Mendocino County Office of Education – Ukiah Unified School District Adult School Report

Mendocino County Office of Education Extraordinary Audit of the Ukiah Unified School District Adult School October 22, 2014 Joel D. Montero Chief Executive Officer Fiscal crisis & ManageMent assistance teaM October 22, 2014 Paul Tichinin, Superintendent Mendocino County Office of Education 2240 Old River Road Ukiah, CA 95482 Dear Superintendent Tichinin: In August 2014, the Mendocino County Office of Education and the Fiscal Crisis and Management Assistance Team (FCMAT) entered into an agreement to conduct an AB 139 extraordinary audit to determine if fraud, misappropriation of funds or other illegal activities may have occurred at the Ukiah Unified School District’s adult school. The county office has reason to believe, based on review of documentation by and reports from the Ukiah Unified school district administration, that misap- propriation of student fees and tuition payments that participating students paid may have occurred. This report contains the study team’s findings and recommendations. FCMAT appreciates the opportunity to serve you and extends thanks to all the staff of the Mendocino County Office of Education and Ukiah Unified School District for their cooperation and assistance during fieldwork. Sincerely, Joel D. Montero Chief Executive Officer Fiscal crisis & ManageMent assistance teaM i TABLE OF CONTENTS Table of Contents Foreword .................................................................................................iii Introduction ............................................................................................1 Definition of Fraud and Internal Controls .....................................5 Findings and Recommendations .....................................................9 Substantive Testing .......................................................................................9 Manuals and Cross-Training ......................................................................19 Federal Student Aid (FSA) .........................................................................21 Fraud Prevention and Detection ............................................................25 Employee Bonding ......................................................................................29 AB139 Extraodrinary Audit Report Summary: Potential Fraud .....31 Appendices ...........................................................................................33 Mendocino county office of education ii Fiscal crisis & ManageMent assistance teaM iii ABOUT FCMAT About FCMAT FCMAT’s primary mission is to assist California’s local K-14 educational agencies to identify, prevent, and resolve financial and data management challenges. FCMAT provides fiscal and data management assistance, professional development training, product development and other related school business and data services. FCMAT’s fiscal and management assistance services are used not just to help avert fiscal crisis, but to promote sound financial practices and efficient operations. FCMAT’s data management services are used to help local educational agencies (LEAs) meet state reporting responsibilities, improve data quality, and share information. FCMAT may be requested to provide fiscal crisis or management assistance by a school district, charter school, community college, county office of education, the state Superintendent of Public Instruction, or the Legislature. When a request or assignment is received, FCMAT assembles a study team that works closely with the local education agency to define the scope of work, conduct on-site fieldwork and provide a written report with findings and recommendations to help resolve issues, overcome challenges and plan for the future. Studies by Fiscal Year 90 80 70 60 50 40 30 20 10 0 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 Mendocino county office of education seidutS fo rebmuN FCMAT also develops and provides numerous publications, software tools, workshops and professional development opportunities to help local educational agencies operate more effec- tively and fulfill their fiscal oversight and data management responsibilities. The California School Information Services (CSIS) arm of FCMAT assists the California Department of Education with the implementation of the California Longitudinal Pupil Achievement Data System (CALPADS) and also maintains DataGate, the FCMAT/CSIS software LEAs use for CSIS services. FCMAT was created by Assembly Bill 1200 in 1992 to assist LEAs to meet and sustain their financial obligations. Assembly Bill 107 in 1997 charged FCMAT with responsi- bility for CSIS and its statewide data management work. Assembly Bill 1115 in 1999 codified CSIS’ mission. AB 1200 is also a statewide plan for county offices of education and school districts to work together locally to improve fiscal procedures and accountability standards. Assembly Bill 2756 (2004) provides specific responsibilities to FCMAT with regard to districts that have received emergency state loans. In January 2006, SB 430 (charter schools) and AB 1366 (community colleges) became law and expanded FCMAT’s services to those types of LEAs. iv ABOUT FCMAT Since 1992, FCMAT has been engaged to perform more than 1,000 reviews for LEAs, including school districts, county offices of education, charter schools and community colleges. The Kern County Superintendent of Schools is the administrative agent for FCMAT. The team is led by Joel D. Montero, Chief Executive Officer, with funding derived through appropriations in the state budget and a modest fee schedule for charges to requesting agencies. Fiscal crisis & ManageMent assistance teaM 1 INTRODUCTION Introduction Background The Ukiah Unified School District is located in the county of Mendocino and serves approxi- mately 5,800 students, preschool age through adult. The district is comprised of six elementary schools, two middle schools, and a comprehensive high school. The district operates an early education preschool, an alternative education high school, and an adult school. The Ukiah Adult School offers training programs including General Educational Development (GED) preparation and testing, and Licensed Vocational Nursing (LVN). The adult school has a longstanding history of preparing students for the National Council Licensure Examination for Practical Nurses for more than 40 years and recently became an authorized Title IV adminis- trator, allowing the district to administer Federal Student Aid (FSA) including Pell Grant awards. In early June 2014, the district administration identified inconsistencies and irregularities between the cash collections receipted at the district’s adult school and those forwarded to the school district business office for deposit. The district reported these concerns and provided the Ukiah Police Department with preliminary evidence prepared by the district’s adult school administration. The police department conducted a preliminary investigation, interviewing district and school site staff recording a summarization of findings in a police report dated 6/27/2014-0712. Because of concerns that allegations of potential illegal acts, including fraud, may violate government and education codes related to fraud and/or misappropriation of assets, the county superintendent initiated an investigation to determine whether sufficient evidence of fraud, misappropriation of funds or other illegal activities exists to merit reporting the matter to the local district attorney’s office for further investigation. Under the provisions of Education Code section 1241.5(b), in August 2014 the Mendocino County Office of Education requested that FCMAT assist the county office by conducting an AB 139 extraordinary audit to determine if fraud, misappropriation of funds or other illegal activities may have occurred at the district’s adult school. The study agreement specifies that FCMAT will perform the following: 1. Interview key management, certificated or classified employees responsible for student tuition and program fees to identify and assess the organizational structure and operating style, written communications, and all internal risk assessment processes. 2. Review the organizational chart, delegation of authority, and management reports of each employee responsible for the various activities related to student tuition and program fees. 3. Interview select staff members to obtain the staff perspective. Interviews will include, but may not be limited to, the superintendent and district office or other site personnel. During all interviews the team will solicit input on concerns or areas of risk. Mendocino county office of education 2 INTRODUCTION 4. Evaluate the adequacy of the organizational structure and various reporting processes to help determine whether accountability for financial results is clearly demonstrated. 5. If the organizational structure and various reporting processes do not appear adequate, provide recommended or alternative structures or reporting processes to provide additional assurance. This may include comparisons to similar adult school program operations, or to corresponding departments in the district. 6. Identify all key activities (assessment and billing, fee adjustments or allow- ances, collections and write-off, and distribution) and gain an understanding of the business processes and the positions responsible for them. 7. Review financial processes and document those positions responsible for initiating, reviewing, approving, and reconciling financial transactions. 8. Evaluate processes for adequate separation of duties and proper authorization and approval to help determine whether they are sufficient to provide reason- able assurance that the district’s resources are properly safeguarded. 9. Interview department information systems personnel to identify all relevant information systems, applications, databases, and interfaces (manual or electronic) with other systems. For example, the team will strive to obtain the following information: a. Is this an electronic or manual information system b. Does the system interface with core administrative information systems? If yes, is that process manual or electronic? c. What type(s) of source documents are used to input the data? d. Who has access to the data in the system? e. What type of access and editing controls are in place within the automated or manual system? f. How are transactions reviewed and approved within the system? The team will sample test data for the 2013-14 and two prior fiscal years and will include a summary review of the total adult school program fees or tuition payments for each fiscal year. Testing associated with this review will be based on sample selection and may not include all transactions and records for this period. Sample testing and review results are intended to provide reasonable but not absolute assurance regarding the accuracy of the district’s transactions and financial activity. Fiscal crisis & ManageMent assistance teaM 3 EXECUTIVE SUMMARY Fieldwork Investigating allegations of fraud requires a number of steps including interviews with potential witnesses and gathering evidence from internal and external sources. FCMAT reviewed, analyzed and tested business records including cash receipts, deposit history, general ledger activity, vendor master files, financial reports, board policy and administrative regulations, and internal docu- ments from various departments and independent sources. FCMAT also conducted interviews with management personnel, business office and other district staff to obtain information on general business practices and the events that occurred during the 2013-14 and two preceding fiscal years, including any alleged mismanagement, fraud or abuse. Although there are many different types of fraud, occupational fraud is common when employees are in positions of trust and have access to assets. Embezzlement occurs when someone who is lawfully entrusted with property takes it for his or her personal use. Common elements in all fraud include the following: • Intent, or knowingly committing a wrongful act • Misrepresentation to accomplish the act • Reliance on weaknesses in the internal control structure • Concealment to hide the act Scope and Procedures The primary purpose of this review is to provide the Mendocino County Office of Education and the district with reasonable assurance, based on testing, that there are adequate management controls for the district’s reporting and monitoring of financial transactions, and determine whether fraud, misappropriation of funds or other illegal activities may have occurred. Fraud investigations consist of gathering adequate information about specific allegations and performing audit test procedures to determine whether fraud may have occurred; evaluating the associated loss; determining who was involved and how it may have occurred. During interviews, FCMAT study team members asked questions on policies and procedures; job responsibilities; cash handling; purchasing and expenditure practices; transaction authorization; cash deposit practices, adult school program administration; student financial aid administration and open-ended questions designed to elicit information about other possible irregularities related to the scope of work. 1. FCMAT also performed substantive testing procedures for all cash received by the Ukiah Adult School during fiscal years 2011-12, 2012-13 and 2013-14. FCMAT’s findings and recommendations are the result of the above audit procedures. Study Guidelines FCMAT provides a variety of services to school districts and county offices of education upon request. Education Code Section 1241.5(b) permits a county superintendent of schools to review or audit the expenditures and internal controls of any school district in that county if he or she has reason to believe that fraud, misappropriation of funds, or other illegal fiscal practices Mendocino county office of education 4 EXECUTIVE SUMMARY have occurred that merit examination. According to the Education Code, the review or audit conducted by the county superintendent will focus on the alleged fraud, misappropriation of funds, or other illegal fiscal practices and is to be conducted in a timely and efficient manner. This is in accordance with Education Code Section 42638(b), which states the following: If the county superintendent determines that there is evidence that fraud or misappropriation of funds has occurred, the county superintendent shall notify the governing board of the school district, the State Controller, the Superintendent of Public Instruction, and the local district attorney. Therefore, FCMAT focused on the allegations of misappropriation of assets, cash receipting prac- tices, cash receipts issued by the Ukiah Adult School, completed deposits submitted by the adult school to the district business office, and district deposits in the Mendocino County Treasurers Office recorded in the district’s general ledger during the 2011-12, 2012-13 and 2013-14 fiscal years. These actions were taken to determine whether the district and/or its personnel may have been involved in or committed fraudulent activities. FCMAT visited the district on August 5-7, 2014 to conduct interviews, collect data and review documents. This report is the result of those activities and is divided into the following sections: • Definitions of Fraud and Internal Controls • Substantive Testing • Organizational Structure and Control Environment • Other Concerns • Fraud Prevention and Detection • AB139 Extraordinary Audit Report Summary • Appendices Study Team The study team was composed of the following members: Marisa A. Ploog, CPA, CFE, CICA, CGMA Pam Viar FCMAT Fiscal Intervention Specialist FCMAT Consultant Bakersfield, CA Sanger, CA Eric Smith Leonel Martínez FCMAT Fiscal Intervention Specialist FCMAT Technical Writer Templeton, CA Bakersfield, CA Fiscal crisis & ManageMent assistance teaM 5 DEFINITION OF FRAUD AND INTERNAL CONTROLS Definition of Fraud and Internal Controls Fraud can include an array of irregularities and illegal acts characterized by intentional deception and misrepresentations of material facts. One of the main issues in evaluating the adult educa- tion program at the Ukiah Unified School District was the receipt of tuition for the licensed vocational nursing (LVN) program in the form of checks and cash and whether fraud may have occurred in this area. A material weakness is a deficiency in the internal control process that may allow errors and omissions, intentional or otherwise, including fraud, to occur. When a material weakness exists, employees in the normal course of business may not detect errors in time to correct them. A material weakness also can be a violation of law or regulations. Although all employees have some degree of responsibility for internal controls, the governing board, superintendent and senior management are ultimately responsible. Occupational Fraud Occupational fraud occurs when an organization’s owners, executives, managers or employees use their occupation to deliberately misuse or misapply the employer’s resources or assets for personal benefit. The three main types of occupational fraud are corruption, asset misappropriation, and financial statement fraud. The diagram on the following page shows the Occupational Fraud and Abuse Classification System, also referred to as the fraud tree. (ACFE 2014 Report to the Nations on Occupational Fraud and Abuse) Mendocino county office of education 6 DEFINITION OF FRAUD AND INTERNAL CONTROLS Corruption involves an employee or employees using influence in business transactions to obtain a personal benefit that violates that employee’s duty to the employer or the organization. Asset misappropriation includes cash skimming, falsifying expense reports and/or forging company checks. Financial statement fraud includes the intentional misstatement or omission of material information in financial reports. Occupational fraud is one of the most difficult types of fraud and abuse to detect; however, the most common method of detection is tips, which help prevent occupational fraud three times as often as any other detection method. According to the 2014 Report to the Nations conducted and published by the Association of Certified Fraud Examiners, asset misappropriation is by far the most common of the three primary categories of occupational fraud, occurring in more than 85% of cases the association analyzed for this report. Corruptions schemes accounted for 36.8% of the 1,483 cases analyzed, with a median loss of $200,000. The 2014 report also noted that those who commit fraud often engage in schemes that fall within more than one of the three distinct occupational fraud categories identified. Fiscal crisis & ManageMent assistance teaM 7 DEFINITION OF FRAUD AND INTERNAL CONTROLS Internal Controls Internal controls are the principal mechanism for preventing and/or deterring fraud or illegal acts. Illegal acts, misappropriation of assets or other fraudulent activities can include an assort- ment of irregularities characterized by intentional deception and misrepresentation of material facts. Effective internal control processes provide reasonable assurance that a district’s operations are effective and efficient, the financial information produced is reliable, and the organization operates in compliance with all applicable laws and regulations. Internal control elements provide the framework for an effective fraud prevention program. An effective internal control structure includes the policies and procedures used by staff, adequate accounting and information systems, the work environment, and the professionalism of employees. Internal control consists of five components: 1. Control Environment is the tone of the organization and influences the behavior of employees. It is the foundation for the other components of internal controls. 2. Risk Assessment analyzes and identifies the risks that the organization will not achieve its objectives. This component structures the basis for how these risks should be managed. 3. Information and Communication require systems that gather, identify and exchange information in a format and time frame that enable the people in the organization to successfully perform their duties. 4. Control Activities ensure that management directives are carried out. Control activities are designed to discourage errors or irregularities or find them after they have occurred. 5. Monitoring is essential and used to assess the quality of internal control performance over time The following is a partial list of deficiencies and omissions that can cause internal control failures: • Failure to adequately segregate duties and responsibilities related to authorization. • Failure to limit access to assets or sensitive data (e.g. cash, fixed assets, personnel records). • Failure to record transactions, resulting in lack of accountability and the possibility of theft. • Failure to reconcile assets with the correct records. • Unauthorized transactions, resulting in skimming, embezzlement or larceny. • Lack of monitoring or implementation of internal controls by the governing board and management or by unqualified personnel. • Collusion among employees where little or no supervision exists. A system of internal controls consists of policies and procedures designed to provide the governing board and management with reasonable assurance that the organization is achieving its objectives and goals. Traditionally referred to as hard controls, these include segregation of duties; limiting access to cash; management review and approval, and reconciliations. Other types of internal controls, typically referred to as soft controls, include management tone, performance evaluations, training programs, and maintaining established policies, procedures and standards of conduct. Mendocino county office of education 8 DEFINITION OF FRAUD AND INTERNAL CONTROLS A strong system of internal controls that includes all five of the above elements can provide reasonable but not absolute assurance that the organization will achieve its goals and objectives. Control Environment The internal control environment is critical because it establishes the moral tone of the organi- zation. Though intangible, it begins with the leadership and consists of employees’ perception of the ethical conduct displayed by the governing board and executive management. The control environment is a prerequisite that enables other components of internal control to be effective in achieving the goals and objectives necessary to prevent and/or deter fraud or illegal acts. It sets the tone for the organization, provides discipline and control, and includes factors such as integrity, ethical values and competence of employees. The control environment can be weakened significantly by a lack of experience in financial management and internal controls. Control Activities Control activities are a fundamental element of internal controls, and are a direct result of policies and procedures designed to prevent and identify misuse of a district’s assets, including preventing any employee from overriding controls in the system. Control activities include the following: 1. Performance reviews, which compare actual data with expectations. In accounting and business offices, this most often occurs when budgeted amounts are compared with actual expenditures to identify variances and followed up with budget transfers to prevent overspending. 2. Information processing, which includes the approvals, authorizations, veri- fications and reconciliations necessary to ensure that transactions are valid, complete and accurate. 3. Physical controls, which are the processes and procedures designed to safe- guard and secure assets and records. 4. Segregation of duties, which consists of processes and procedures that ensure that no employee or group is placed in a position to be able to commit and conceal errors or fraud in the normal course of duties. In general, segregation of duties includes separating the custody of assets, the authorization or approval of transactions affecting those assets, the recording or reporting of related transactions, and the execution of the transactions. Adequate segre- gation of duties reduces the likelihood that errors will remain undetected by providing for separate processing by different individuals at various stages of a transaction and for independent review of the work. Fiscal crisis & ManageMent assistance teaM 9 SUBSTANTIVE TESTING Findings and Recommendations Substantive Testing FCMAT’s review of Ukiah Adult School included testing the cash receipt and deposit transac- tions of the adult school deposits for fiscal years 2011-12, 2012-13, and 2013-14. All transac- tions receipted and deposits recorded in the district’s financial software system ledgers during these fiscal years were reviewed. The district accounts for all Ukiah Adult School financial activity in the general fund in a locally defined resource code 639, allowing the team to efficiently analyze all transactions recorded in subsidiary ledgers and reports. FCMAT requested and obtained from the Mendocino County Office of Education financial system the Ukiah Unified School District reports for the 2011-12, 2012-13 and 2013-14 fiscal years and performed procedures: • The data in the detailed general ledger reports was analyzed and sorted to identify all transactions related to the Ukiah Adult School recorded in Standardized Account Code Structure (SACS) Resource Code 639. • The deposit history report data was analyzed and sorted to identify all deposit transactions related to the adult school. • All original receipts from receipt books issued to the adult school, listed in inventory and/or included in school site/district deposits during the 2011-12, 2012-13 and 2013-14 fiscal years, were traced to or identified as omitted from deposits recorded in the general ledger. • All supporting documentation was reviewed for adult school deposits included in district deposits recorded in 2011-12, 2012-13 and 2013-14 fiscal years. • The math accuracy was verified for all adult school deposit receipts and correlating documentation including receipts issued by the adult school. • The form and total was verified for all consideration included in each adult school deposit and its agreement with accompanying adult school receipts. • FCMAT identified all receipts that were voided, utilized for preschool and appropriately excluded from adult school deposits, and those that were issued but not included in school site/district deposits. FCMAT reviewed 1,278 transactions each documented through the issuance of a prenumbered, preprinted, standard receipt completed by the adult school staff from July 11, 2011 through June 19, 2014. Upon completion of testing 173 transactions totaling $93,182.00 were identified where the receipt was issued, but cash and the associated yellow receipt copy were omitted from the deposits prepared by the school site and forwarded to the district business office for deposit in the general fund. The table below is a summary reconciliations of the transactions reviewed and related findings. A detailed list of transactions tested with identifiable exceptions is attached in Appendix A to this report. Mendocino county office of education 10 SUBSTANTIVE TESTING Transaction Testing Summary of Exceptions # of Transactions Cash Check Total Receipts issued by Adult School and traced to district deposits 1078 $115,025.00 $486,391.26 $601,416.26 Receipts issued not included in district deposits recorded in the 173 90,852.00 2,330.00 93,182.00 General Ledger Receipts issued for programs other than Adult School - properly 27 400.25 1,824.45 2,224.70 excluded Total Receipted Transactions Tested 1278 $206,277.25 $490,545.71 $696,822.96 Transactions included in district deposits for Adult School / Not 18 $16,341.12 receipted by site Total collections receipted and traced to Adult School deposits $617,757.38 District deposits recorded in General Ledger for Adult School $617,757.38 Several weaknesses related to cash-handing procedures were identified during FCMAT’s review and are described in greater detail in the following pages. Organizational Structure and Control Environment The district’s hierarchical administrative structure is typical of California school districts. The superintendent acts as the chief executive officer, and the district’s functions are carried out through three organizational divisions, Educational Services, Human Resources and Business Services. The adult education school is under the Educational Services Division as are all of the other schools in the district. The district’s adult school has a recent history of administrative turnover and is overseen by an interim assistant principal. The interim assistant principal is a retired district administrator who served in various administrative positions, including as the adult education administrator, for almost 40 years. The interim assistant principal has served as the administrator in charge of the adult education programs for the last two school years under a letter of agreement with the district. He reports directly to the director of alternative education who is responsible to the assistant superintendent of educational services. He is supported by two clerical positions: one secretary III and one attendance secretary II. Although leadership changes can be difficult, change in leadership can also introduce new ideas and approaches about how processes should be performed. Leadership change also often identi- fies areas of complacency in adherence to established processes and procedures. The term “internal control” is clearly defined by the accounting industry as it applies to organiza- tions, including school districts. An organization establishes control over its operations by setting objectives, goals, budgets and performance expectations. An effective internal control structure provides the means to monitor, direct, and measure the organization’s assets and resource and plays a key role in protecting the organization from fraud, abuse or misappropriation. Many factors influence internal controls effectiveness, including the social environment and how it affects employee’s behavior, the availability and quality of information used to monitor the orga- nizations operations, and the procedures and policies that guide the organization. The district Fiscal crisis & ManageMent assistance teaM 11 SUBSTANTIVE TESTING has permitted the adult school to operate with a great deal of autonomy and little oversight over the financial activities related to programs and student financial aid administration. This lack of oversight presented a significant weakness in the district’s internal control over cash collections. Greater detail regarding specific weaknesses is discussed later in this report. Each person in a school district is responsible for internal control in some capacity because nearly everyone produces information used by the internal control system or takes action to implement organizational control. An example would be the segregation of duties related to purchasing. Each school site or department initiates requisitions for supplies. Internal controls are used to process requisitions through budget approvals and/or program approval by someone other than the initiator of the requisition. Additional controls are commonly established requiring only purchasing staff to create and release the purchase order to the vendor once the requisition has been approved. These activities are separated from those related to authorization of processing payment to the vendor once items are received. Segregation of duties prevents an employee from having access and authority over multiple steps in the transaction process from the start to finish, reducing the opportunity for fraud or misuse of funds. Further, each individual should take responsibility for appropriately communicating problems in operations, noncompliance with policies and procedures, or illegal actions. The superintendent, as the organization’s leader and chief executive officer, sets the organizational tone that influences all decisions, activities and the control awareness of employees. Factors that contribute to a positive control environment include management philosophy and operating style, ethical values, integrity, organizational structure or configuration, assignment of authority and responsibility, and employee expertise and proficiency. The chief business official is ultimately responsible for overseeing the integration of all five internal control components into one cohesive structure and monitoring and revising that structure to ensure its adequacy is maintained. The administrative team provides leadership and direction to managers and reviews and gives feedback on internal control decisions. In turn, the managers assign the responsibility of establishing specific internal control procedures and poli- cies, control activities and monitoring the personnel responsible for unit functions. The governing board works as a group to provide governances, oversight and guidance, while individual board members particularly enhance the control environment when they are informed, free of bias, inquisitive, conduct themselves in an ethical and principled manner and expect the same standard from everyone in the organization. Independent auditors assess the controls and determine if properly designed, implemented, and monitor whether the controls work effectively. They also may make recommendations for improving internal controls. The adult school operates a fee-for-service licensed vocational nursing program as well as the following programs that are offered free to the community: • GED test preparation • Adult school diploma classes • English as a second language • Citizenship • Class for disabled adults Mendocino county office of education 12 SUBSTANTIVE TESTING • The adult school’s flagship program is the licensed vocational nursing (LVN) program. This fee-based program is delivered in two instructional formats. The full-time program is 18 months long and is aligned with the district’s instructional calendar. Students attend classes four days per week, and two are 10-hour days. Students do not attend classes during the summer break. The part-time program is 24 months long and runs through summer. Students attend classes three times a week, and one is a 10-hour day. The LVN program is an extremely competitive program. The program is oversubscribed and usually receives more than 120 applicants for 30 to 45 slots. Interviews with staff indicate the number of slots offered from one class to the next has been inconsistent, ranging from 33-45. To gain admittance, prospective students must submit a completed application and transcripts and take a standardized entrance examination. If the prospective student passes the entrance exam- ination, he or she proceeds to an oral interview with a panel. Panel members give each applicant a score that is averaged across all panel members. The entrance examination combined with the panel score is used to determine the final score for each applicant. However, other factors such as a letter of recommendation or work history can also be considered in addition to the applicant’s final score. The entire tuition for the LVN program is $6,500; however, students can pay in installments and almost always use this option. The cost for the first term is $2,500 and includes textbooks. The two subsequent terms cost $2,000 each, and students must purchase their own uniforms. Revenue Recognition and Collection Adult school staff reported that students have been permitted to make alternative payment arrangements at the discretion of the secretary III, who is solely responsible for tracking student account balances and payments. The district has not established procedures for modifying the established fee-payment schedule. A significant internal controls weakness results from assigning isolated control and discretion solely to one individual for student account management, fee schedule modifications, fee collection and postings without, at a minimum, including review and authorization. This weakness is magnified when combined with other identified weaknesses related to the cash collections procedures discussed elsewhere in this report. The weak internal controls and procedures for LVN program revenue combined with the absence of proper review and authorization procedures provide an opportunity for the staff member to make adjustments to outstanding student fee balances that may not otherwise be valid. Student information is maintained in a database designed by the district information technology (IT) staff and is not integrated into any other system. The secretary III enters data into the student information system from each application and notes if the student is accepted into the LVN program. The secretary III enters student tuition payments into the database by simply adjusting the total amount paid rather than identifying each payment date and amount. Although the district utilizes the Quintessential School Systems/QSS Control Center (QSS/ QCC) financial system, which includes an accounts receivable module, the school does not use this system to track student obligations and receipts. No procedures are established to recognize revenue and the obligation of the student for outstanding fees on acceptance into the LVN program. Revenue is recognized on a cash basis, when student fees are paid and deposited, rather than a modified accrual basis of accounting. Fiscal crisis & ManageMent assistance teaM 13 SUBSTANTIVE TESTING California School Accounting Manual (CSAM) Procedure 101, Governmental Accounting, Basics of Accounting, refers to the timing of recognizing transactions and events in the accounting records and reporting them in the financial statements. Following the modified accrual basis of accounting, revenues are recognized in the period when they become available and measurable, and expenditures are recognized when a liability is incurred, regardless of when the receipt or payment of cash takes place. The term “available” means collectible within the current period or soon thereafter to be used to pay the liabilities of the current period. An accounts receivable should be created in the district’s financial system for each individual student when he or she is accepted into the LVN program. Payments should be applied to the outstanding account receivable when the student pays fees. The adult school contracts with local agencies for interns and other services recognized as other local revenues. An invoice should be generated at the time of signed agreement and an accounts receivable established. An example of transactions with appropriate object code is listed below. A journal entry may be recorded to adjust the outstanding accounts receivable balance in the district’s unaudited actuals to recognize income in the appropriate accounting period if outstanding balances exceed a reasonable collection timeframe after each fiscal year end. File folders are created for every applicant to maintain documentation for the application, testing and interviews, and a second folder is created for each student accepted into the LVN program. Each student accepted receives an acceptance letter that requires a written response stating his or her intent to attend. The second folder includes the letter of intent, background check, immunization records, and copies of receipts issued to students when tuition payments are made. FCMAT interviews found that although all adult school staff accept student payments and issue receipts, the secretary III is responsible for entering the tuition due from each student into the database as well as maintaining and monitoring student account information including payments and outstanding balances. The secretary III also prepares invoices and receives payments from agencies that extend grants to students attending adult school programs. Staff duties and activities observed by FCMAT are not consistent with district Board Policy 3400 (Internal Controls/Fraud Prevention) and accounting standards. Duties are not sufficiently segre- gated since one person can record the amount due (accounts receivable), receive payment, record payment transaction, and determine the remaining balance due for each student as demonstrated by the adult school secretary III. Staff members also indicated that student tuition fee revenue, collections and outstanding balances are not reconciled. The lack of procedures and segregation of duties creates the potential for unintentional errors and omissions as well as intentional illegal acts, including fraud. An ideal accounts receivable process requires recognition and recording of the tuition due for each student accepted into the LVN program. Adult school staff should enter tuition and invoice amounts into the district financial software system while district office staff should receive and process payments. By entering the data in the district financial system, revenue is recorded and recognized immediately when an account receivable is recorded. As student payments are received, they are posted to the account receivable, making it easy to identify and track any unpaid balances. Outstanding student balances are necessary to determine if a diploma may be granted to a student upon completion of a program since all outstanding fee balances must be resolved. Additionally, payment history is necessary to determine outstanding balances to be carried over to a new fiscal year, determine the necessary adjustments resulting if a student is dropped from the program, or track student payments received but not applied to the correct Mendocino county office of education 14 SUBSTANTIVE TESTING student account. Inquiries with staff indicated that the district has not received complaints resulting from errors and/or nonposting of student fee payments to accounts. Agreements with local agencies provide internships for LVN students. When the agreements are signed, the secretary III creates an invoice and mails it to the agency. The secretary III writes a receipt when payment is received. The payment is placed in the safe and included with weekly deposit. An accounts receivable process does not exist to identify and track payments or outstanding balances. The lack of segregation of duties allows opportunity for intentional or unintentional omissions. The ideal accounts receivable process requires identifying and recording the amount due for each agreement. Adult school staff should enter invoice amounts into the district financial software system, and district office staff should receive and process payments. Receipting Process The adult school utilizes a 4-part sequentially prenumbered, preprinted, standard receipt book issued by the district office. The accounting technician III in the Business Services Department at the district office is responsible for distributing receipt books. An informal log is maintained at the district office for all receipt books by sequence, but there are no control procedures to monitor use once distributed. As receipt books are collected, the individual enters the date and signs the log on next to each sequential book removed from the supply cabinet. The accounting technician III does not accompany individuals or verify and document receipt books and numbers removed. Completed receipt books are not returned once exhausted, nor is there any verification that receipts issued are forwarded to the district office with the proceeds after issu- ance. Standardized receipts are not required districtwide. School sites and or departments that wish to purchase their own receipt books for documenting cash collections are permitted to do so without any oversight, tracking or reconciliations by the business office staff. The lack of a stan- dardized receipting practice districtwide provides the opportunity for an individual to purchase and use any receipt book to acknowledge collections and omit them from deposits since no custody controls or verification processes have been established to ensure all cash collections are forwarded for deposit. Because of the lack of control over receipt books, receipts and the related value can easily be lost, misplaced, or stolen. Further, the lack of standardized controls and procedures for cash handling and receipting combined with the lack of procedures for recognizing, recording and managing program revenues for student fees and accounts provide the opportunity for site-level staff to accept cash, issue a receipt for payment and omit the proceeds from deposits. Both the secretary III and attendance secretary II have the authority to collect receipt books from the district office although a review of the book log indicates that the attendance secretary II generally completes this task. The adult school frequently picks up multiple books at a time from the district office. The same receipt books are utilized to document all cash collections, both in person and by mail, for any particular purpose including those for LVN tuition, General Educational Development (GED) testing fees and local grant funding intended to be distributed by the district for student awards. The adult education office receipted cash and checks for tuition using two separate receipt books, which circulated among all three of the adult education staff. It is common for each secretary to keep a book near his or her workspace, and the remaining unused books are locked in the Fiscal crisis & ManageMent assistance teaM 15 SUBSTANTIVE TESTING safe. The fact that multiple receipt books are used simultaneously causes receipts to be issued out of sequence, making it difficult to easily track the issuance of all receipts and ensure they are accounted for in deposits. The adult school does not prepare a receipt book log or a log of cash collections nor is a reconciliation of receipts conducted. The district should require the adult education office staff to use only one receipt book to ensure that the deposits can be tracked by an uninterrupted numerical sequence. Students can pay their tuition with cash, checks or money orders, but credit cards are not accepted. The assistant principal, secretary III, attendance secretary II, and sometimes an adult education teacher receive payments. Once payment is made, a receipt is issued and signed by the employee who prepared the receipt. The receipt shows whether the payment was made with cash, money order or check. The white copy is retained by the student, the yellow copy is placed with the payment to the safe, the pink copy goes in the student’s file, and the goldenrod copy stays in the receipt book. All four copies of a voided receipt remain intact in the receipt book. Cash, checks and money orders are stored in a cash box in the office safe. The top tray of the cash box contains $5, $10 and $20 bills, and $100 bills are stored in the bottom. Adult education staff indicates that they receive several $100 bills at a time. Funds received are delivered to the district office for deposit once per week. Cash and coin are itemized on the deposit slip and copies of checks and/or money orders received are also provided to the district office. The adult education office staff receipted cash and checks and placed them in a locked safe; however, all three of the adult education staff had keys. At least one employee stored her keys in an unsecured location that is utilized by IT personnel to access the safe unsupervised and store system backup tapes. Circulating more than one key increases the potential for fraud. The best practice is to limit the number of keys to one and ensure it is stored in a secured location. Adult School Deposits The attendance secretary II prepares and delivers all adult school deposits to the accounting tech- nician III at the district office every two weeks or weekly when cash collections are high volume. The secretary counts all cash and checks and verifies that the total is the same as that of the yellow receipt copies in the cashbox. She then creates a deposit receipt (district-created form) that includes the date, completed by, total of checks and currency, account codes, and deposit total. All checks are photocopied and attached with the yellow receipt copies to the deposit receipt. The site-level supervisor does not perform a second-party review or approve the deposit and its content. Once complete, the secretary II takes the deposit package to the accounting technician III in the district business office. The adult education office did not require funds to be counted jointly by two employees before the funds were transported to the district office for deposit. Double-counting receipts is the industry standard and is important in preventing fraud. The accounting technician III and the attendance secretary II immediately count and verify the cash upon delivery at the district office. The accounting technician II reviews the deposit receipt, notes who delivered the deposit, the date, the verified amount, the date deposited, and the initials. A district business office receipt is issued for the total deposit and given to the attendance secretary II, and the deposit is logged and locked in a safe at the district office. Once each week, the accounting coordinator creates a consolidated deposit in the district financial system. A batch is opened to record all deposits collected districtwide, and each line item is entered and balanced to a receipt log prepared by the district office. Once it is entered and posted in the financial system, the district office attendance technician consolidates and balances the cash and checks for Mendocino county office of education 16 SUBSTANTIVE TESTING the entire deposit in preparation for delivery to the Mendocino County Treasurer. The director of fiscal services reviews deposits. The receipt numbers issued by the school site from receipt books issued by the district office are not tracked, verified or logged through the entire process. There is a considerable weakness and an opportunity for fraud, misappropriation of funds or other illegal activity in the absence of control and verification of each receipt from the time that a receipt book is issued to the school site to the point that receipts and accompanying cash collections are forwarded to the district office for deposit. Also problematic the absence of requirement that all receipt books be returned and accounted for once exhausted. When the adult school attendance secretary II prepares the deposit receipt, the numbers should be written in sequence and verified to ensure all those preceding are accounted for and subsequent ones remain intact in the books. To establish a clear audit trail, the range of receipt numbers should be noted on the deposit receipt and in the district financial system when posting deposits. A log should be maintained at the adult school and include receipt books received by the district office and the person to which they are assigned. In addition, a cash receipts log should be created to track all receipts as they are processed for deposit. The adult school and business office should use this log to ensure all receipts are accounted for when processing each deposit. The district should require adult education office staff to assign two employees to count the funds received daily and require both employees to verify the amount by signing the deposit slip. Cash, checks and money orders were transported to the district only once per week even though the adult education office sometimes receipted as much as $25,000 in cash in one day. The district Fiscal Services Division issued a memorandum to site personnel dated August 8, 2011 requiring all monies received at sites to be submitted weekly to the business office. This practice satisfies the direction of the Mendocino County Treasurer and removes cash and checks from the site for extended periods of time, reducing the risk of fraud or theft. The district business office did not monitor and enforce the deposit requirement. A dollar threshold specifying when the adult education office is required to transport a deposit to the district office should also be established in addition to the established frequency requirement. The timely deposit of funds reduces the opportunity for fraud. FCMAT’s review of the adult education program focused on all cash collections receipted and deposited for fiscal years 2011-12, 2012-13 and 2013-14. FCMAT’s review found the following significant weaknesses in the control environment: • The adult education office has no written procedures manuals that specify how the accounts receivable function should be carried out. As a result, there is no consistency among office staff on the receipt and/or deposit of funds received for student tuition. • The adult education office receipted cash and checks for tuition using two separate receipt books that circulated among multiple adult school staff. As a result, when receipted funds were deposited at the district office, they were nonsequential, increasing the potential for fraud. • The adult school office did not require two employees to count cash and checks before they were transferred to the district office to be deposited. Double-counting of receipts is important in preventing fraud. Fiscal crisis & ManageMent assistance teaM 17 SUBSTANTIVE TESTING • Cash, checks and money orders were transported to the district only once per week even though the adult education office sometimes receipted as much as $25,000 in cash in one day. Timely deposits of cash reduce the opportunity for fraud, misappropriation of funds or other illegal activities. • The adult education office receipted cash and checks and placed them in a safe; however, all three of the adult education staff had keys to the safe, and at least one employee stored her key in an unsecured location. Having more than one key in circulation increases the potential for fraud. • The interim assistant principal did not monitor the adult school budget, track program revenue, or review the student fee collections and deposits. As a result, controls were weak and possible theft may have occurred for at least three fiscal years. Regular review of financial transactions by management increases the likelihood of detecting fraud. Recommendations The district should: 1. Establish an accounts receivable process to complete the following: • Record and recognize revenue related to adult school program transactions at the point of student acceptance to the LVN program. • Integrate transactions into the district financial software. 2. Establish procedures for maintaining student accounts that include the tracking of each payment of student fees including the date of payment, amount and receipt number. Outstanding student account balances should be routinely reviewed. A procedure should be established to modify the payment schedule and should include review and approval. 3. Establish procedures to routinely reconcile student accounts and receivable balances. 4. Strengthen procedures for cash collections by establishing and documenting a standardized receipting process districtwide utilizing standard, prenumbered preprinted standard receipt books. Custody and control should be retained by the Business Services Department, and authorization of receipt books should be designated. A detailed receipt book log should be prepared and retained, requiring identification of all receipt books by receipt number range, the department or site issued, the date and signature of employee receiving the books and the date returned. 5. Establish and document procedures for retaining exhausted receipt books by Business Services Department and before issuing new receipt books. A minimum period of four years for disposable records. 6. Establish procedures to verify that all receipts issued are accounted for in district deposits. Mendocino county office of education 18 SUBSTANTIVE TESTING 7. Require the adult education office staff to use only one receipt book to ensure that the deposits can be tracked by an uninterrupted numerical sequence. 8. Require each school site/department to maintain a cash receipts log as cash is collected and receipts are issued. The cash receipts log should include the date of receipt, the receipt number issued and the amount. A copy of the site cash receipts log should accompany each school site deposit, and the district deposit number and date should be entered once delivered to the district office. 9. Require all school sites and/or departments to follow established procedures for timely deposits. 10. Ensure that all keys are secured and access to the safe is limited to those with assigned keys. A staff member with assigned authority should accompany anyone given access for other purposes, such as an information technology staff member using the safe for system backup storage. The number of keys to the adult education office safe should be reduced from three to one, and the district should require the single key to be stored in a secured location. 11. Establish deposit preparation procedures requiring at least two adult school staff members. One staff member should prepare each deposit, and a second one should review and approve it. Each deposit should include a copy of the cash receipts log, an accounting of all issued receipts in sequential order, ensuring that all receipts issued are accounted for in the prior deposit, current deposit and/or remain unused in issued receipt books. 12. Require adult education funds to be counted jointly by two employees before the funds are transported to the district office for deposit. 13. Segregate the duties of initiating invoices and distributing payments. An accounts receivable process should be established to record and recognize revenue related to adult school agreements with local agencies and to inte- grate transactions into the district financial system. 14. Establish procedures to maintain local agency accounts, including the tracking of each payment along with the date of payment, the amount and receipt number. Outstanding accounts should be routinely reviewed. Fiscal crisis & ManageMent assistance teaM 19 MANUALS AND CROSS-TRAINING Manuals and Cross-Training The adult school lacks manuals of policies and procedures. Desk manuals that include policies and procedures help ensure proper internal controls, provide a better understanding of each posi- tion’s responsibilities, and help staff complete necessary functions when the employee normally assigned to a particular duty is absent. The interim assistant principal did not monitor the adult education budget or review the receipt of deposits and did not detect a problem until sometime this fiscal year. Regular review of finan- cial transactions by management increases the likelihood that fraud will be detected. The district business office should provide the interim assistant principal with ongoing training on how to read budget printouts from the financial system, including those showing the working budget and financial activity, and require him to monitor budgeted income and expense versus actuals quarterly. Employees lack cross-training. Although many have been in their positions for a significant amount of time and know their jobs well enough to function without manuals, there are disadvantages to this approach. Employees can become so accustomed to their jobs and level of productivity that change is difficult. Further, if an employee leaves a position or is absent, no documentation or cross-training exists to help another employee perform those duties and maintain organizational continuity. The challenges faced by the new chief business official (CBO) have highlighted the need for documented procedures and references. The district has a unique opportunity to begin developing these documents as the new CBO learns various duties and procedures. The COE Fiscal Procedural Manual is a free resource designed to help school districts establish procedures. It is financed by FCMAT, produced by the San Diego County Office of Education, and available on the Internet at http://fcmat.org/coe-fiscal-procedural-manual-update-for-2013/. This document can serve as a template to help develop procedures. Recommendations The district should: 1. Develop written desk manuals, standard operating procedures and other specific references in the business and adult education offices so that there are written documentation detailing processes and duties. 2. Provide ongoing training to the interim assistant principal on how to read budget print outs from the financial system, including working budget and financial activity print outs, and require him to monitor budgeted income and expense versus actuals on a quarterly basis. 3. Review the Business Services Guide and consider using it as a template as specific procedures are developed. 4. Ensure that cross-training is provided to various district office employees so that functions can be carried out if an employee leaves or unexpected absences occur. Mendocino county office of education 20 MANUALS AND CROSS-TRAINING Fiscal crisis & ManageMent assistance teaM 21 FEDERAL STUDENT AID (FSA) Federal Student Aid (FSA) Approximately two years ago, the adult school became accredited to administer PELL grant funding as a payee through the Free Application for Federal Student Aid (FAFSA). A payee is an entity designated by the grantee to request and manage federal funds on its behalf. The interim assistant principal of the adult education program retrieves student data from the Instructional Student Information Reports (ISIR) through the FAFSA program. This report identifies if a student qualifies for funding from the data processed through FAFSA or if the student data requires verification by the adult school. If verification is required, the interim assistant principal requests information including, but not limited to, Internal Revenue Service documentation, high school graduation records, assistance for food stamps as well as number of family members. From this information, the interim assistant principal determines which students qualify for PELL funding. An estimated 50% of FAFSA applicants require manual verification. When funding is approved and the award notification is received, the interim assistant principal provides the secretary III with a list of the student names and amount awarded. Student PELL grant funding is drawn by the district through the Department of Education’s G5 Grants Management System, a delivery system that supports program award and payment administration. As part of her responsibilities for categorical programs, the accounting manager provides oversight and monitoring of the Title IV PELL Grant G5 draws. District office and adult school staff acknowledged that the director of fiscal services, accounting manager, adult school secretary III and the former adult school principal attended training on the FAFSA and G5 systems in San Francisco in September 2013. Once the adult school verifies and qualifies the student to receive the PELL Grant, awards the grant and authorizes payment, the funds go into the G5 system. The accounting manager draws the funds from the G5 system; however, interviews with staff indicated that the interim principal is the only person evaluating and authorizing grants. Although the accounting manager reported that no identifiable concern was evident in the process because the amounts entered in the G5 and related student disbursements always match, a secondary district level review should occur. The process to distribute awards to students is initiated through the district’s purchase-order process. Upon verification and approval, the adult school secretary III sends an e-mail to the accounting tech III in accounts payable requesting the creation of a vendor account for qualifying each student. Each student awarded a PELL grant is issued a unique vendor number in the QCC financial system as well as a unique 4-digit district defined number, which allows the district to query student payments history in the financial system in several ways including by vendor history report and detail general ledger report. While interviews indicated that the accounting coordinator or the accounting manager create student vendor numbers in the system, the accounting tech III in business services reported that she routinely adds all new vendors for purchase orders in the finan- cial system for the entire district. The accounting tech III is also responsible for creating purchase orders, processing all payments to vendors for the district, addressing vendor inquiries, maintaining petty cash and reconciling the district’s revolving fund bank statements. The ability to create vendors, initiate requisitions and issues purchase orders in the financial system and issue accounts payable warrants against purchase orders constitutes a serious break- down of internal controls. An employee could create a fictitious vendor in the financial system, create a purchase order, and issue a payment or payments against the purchase order to the vendor, resulting in fraud. The functions of establishing vendors and creating purchase orders should be segregated from the accounts payable function where invoices are paid. Mendocino county office of education 22 FEDERAL STUDENT AID (FSA) Once a vendor number has been established, the accounting tech III notifies the adult school secretary III that she can initiate requisitions for distributing grant funding to each student. The requisitions go through an approval process, and the purchase order is created in the district office for the full awarded amount. Copies of the FAFSA approval for individual student awards are used as documentary support for each purchase requisition and the preparation of each purchase order, which is prepared for the full grant award for each student. Purchase orders are coded to California’s Standardized Account Code Structure (SACS) resource code 5890, and students receive the PELL grant award in two separate payments. Once the purchase orders are established, the adult school provides the accounting manager with a spreadsheet identifying the student disbursements for each payment cycle. This spreadsheet is attached with the award letters and forwarded to the accounting tech III as backup when issuing warrants. The first payment is generated when the purchase order is created, and the interim assistant principal determines when the second payment is to be issued based on the hours of instruction completed for each student. The secretary III provides the interim assistant principal with a progress report from the student information system, which determines the second payment, and notifies the accounting tech III about when to distribute the second payment. The accounting tech III generates a warrant through the district’s accounts payable system, which applied against each purchase order established for each student’s PELL grant. The administra- tive assistant verifies each warrant against the invoice and mails them directly to the students. Interviews with district and adult school staff indicated that there are occasions where at the request of adult school staff, the warrants are forwarded to the adult school for direct delivery to students. It is best practice to separate the practices of processes of disseminating warrants from those who request and process payments. The district business office uses the purchase orders created for student Pell Grant distributions to establish a revenue budget to account for the receipt of student federal funding. Once the funding is drawn from G5 system, the district accounts for it as revenue in the general ledger when the deposit is recorded. The district does not use the accounts receivable module to account for the federal funding draws for purchase orders established to distribute student Pell grants and validate the funding draw from the G5 system. GASB Statement No 24 as amended provides guidance on the accounting for pass-through grants. School districts administering pass-through grants, including Pell Grants, should report financial transactions as nonoperating revenues and expenses if the LEA has any administrative or direct financial involvement in the program. Direct financial involvement includes determining student eligibility. Although the district accounts for the receipt of Pell Grant funding as revenue, it is recognized as operating revenue using object code 8290 All Other Federal Revenue. Additionally, the district records the distribution of Pell Grant proceeds as an agency operating expenditure using object code 5800 Professional Services. The district should follow guidance in the California School Accounting Manual, Procedure 750, Pass-Through Grants and Cooperative Projects. Fiscal crisis & ManageMent assistance teaM 23 FEDERAL STUDENT AID (FSA) Recommendations The district should: 1. Establish procedures for a secondary review and approval of the documen- tation prepared by the interim assistant principal supporting the amounts drawn through the G5 system for student Pell grant funding. 2. Review the duties assigned to the accounting tech III at the district office to ensure that these duties and accounting functions are properly segregated and that the span of control, access and authority do not present control risk. 3. Establish procedures creating new vendors in the database. Access to creating vendors to someone other than accounts payable should be restricted. The ability to create new vendors should be separated from the ability to pay vendors. 4. Establish a procedure for distributing warrants to students at adult school. A log including student name, date warrant received and student signature should be created, and the person responsible for distributing warrants must be someone other than the staff requesting the warrant. 5. Follow Procedure 750, Pass-Through Grants and Cooperative Projects to account for the receipt of funds and distributions of Pell Grants to students. Mendocino county office of education 24 FEDERAL STUDENT AID (FSA) Fiscal crisis & ManageMent assistance teaM 25 FRAUD PREVENTION AND DETECTION Fraud Prevention and Detection Occupational fraud is a global problem in business, including government. A May 2014 report by the Association of Certified Fraud Examiners concluded that organizations lost up to 5% of their annual revenue through fraud, and the sectors most commonly victimized included public administration and government. Given the high cost of occupational fraud, all organizations should have a strong fraud prevention and detection program. District Board Policy 3400 states that employees are expected to act with integrity and due diligence in dealings involving the district’s assets and fiscal resources and indicates they should all be alert for any indication of fraud, financial impropriety, or irregularity in their area of responsibility. Board policy instructs an employee who suspects fraud, impropriety, or irregularity to immediately report those suspi- cions to his/her immediate supervisor and/or the superintendent or designees. In addition, the superintendent or designee is required to establish a method for employees and outside persons to anonymously report any suspected instances of fraud, impropriety, or irregularity. The district participates in a program that provides a hotline to report potential workers compensation fraud; however, this program does not constitute a district fraud prevention and detection program suit- able to meet all areas of potential fraud. Additionally, a successful fraud prevention and detection program requires education and training of staff. Fraud and/or the misuse of physical or cash assets occur when three factors converge: pressure or motive, opportunity, and rationalization or lack of integrity. This is known as “fraud triangle.” When two of the three factors exist, the probability that fraud will occur increases, and when all three factors exist, it is almost certain that fraud will occur. The opportunity for fraud varies throughout the district depending on the responsibilities assigned to an employee. Rationalization and lack of integrity are more likely to be present in organizations that do not implement and promote anti-fraud policies. Ongoing employee educa- tion can help prevent and detect occupational fraud. Employees should be repeatedly trained in what constitutes fraud, how it hurts everyone in the organization, widely found fraud schemes, and common behavior signs. Employees should be encouraged not to ignore warning signs and have several avenues for reporting improprieties such as an anonymous employee hotline. The knowledge that someone can anonymously report suspicious behavior can deter fraudulent activity. Independent auditors should not be the district’s only approach of monitoring internal control. A misconception exists that a district’s annual independent audit should detect and identify errors, omissions and fraud. The independent auditor’s responsibility is to express an opinion on the fair presentation of a district’s financial position. Through the audit process, procedures are performed to obtain assurance on whether the financial statements are free of material misstate- ment. Auditors obtain an understanding of district-established internal controls relevant to the entity’s preparation and presentation of the financial statements during the audit; however, this understanding is not to express an opinion on the effectiveness of the entity’s internal controls or identify all internal-control deficiencies that might be material weaknesses or significant deficien- cies. District management is responsible for designing, implementing, and maintaining internal controls. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a defi- ciency, or combination of deficiencies, in internal control, such that there is a reasonable possi- Mendocino county office of education 26 FRAUD PREVENTION AND DETECTION bility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. The integrity and ethics of leaders set the tone of an organization and are an essential part of the internal control environment. They demonstrate to others that dishonest or unethical behavior will not be tolerated. An atmosphere in which employees feel safe to communicate concerns is a fundamental compo- nent of a strong and effective internal control environment. Managers are in a position of authority and therefore have a higher standard of care to establish the ethical tone and serve as examples to other employees. Employees with administrative respon- sibility have a fiduciary duty to the organization to ensure that activities are conducted in compli- ance with all applicable board policies, laws, regulations, and standards of conduct. Management personnel are entrusted to safeguard the district’s assets and ensure that internal controls function as intended. The district has established board policy BP3400, which addresses management of district assets/ accounts and includes segregation of duties. However, the district has not provided continuous training on internal controls and detection and prevention of fraud. The district should implement fraud detection methods such as random audits for fraud risk assessment. Fraudulent activity is deterred when the district demonstrates that it actively monitors employee activities, investigates all identified concerns and seeks prosecution for wrong- doing. The following basic concepts and procedures can help ensure an effective internal control struc- ture: • System of checks and balances – Procedures should be implemented to initiate, approve, execute, record and reconcile all transactions. The procedures should identify the employees responsible for each step and the time allowed for completion. Key areas requiring checks and balances include purchasing, accounts payable and accounts receivable/cash receipts, and payroll. • Segregation of duties – Internal accounting procedures must be implemented and necessary changes made to segregate job assignments and protect the district’s assets. No single employee should handle a transaction from initiation to reconciliation, and no single employee should have custody of an asset, such as cash, and maintain the records of its activity and transactions. • Staff cross- training – More than one employee should be able to carry out each duty. Each employee should be required to use accrued vacation during which another staff member is assigned to perform those duties. Inadequate cross-training is frequently a problem regardless the size of an organization. • Use of prenumbered documents – Checks, cash receipts, purchase orders, receiving reports and tickets should all be printed by an entity independent the district or automatically assigned in the financial software. Physical controls should be maintained over the check stock, cash receipt books and deposit tickets. It is not adequate to simply use prenumbered documents without an independently reconciled log of numbers. Fiscal crisis & ManageMent assistance teaM 27 FRAUD PREVENTION AND DETECTION • Asset security – Cash should be deposited daily, and other property of the district such as computers should be secured and protected. Access to supplies should be restricted to designated employees. • Timely reconciliations – An employee who is independent from the individual assigned the original transactions and posting process should reconcile bank statements and account balances monthly. For example, the employee reconciling the checking account should not be the same person processing vendor payments. • Comprehensive annual budget – The annual budget should include sufficient detail for revenue and expenditures by school site, department and resource to identify variances and determine if financial goals were achieved. Material variances in revenues and expenditures should be investigated without delay and thoroughly. • Inventory records – Inventory records should be maintained that identify the items and quantities purchased, sold, or designated surplus. Physical inventory should be taken periodically and reconciled with the inventory records. Inventoried items particularly susceptible to misappropriation include: computer equipment, warehouse supplies, food service commodities, transportation and maintenance parts and student store goods. Recommendations The district should: 1. Communicate to every employee the expectation of compliance with all policies and procedures, standards of conduct and code of ethics. 2. Adopt board policies that include measures to prevent fraud. 3. Develop and implement fraud-detection methods. 4. Develop and implement ongoing employee fraud prevention training programs. 5. Ensure employees are cross-trained in all areas of responsibilities. 6. Adopt board policies that include adequate internal controls and segregation of duties for the business and adult education office. 7. Provide continuous training on internal controls and the detection and prevention of fraud. Mendocino county office of education 28 FRAUD PREVENTION AND DETECTION Fiscal crisis & ManageMent assistance teaM 29 EMPLOYEE BONDING Employee Bonding The exposure and risk associated with misappropriation increases in organizations where employees are expected to handle cash. To help mitigate losses associated with this risk, it is best practice for employees to be bonded. This requires the employee or employees to be bonded. This includes employees who perform the following types of responsibilities • Have physical contact or control over cash, checks or similar property. • Have the right to transfer or negotiate for value such items as titles to properties or securities. • Disburse funds. • Sign or endorse checks or similar instruments individually or as co-signers. • Supervise individuals who receive, disburse, handle or have access to or control over funds or assets. Types of Bonding Insurance Three basic types of fidelity bonds are available to school districts through their property and liability provider to protect themselves from theft: Name Schedule Fidelity Bond A school district designates a set amount of coverage for a list of employees provided for the insurance company. Each time a new employee who may handle cash is hired, the school district must contact the insurance company to have that person added to the list. Collection under this coverage depends on absolute proof that an employee stole from the school district. Blanket Position Bond Under this type of bond, a school district receives coverage for a position rather than the indi- vidual. Each employee in that position is covered, and new employees are added automatically. Coverage is offered for each employee up to the maximum established in the insurance policy. Blanket position bonds don’t require proof of the individual responsible for the theft. Primary Commercial Blanket Bond Similar to a blanket position bond, a primary commercial blanket bond covers each employee within a class in a school district. This type of coverage does not accommodate each employee, but rather treats the employees as a class. Under a primary commercial blanket bond, it does not matter if one or five people were involved in the crime, the school district will be able to claim the same amount. Recommendations The district should: 1. Determine whether the risk is significant to require bonding of staff in the adult education office. 2. Identify the type of coverage (e.g. name schedule fidelity bond, blanket posi- tion bond or primary commercial blanket bond) best suits the district. 3. Specify the positions to be bonded under the coverage. Mendocino county office of education 30 EMPLOYEE BONDING Fiscal crisis & ManageMent assistance teaM 31 AB 139 EXTRAORDINARY AUDIT REPORT SUMMARY: POTENTIAL FRAUD AB 139 Extraordinary Audit Report Summary: Potential Fraud Based on the findings in this report, sufficient evidence exists to demonstrate that fraud, mismanagement and misappropriation of the district’s adult school resources and assets may have occurred. Significant material weaknesses in the district’s internal control environment increase the probability of fraud Based on the findings and/or abuse. These findings should be of great concern to the in this report, sufficient district’s governing board and the Mendocino County Office of evidence exists to Education and require immediate intervention to limit the risk of fraud and/or misappropriation of assets in the future. demonstrate that fraud, mismanagement and Judgments Regarding Guilt or Innocence misappropriation of the The existence of fraud is solely the purview of the courts and district’s adult school juries, and FCMAT will not make statements that could be construed as a conclusion that fraud has occurred. resources and assets may In accordance with Education Code Section 42638(b), action have occurred. by the county superintendent shall include the following: If the county superintendent determines that there is evidence that fraud or misappro- priation of funds has occurred, the county superintendent shall notify the governing board of the school district, the state controller, the superintendent of public instruc- tion and the local district attorney. In accordance with Education Code Section 1241.5(b), the county superintendent shall report the findings and recommendations to the governing board of the district at a regularly scheduled board meeting within 45 days of completing the audit. The governing board of the school district shall notify the county superintendent within 15 days after receipt of the report of its proposed actions regarding the county superintendent’s recommendations. Recommendation The county superintendent should: 1. Notify the governing board of the Ukiah Unified School District, the state controller, the superintendent of public instruction, and the local district attorney that fraud or misappropriation of district funds and/or assets may have occurred. Mendocino county office of education 32 AB 139 EXTRAORDINARY AUDIT REPORT SUMMARY: POTENTIAL FRAUD Fiscal crisis & ManageMent assistance teaM 3333 APPENDDRICAEFST Appendices Mendocino county office of education 3344 DARPPAEFNTDICES Fiscal crisis & ManageMent assistance teaM 3355 APPENDDRICAEFST Appendix A - Substantive Testing Tick Mark Legend Identifies transactions included in 2011-12 Deposits Identifies transactions included in 2012-13 Deposits Identifies transactions included in 2013-14 Deposits 1 Receipt voided 2 Receipt was utilized for purposes other than Adult School Other identified matters: a. receipt was issued 1 year prior to deposit (#51597) 3 b. receipt was included in deposit but permanent copy was removed from receipt book c. Adult School deposit was adjusted when remitted to DO 4 Receipt issued - but not included in school site and district deposits 5 Omitted receipt may be mistakenly accounted for subsequent fiscal year deposit(s) 6 District receipt noted that the payment was refunded 6-4-12 7 Deposit included 2 receipts for $50 cash, unable to identify specific cash transaction omitted Receipt combination and series coincides with recorded district deposit. Copies of district backup 8 not reviewed/documented to verify tie. Cash accompanying district deposit was $150 less than receipts included in the deposit. 9 Collections paid by check agreed to deposit. Procedures Obtained district financial system deposit history report for 2011-12, 2012-13 and 2013-14 from 1 Mendocino COE Requested, reviewed and copied all original receipts from receipt books issued to Ukiah Adult 2 School listed in inventory and/or included in school site/district deposits during 2011-12, 2012-13 & 2013-14 Identified all adult school receipts included in deposits completed by adult school and included in 3 district 2011-12, 2012-13 and 2013-14 deposits Reviewed supporting documentation for all district deposits recorded in 2011-12, 2012-13 and 2013-14. Traced all completed receipts to deposits, verified math accuracy of adult school deposit receipt and related receipts, verified the form and total of consideration included in each adult 4 school deposit and its agreement with accompanying adult school receipts, identified all voided receipts; receipts utilized for pre-school and appropriately excluded from AE deposits, and issued receipts not included in school site/district deposits. Mendocino county office of education 3366 DARPPAEFNTDICES Fiscal crisis & ManageMent assistance teaM ciT tnuomA tisopeD EA tcirtsiD .tsiD kcehC tpieceR narT muS tisopeD tnuomA kcehC tnuomA hsaC eltiT/giS roF etaD kraM gnissiM latoT # tpieceR # .peD # # # 1 diov diov diov diov DIOV dioV 43394 1 1 diov diov diov diov DS 01$-DIOV dioV 26305 2 1 diov diov diov diov OJ 03$-DIOV dioV 17305 3 1 diov diov diov diov DIOV dioV 49015 4 6 3412 051 OJ )s(tseT DEG 2102/12/5 73415 5 1 diov diov diov diov DIOV 2102/5/21 28025 6 1 diov diov diov diov OJ DIOV 3102/91/6 07825 7 1 diov diov diov diov OJ )06$ - DEDIOV( tset DEG 3102/81/11 65435 8 1 diov diov diov diov neslO srednoW llamS 095712# tpiecer wen 4102/51/4 28435 9 1 diov diov diov diov diov DS )001$ DIOV( yparehT VI NVL 4102/62/2 49535 01 ciT tnuomA tisopeD EA tcirtsiD .tsiD kcehC tpieceR narT muS tisopeD tnuomA kcehC tnuomA hsaC eltiT/giS roF etaD kraM gnissiM latoT # tpieceR # .peD # # # 2 K-erP - srednoW llamS 1102/6/9 67394 1 2 4591 00.05 reK M aiM K-erP 1102/11/01 56305 2 2 --- 00.872 reK M aiM K-erP 1102/31/01 66305 3 2 --- 00.5 reK M aiM K-erP 1102/21/9 76305 4 2 00.04 reK M aiM K-erP 1102/1/01 86305 5 2 00.02 reK M aiM K-erP 1102/1/01 96305 6 2 00.02 reK M aiM K-erP 1102/72/01 37305 7 2 00.052 reK M aiM K-erP 1102/41/11 09305 8 2 X 00.05 reK M aiM K-erP 2102/62/1 39405 9 2 X 00.05 reK M aiM K-erP 2102/32/2 28015 01 2 di xat 00.05 raP M raM K erP - srednoW llamS 2102/13/5 46415 11 2 00.34 raP M raM slairetam loohcs - srednoW llamS 2102/42/9 49515 21 2 8104 50.001 OJ srednoW llamS 2102/03/8 15915 31 2 05.23 OJ srednoW llamS 2102/13/8 25915 41 2 OM 58.67 OJ srednoW llamS 35915 51 2 9071 52.63 OJ srednoW llamS 45915 61 2 OM 54.88 OJ srednoW llamS 55915 71 2 161 00.53 OJ srednoW llamS 65915 81 2 5531 58.431 OJ srednoW llamS 75915 91 2 57.24 OJ egalliV loohcserP 85915 02 2 00.91 OJ egalliV loohcserP 95915 12 2 00.32 OJ egalliV loohcserP 2102/72/9 06915 22 2 DI xat 00.02 RMM noitanod - srednoW llamS 2102/62/01 65025 32 2 DI xat 00.001 RMM noitanod - srednoW llamS 2102/62/01 75025 42 2 DI xat 00.005 RMM noitanod - srednoW llamS 2102/62/01 85025 52 2 00.001 neslO loohcserP srednoW llamS 4102/5/3 77435 62 2 00.04 neslO loohcserP srednoW llamS 4102/01/3 87435 72 3377 APPENDDRICAEFST Mendocino county office of education ciT tnuomA tisopeD EA tcirtsiD .tsiD kcehC tpieceR narT muS tisopeD tnuomA kcehC tnuomA hsaC eltiT/giS roF etaD kraM gnissiM latoT # tpieceR # .peD # # # a3 00.012,1 95635 97.255,301 400041 00.03 OJ tseT DEG 2102/62/9 79515 1 b3 00.087,01 21625 23.239,38 310031 00.03 OJ tseT DEG 3102/11/2 30125 2 b3 00.087,01 21625 23.239,38 310031 00.004 OJ noitiuT II mreT NVL 3102/31/2 40125 3 b3 00.087,01 21625 23.239,38 310031 00.000,2 OJ noitiuT II mreT NVL 3102/02/2 50125 4 b3 00.087,01 21625 23.239,38 310031 00.03 OJ tseT DEG 3102/02/2 60125 5 b3 00.087,01 21625 23.239,38 310031 00.051 OJ tseT DEG 3102/02/2 70125 6 b3 00.087,01 21625 23.239,38 310031 00.03 OJ tseT DEG 3102/02/2 80125 7 b3 00.087,01 21625 23.239,38 310031 00.051 OJ tseT DEG 3102/02/2 90125 8 b3 00.087,01 21625 23.239,38 310031 00.03 OJ tseT DEG 3102/02/2 01125 9 b3 00.087,01 21625 23.239,38 310031 00.051 OJ tseT DEG 3102/12/2 11125 01 b3 00.087,01 21625 23.239,38 310031 00.000,2 OJ noitiuT II mreT NVL 3102/12/2 21125 11 c3 00.098 88235 89.792,745 300041 00.09 tseT DEG 45925 21 ciT tnuomA tisopeD EA tcirtsiD .tsiD kcehC tpieceR narT muS tisopeD tnuomA kcehC tnuomA hsaC eltiT/giS roF etaD kraM gnissiM latoT # tpieceR # .peD # # # 8 00.03 283 00.03 OJ tset DEG 3102/82/01 19335 1 8 00.06 00.06 OJ tset DEG 3102/92/01 29335 2 8 00.03 00.03 OJ tset DEG 3102/13/01 39335 3 8 00.09 00.09 DS tset DEG 3102/52/01 43435 4 8 00.005 00.005 DS noitiuT III mreT NVL 3102/52/01 53435 5 8 00.051 00.051 DS tset DEG 3102/82/01 63435 6 8 00.03 00.03 DS tset DEG 3102/92/01 73435 7 8 00.06 00.06 DS tset DEG 3102/92/01 83435 8 8 00.03 00.03 DS tset DEG 3102/92/01 93435 9 8 00.082 00.082 DS noitiuT III mreT NVL 3102/03/01 04435 01 8 00.06 00.06 DS tset DEG 3102/03/01 14435 11 8 00.051 00.051 DS tset DEG 3102/03/01 24435 21 8 00.002,1 00.002,1 DS noitiuT III mreT NVL 3102/03/01 34435 31 8 00.008,1 00.008,1 DS noitiuT I mreT NVL 4102/01/2 27535 41 3388 DARPPAEFNTDICES Fiscal crisis & ManageMent assistance teaM ciT tnuomA tisopeD EA tcirtsiD .tsiD kcehC tpieceR narT muS tisopeD tnuomA kcehC tnuomA hsaC eltiT/giS roF etaD kraM gnissiM latoT # tpieceR # .peD # # # 4 00.51 00.51 DS pukcip dlihc etaL 1102/52/8 35394 1 4 00.051 00.051 DS )s(tseT DEG 2102/6/2 31405 2 4 00.09 00.09 OJ )s(tseT DEG 2102/9/2 22405 3 4 00.001 00.001 DS noitiuT III mreT NVL 2102/31/2 72405 4 4 00.05 4001 00.05 DS noitacilppA NVL 2102/41/2 53405 5 4 00.005,1 00.005,1 DS noitiuT III mreT NVL 2102/71/1 87405 6 4 00.000,1 00.000,1 DS noitiuT III mreT NVL 2102/42/1 19405 7 4 00.05 00.05 DS noitacilppA NVL 2102/42/2 25015 8 4 00.005,1 00.005,1 DS noitiuT III mreT NVL 2102/72/2 75015 9 5 ,4 00.05 00.05 DS noitacilppA NVL 2102/21/4 40115 01 5 ,4 00.05 00.05 OJ noitacilppA NVL 2102/21/4 60115 11 5 ,4 00.05 00.05 DS noitacilppA NVL 2102/21/4 70115 21 5 ,4 00.03 00.03 DS )s(tseT DEG 2102/71/4 62115 31 5 ,4 00.05 00.05 DS noitacilppA NVL 2102/71/4 72115 41 5 ,4 00.05 00.05 DS noitacilppA NVL 2102/91/4 93115 51 5 ,4 00.05 00.05 DS noitacilppA NVL 2102/91/4 54115 61 5 ,4 00.05 00.05 DS noitacilppA NVL 2102/91/4 64115 71 5 ,4 00.05 00.05 DS noitacilppA NVL 2102/02/4 74115 81 5 ,4 00.05 00.05 DS noitacilppA NVL 2102/02/4 84115 91 5 ,4 00.05 00.05 DS noitacilppA NVL 2102/02/4 94115 02 4 00.05 00.05 DS noitacilppA NVL 2102/22/3 16115 12 4 00.05 00.05 DS noitacilppA NVL 2102/32/3 26115 22 4 00.05 00.05 DS noitacilppA NVL 2102/32/3 36115 32 4 00.061 00.061 DS noitiuT III mreT NVL 2102/72/3 27115 42 4 00.05 00.05 OJ noitacilppA NVL 2102/9/4 28115 52 4 00.03 00.03 DS )s(tseT DEG 2102/9/4 58115 62 4 00.05 00.05 OJ eeF noitacilppA NVL 2102/02/4 20415 72 4 00.05 00.05 OJ eeF noitacilppA NVL 2102/02/4 30415 82 4 00.003 00.003 DS ssalC treC yparehT VI 2102/8/5 12415 92 4 00.002 00.002 DS ssalC treC yparehT VI 2102/8/5 42415 03 4 00.001 00.001 DS noitiuT III mreT NVL 2102/71/5 43415 13 4 00.003 00.003 DS ssalC treC yparehT VI 2102/22/5 93415 23 4 00.006 00.006 DS noitiuT III mreT NVL 2102/22/5 04415 33 4 00.051 00.051 DS ssalC treC yparehT VI 2102/22/5 64415 43 4 00.001 00.001 DS ssalC treC yparehT VI 2102/22/5 74415 53 4 00.06 00.06 DS noitiuT II mreT NVL 2102/22/5 84415 63 4 00.03 00.03 DS )s(tseT DEG 2102/42/5 15415 73 4 00.003 00.003 DS ssalC treC yparehT VI 2102/92/5 65415 83 4 00.003 00.003 DS ssalC treC yparehT VI 2102/92/5 75415 93 4 00.09 00.09 DS )s(tseT DEG 2102/5/6 86415 04 4 00.003 00.564,5 92715 36.905,914 220021 00.003 DS ssalC treC yparehT VI 2102/03/5 95415 14 3399 APPENDDRICAEFST Mendocino county office of education ciT tnuomA tisopeD EA tcirtsiD .tsiD kcehC tpieceR narT muS tisopeD tnuomA kcehC tnuomA hsaC eltiT/giS roF etaD kraM gnissiM latoT # tpieceR # .peD # # # 4 00.003 00.003 DS ssalC treC yparehT VI 2102/11/6 77415 24 4 00.051 00.051 DS ssalC treC yparehT VI 2102/11/6 87415 34 4 00.000,2 00.000,2 OJ noitiuT I mreT NVL 2102/6/7 68415 44 4 00.000,2 00.000,2 DS noitiuT I mreT NVL 2102/02/7 79415 54 4 00.000,1 00.000,1 DS noitiuT I mreT NVL 2102/02/7 99415 64 4 00.000,2 00.000,2 DS noitiuT I mreT NVL 2102/02/7 00515 74 4 00.000,2 00.000,2 DS noitiuT I mreT NVL 2102/02/7 20515 84 4 00.000,2 00.000,2 DS noitiuT I mreT NVL 2102/03/7 71515 94 4 00.000,2 00.000,2 DS noitiuT I mreT NVL 2102/03/7 81515 05 4 00.000,2 00.000,2 DS noitiuT I mreT NVL 2102/03/7 12515 15 4 00.000,2 00.000,2 DS noitiuT I mreT NVL 2102/31/9 08515 25 4 00.000,2 00.000,2 OJ noitiuT NVL 2102/4/21 38915 35 4 00.005,1 00.005,1 DS noitiuT II & I mreT NVL 3102/82/1 40025 45 4 00.008 00.008 DS noitiuT II mreT NVL 3102/21/2 11025 55 4 00.000,2 00.000,2 DS noitiuT II mreT NVL 3102/41/2 81025 65 4 00.000,2 00.000,2 DS noitiuT II mreT NVL 3102/41/2 91025 75 4 00.000,2 00.000,2 DS noitiuT III mreT NVL 3102/5/3 72025 85 4 00.000,2 00.000,2 DS noitiuT II mreT NVL 3102/7/3 33025 95 4 00.051 00.051 DS tseT DEG 3102/51/3 93025 06 4 00.06 00.06 DS tseT DEG 3102/02/3 04025 16 4 00.000,2 00.000,2 DS noitiuT II mreT NVL 3102/12/3 54025 26 4 00.003 00.003 DS noitiuT II mreT NVL 3102/82/3 84025 36 4 00.06 00.06 DS tseT DEG 3102/8/4 94025 46 4 00.000,2 00.000,2 DS noitiuT II mreT NVL 2102/31/11 36025 56 4 00.000,2 00.000,2 DS noitiuT II mreT NVL 2102/72/11 27025 66 4 00.005 00.005 DS noitiuT II mreT NVL 2102/11/21 58025 76 4 00.005 00.005 DS noitiuT II mreT NVL 3102/51/1 89025 86 4 00.06 00.06 OJ tseT DEG 3102/6/3 02125 96 4 00.09 00.09 OJ tseT DEG 3102/91/3 32125 07 4 00.000,2 00.000,2 DS noitiuT II mreT NVL 3102/01/4 13125 17 4 00.06 00.06 OJ tseT DEG 3102/52/4 34125 27 4 00.06 00.06 OJ tseT DEG 3102/1/5 54125 37 4 00.051 00.051 OJ stseT DEG 3102/8/5 94125 47 4 00.03 00.03 OJ stseT DEG 3102/8/5 05125 57 4 00.03 00.03 DS tseT DEG 3102/81/4 10825 67 4 00.051 00.051 DS tseT DEG 3102/61/4 20825 77 4 00.051 00.051 DS tseT DEG 3102/7/5 40825 87 4 00.051 00.051 DS tseT DEG 3102/7/5 50825 97 4 00.03 00.03 DS tseT DEG 3102/7/5 60825 08 4 00.03 00.03 DS tseT DEG 3102/8/5 90825 18 4 00.005 00.005 DS noitiuT III mreT NVL 3102/02/5 51825 28 4400 DARPPAEFNTDICES Fiscal crisis & ManageMent assistance teaM ciT tnuomA tisopeD EA tcirtsiD .tsiD kcehC tpieceR narT muS tisopeD tnuomA kcehC tnuomA hsaC eltiT/giS roF etaD kraM gnissiM latoT # tpieceR # .peD # # # 4 00.53 00.53 DS DEG-sserdda fo egnahC 3102/12/5 61825 38 4 00.005 00.005 DS noitiuT II mreT NVL 3102/92/5 81825 48 4 00.06 00.06 DS tseT DEG 3102/3/6 12825 58 4 00.05 00.05 DS eeF noitacilppA NVL 3102/3/6 22825 68 4 00.05 00.05 DS eeF noitacilppA NVL 3102/4/6 52825 78 4 00.05 00.05 DS eeF noitacilppA NVL 3102/6/6 72825 88 4 00.05 00.05 DS eeF noitacilppA NVL 3102/6/6 82825 98 4 00.06 00.06 DS tseT DEG 3102/6/6 92825 09 4 00.03 00.03 DS tseT DEG 3102/7/6 03825 19 4 00.05 00.05 DS )elbadaer ton epyt( noitacilppA 3102/31/6 73825 29 4 00.09 00.09 DS tseT DEG 3102/31/6 93825 39 4 00.06 00.06 DS tseT DEG 3102/41/6 24825 49 4 00.06 00.06 DS tseT DEG 3102/71/6 84825 59 4 00.03 00.03 DS tseT DEG 3102/71/6 94825 69 4 00.602 00.602 OJ margorP ANC 3102/92/5 25825 79 4 00.05 00.05 OJ noitacilppA NVL 3102/5/6 45825 89 4 00.051 00.051 OJ tseT DEG 3102/11/6 85825 99 4 00.05 00.05 naDuC ycarT noitacilppA NVL 3102/41/6 06825 001 4 00.051 00.051 DS tseT DEG 3102/81/6 26825 101 4 00.051 00.051 DS tseT DEG 3102/81/6 56825 201 4 00.003,1 00.003,1 OJ margorP ANC 3102/42/6 77825 301 4 00.000,2 00.000,2 DS noitiuT III mreT NVL 3102/62/6 97825 401 4 00.000,2 00.000,2 DS noitiuT III mreT NVL 3102/72/6 08825 501 4 00.05 00.05 DS noitacilppA NVL 3102/32/7 39825 601 4 00.05 00.05 DS noitacilppA NVL 3102/42/7 49825 701 4 00.51 00.51 DS DEG - mroF rorrE 3102/52/7 59825 801 4 00.000,1 00.000,1 DS noitiuT III mreT NVL 3102/21/8 00925 901 4 00.000,1 00.000,1 OJ noitiuT III mreT NVL 3102/21/7 81925 011 4 00.03 00.03 GD tseT DEG 3102/52/7 22925 111 4 00.05 00.05 DS noitacilppA NVL 3102/72/8 87925 211 4 00.05 00.05 DS noitacilppA NVL 3102/82/8 97925 311 4 00.003 00.003 DS noitiuT III mreT NVL 3102/3/9 38925 411 4 00.05 00.05 DS noitacilppA NVL 3102/6/9 19925 511 4 00.05 00.05 DS noitacilppA NVL 3102/9/9 29925 611 4 00.06 00.06 DS tseT DEG 3102/9/9 39925 711 4 00.05 00.05 OJ noitacilppA NVL 3102/6/9 25335 811 4 00.021 00.021 OJ tset DEG 3102/01/01 87335 911 4 00.000,1 00.000,1 DS III mreT NVL 3102/81/9 40435 021 4 00.000,2 00.000,2 DS noitiuT III mreT NVL 3102/2/01 11435 121 4 00.000,2 00.000,2 DS noitiuT III mreT NVL 3102/2/01 31435 221 4 00.005 00.005 DS noitiuT III mreT NVL 3102/11/01 61435 321 4411 APPENDDRICAEFST Mendocino county office of education ciT tnuomA tisopeD EA tcirtsiD .tsiD kcehC tpieceR narT muS tisopeD tnuomA kcehC tnuomA hsaC eltiT/giS roF etaD kraM gnissiM latoT # tpieceR # .peD # # # 4 00.000,2 00.000,2 DS III mreT NVL 3102/61/01 52435 421 4 00.000,2 00.000,2 DS noitiuT III mreT NVL 3102/61/01 62435 521 4 00.051 00.051 OJ tset DEG 3102/51/11 45435 621 4 00.051 00.051 OJ tset DEG 3102/91/11 75435 721 7 ,4 00.051 9501 00.03 00.021 OJ yparehT VI NVL 4102/32/6 58435 821 7 ,4 00.051 00.051 OJ yparehT VI 4102/32/6 68435 921 7 ,4 00.003 8601 00.051 00.051 OJ yparehT VI 4102/32/6 78435 031 7 ,4 00.051 011 00.051 OJ yparehT VI 4102/32/6 88435 131 7 ,4 00.003 00.003 OJ yparehT VI 4102/32/6 98435 231 7 ,4 00.051 00.051 OJ yparehT VI 4102/32/6 09435 331 7 ,4 00.051 00.051 OJ yparehT VI 4102/32/6 19435 431 7 ,4 00.051 411 00.051 OJ yparehT VI 4102/42/6 29435 531 7 ,4 00.051 2752 00.051 GD yparehT VI 4102/42/6 39435 631 7 ,4 00.001 022 00.001 OJ yparehT VI 4102/42/6 49435 731 7 ,4 00.01 00.01 OJ kooB LSE 4102/62/6 59435 831 7 ,4 00.051 00.051 OJ yparehT VI 4102/62/6 69435 931 7 ,4 00.051 00.051 OJ yparehT VI 4102/62/6 79435 041 7 ,4 00.051 00.051 OJ yparehT VI 4102/72/6 89435 141 7 ,4 00.051 00.051 OJ yparehT VI 4102/72/6 99435 241 7 ,4 00.051 00.051 OJ yparehT VI 4102/1/7 00535 341 7 ,4 00.003 00.003 DS yparehT VI 4102/7/3 10535 441 7 ,4 00.041 00.041 DS yparehT VI 4102/7/3 20535 541 4 00.947,1 00.947,1 DS noitiuT I mreT NVL 4102/71/3 90535 641 4 00.008 00.008 DS noitiuT III mreT NVL 4102/01/4 71535 741 4 00.947,1 00.947,1 DS noitiuT II mreT NVL 4102/52/4 22535 841 4 00.157 00.157 DS noitiuT I mreT NVL 4102/82/4 42535 941 4 00.157 00.157 DS noitiuT I mreT NVL 4102/82/4 62535 051 4 00.003 00.003 DS yparehT VI NVL 4102/8/5 43535 151 4 00.051 811 00.051 DS yparehT VI NVL 4102/8/5 53535 251 4 00.051 8452 00.051 DS yparehT VI NVL 4102/8/5 63535 351 4 00.002 00.002 DS yparehT VI NVL 4102/8/5 73535 451 4 00.007 00.007 DS noitiuT I mreT NVL 4102/42/1 06535 551 4 00.003 00.003 DS yparehT VI NVL 4102/82/1 66535 651 4 00.003 0552 00.003 DS yparehT VI NVL 4102/92/1 76535 751 4 00.157 00.157 DS noitiuT I mreT NVL 4102/03/1 86535 851 4 00.003 7251 00.003 DS yparehT VI NVL 4102/03/1 96535 951 4 00.051 0741 00.051 DS yparehT VI NVL 4102/7/2 17535 061 4 00.003 97 00.003 DS yparehT VI NVL 4102/11/2 37535 161 4 00.003 00.003 DS yparehT VI NVL 4102/11/2 47535 261 4 00.051 00.051 DS yparehT VI NVL 4102/02/2 78535 361 4 00.051 2072 00.051 DS yparehT NVL 4102/62/2 39535 461 4422 DARPPAEFNTDICES Fiscal crisis & ManageMent assistance teaM ciT tnuomA tisopeD EA tcirtsiD .tsiD kcehC tpieceR narT muS tisopeD tnuomA kcehC tnuomA hsaC eltiT/giS roF etaD kraM gnissiM latoT # tpieceR # .peD # # # 9 00.051 00.462,9 88545 12.546,721 510041 00.006 DS 4102/62/2 59535 561 4 00.002 00.002 DS noitiuT III mreT NVL 3102/12/11 61635 661 4 00.005 00.005 DS noitiuT III mreT NVL 3102/22/11 71635 761 4 00.005,2 00.005,2 DS I mreT margorP NVL 3102/4/21 22635 861 4 00.06 00.06 DS tset DEG 3102/6/21 52635 961 4 00.005,2 00.005,2 DS noitiuT I mreT NVL 4102/6/1 14635 071 4 00.005,2 00.005,2 DS noitiuT I mreT NVL 4102/9/1 34635 171 4 00.005,2 00.005,2 DS noitiuT I mreT NVL 4102/41/1 94635 271 4 00.003 00.003 DS yparehT NVL 4102/21/5 10245 371 00.281,39 00.033,2 00.203,19 00.557,8 stisopeD 21-1102 ni dedulcnI 371 00.571 00.51 00.061 00.195,74 stisopeD 31-2102 ni dedulcnI skcehc dna hsac dedulcni snoitcasnart owT 00.638,63 stisopeD 41-3102 ni dedulcnI 00.281,39 - 10394 YF 11-0102 ni nward roirp dna 03394 03394 -80245 krowdleif fo sa detisopeD/deussinU 00545 snoitpecxE detoN dediov tpieceR 1 9 loohcS tludA naht rehto sesoprup rof dezilitu saw tpieceR 2 72 :srettam deifitnedi rehtO )79515#( tisoped ot roirp raey 1 deussi saw tpiecer .a 3 3 koob tpiecer morf devomer saw ypoc tnenamrep tub tisoped ni dedulcni saw tpiecer .b OD ot dettimer nehw detsujda saw tisoped loohcS tludA .c stisoped tcirtsid dna etis loohcs ni dedulcni ton tub - deussi tpieceR 4 371 )s(tisoped raey lacsif tneuqesbus rof detnuocca ylnekatsim eb yam tpiecer dettimO 5 2 21-4-6 dednufer saw tnemyap eht taht deton tpiecer tcirtsiD 6 1 dettimo noitcasnart hsac cificeps yfitnedi ot elbanu ,hsac 05$ rof stpiecer 2 dedulcni tisopeD 7 1 ton pukcab tcirtsid fo seipoC .tisoped tcirtsid dedrocer htiw sedicnioc seires dna noitanibmoc tpieceR 8 .eit yfirev ot detnemucod/deweiver yb diap snoitcelloC .tisoped eht ni dedulcni stpiecer naht ssel 051$ saw tisoped tcirtsid gniynapmocca hsaC 9 1 .tisoped ot deerga kcehc 4433 APPENDDRICAEFST Appendix B - Study Agreement Mendocino county office of education 4444 DARPPAEFNTDICES Fiscal crisis & ManageMent assistance teaM 4455 APPENDDRICAEFST Mendocino county office of education 4466 DARPPAEFNTDICES Fiscal crisis & ManageMent assistance teaM 4477 APPENDDRICAEFST Mendocino county office of education 4488 DARPPAEFNTDICES Fiscal crisis & ManageMent assistance teaM