Internal Controls in Schools Training for ROC and School-based Staff

1. Internal Controls in SchoolsTraining for ROC and School-based Staff Presented By: OFFICE OF AUDITOR GENERAL New York City Department of Education

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, to analyze the risks to the effective performance of those functions, and to promote the alignment of resources to address those risks. This mission embraces a wide array of responsibilities, including not only the traditional internal audit function of overseeing regulatory compliance and promoting fiscal integrity and revenue preservation, but also the broader role of assessing the effectiveness and efficiency of the organization in achieving its critical goals.

3. INTERNAL CONTROL OFFICERS Arnold Ali – Director of Internal Controls • Danny Nunez - ROC C* (Regions 3 & 75) ROC D* (Regions 4 & 5) ROC F* (Regions 6 & 7) • Monique Scales– ROC A***(Regions 9 & 10) ROC B* (Regions 1 & 2) ROC E***(Regions 8, 79) *1 Fordham Plaza Bronx & Queens Plaza North **30-48 Linden Place Queens & 715 Ocean Terrace Staten Island ***333 7th Ave Manhattan & 131 Livingston Brooklyn

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. INTERNAL CONTROL AREAS • Timekeeping & Per Session • Per Diem & Class Coverage • General School Funds • Inventory • Fire Drills & Safety • Purchasing • Procurement Card (P-Card) • 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 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

11. 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 • Application (OP175) & Waiver (OP175W) http://schools.nyc.gov/NR/rdonlyres/6B5A8D03-E84A-47CF-A294-5AD4D1AD7809/0/OP1750607FormOP175WFebruary2006.pdf • - over 400 hours - multiple activities (more than 25 hrs) • Time records must be maintained on file

12. Per Session Resources • Chancellor’s Regulation C-175 • Per Session Employment • Hourly Professional Personnel Time Report

13. Per SessionCommon Findings • Secretaries are paid at teacher’s rate • 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

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 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.

16. SMART CARD System • Complete & fax Site Survey Form to Joe Fryd at (718) 935-4375 • PC minimum requirements – Pentium with CD-rom drive, Windows 95 or later, 32 megabytes memory/mainframe access • Color-coded eligibility notice • PDPS interface (in progress) • New per diem teachers • Training Smart Card System For questions, please contact DHR’s Smart Card Help Unit at (718) 935-2635 Sample of Request Letter

17. 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

18. Per Diem/Class CoverageCommon Findings • Payments are made to a per diem, as well as to a paid class coverage individual, on the same day for the same absent teacher. • 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. • PDPS does not always indicate the “Replacement ID” information for tracking purposes. • Poor recordkeeping, e.g. logs are not maintained for paid class coverages. • Payments are made to F-status employees for services not rendered.

19. GENERAL SCHOOL FUNDS & CASH TRANSACTIONS

20. 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

21. New GSF Bank Accounts Account must be titled: New York City Department ofEducation In Trust For (School Name and/or Number) General School Fund Account Copy of signature card must be sent to: Division of Financial Operations Bureau of Receivables Accounting – Banking Unit 65 Court Street, Room 1802 Brooklyn, NY 11201 DOE Federal Tax Identification Number is13-6400434

22. Bank Account Survey Schools are required to report their year-end June bank statement 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. https://dfoforms.nycenet.edu/BANK/CONSOLE.ASPX 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

23. GSF ControlsSegregation 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.

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

25. GSF ControlsCash Receipts (Monies Collected) • Journals/ledgers must be maintained • 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.

26. GSF ControlsCash 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

27. 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 Checkbook Controls

28. Other Controls • Monthly bank reconciliation within ten days of receipt of bank statements • 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

29. 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/Login.aspx?ReturnUrl=%2fschools%2fgiftsgrants%2fDefault.aspx *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 Officer) DFO’s On-line Gifts/Grants Tracking System FAMIS DFO Receivable Accounting School GALAXY DBOR

30. Grants School Based Gifts and Grants Reporting System http://nycboe.net/Schools/GiftsGrants/Login.aspx?ReturnUrl=%2fschools%2fgiftsgrants%2fDefault.aspx All Grants • Copy of Grant Award Letter • Copy of School’s proposal or letter of Request School SGO (Senior Grants Officer) DFO On-line Gifts/Grants Tracking System GALAXY DFO Receivable Accounting FAMIS DBOR

31. 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://schools.nyc.gov/NR/rdonlyres/3870C36E-58C8-4EE0-916B-6C25DD886D9E/0/sopgsfchapter.pdf - • General School Funds & Cash Transactions

32. General School FundCommon Findings • GSF monies are spent on other than 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.

33. INVENTORY Textbook Equipment

34. 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

35. Textbook InventoryCommon 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

36. 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 labeled 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

37. Equipment InventoryObsolete 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 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.

38. Equipment Resources • Dell Manage Service linkhttp://www.managedservices.nycenet.edu/ check the status of an order; identify your Regional Technology Manager; how to obtain Dell's inventory. • Advertised Items http://schools.nyc.gov/Offices/DFO/SOP/AdvertisedItems/aditems.htm • Inventory-SOP http://schools.nyc.gov/NR/rdonlyres/A043AAF1-A439-4D7E-BB63-C46F7FDA7DEB/0/sopinventoryfinalchapter.pdf -

39. Equipment InventoryCommon 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.

40. FIRE DRILLS & SAFETY

41. 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.

42. 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 • Certificate of Compliance must be on file at the school • Shelter Drills No less than three (3) per school year • One (1) drill by December 1st

43. Fire Drills & SafetyResources • Chancellor’s Regulation A-414 http://docs.nycenet.edu/docushare/dsweb/Get/Document-18/A-414.pdf Safety Plans (School Safety Committee) • School Safety Plan on-lineat http://erceo.nycenet.edu • Office of Pupil Transportation http://www.opt-osfns.org/opt/sch/safety_drill.asp • Chancellor’s Regulation A-801 http://mtapp21.nyced.org:8080/docushare/dsweb/Get/Document-39/A-801.pdf For additional information, please contact your Regional Safety Administrator

44. 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

45. PURCHASING

46. PurchasingDocumentation • Invoice • Purchase Order • Packing Slip • Certification of Delivery • Logs/agendas/participants list • Bidding documents

47. 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

48. PurchasingCommon Findings • Vendor invoices were not on file to support payment • Purchases were paid without proper authorization and approval • Vendors were paid before goods are delivered or services are rendered • No separation of duties • No indication that vendor’s invoices were paid

49. PROCUREMENT CARD

50. Procurement Card (P-card) • Used for purchases related to theater and museum admission fees for students, and supplies and materials (Staples approved vendor). Additionally, on-line purchases can be made at the Staples. Register at https://www.staplescentral.com • 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) • P-Cards expire at the end of fiscal year