohibited Activities • sale of tickets to movies and theaters for children’s attendance, unless theproject is directly connected to the curriculum; • door-to-door solicitations of funds by children, except where parent solicitsfunds with his or her children; • sale of raffle tickets to children or distribution of raffle tickets throughchildren; • bingo or any other form of gambling. • All fund-raising activities must comply with the Chancellor’s Regulations on Flea Markets (A-650), Fund Raising Activities and Collection of Money from Students (A-610), and Sale of Nutritious and Non-Nutritious Foods (A-812). • PA/PTAs must prepare and give to principals and all parents a brief statement showing the total amount of money raised, expenses, and net proceeds.

35. Principal’s Reminders • Debts incurred by the PA/PTA are the responsibility of the PA/PTA and are not the responsibility of the school, district, Region or Department of Education. • If the school safe is being used to store PA/PTA funds, then the funds must be verified before placing into the safe by more than one person. • Principals shall have access to the PA/PTA financial records upon receipt of a complaint from any source; • In the event the PA/PTA runs an after-school program, the PA/PTA must obtain a permit from the school, obtain appropriate liability insurance, and use the facilities in accordance with all applicable federal laws, NYS laws, NYC laws and Departmental policies. • The PA/PTA may not hire Department employees to run the program (s) or perform other administrative tasks, but may hire Department employees to work directly with children (e.g.: tutoring, coaching sports). • Complaints of allegations of criminal wrongdoing or misconduct and/or financial wrong doing must be reported to the Special Commissioner of Investigations for the New York City School District.

36. Reports • Principal has to receive two (2) reports for the year from the PA/PTA • An Interim Financial Report - must be filed with the Principal by January 31st • Annual Financial Accounting -must be filed with the Principal by June 30th • PAs must prepare and give to principals and all parents a brief statement showing the total amount of money raised, expenses, and net proceeds • Proposed Budget

37. Resources • Chancellor’s Regulation A-610 • http://docs.nycenet.edu/docushare/dsweb/Get/Document-26/A-610.pdf • Fundraising Activities and Collection of Money from Students • Chancellor’s Regulation A-660 • http://schools.nyc.gov/NR/rdonlyres/EBEFFD82-30D5-4B91-9F9A-6A07B0D0F2D6/0/A660.pdf • Parent Associations and the Schools • Nutritional Guidelines for Products Sold in Schools • http://www.opt-osfns.org/osfns/nutrition/NutritionalGuidelinesforProductsSoldinSchools_3-23-2011.pdf • WWW.IRS.GOVto obtain the SS-4 application for EIN# Division of Family And Community Engagement (FACE) NYC Department of Education 49 Chambers Street - Room 503 New York, New York 10007 FACE@schools.nyc.gov

38. PURCHASING

39. Purchasing Documentation • Invoice • Purchase Order • Packing Slip • Certification of Delivery • Logs/agendas/participants list • Bidding documents NOTE Documentation must be maintained for a period of 6 years and be available for audits.

40. Procurement Card (P-card) • One P-card allows for the use of multiple object codes: • 100 – supplies and materials • 300 – non-consumables • 400 – general services • 451 – local business meeting and related expenditures • Enrollment application at FAMIS portal https://dfoforms.nycenet.edu/FamisPortal/login.aspx?Sessiontoken=bxtxvb55l5mejzaog2fpmjj0 • Usage log should be maintained. • When the P-card expense reporting screen is populated with monthly transactions, it must be compared promptly to the P-Card Usage Log and receiving reports (commercial card statement) to verify that there are no billing discrepancies. • Limitations on the amount that can be purchased in any individual transactionshall be no greater than $2,500 pertransaction. • P-Cards maximum spending limit cannot exceed $15,000 at any given point in time. • Monthly online certifications must be completed using FAMIS within 2 weeks of receipt of e-mail notification.

41. Procurement Card (P-card) • Spending and Restricted Use Conditions • Procurement Cards are a purchasing vehicle and payment mechanism. Only DOE employees may apply for a P-Card. In addition, only authorized staff may use P-Cards for business related purchases and under the conditions set forth below. As defined by the NYC DOE, these spending and restricted use conditions include: • The safeguard and charges appearing on each card are the responsibility of the cardholder • Purchases that are personal in nature are strictly prohibited • Under no circumstances are P-Cards to be used for the purchase of individual services (e.g. consultants) • P-Cards cannot be used to split orders or otherwise circumvent bidding thresholds • Limitations on the amount that can be purchased in any individual transaction; amount shall be no greater than $2,500 per transaction. However, for non-contracted purchases, if a single transaction will exceed $250, please adhere to the appropriate bidding regulation • No cash advances • May not be used to pay open Purchase Orders NOTE Failure to comply with any P-card procedures detailed in the SOP, will result in progressive consequences.

42. Resources • SOP – Other Than Personal Service (OTPS) • http://dfoapps.nycenet.edu/SOP/Default.aspx?c=1185 P-Card: Report billing discrepancies to Citibank at – (800) 248-4553 & DFO’s Bureau of Finance For additional information, contact DFO at (718) 935-2841

43. Purchasing - Common Findings • Purchases could not be substantiated by any type of supporting documentation, e.g. agenda, participants list. • No proof/confirmation that purchases were actually received. • No written justification nor approval of sole-source vendor purchases. • Bidding documentation, when required, was not solicited thereby circumventing DOE procurement policies. • Vendor invoices were not on file to support payment. • Purchases were paid without proper authorization and approval. • Payments were split to circumvent bidding procedures. • Expenditures were not in accordance with the intended use of grant funds.

44. Purchasing - Common Findings • Transactions were not allowable per DOE policy or were a waste of resources. • Vendors were paid before goods are delivered or services are rendered. • Food/refreshments for meetings exceeding the allowable spending limit outlined in the SOP (i.e., eight dollars per person per meal). • Meetings held in restaurants especially at holidays and end the of school year. • Personal purchases (including Dunkin Donuts and food). • Inappropriate staff incentives (such as movie tickets and holiday gifts). • Schools paid sales tax for non-taxable items. • P-Card Log is not maintained to record all purchases. • Commercial card statements are not reconciled with P-Card usage records.

45. INVENTORY Textbook Equipment

46. Textbook Inventory • Separate inventory records for New York State Textbook Law (NYSTL) must be maintained. • “NYSTL” must be stamped on all textbooks purchased with NYSTL funds. • Annual physical inventory should be completed by April 15th, and inventory records should be updated. • All discrepancies between inventory records and physical inventory should be investigated and reported to the principal. Textbook Inventory Record

47. Textbook Inventory - Common Findings • Inventory records are not maintained. • Annual physical inventory is not performed. • Distribution records are not maintained, updated and/or reconciled with the inventory records.

48. Equipment Inventory • Inventory recordsshould be maintained. • Inventory records should be updated when new equipment is received and/or relocated. • Annual physical inventory should be performed and completed by April 15th, inventory records should be updated, and discrepancies should be reported to the principal. • A “Request for Off-Site Equipment Utilization” form should be prepared. • Equipment should be utilized as it arrives and should not be kept in boxes or storage rooms unutilized. • Engrave or permanently label all equipment “Property of NYC Department of Education”. All forms can be accessed through the FAMIS Portal https://dfoforms.nycenet.edu/FamisPortal/login.aspx?Sessiontoken=fpotot45itl10tfxkjfsodn2

49. Equipment Inventory - Obsolete Equipment • Equipment may be considered to be obsolete and no value to the Department of Education when its condition is: • Category A – Unrepairable or Not cost effective to repair • Category B – Technologically or educationally inappropriate for the site, or a safety hazard to the site NOTE Computer equipment must be disposed of using the Personal Computing Services (PCS) vendor selected by the school. For further assistance, contact DIIT’s Help Desk at 718 935-5100 or http://helpdesk.nycenet.edu/.

50. Equipment - Resources • DIIT Self-Support Website http://servicecenter.nycenet.edu/selfsupport/login.asp • AdvertisedItems • http://schools.nyc.gov/Offices/EnterpriseOperations/ChiefFinancialOfficer/DFO/KeyDocuments/Advertised+Items.htm • Inventory-SOP • http://dfoapps.nycenet.edu/SOP/Default.aspx?c=1114