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					Internal Controls Training
for ISC and School-based Staff

Presented By: OFFICE OF AUDITOR GENERAL

New York City Department of Education

Updated April 2009

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, • to analyze the risks to the effective performance of those functions, and • to promote the alignment of resources to address those risks.

INTERNAL CONTROL OFFICERS
Monique Scales – Director of Internal Controls

•
• •

Racine Banner
Lester Chester Paola Freire

Bronx ISC (Districts 7, 8, 9, 10, 11, 12) Queens ISC (Districts 24, 25, 26, 27, 28, 29, 30)
Staten Island ISC (Districts 17, 18, 20, 21, 22,31) District 75 Brooklyn ISC (Districts 13, 14, 15, 16, 19, 23, 32)

•

Michael Graham

Manhattan ISC (Districts 1, 2, 3, 4, 5, 6) District 79

With regard to the Children’s First Network and Empowerment Support Organization, the schools will be assigned to the ICO based on geographic location and ISC assignment.

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

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

INTERNAL CONTROL AREAS
• • • • • • • • Timekeeping & Per Session Per Diem & Class Coverage General School Funds Parent/Parent-Teacher Association (PA/PTA) Funds Inventory Purchasing Fire Drills & Safety MetroCard
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Timekeeping & Per Session

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.

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

Timekeeping Common Findings
• No written timekeeping policies • Absences/lateness 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

Per Session Activities
• Advertisement – at least 20 days prior to start date, and must include posting date, start/end dates of assignment, no. of hours to be worked, work description
http://schools.nyc.gov/NR/rdonlyres/A0974D00-8A06-46D5952B-99ECE4102934/0/OP175Form20082009.pdf

• Application (OP175) & Waiver (OP175W)
- over 500 hours
• Time Clock must be used • Time records must be maintained on file

Per Session Resources
• Chancellor’s Regulation C-175
http://docs.nycenet.edu/docushare/dsweb/Get/Document-327/C175%20%2012-3-08%20Final.pdf

• Hourly Professional Personnel Time Report

Per Session Common Findings
• Time Clock was not used to punch in/out • Per session hours overlap resulting in an overpayment • Per session time records/payments are not approved by the individuals’ supervisor • Per session time records are not approved or maintained on file • Per session time records are not accurate, e.g. time card does not agree with service report • Teachers were absent (sick) from their regular job assignment and also worked and were paid for a persession assignment on the same day

Per Diem & Class Coverage

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
Per Diem Leave Information
NOTE Use PDPS daily to check eligibility of substitutes, prior to calling anyone for service.

SMART CARD System
• Complete & fax Site Survey Form to Joe Fryd at (718) 935-5294 • PC minimum requirements – Pentium with CD-rom drive, Windows 95 or later, 32 megabytes memory/mainframe access • Color-coded eligibility notice Smart Card • PDPS interface (in progress) System • New per diem teachers • Training
For questions, please contact DIIT’s Help Desk at (718) 935-5100

Sample of Request Letter

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).

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 was paid for a class coverage(s)

GENERAL SCHOOL FUNDS & CASH TRANSACTIONS

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 cocurricular student activities.
• Funds must be spent on items necessary for the proper functioning of student extracurricular and cocurricular 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

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 obtain signature cards and then submit to DFO along with a "Letter to the Bank" and the application form. DFO will approve and forward to DOF, who opens an account on behalf of the schools.

•

DOF will only use one of the 16 banks. Schools may have an advantage of free or discount services plus insurance coverage for balances above $100k.
Send all three to: Division of Financial Operations Financial Management & Reporting – Banking Unit 65 Court Street, Room 1802 Brooklyn, NY 11201 (718) 935-3544

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.
http://dfoforms.nycenet.edu/BANK/CONSOLE.ASPX

“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 form

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.

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

GSF Controls Cash Receipts (Monies Collected)
- Journals/ledgers must be maintained - Duplicate treasurer’s receipt (prenumbered) 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.

GSF Controls Cash Disbursements (Monies Expended)
- “Request for Expenditure” form - Journals/ledgers must be maintained - Vendor’s invoices/receipts & other pertinent documentation should be maintained on file and cancelled (Stamped “Paid”) to help prevent duplicate payment

Checkbook Controls
• • • • • • • • 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 Never pre-sign checks Never write a check payable to “Cash” Check signatories should review documentation prior to signing the check

Other Controls
• Monthly bank reconciliation within ten days of receipt of bank statements
- Bank Reconciliation Statement http://schools.nyc.gov/NR/rdonlyres/C68D3C73-0BCF-4E82-996D92690DBC32D4/0/gsfbankrecon.pdf

• 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

Gifts
(FOR REPORTING ONLY)

Non-monetary Gifts Valued by donor $1,000 - $9,999 Monetary Gifts* $1.00 - $9,999

School personnel must report on-line all gifts of $1,000 or more

FOR REPORTING ONLY
1. Copy of donor’s letter 2. Letter of request or

proposal

To be used for Personnel Expenses

1. Original check

Monetary & Non-monetary Gifts $10,000 or more are to be used only for OTPS, school personnel enters on-line and may deposit the funds in School’s Bank Account (GSF)

School Based Gifts and Grants Reporting System
http://nycboe.net/Schools/GiftsGr ants/Login.aspx?ReturnUrl=%2fsch ools%2fgiftsgrants%2fDefault.aspx

2. Copy of donor’s letter 3. Letter of request or proposal 4. Requirement for use of gifts

*If gifts

SGO (Senior Grants Officer)

DFO’s On-line Gifts/Grants Tracking System

FAMIS
GALAXY

DFO Receivable Accounting

DBOR

Grants
School Based Gifts and

All Grants

Grants Reporting System
http://nycboe.net/Schools/GiftsGrants/ Login.aspx?ReturnUrl=%2fschools%2fgif tsgrants%2fDefault.aspx
1. 2. Copy of Grant Award Letter Copy of School’s proposal or letter of Request

SGO (Senior Grants Officer)

DFO On-line Gifts/Grants Tracking System

GALAXY

DFO Receivable Accounting
DBOR

FAMIS

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

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

•
•

•

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

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

New PA/PTA Bank Accounts
• To open a Bank Account PA/PTAs must obtain an Employee 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. Must have a separate Bank Account for GSF funds. – (Keep PA/PTA funds separate and independent from school funds (GSF) and budgets (galaxy). Funds/records must be stored in a secure location in the school.

•

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
–
– –

•

•

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.

–

sale of tickets to movies and theaters for children’s attendance, unless the project is directly connected to the curriculum; door-to-door solicitations of funds by children, except where parent solicits funds with his or her children; sale of raffle tickets to children or distribution of raffle tickets through children; bingo or any other form of gambling.

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 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.

Reports
• Principal has to receive two (2) reports for the year from the PA/PTA
– An Interim Financial Report must be made by the PA by January 31st Annual Financial Accounting must be made by the PA 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 Principal’s Report of PA Status

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://docs.nycenet.edu/docushare/dsweb/Get/Document-31/A-660.pdf

Parent Associations and the Schools
• WWW.IRS.GOV to obtain the SS-4 application for EIN#
Office of Family Engagement and Advocacy NYC Department of Education
49 Chambers Street - Room 503 New York, New York 10007 Telephone (212) 374-2323 Fax (212) 374-0076

INVENTORY
Textbook Equipment

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

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

Equipment Inventory
• Inventory records should 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

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
Category B

–
-

Unrepairable or Not cost effective to repair
Technologically or educationally inappropriate for the site, or a safety hazard to the site
NOTE

Computer equipment classified into Category A must be disposed of using Dell Managed Services (DMS). The school is required to contact the DIIT’s Help Desk at 718 935-5100 or http://helpdesk.nycenet.edu/ for follow up by DMS.

Equipment Resources
• Dell Manage Service link
http://www.managedservices.nycenet.edu/ check the status of an order; how to obtain Dell's inventory. http://schools.nyc.gov/Offices/DFO/KeyDocuments/Advert ised+Items.htm
http://dfoapps.nycenet.edu/SOP/Default.aspx?c=1114

• Advertised Items • Inventory-SOP

Equipment Inventory Common Findings
• Inventory records are not maintained and/or updated. • Equipment could not be located, and for missing equipment, police report is not prepared. • Equipment was observed not used, e.g., still in original boxes/cartons unopened. • “Request for Off-Site Equipment Utilization” form is not prepared.

PURCHASING

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.

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 Monthly-itemized expense reports must be compared with receipts and invoices to verify any billing discrepancies (commercial card statement) Limitations on the amount that can be purchased in any individual transaction shall be no greater than $5,000 per transaction. P-Cards maximum spending limit cannot exceed $15,000

Resources
SOP – Other than Personal Service (OTPS)
http://dfoapps.nycenet.edu/SOP/Default.aspx?c=1185

P-Card: Report billing discrepancies to JP Morgan Chase Bank & DFO’s Bureau of Finance For additional information, contact DFO at (718) 935-2841

Purchasing Common Findings
• Purchases could not be substantiated by any type of supporting documentation • 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

Purchasing Common Findings
• Vendors were paid before goods are delivered or services are rendered • No separation of duties • No indication that vendor’s invoices were paid • 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 PCard usage records. • P-Cards are not secured in a safe location when not being used.

FIRE DRILLS & SAFETY

Fire Drills
State Law Requirement (Section 807)
- At least 12 times in each school year - Eight (8) drills by Dec. 1st
- Instruction given on procedures to be followed in the event that a fire occurs during lunch period; or, actual fire drill performed during a lunch period - Summer school, two (2) additional drills, one in the first week

NOTE

Neglect by a principal or other person in charge to comply with the above requirements is a misdemeanor punishable by a fine.

Other Safety Drills
• School Bus Safety Drills
No less than three (3) per school year

– 1st drill, within the first 5 days of school – 2nd drill between 11/1 – 12/31
– 3rd drill between 3/1 – 4/30

– Once the drills are completed, schools need to go to the Office of School and Youth Development Web site to log in and enter the drill information.

Fire Drills & Safety Resources
• Chancellor’s Regulation A-414
Safety Plans (School Safety Committee)

http://docs.nycenet.edu/docushare/dsweb/Get/Document-18/A-414.pdf

• Office of School and Youth Development
http://erceo.nycenet.edu

• Office of Pupil Transportation • Chancellor’s Regulation A-801

http://www.opt-osfns.org/opt/sch/safety_drill.asp

http://mtapp21.nyced.org:8080/docushare/dsweb/Get/Document-39/A-801.pdf

For additional information, please contact your Safety Administrator

High Risk Areas
 Exterior exit doors must be unlocked and operable  Swinging hallway/stairwell doors must open and close  Access gates and doors leading to roof must have a key made accessible  All exit doors must be unobstructed  Fire alarm system must be in good working order

METROCARD

MetroCard Controls
• Distribution log should be maintained and should include student name & signature, MetroCard serial number and replacement information. • MetroCard serial numbers should be assigned to individual students in ATS. • MetroCard should be kept in a safe at all times, not in locked filing cabinets, desk drawers or offices. • School cannot under any circumstances lend MetroCards to another school. • School must account for all MetroCard issued, on hand, lost/stolen, deactivated, etc. and a reconciliation should be performed monthly.
NOTE
At no time, should a student wait more than one week for a replacement.

Immediately, report all lost or stolen MetroCard(s) to the New York City Transit.

MetroCard Resources

Request Replacement MetroCards http://schools.nyc.gov/Offices/Transportation/School Resources/replacementmetrocards.htm For additional information, visit the

Office of Pupil Transportation website http://www.opt-osfns.org/opt/metrocards/default.asp

MetroCard Common Findings
• Distribution records are not maintained • Cards could not be accounted for

For assistance, please contact the Office of Auditor General at 718 935-2600 or ICTHelp@schools.nyc.gov
OAG’s Training, Process Improvement, and School Support Unit

http://schools.nyc.gov/Offices/GeneralCounsel/OAG/Training Process/default.htm

This presentation is available on the web at

http://schools.nyc.gov/oag/ico/ict.ppt