Nevada Joint Union High School District Report

Nevada Joint Union High School District ASB Review June 3, 2019 Michael H. Fine Chief Executive Officer Fiscal crisis & ManageMent assistance teaM June 3, 2019 Brett McFadden, Superintendent Nevada Joint Union High School District 11645 Ridge Road Grass Valley, CA 95945 Dear Superintendent McFadden: In October 2018, the Nevada Joint Union High School District and the Fiscal Crisis and Management Assistance Team (FCMAT) entered into an agreement for FCMAT to conduct a review of the district’s associated student body (ASB) operations. Fieldwork and site visits were planned for March 2019. The agreement stated that FCMAT would perform the following: 1. Provide on-site technical assistance to evaluate the Associated Student Body of four high schools of the Nevada Joint Union High School District. Review ASB opera- tions, forms, and activities. Meet with each site principal. At the conclusion of the site visits, present two separate ASB workshops to discuss areas for improvement. 2. Conduct two three-hour ASB workshops for the district on March 6, 2019 and March 7, 2019, from 9 a.m. to 12 noon, as requested. Registration begins at 8:30 a.m. and is limited to only those associated with the Nevada Joint Union High School District. Attendees of workshops should be principals, vice principals, other administrators, activity directors, bookkeepers, and members of student council and PTA/booster club organizations. This final report contains the study team’s findings and recommendations in the above areas of review. FCMAT appreciates the opportunity to serve the Nevada Joint Union High School District, and extends thanks to all the staff for their assistance during fieldwork. Sincerely, Michael H. Fine Chief Executive Officer Fiscal crisis & ManageMent assistance teaM i TABLE OF CONTENTS Table of Contents About FCMAT .........................................................................................iii Introduction ........................................................................................... 1 Background ..................................................................................................... 1 Study Team...................................................................................................... 2 Study Guidelines ........................................................................................... 2 Executive Summary ............................................................................. 3 Findings and Recommendations ................................................... 5 ASB Policies and Procedures, Board Designee, Board Policies and Internal Controls ...................................................................................5 ASB Accounting Software ..........................................................................9 Student Body Accounts .............................................................................11 ASB Not Required .......................................................................................15 ASB Club Budgets, Inactive Clubs and Large Club Balances .........17 Financial Reports and Bank Reconciliations ........................................21 Forms ..............................................................................................................23 ASB Fundraisers & Revenue Potential ..................................................25 ASB Purchase Process & Preapproval ...................................................27 Cash Controls ...............................................................................................33 Appendix ............................................................................................37 Nevada JoiNt UNioN HigH ScHool diStrict 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, human resources 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 manage- ment assistance services are used not just to help avert fiscal crisis, but to promote sound financial practices, support the training and development of chief business officials and help to create efficient organizational operations. FCMAT’s data management services are used to help local educational agencies (LEAs) meet state reporting responsibilities, improve data quality, and inform instructional program decisions. 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 LEA 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. FCMAT has continued to make adjustments in the types of support provided based on the changing dynamics of K-14 LEAs and the implementation of major educational reforms. Studies by Fiscal Year 90 80 70 60 50 40 30 20 10 0 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 12/13 13/14 14/15 15/16 16/17 17/18 FCMAT also develops and provides numerous publications, software tools, workshops and professional development opportunities to help LEAs operate more effectively and fulfill their fiscal oversight and data management responsibilities. The California School Information Services (CSIS) division of FCMAT assists the California Department of Education with the implementation of the California Longitudinal Pupil Achievement Data System (CALPADS). CSIS also hosts and maintains the Ed-Data website (www.ed-data.org) and provides technical expertise to the Ed-Data partnership: the California Department of Education, EdSource and FCMAT. FCMAT was created by Assembly Bill (AB) 1200 in 1992 to assist LEAs to meet and sustain their financial obligations. AB 107 in 1997 charged FCMAT with responsibility for CSIS and its state- wide data management work. AB 1115 in 1999 codified CSIS’ mission. Nevada JoiNt UNioN HigH ScHool diStrict seidutS fo rebmuN iv ABOUT FCMAT 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. AB 2756 (2004) provides specific responsibilities to FCMAT with regard to districts that have received emergency state loans. In January 2006, Senate Bill 430 (charter schools) and AB 1366 (community colleges) became law and expanded FCMAT’s services to those types of LEAs. On September 17, 2018 AB 1840 was signed into law. This legislation changed the how fiscally insolvent districts are administered once an emergency appropriation has been made, shifting the former state-centric system to be more consistent with the principles of local control, and providing new responsibilities to FCMAT associated with the process. 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 Michael H. Fine, 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 Nevada Joint Union High School District is located in the city of Grass Valley and serves approximately 2,584 students at two comprehensive high schools, one early college high school, two continuation high schools, and two independent study schools. The district is working to improve its operations and procedures for Associated Student Body (ASB) funds. In doing so, the district has recognized through self-evaluation that more work is needed in this area and contracted with FCMAT to review its ASB operations and provide training in March 2019 to further help the district comply with requirements in this area. Three of the most important properties necessary to the operations of any ASB are board policies, administrative regulations, and detailed operating manuals. Page 5 of the FCMAT Associated Student Body Accounting Manual, Fraud Prevention Guide and Desk Reference (FCMAT ASB Manual) states, The governing board of the school district, charter school or community college is ulti- mately responsible for everything that happens in the district, including the activities of student organizations. Under Education Code section 48930 for K-12, and section 76060 for community colleges, the governing board has the authority to approve the formation of a student body organization within the district. This means that governing boards are not required to allow student body organizations to exist. Many districts have chosen to stop student fundraising and organizations as a last resort because of continual and severe noncompliance issues, including fraud. In assuming the authority the Education Code gives them, governing boards estab- lishes parameters for district operations through board policies and regulations. These policies and regulations must specify how the student body organization will be established, how the organization’s activities will be supervised, and how the organization’s finances will be operated and managed. The district’s administration is responsible for establishing and monitoring the procedures to carry out the policies and regulations adopted by the governing board. Students are raising funds for their own benefit and are able to make decisions about the funds (with co-approval from an administrator); however, when there is a conflict, governing board policies and regulations override ASB decisions because ultimately the funds are under the governing board’s authority. A comprehensive board policy is the cornerstone of sound practices in student organi- zations. This is most effectively achieved by establishing a comprehensive district ASB manual for all student organizations to follow, and referencing it in board policy that requires all staff to follow the manual’s guidance… [Emphasis Added) Page 15 of the FCMAT ASB Manual discusses governing board policy and administration regula- tions, and states the following: Because most ASB operations relate directly to business management functions, the district’s chief business official should take a lead role in ensuring that the district has appropriate board policies and administrative regulations regarding the operation and Nevada JoiNt UNioN HigH ScHool diStrict 2 INTRODUCTION management of the organization’s finances. In addition, all individuals involved with the ASB should receive training at least every two years on ASB laws, policies, regulations, internal controls and good business practices. The district’s business office should take the lead in ensuring that this training is provided. ASBs must be made aware that district policy applies to them, and people involved in ASB must understand that district board policies and regulations are an additional set of laws that ASB organizations must follow. All district board policies that apply to general district operations apply to ASB as well, unless there is a policy stating otherwise. [Emphasis Added] In addition to board policies that apply to ASB operations, districts must ensure they follow each ASB club’s constitution and bylaws. Study Team The study team was composed of the following members: Michael Ammermon John Lotze CPA, CFE, CRFAC, DABFA FCMAT Technical Writer FCMAT Intervention Specialist Bakersfield, CA San Clemente, CA Study Guidelines In October 2018, the Nevada Joint Union High School District and FCMAT entered into an agreement for FCMAT to provide management assistance. The study agreement states that FCMAT will perform the following: 1. Provide on-site technical assistance to evaluate the Associated Student Body of four high schools of the Nevada Joint Union High School District. Review ASB operations, forms, and activities. Meet with each site principal. At the conclusion of the site visits, present two separate ASB workshops to discuss areas for improvement. 2. Conduct two three-hour ASB workshops for the district on March 6, 2019 and March 7, 2019, from 9 a.m. to 12 noon, as requested. Registration begins at 8:30 a.m. and is limited to only those associated with the Nevada Joint Union High School District. Attendees of workshops should be princi- pals, vice principals, other administrators, activity directors, bookkeepers, and members of student council and PTA/booster club organizations. FCMAT visited the district office and its school sites on March 4-7, 2019 to conduct interviews with district and site staff, collect data and review documents. Based on the interviews and a review of documents at each school site, FCMAT determined that the findings and recommen- dations presented in this report are applicable to all sites and that each site would benefit from implementing the recommendations. FCMAT’s reports focus on systems and processes that may need improvement. Those that may be functioning well are generally not commented on in FCMAT’s reports. In writing its reports, FCMAT uses the Associated Press Stylebook, a comprehensive guide to usage and accepted style that emphasizes conciseness and clarity. In addition, this guide emphasizes plain language, discourages the use of jargon and capitalizes relatively few terms. Fiscal crisis & ManageMent assistance teaM 3 EXECUTIVE SUMMARY Executive Summary Although the district has adopted board policies and provided some training in the past related to its ASB operations, many procedures and practices can be improved. The district recognizes the issues discussed in this report and has already begun implementing many of the recommen- dations. The following is a summary of ASB-related practices and procedures that the district and FCMAT found have room for improvement and change: • Various board policies need to be updated and clarified. The board should consider adopting the FCMAT ASB Manual and creating and adopting a supplemental district ASB manual, guide, or list of allowable and prohibited activities as board policy and administrative regulations. This would help define and communicate which ASB-related practices and activities are allowable and which are prohibited. • Board policy needs to specifically identify the title of the individual(s) the board has selected as designee(s) to approve fundraisers, such as the school principal(s). • The district needs to continue to improve internal controls related to ASB, and should implement annual ASB training. Internal controls are greatly needed for fundraisers; forms; purchasing and preapproval; counting and transport of funds with a witness; and keeping cash in controlled, tamper-proof plastic bank bags. These measures will improve the integrity of ASB processes and procedures. • Independent sales tax accounts for ASB operations need to be closed; sales taxes should be remitted through the district office’s sales tax reporting. • A whistleblower hotline is always recommended as a way for individuals to report concerns about possible fraud. • The district could benefit from using the same ASB accounting software districtwide. • All ASB trust accounts need to be evaluated to determine if the clubs whose account they are meet the criteria and requirements to be a club that is part of ASB. Accounts or trusts for clubs that do not meet the proper criteria should be removed from the ASB and accounted for in other accounts approved by the district’s business office. • Club budgets, inactive clubs, and large club cash balances need to be evaluated. All clubs are required to have a budget and should not spend any funds until a budget is in place. Inactive clubs should be closed, and any club with a large cash balance should be evaluated to determine whether it will continue as a club or what the disposition of its cash balance should be if it does not continue as a club. • The appropriate administrator(s) need to review and sign all financial reports and bank reconciliations. • All school sites need to use the same forms and accounting software. Consistency in this area, and the use of multicopy forms, will strengthen documentation and authorizations and should improve accountability and internal controls. Nevada JoiNt UNioN HigH ScHool diStrict 4 Fiscal crisis & ManageMent assistance teaM 5 ASB POLICIES AND PROCEDURES, BOARD DESIGNEE, BOARD POLICIES AND INTERNAL CONTROLS Findings and Recommendations ASB Policies and Procedures, Board Designee, Board Policies and Internal Controls To ensure successful ASB operations, school entities need the following: • Comprehensive board policies and administrative regulations for ASB operations and funds; these should include guidance that goes beyond what is in the law, including procedures, best practices and internal controls. • A comprehensive and user-friendly ASB manual that provides guidance for all individuals involved in day-to-day ASB activities. • A significant level of oversight and support from the district’s business office. • Annual training for all staff members and students who work with ASB operations. • Standard processes and procedures at all sites. ASB Policies, Procedures and Manual(s) The district has been aware that it needs additional guidelines and controls in this area. The district has some board policies regarding ASB funds, and it uses the 2015 FCMAT Associated Student Body Accounting Manual, Fraud Prevention Guide, and Desk Reference (FCMAT ASB Manual), which has the most up-to-date ASB policies and procedures and fraud awareness tools. However, the district’s adopted board policies do not indicate that the district has adopted the FCMAT ASB Manual or created its own ASB accounting manual, guide, or list of allowable and prohibited activities as part of its policies and procedures. Updating board policy to include this specificity would give staff more direction about which resources to rely on when questions arise. Suggested board policy language is as follows: The governing board adopts, on an ongoing basis, the most recent Fiscal Crisis and Management Assistance Team (FCMAT) Associated Student Body Accounting Manual, Fraud Prevention Guide, and Desk Reference and the Nevada Joint Union High School District ASB Manual as district ASB board policy. If any conflict occurs between the most recent FCMAT Associated Student Body Accounting Manual, Fraud Prevention Guide, and Desk Reference and the Nevada Joint Union High School District ASB Manual, the policies and procedures established in the latter document will prevail. This type of language would allow the district to modify its own ASB manual to include specific policies and procedures that may differ from those in the FCMAT ASB Manual. Board Policy and Designee The FCMAT ASB Manual consistently discusses use of a board designee. A board designee for ASB is the person the board designates to approve ASB fundraisers and activities on behalf of the board. The district’s board policies lack clear instructions and information regarding who its board designee is for ASB purposes. The district needs board policy that identifies a designee for approving fundraisers and activities. Without such a designee, the board is responsible for approving all fundraisers for ASB, boosters, foundations, and any other district or school Nevada JoiNt UNioN HigH ScHool diStrict 6 ASB POLICIES AND PROCEDURES, BOARD DESIGNEE, BOARD POLICIES AND INTERNAL CONTROLS connected organization’s fundraisers. Typically a board will designate each school principal to approve ASB fundraisers and activities because the principal is most familiar with the activities and school-connected organizations at their school. Education Code section 48932 requires that the governing board approve fundraising events as follows: The governing board of any school district may authorize any organization composed entirely of pupils attending the schools of the district to maintain such activities, including fund-raising activities, as may be approved by the governing board. The governing board of any school district may, by resolution, authorize any student body organization to conduct fund-raising activities on school property during school hours provided that the governing board has determined that such activities will not interfere with the normal conduct of the schools. Education Code section 51521, Fundraising Projects, states that the governing board of the district, or the board’s designee, is responsible for approving all fundraising: No person shall solicit any other person to contribute to any fund or to purchase any item of personal property, upon the representation that the money received is to be used wholly or in part for the benefit of any public school or the student body of any public school, unless such person obtains the prior written approval of either the governing board of the school district in which such solicitation is to be made or the governing board of the school district having jurisdiction over the school or student body represented to be benefited by such solicitation, or the designee of either of such boards. [Emphasis Added] Board policies apply to ASB; therefore, policies and administrative regulations already in place regarding awards, purchasing, travel, reimbursements and other items apply to ASB. Policies that apply to ASB should be identified and included in any ASB manual, guide, or list. Internal Controls Comprehensive board policies, ASB manuals, training, and oversight are all components of a strong ASB internal control system. Internal controls begin with gaining an understanding of how processes and procedures are operating, and evaluating them for improvement. This report identifies processes, procedures, forms and practices that need improvement. Sales Tax ASB operations should not have their own sales tax accounts. Typically, sales and use tax is reported to the district office, which then pays both that tax and the taxes the district owes from its other operations. However some of the district’s schools account for and pay sales and use tax directly to the California Department of Tax and Fee Administration using the school’s sales tax identification number. All sales tax and use tax needs to be reported through the district office and should use the district’s sales and use tax identification number. The district office will need to accumulate all sales and use tax districtwide and remit those to the state of California along with the California Department of Tax and Fee Administration’s sales and use tax report. Annual Training Annual ASB training is a best practice. The training needs to include administrators, activities directors, coaches, athletics directors, bookkeepers, and student council members. Training may also include members of school-connected organizations such as booster clubs, parent-teacher Fiscal crisis & ManageMent assistance teaM 7 ASB POLICIES AND PROCEDURES, BOARD DESIGNEE, BOARD POLICIES AND INTERNAL CONTROLS associations, and parent-teacher organizations. Annual training provides an opportunity to iden- tify weaknesses and practices that need improving, and is an opportunity for all schools to keep practices aligned with one another. Whistleblower Hotline The district does not have an independent third-party whistleblower hotline or web-based fraud reporting service. Having such hotline or service can benefit any ASB and is essential to both detecting fraud and establishing the perception that it is likely to be detected. Fraud experts believe that people are less likely to commit fraud when they perceive a greater probability of detection. Recommendations The district should: 1. Amend its board policies to identify a board designee for approving ASB fundraisers and activities, or stipulate in board policy that the board will approval all fundraisers. If the board selects a designee or designees to approve fundraisers and activities, board policy should identify each designee by title, such as school principal. 2. Develop a districtwide ASB manual, guide, or list of allowable and prohibited ASB activities, and ensure that this document includes as an additional resource all district board policies and administrative regulations that apply to ASB. 3. Amend its board policies to indicate that the most recent FCMAT Associated Student Body Accounting Manual, Fraud Prevention Guide and Desk Reference and the Nevada Joint Union High School District ASB Manual (or equivalent local document) are additional governing board-approved policies and proce- dures. 4. Continue to provide staff with annual training regarding its ASB manual and procedures. 5. Ensure that new staff members and student council members are provided with ASB training throughout the year, and with copies of the district’s and FCMAT’s ASB manuals. 6. Request that the schools that have their own separate ASB sales tax accounts close those accounts and reimburse the district for all sales tax collected by the ASB. Ensure that all sales tax is reported in the districtwide sales and use tax report. 7. Establish a fraud reporting service. Nevada JoiNt UNioN HigH ScHool diStrict 8 Fiscal crisis & ManageMent assistance teaM 9 ASB ACCOUNTING SOFTWARE ASB Accounting Software The district does not use the same accounting software districtwide. Some sites use Quicken, a spreadsheet, or a checkbook, and one site uses one of the newest ASB-specific accounting soft- ware products, known as ASB Works. Using the same ASB-specific accounting software districtwide would enable the district’s business office to review transactions and reports more easily, cross train employees so they can operate the same system at each site, and standardize accounting. Recommendations The district should: 1. Identify an ASB accounting software system that will meet its needs, and adopt that software for districtwide use. 2. Ensure that the company that provides the selected software offers sufficient training for the district’s employees who will use it. 3. Develop a software implementation plan that considers the best time to implement use of the software. For example, implementations are usually best if timed for completion by the beginning of the school or fiscal year (usually July 1), or the beginning of the calendar year. Nevada JoiNt UNioN HigH ScHool diStrict 10 Fiscal crisis & ManageMent assistance teaM 11 STUDENT BODY ACCOUNTS Student Body Accounts Student organizations in middle schools and high schools are called organized ASBs because the students organize their activities through student clubs and a student council. Adults (certificated advisors, principals, assistant principals, and district office staff) provide oversight and assistance, but the students do the work and make the decisions. Club and Trust Criteria Each club in an organized ASB should have its own focus and organizational requirements. Students in organized ASBs are responsible for their organizations: the student council and student club leaders hold formal meetings, develop budgets, plan fundraisers, decide how the funds will be spent, and approve payments. The school administration, ASB bookkeeper and club advisor(s) assist and advise. All clubs need the following to qualify as an official club under an ASB: • The endorsement of a certificated employee who agrees to serve as the club advisor. • Student officers. • A constitution. • Official meetings. • Meeting minutes that serve as the record of each meeting and the actions taken, demonstrating that the student council or club has followed the ASB organization’s policies and procedures. • An adopted budget. To become a recognized part of the student body organization, a club, like the ASB itself, must be composed entirely of students enrolled at the school. In addition, for fundraising and expendi- tures to be legitimate, students must be the primary authority on both, with adults co-approving. If all of these elements are not in place, then the funds do not belong in an ASB account. All clubs need to follow the regulations in the ASB constitution regarding club formation. Any group of students may apply for permission to form a club by submitting a proposed charter of constitution to the ASB; however, for a club to exist it must prepare a constitution and have it approved by the ASB leadership. Club bylaws are also important because they provide additional rules that the club will follow; these should also be approved along with the constitution. Some ASB clubs at the district’s schools lack ASB-approved constitutions. Some accounts kept as ASB accounts are used primarily as a convenience or are accounts for classes to subsidize classroom activities; the students do not decide whether to have fundraisers or how funds in these accounts are spent. Examples of classroom accounts kept in the ASB are band fund, beef and ag mechanics, choir, clay, video production, drama productions, theatrical dance, and yearbook. ASB accounts should be established and funded from an ASB club’s activities and fundraising, such as dance ticket sales, snack shop sales, or yearbook sales if there is a yearbook club. Students should be the primary decision makers regarding ASB funds. If the students are not the primary decision makers (i.e., adults are making the decisions), or if the club advisor is not a certificated instructor (e.g., a walk on coach, classified staff or volunteer), or if there is no club constitution, then that club’s funds do not belong in the ASB and should be moved to a district business office-approved school site budget account. Nevada JoiNt UNioN HigH ScHool diStrict 12 STUDENT BODY ACCOUNTS When donations from parents or others are not generated from ASB activities or fundraising, they also belong in a district’s donation account for a specific school site, not an ASB account. It is best practice to use the school site’s district budget accounts for these types of donations from parents, students and community members or groups, and to set them aside in a locally restricted resource so the funds are segregated. Athletics The district’s athletics are operated as part of the ASB, with funds deposited into the ASB bank account. However, the ASB is only holding money for the athletics sport trust accounts. These sports trust accounts lack the following: • ASB-approved constitutions and budgets • Minutes • A certificated instructor as the club advisor who is present at all games, practices and events (this is an Education Code section 48933(b) requirement for an ASB club) • Students making the decisions for all activities, purchases, and fundraising • Preapproved purchases for all expenditures, signed by the student representative of the club, the club advisor, and the principal All funds deposited into the ASB accounts are under the control and direction of the ASB; adult administrators co-advise, but students make the decisions. If all the rules for trust fund accounting of ASB funds cannot be followed, those funds should be moved to another district-approved non-ASB account. If athletics is not operated as club or clubs that meet the ASB criteria, the following options are available: Option 1 Remove athletics from ASB and operate it from a district site budget account. This means the deposits for gate receipts and other revenue should be taken to the district office, and checks should be written through the district’s warrant system. The accounting could still be processed by the ASB bookkeeper but would use the district’s accounting system. If this option is selected, it is best practice to develop an athletics manual or guide that specifies how funds will be accounted for, the approval processes, and all other procedures that athletics should follow. For example, purchases should always be preapproved, a budget should be prepared and approved, and funds should be counted only with a witness present. If revenue is to be shared between athletics and ASB, develop agreements, contracts or memoranda of understanding that describe in detail all arrangements, and ensure that these are approved by the district’s business office and agreed to and signed by both athletics and ASB. These measures will help provide the good business practices and internal controls that are essential to effective management of funds and accounts. Option 2 Remove athletics from ASB and operate it from its own district-approved site bank account, separate from ASB, and with its own separate accounting books. The accounting could still be processed by the ASB bookkeeper using the same ASB accounting software, but athletics would have its own company file and chart of accounts. Deposits for gate receipts would be placed in this new bank checking account, which could be considered a separate trust account but not an ASB club account, and which would be subject to audit by the district’s auditor. Fiscal crisis & ManageMent assistance teaM 13 STUDENT BODY ACCOUNTS As with Option 1 above, if Option 2 is selected, the district should follow the same best practices specified in the second paragraph under Option 1 above. Option 3 Leave athletics in ASB, follow all the rules and criteria for ASB clubs, and determine how athletics should be organized. Athletics in ASB may be organized as one athletics club or as two or more individual sport clubs. Athletics Club Chapter 4 of the FCMAT ASB Manual states, For any sports revenues and expenditures to be accounted for and part of the ASB account, the sport must meet the same ASB club requirements. Each sport may be a separate club with its own constitution, certificated advisor, budget and other required elements, or multiple sports can be organized as one athletics club, with each sport having representation in the club. The athletics club must be led by enrolled students. Each sport in the athletics club should elect at least one delegate or commissioner to be a member of the club’s student leadership, thus ensuring that each sport receives representation. Each sport represented in the athletics club may then be accounted for in the ASB accounting record as a sub-account of the athletics club. If the athletic director of the school is a certificated employee of the district, the athletic director may serve as club advisor. Organizing as an athletics club means that there is one athletics club, and all sports are subcom- ponents of that club. Each sport should have a representative in the athletics club leadership. Each sport should account for its funds separately but as a component of the total club budget. The athletics club would have one constitution and one set of bylaws, at least one budget, and one set of minutes. Students would make the decisions, purchases for the club and for each sport would be preapproved, and the club would have at least one certificated club advisor. However, because the club advisor must be at all activities, including all games and practices, it is accept- able to name more than one certificated club advisor in the club constitution to ensure a club advisor is always present. Volunteers, walk-on coaches, and other district-approved assistants are permitted, but they cannot be the club advisor and cannot be left alone with the students; an official club advisor must be present. Clubs for Individual Sports If athletics is organized using a club for each sport, each sport must have its own constitution and bylaws, budget, and minutes. Students must make the decisions, purchases must be preapproved, and the club must have at least one certificated advisor. A club advisor must be at all activities, including games and practices, so it is acceptable to name more certificated advisors in the club constitution to ensure an advisor is always present. Volunteers, walk-on coaches, and other district approved assistants are allowable, but they cannot be considered the club advisor and cannot be left alone with the students; an official club advisor must be present. Other Non-ASB Accounts The district’s ASB accounts included accounts for a site administrator’s or teacher’s discretionary use, such as staff appreciation. These types of accounts are for convenience and are considered pass-through accounts. The balance in the discretionary account was zero; however, this means at some point the account was created for use. This type of account does not belong under ASB. The only accounts that belong in ASB are club accounts, class accounts (such as class of 2021 or Nevada JoiNt UNioN HigH ScHool diStrict 14 STUDENT BODY ACCOUNTS senior class), and ASB-approved scholarship accounts. Examples of accounts that do not belong in the ASB are library fines, exam fees, staff coffee funds, non-ASB field trips, and staff apprecia- tion. If a site administrator or teacher is deciding how to spend funds, the account does not qualify as an ASB account. ASB funds are to benefit the students, not to supplement a class or adult’s budget, nor to be spent based on an adult’s decision. The students should decide how to spend these funds. The district’s ASB financial statements show many accounts that may not be associated with student clubs. Because students are neither conducting activities or fundraisers to generate these funds nor making decisions about how to spend these funds, the accounts do not qualify as ASB accounts. These funds should be closed out of the ASB, and the account(s) should be removed or made inactive. Recommendations The district should: 1. Ensure that each club meets the criteria required to be an ASB club. 2. Ensure that each club has a set of bylaws to provide additional rules the club will follow. 3. Certify that all fundraisers and expenditures are approved in advance by students. 4. Ensure that every ASB club has a formally approved constitution and approval from ASB leadership before it begins any activities. 5. Transfer all non-ASB club accounts, including but not limited to pass- through type accounts, into another district donation account, and discon- tinue accounting for non-ASB activities in the ASB financial records. 6. Determine how athletics will be operated and function. If athletics will be removed from ASB, establish all of its operating details, policies and proce- dures. If athletics will remain part of ASB, ensure that it has all elements required to be part of ASB. 7. Ensure that any athletic program receipts that are not intended for ASB use and do not have the required elements in place are held at the district as a donation trust account or other approved account; these should not be accounted for through the ASB. 8. Ensure that non-ASB donations from parents, students or community members or groups are deposited in the school site’s district donation account, not accounted for through the ASB. Fiscal crisis & ManageMent assistance teaM 15 ASB NOT REQUIRED ASB Not Required Not every school site needs to have ASB. If students are not making the decisions, or if field trips are for the whole school rather than for a class or club, or if there is not a certificated club advisor, or if the ASB is used only as a pass-through account, then there is no need for ASB accounting. Fundraising and activities that are not for clubs and do not meet the criteria for ASB clubs may be administered by school site administrators and their funds accounted for in a district-approved school site donation account. Chapter 2 of the FCMAT ASB Manual states: The governing board of the school district, charter school or community college is ulti- mately responsible for everything that happens in the district, including the activities of student organizations. Under Education Code section 48930 for K-12, and section 76060 for community colleges, the governing board has the authority to approve the formation of a student body organization within the district. This means that governing boards are not required to allow student body organizations to exist. Many districts have chosen to stop student fundraising and organizations as a last resort because of continual and severe noncompliance issues, including fraud. [Emphasis Added] In assuming the authority the Education Code gives them, governing boards establish parameters for district operations through board policies and regulations. These policies and regulations must specify how the student body organization will be established, how the organization’s activities will be supervised, and how the organization’s finances will be operated and managed. The district’s administration is responsible for establishing and monitoring the procedures needed to carry out the policies and regulations adopted by the governing board. Chapter 2 of the FCMAT ASB Manual states, Students are raising funds for their own benefit and are able to make decisions about the funds (with co-approval from an administrator); however, when there is a conflict, governing board policies and regulations override ASB decisions because ultimately the funds are under the governing board’s authority. A comprehensive board policy is the cornerstone of sound practices in student organi- zations. This is most effectively achieved by establishing a comprehensive district ASB manual for all student organizations to follow, and referencing it in board policy that requires all staff to follow the manual’s guidance. Two of the district’s school sites have one or more of the following characteristics: • Very little ASB- or student-driven financial activity • Most activities are for the whole school and are indistinguishable from non-student- organized school activities • Other criteria for qualifying as ASB is not met • They operate as an ASB mostly because they are simply following past practice. Not every school must have an ASB. If the standards and criteria for being an ASB are not in place or followed, then closing the ASB component is an option. Nevada JoiNt UNioN HigH ScHool diStrict 16 ASB NOT REQUIRED Recommendation The district should: 1. Determine if there should be an ASB or not at each school site. If a decision is made to close the ASB, have the students vote on and approve the closure, and transfer the funds to a district business office-approved school site account. If a decision is made to keep the ASB, improve the operations and internal controls needed to operate properly and meet the criteria for an ASB. Fiscal crisis & ManageMent assistance teaM 17 ASB CLUB BUDGETS, INACTIVE CLUBS AND LARGE CLUB BALANCES ASB Club Budgets, Inactive Clubs and Large Club Balances Budgets Some of the district’s student clubs do not prepare annual budgets. To qualify as an ASB account, every club must have an annual budget that is monitored and updated as the year proceeds. A budget is a financial plan for a specific period of time; it allows the ASB organization to estimate at the beginning of the fiscal year what its financial situation will be at the end of the year. The student council and each individual club need to develop a budget for each fiscal year. The budget document should include the club’s or council’s annual goals and a plan for achieving those goals by deciding the following: • Estimated revenues: What fundraisers will the club or council have? • Estimated expenses: What will the fundraisers cost to hold? • Estimated ending balance and club carryover: Is there enough left over to accomplish the goals outlined? A budget allows students to determine if they will raise enough funds during the year to cover their anticipated expenses. One of the benefits of an ASB organization is that it gives students an opportunity to learn about business operations, including preparing a budget. During budget development, the club advisor should ensure that the students prepare a balanced budget. If the club had significant carryover of funds from the prior fiscal year, it is acceptable for the expenses to exceed the revenues by the amount of the prior year’s carryover. Funds should be carried over only when there is a defined plan and purpose for their use, such as long-term projects or events that span multiple years, or events that occur early in the next fiscal year. The budget for the next year’s activities may be prepared before the end of the current fiscal year or at the beginning of the new fiscal year. Budgeting can be as simple as the students deciding what they want to do next year and developing estimated costs for each activity so the club members know how much money they need to raise. The students should prepare the budget with the guidance of the club advisor and activities director. Basing a budget for the subsequent year on the previous year’s actual accounting information is also a good way for students to learn budgeting. The budget process does not have to be perfect; students should prepare each club’s budget and learn from their budget estimates. The guiding principle is that students are to do these tasks, not adults. After the budget is adopted and the year begins, more accurate information will be obtained. Because budgets change, they need to be monitored continually throughout the year. Monitoring involves comparing the budget to the actual revenues and expenses at a point in time to deter- mine whether revenues are coming in as projected and whether expenses are within the amounts authorized in the budget. The students and the advisor should monitor the budget at least monthly so there is enough time to adjust plans if the budget is not realistic or if the planned goals will not be met because of lower-than-projected revenue or higher-than-projected expenses. If budget monitoring detects variances in revenues or expenses, the students can revise the budget to reflect more accurate estimates. Students should do this whenever the estimated revenues or expenses change significantly. The advisor and/or school site administrator should review and approve all revisions to the budget. Nevada JoiNt UNioN HigH ScHool diStrict 18 ASB CLUB BUDGETS, INACTIVE CLUBS AND LARGE CLUB BALANCES Many school districts formally prohibit a club from spending any funds until there is an approved budget in place. This helps ensure that all clubs have established budgets, and it would benefit the district to adopt such a policy. Effective budget monitoring can help clubs ensure that balances are not too high or too low, and thus avoid a large carryover balance or a negative balance. ASB club balances can sometimes be negative for a short time because of the timing of planned fundraisers, deposits and check disbursements; however, if a budget is monitored regularly and revised as needed, this should not occur often. FCMAT’s review of the district’s ASB trial balances revealed clubs with both negative balances and excessively high balances. Inactive Clubs A lack of ongoing financial activity may be an indicator that a club has become inactive. Monitoring club balances can help ensure that a club and its account are closed properly and its remaining balance transferred into the general ASB account so the funds do not remain unspent. A negative balance combined with no financial activity indicates that a club has become inactive after spending more money than it earned. This can be problematic because when a negative club balance is closed and transferred into the general ASB account, the general ASB student body account subsidizes the inactive club’s overspending, which reduces the funds available to the general student body. The district’s ASB accounts include a number of inactive clubs or non-ASB accounts with either positive or negative cash balances. It is best practice to have a district policy that states what is to be done with clubs that have inactive accounts. This can be defined in board policy, or in the ASB constitution and/or bylaws. For example, one or more of these documents could state that, because all trust accounts are part of the general ASB, if a club becomes inactive or all students in the club graduate, the club’s funds will be transferred to the general ASB account unless the club’s constitution, bylaws, or a decision made by students before the club became inactive provides other instruction. The ASB bylaws or guidelines in the constitution should also contain a definition of an inactive club. For example, as the FCMAT ASB Manual discusses, a club could be deemed inactive if it has had no financial activity for more than 18 months. Excessive Balances Cash balances that carry forward from year to year without any plan for their use means that students have been fundraising without a defined purpose. The purpose of fundraising in any ASB organization is to benefit students by providing funds to spend on extras and fun activities or for other needs they may have. One of the district’s school sites has an ASB savings account with a balance of more than $100,000, which means many students have spent time fundraising over the years but did not spend that money for their own and other students’ benefit while they were students. Chapter 6 of the FCMAT ASB Manual states the following regarding carryover: The governing board should include a limit on carryover in its ASB board policy. Some districts include this limit in their own district-generated ASB manual or request that it be included in the clubs’ constitutions. If a district has already provided guidance about this issue, that guidance should be followed. However, if a district’s board and/or administration has not included language regarding carryover balances, it is suggested that this issue be brought to their attention. A good rule of thumb guideline could be Fiscal crisis & ManageMent assistance teaM 19 ASB CLUB BUDGETS, INACTIVE CLUBS AND LARGE CLUB BALANCES something like the following: “No student club or organization may carry over more than 20 percent of the total amount raised in a given school year without a spending plan that has been approved by the district’s business office.” Under this rule, for example, if the total club revenues were $4,000 in a given year, the club could carry over up to $800 without an approved plan. There may be circumstances in which it would be appropriate for a club to carry over more than 20% of the funds raised that year. For example, if the club wants to partici- pate in a band competition and parade festival overseas, it could take them two years or more to raise the funds. If the club has voted for this project, and the advisor and the school principal or other administrator have approved it, it may be appropriate for the business office to approve the carryover of funds. The Budget Carryover Request form is the form that the student club (organized ASB) or school principal or other administrator (unorganized ASB) should submit to the district business office in April or May of each school year to request approval to carry over more than the allowed district amount (e.g., 20%). Recommendations The district should: 1. Require all ASB clubs to have formally approved budgets for the upcoming school year that students have participated in preparing, and to submit and have these budgets approved by the end of May of the current school year. 2. Prohibit any ASB club from spending any funds until its budget has been completed and approved. 3. Ensure that each club’s budget document includes the club’s annual goals and a plan for achieving those goals. 4. Ensure that clubs monitor and revise their budgets as needed by comparing estimates to actual receipts and expenditures. 5. Identify all inactive clubs with account balances, close these clubs and their associated accounts, and transfer these fund balances to the general ASB account. 6. Establish a board policy regarding inactive clubs; consider including in it the following language: The district governing board policy regarding inactive ASB clubs is that if an ASB club has no financial activity for more than 18 months, the club is considered inactive. An inactive club’s cash balances shall be transferred to the general ASB account as soon as it has been determined the club is inactive when there has been no financial activity for 18 months, unless the club’s constitution or a decision made by students before the club became inactive provides specific instructions to do otherwise. Nevada JoiNt UNioN HigH ScHool diStrict 20 ASB CLUB BUDGETS, INACTIVE CLUBS AND LARGE CLUB BALANCES 7. Review all ASB account balances for excessive amounts, and have the students develop a plan to spend any such excess funds. 8. Establish a board policy that limits carryover of funds, or ensure that each club’s bylaws set a limit on carryover, stated as either a dollar amount or a percentage of annual expenditures (e.g., 20%) depending on each club’s circumstances and financial needs. Fiscal crisis & ManageMent assistance teaM 21 FINANCIAL REPORTS AND BANK RECONCILIATIONS Financial Reports and Bank Reconciliations Financial Reports Financial reports are the most effective instruments for monitoring and determining an entity’s fiscal position. For site administrators, ASB advisors and students to understand the ASB’s finan- cial position, the ASB bookkeeper must prepare periodic financial statements. The type and frequency of financial reports often depend on the size of an ASB’s operations and the students’ grade level, and are sometimes determined by governing board policy. For organized ASBs, it is best practice to review the financial status monthly; in no case should it be reviewed less than quarterly. A monthly reporting requirement is most common. Issuing monthly financial reports that identify detailed transaction activity for each ASB club is critical to ensuring proper internal controls. It is best practice to provide such a report to each club monthly, and for the club advisor and club leaders to review the report. The school principal or assistant principal, and the district office, should also receive monthly financial reports, bank statements and bank statement reconciliations from the ASB bookkeeper. Even if an ASB club advisor insists that the club does not need a financial report, the ASB accounting bookkeeper should provide the report so that no club can later claim it was not aware of its own account transactions. It is best practice for the ASB club, ASB student leadership team, school site principal or administrator, club advisor, ASB activities director, and district accounting office staff to be responsible for reviewing detailed monthly ASB financial reports. The district does not require signatures or dates on club financial reports. It is best practice to require that reports be signed and dated when they are produced and reviewed. Bank Reconciliations Timely and accurate bank account reconciliations and reviews are prudent and necessary. For all accounts maintained by student organizations, it is best practice to reconcile the financial institution’s account balance with the student organization’s records for every period for which a statement is received. Establishing internal controls can help ensure that bank reconciliations are performed on time and accurately, and that sufficient separation of duties exists. The school site administrator or ASB advisor needs to ensure that each bank statement is reconciled within two weeks after it arrives. When each month’s reconciliation, is completed, the ASB bookkeeper should sign and date it. The activities director, the school principal or designee, and the district office should review the monthly ASB financial statement, bank reconciliation and any accompanying report, and sign and date these documents to indicate their review and approval. The district requires that bank reconciliations for the previous month be completed within two weeks of receiving them, but this does not always occur. Reconciliation procedures are vital to ensuring cash controls. If the bank reconciliation is not completed within two weeks of receipt, the activities director, school site principal and district office should immediately ask why it is late and document this issue and how it is resolved. The district does not require signatures or dates on bank reconciliations. It is best practice to require that bank reconciliations be signed and dated when they are produced and reviewed. Both the financial reports and bank reconciliations should be combined as one financial report, signed and dated by the bookkeeper as the preparer, and signed and dated by all those who Nevada JoiNt UNioN HigH ScHool diStrict 22 FINANCIAL REPORTS AND BANK RECONCILIATIONS review the reports (activities director, school principal or principal’s designee, and the district office). This helps provide a record that shows the review took place. Recommendations The district should: 1. Require that the ASB bookkeeper issue monthly ASB financial reports, and that they be reviewed by all ASB club and ASB student leaders as well as by the district’s accounting office, school principal or principal’s designee, and ASB activities director. 2. Require that all ASB clubs retain monthly financial reports, identify in their meeting minutes that the club has received and reviewed the monthly finan- cial report, and approve the report either immediately or after any questions or discrepancies are resolved. 3. Ensure that the ASB bookkeeper signs completed monthly ASB financial reports and bank reconciliations and provides copies to the ASB activities director, school principal or principal’s designee, and the district office. 4. Ensure that the ASB activities director, school principal or principal’s designee, and district office sign and date the monthly ASB financial reports and bank reconciliations when they receive them to indicate their review and approval. 5. Ensure that either all clubs, or all clubs that have financial activity in a given quarter, receive a monthly financial report. If the latter, consider creating a policy that allows clubs that have no financial activity in a given quarter to receive a financial report quarterly. 6. Document late bank reconciliations and their resolution. Fiscal crisis & ManageMent assistance teaM 23 FORMS Forms The district’s sites do not use the same forms districtwide, and the number of forms used at each site varies. The district does not have a list that identifies which forms are recommended and which are required. It would benefit the district to standardize and require the use of the following ASB forms: • Cash count form, which includes startup cash (multicopy) • Fundraiser approval form (multicopy) • Revenue potential (multicopy) • Ticket control form, also called the report on ticket sales form (multicopy) • Purchase order (multicopy, or printed from accounting software twice) These five forms help provide vital cash controls. In the district’s case, these forms are not multicopy forms, but it is best practice to make these forms multicopy because this helps provide both the club advisor and ASB bookkeeper with supporting documentation and chain of custody protection in the event of a discrepancy. For example, a multicopy ASB cash count form offers the best chain of custody protection for documenting deposits. Without a copy of this form, the following are likely to occur: • The ASB bookkeeper retains the final and only ASB cash count form. • The only evidence the ASB advisor has of an ASB club’s deposit is the ASB cash count form for the deposit, which the advisor submits to the ASB accounting technician. Thus, all control and risk of the deposit rests with the ASB bookkeeper. • If the security of the ASB office or ASB accounting software is compromised, or if the ASB or other another individual removes the only cash count form from the office, the ASB clubs have no backup documentation that would allow them to reconstruct a club’s revenue-producing activities. • Because the club advisor has no duplicate form, there is no way to prove that the ASB bookkeeper did not alter the deposit amounts for personal gain. Having multicopy forms does the following: • Provides both the ASB club advisor and the ASB bookkeeper with a complete duplicate record of the deposit information. • Adds accountability and helps protect both the ASB club advisor and the ASB bookkeeper. Because the five forms listed above provide critical financial information, they need to remain in a district-prescribed and multicopy format and not be modified. These forms should always be filled out completely because they are necessary to ASB functions, but in the district’s case this does not always occur. Over the years, schools have added forms and combined the content of some forms, such as the request for payment and check request forms. The Education Code requires approval of all ASB purchases before any spending takes place. Preapproval requires the signatures of the student representative, club advisor, and principal. Regardless of the title of the form used for preap- proval, only that form is required to authorize an ASB purchase. Nevada JoiNt UNioN HigH ScHool diStrict 24 FORMS Check Request The ASB purchase order can have many names, but its purpose is to document preapproval of ASB expenditures. Even though the purchase order is the governing document to authorize spending, many districts also use a check request as part of their additional procedures. However, sometimes districts use a check request to authorize expenditures for which preapproval was not granted. If an ASB purchase order has been preapproved and the district prefers to require an additional authorization to issue a check, a check request is allowable. However, under no circumstances should a check request or other form used by the district (such as a reimbursement form, requisition for a purchase order, request for disbursement, payment approval request, or any other form) be used as a substitute for an ASB purchase order. The preapproval process is discussed further below. Recommendations The district should: 1. Adopt a standard set of ASB forms and indicate that these forms are to be used by each student body organization. 2. Identify certain forms as required and provide them to all ASB accounting technicians in multicopy format. 3. Establish a policy stating that all of these required forms must be filled out completely. 4. Ensure that any portion of a form that is not applicable is identified as such by the individual or individuals completing the form rather than left blank. Fiscal crisis & ManageMent assistance teaM 25 ASB FUNDRAISERS AND REVENUE POTENTIAL ASB Fundraisers and Revenue Potential Fundraising generates most revenue for ASB clubs. California Education Code section 48932 allows the governing board to authorize K-12 student body organizations to conduct fundraising activities. All fundraising events need to be approved and have revenue projections in advance of the event. A fundraiser approval form will describe the fundraiser, its purpose and any necessary background information, and will have the proper signature approvals. The revenue potential is a financial document that is used from the beginning to the end of a fundraiser. The revenue potential document has three columns — budget, actual, and difference — and thus helps compare the estimated or budgeted revenue and expenses to the actual results of the fundraiser. Completing ASB fundraiser approval and revenue projection forms with estimated revenue and expense information can help student organizations have internal controls over their fundraising events and evaluate the cost effectiveness of the events. The fundraiser approval form describes the event, and the revenue projection form serves as a sales plan that includes expected sales levels, sale prices per unit, expected cost, and net income. Thus it helps an ASB club plan and budget. Because the Education Code requires that a district’s governing board approve fundraising events, a fundraiser approval form and revenue potential form can also be submitted to the board or board designee for approval of the event (in the district, these forms are named Request for Fundraiser Approval and Revenue Projection or combined in a single form named Request for Fund-Raiser Approval/Proposed Budget Plan for Fundraiser). In addition, the revenue projection form can serve as an internal control standard, because most external auditing firms will indicate audit findings if some form of revenue reconciliation is not performed for each fundraiser. The revenue projection form can also be used to ensure that the school site administrator is informed of and has approved a fundraising activity at the school site. The district’s fundraising and revenue potential forms vary from school to school and do not include fields for all of the necessary information. Fundraising revenue projections and approvals for all fundraising activities are needed to safeguard student funds. It is acceptable to combine a fundraiser approval and revenue projection form; however, all elements of both forms need to be present in the combined form. Chapter 8 of the FCMAT ASB Manual discusses fundraising events in detail and includes many examples of fundraising approval and tracking forms. Recommendation The district should: 1. Create, adopt and require the use of a standard fundraising approval form and a revenue potential form, or one combined fundraising approval and revenue potential form. Ensure that the form(s) adopted are multicopy, and determine if any of the other forms currently used may be of value as supplemental forms. Nevada JoiNt UNioN HigH ScHool diStrict 26 Fiscal crisis & ManageMent assistance teaM 27 ASB PURCHASE PROCESS AND PREAPPROVAL ASB Purchase Process and Preapproval The district’s schools use many different forms to document purchases, including the following: • Reimbursement form • Requisition for a purchase order • Request for disbursement • Payment approval request • Request for payment A few of the forms used have all the elements needed for proper authorization of an ASB purchase, and others have most elements; however, the forms are often only partially completed or are paired with another form. The simplest way to improve the purchasing process would be to have a single purchase order form for preapproval of purchases, or to add an expenditure reimbursement form, which is essentially a purchase order form but is used for reimbursements. Both of these forms are designed as preapproval forms and contain all of the correct fields for authorizing signatures and other necessary information. The ASB preapproval form is often called the ASB purchase order. A check request is used to request a check after a purchase has taken place and before preapproval. If an ASB purchase order has been preapproved and the district prefers to require additional authorization to issue a check, a check request is allowable. However, under no circumstances should a check request or other form used by the district (such as a reimbursement form, requisition for a purchase order, request for disbursement, payment approval request, request for payment, or any other form) be used a substitute for an ASB purchase order. Chapter 6 of the FCMAT ASB Manual describes the Education Code requirement for preap- proval of ASB purchases as follows: All club members, teachers, advisors and other staff must understand that they cannot obligate ASB funds until a purchase order is prepared and approved by the student club representative, a certificated employee of the district (who is the advisor), and a school principal or other administrator or other board designee before the purchase is made. These three required signatures are listed in Education Code section 48933(b) for K-12 and section 76063 for community colleges, and they must be obtained for an expendi- ture to be considered preapproved. The only way to prove that this Education Code is followed is by having a purchase order or other expenditure approval form containing all three signatures. Chapter 18 of the FCMAT ASB Manual describes 23 steps in the internal controls disbursement process for organized ASBs (that is, ASBs in which the students make the decisions, typically those in middle schools or high schools) as follows: The operations of the ASBs at secondary schools and community colleges are usually more complex and therefore require more elaborate internal controls. At high schools and community colleges, the ASB bookkeeper will be responsible for keeping records for several different clubs. For instance, the ASB bookkeeper at a large high school could maintain the records for more than 50 clubs, writing checks for each club and ensuring that the amount is recorded as a deduction from the appropriate club account. It is important to remember that the ASB is not obligated to pay for an expenditure Nevada JoiNt UNioN HigH ScHool diStrict 28 ASB PURCHASE PROCESS AND PREAPPROVAL ordered by a teacher, other staff member, student or other person who has not received approval using a purchase order prior to purchase. The following are good internal controls for schools with organized ASBs: 1. The principal/school administrator needs to ensure that all club members, teachers and advisors understand that they cannot obligate ASB funds until a purchase order is prepared and approved by the student club representative, advisor, and principal/school administrator or other board designee prior to the purchase. For example, if a teacher places an order or goes shopping for materials without a purchase order that has the appropriate signatures, the teacher is responsible for paying for the goods. 2. Each school should have a purchase order form for use when ordering goods for the various clubs and for employees who use their own funds to purchase items and then request reimbursement. The purchase order form demonstrates that the proposed purchase has been approved by all of the appropriate staff members and students. A sample purchase order form is provided at the end of this chapter. Some districts use an expenditure approval form rather than a purchase order. This is acceptable if it has the correct preapproval signatures in compliance with the Education Code. A sample Expenditure Approval form is included at the end of this chapter. 3. When the purchase orders are printed, they should be numbered or assigned a sequential number that is recorded in a purchase order log to track each document and transaction. Multiple copies of each purchase order should be printed and distributed as follows: • The first copy is retained by the club requesting the goods. • The second copy is for the club or advisor to acknowledge the receipt of the goods. Whoever will physically receive the goods should keep this copy and upon receipt confirm its accuracy, note the date/time the goods were received, sign the copy, and forward it to the ASB bookkeeper. • The third copy is sent to the vendor (if applicable). • The fourth copy is retained by the ASB bookkeeper and attached to the receiving report when the ordered items are received. 4. At a minimum, the purchase order should include the following: • The name of the student club or organization requesting the materials. This is the group that the ASB bookkeeper will charge for the goods. • The name and address of the vendor, or of the employee making the purchase with their own money. • The quantity of goods, including a description and the cost. The requestor should also estimate the sales tax and shipping charges. • Three required signatures. These three signatures meet the requirements for approval in Education Code section 48933(b) for K-12 and section 76063 for community colleges. These signatures must include a student representative, Fiscal crisis & ManageMent assistance teaM 29 ASB PURCHASE PROCESS AND PREAPPROVAL a board designee (principal/school administrator) and a certificated advisor. Because the purchase order has the three required approvals, the check only needs to have two signatures. 5. Before any club makes a commitment to purchase goods, it must prepare a purchase order and obtain all of the required approvals. This is the proof that appropriate prior approval was obtained. 6. If the vendor will not take a purchase order but requires payment by check, the purchase order form should be used as part of the process to request a check and to obtain and document prior approval. A check request is not the same as a purchase order; most check requests are completed after the purchase, not before. The ASB bookkeeper could maintain a pending purchases file as a reminder to obtain an original receipt after payment is made. 7. The students submit the completed purchase order to the ASB book- keeper after all of the approvals are obtained. 8. The students record the issuance and approval of the purchase order in the club’s minutes. This approval can be given after the purchase or before depending on the district’s requirements. The Education Code does not require the club’s approval prior to purchase but does require the approval of the three individuals mentioned in the fourth bullet under item 4 above. 9. The students retain two copies of the purchase order. One copy is saved as a permanent record of the order and the other copy is used as a receiving copy. 10. The ASB bookkeeper verifies that the club has sufficient funds to pay for the goods before the order is sent to the vendor or to the employee who will purchase the goods with their own money and subsequently requesting reimbursement. If the club does not have sufficient funds, the bookkeeper should return the purchase order to the club with a request for a budget revision or a plan for how the item will be paid for. 11. Depending on the policy at the school, the ASB bookkeeper or the club advisor may open and formally receive the goods. 12. The designated receiver (this could be either the ASB bookkeeper or the club advisor) will open the shipment and compare the shipped items to the packing slip. 13. After all of the items have been compared to the packing slip, the receiver will sign the receiving copy of the purchase order. 14. If the advisor is receiving the goods, the advisor should provide the ASB bookkeeper with the signed receiving report (copy of the purchase order) and the packing slip. Nevada JoiNt UNioN HigH ScHool diStrict 30 ASB PURCHASE PROCESS AND PREAPPROVAL 15. When the ASB bookkeeper is ready to pay bills, usually once a week, the bookkeeper matches the original purchase order to the invoice and the receiving copy of the purchase order. When all three documents are matched, the ASB bookkeeper will prepare a check to pay the invoice. 16. Two signatures are required on all checks written from ASB funds. One signature is usually the principal/school administrator or designee and the other is a staff member from the school (e.g., the student council advisor) or from the district office. Students should never sign checks. 17. When the checks are presented for signatures, the ASB bookkeeper should also provide all of the documents for review. This allows the signers to review the invoices and purchase orders before signing the check. 18. After the check has both signatures, the ASB bookkeeper mails the check. 19. The check is then recorded in the accounting records for the club. 20. The invoice is marked paid and the check number is written on the invoice. 21. The ASB bookkeeper stores the paid invoices with the receiving report. 22. The invoice may be slightly higher or lower than the original purchase order. The district should have a policy regarding the amount by which a purchase order may be exceeded and still be paid without further approval. For example, if the invoice exceeds the original purchase order by more than 10%, the ASB bookkeeper should obtain approval from the three individuals who approved the original purchase order. 23. The ASB bookkeeper should maintain a list or log of all purchase orders issued and the dates when the goods or services were received and the invoices were paid. This allows the bookkeeper to determine easily at any time whether there are goods that have been ordered and not received, or goods that have been delivered but not processed for payment. Some financial information systems create such a log automatically. [Emphasis Added] The 23-step process described above does not require a check request because the purchase order is the formal required approval for the purchase. Although not required, a check request may be used as a supplemental form or additional layer of authorization. However, under no circum- stances should a check request or other nonconforming purchasing form be used as a substitute for an ASB purchase order. The district’s ASB purchasing process uses many alternative forms and options. In many instances, a requisition for a purchase order includes the signatures of the advisor or coach, the ASB treasurer or ASB president, and the activities director; however, this form does not always have all of the required signatures. The district’s ASB requisition for a purchase order form states, “(This is not a Purchase Order),” but the district’s purchase orders, which are prenumbered, do not contain all three of the required signatures. Although the purchase order and requisition for a Fiscal crisis & ManageMent assistance teaM 31 ASB PURCHASE PROCESS AND PREAPPROVAL purchase order form together usually contain all of the required signatures, no single authorizing document is being used, and the two documents that are being used may be dated differently and sometimes still lack all required information. In addition, FCMAT learned that in some cases the request for payment form is used to capture all required signatures, and in other cases the request for reimbursement preapproved form is used after the fact and does not have all the signatures required for preapproval. In short, the district is using many disparate forms and sometimes not obtaining approval until after a purchase is made. It is best and common practice to use a single uniform multicopy purchase order form that includes the proper disclosures, notifications, certifications, and fields for the required approval signatures (club student representative, certificated club advisor, and site administrator/board designee). The district could streamline its process by adopting this practice. The purpose of a purchase order is to obtain approval in advance from the appropriate individ- uals and thus to confirm that approval was obtained before the funds were spent. Check requests do not accomplish this because they are completed after a purchase has been made. Any and all purchases, expenditures, or other methods used to obtain goods or services, including reimbursement of an individual, need to go through the preapproval process and be documented using an ASB purchase order. Recommendations The district should: 1. Ensure that it follows the requirements of Education Code section 48933(b) for purchases. 2. Require use of the purchase order form and process to authorize purchases before any check is processed. 3. Design, approve and use a single uniform multicopy ASB purchase order form that meets all purchase preapproval requirements. 4. If an expenditure reimbursement form is also used, ensure that this form also meets all the purchase preapproval requirements and is a multicopy form. 5. Train all school site administrators and ASB staff regarding the need to obtain approval in advance for all purchases. Nevada JoiNt UNioN HigH ScHool diStrict 32 Fiscal crisis & ManageMent assistance teaM 33 CASH CONTROLS Cash Controls Cash Counts and Verification In any school district, cash counting is one of the most important points at which internal controls are needed. To record cash counting, the district uses an ASB deposit record form, ASB deposit sheet, a deposit slip, or a nondescript form that shows checks and cash; it does not use a cash count form. The district’s ASB deposit record form contains more of the information needed for a deposit than the other forms used, but could be improved. This form states, “If counting CASH Dual Counted by,” which means if there is no cash, a dual cash count is not necessary. However, no funds of any kind, including checks, should be counted by only one person. The purpose of having a witness is to attest that all funds, regardless of type or form, have been properly and accurately received, counted, and presented to the bank. Chapter 13 of the FCMAT ASB Manual includes a good example of a two-page cash count form that contains all the elements needed and that lists the supporting documentation that must accompany the multicopy form. The most important component of the cash process is dual counting (in ASB, the term ‘cash’ includes cash, checks, coins, and any other form of payment). This means always counting all cash with a witness present throughout, and ensuring that both individuals sign the form indicating that the amount of the funds matches their count. Subsequently, when the funds are returned to the bookkeeper, they are once again counted by two individuals and the form is signed by both. The two signers who counted the funds initially at the fundraiser can also subse- quently count the funds with the bookkeeper, or the bookkeeper can be one of the counters and can sign. The important internal control element is that there are always at least two signers. A student can also help count money and can be one of the two or more signers of the cash count form. It is best practice to ensure that all cash receipts are counted twice and signed for and dated by two individuals so there is a witness and a record whenever cash changes hands before the funds are deposited. This includes counting cash when tickets are sold. Some district school sites use a ticket tally or ticket control form, but there is no evidence that the funds are counted at the fundraiser by two individuals and then again when submitted to the bookkeeper. Similarly, the district’s ASB cash count form lacks the necessary witness signature and date fields, and it does not indicate whether the two signatures on it are from witnesses at the club event or from the ASB accounting technician’s witness when the bookkeeper counts the cash. Additional signature and date fields need to be added to ensure that the form has two signature and date fields for signatures at the club event and two additional signature and date fields for signatures when the cash is received at the ASB bookkeeping office. The district has no ASB policy that identifies the ASB bookkeeper’s procedure for handling cash count discrepancies in deposits. The district’s ASB bookkeeper is put in an unfavorable situation when a cash count discrepancy exists. In most cases, this occurs when the ASB bookkeeper iden- tifies a difference between the bookkeeping office’s cash count and the club’s cash count. The ASB bookkeeper is often able to resolve the difference with the witness present at the time of the cash counting; however, the outcome depends on the size of the discrepancy: some discrepancies may require further examination. The district needs to establish a procedure for the ASB bookkeeper to follow when there is a significant discrepancy between the ASB bookkeeping office’s cash count and that of a club. All Nevada JoiNt UNioN HigH ScHool diStrict 34 CASH CONTROLS discrepancies, regardless of amount, should be reported immediately to the school site adminis- trator, and the ASB club should also be notified. Good communication is necessary but is not in itself sufficient to protect the ASB bookkeeper from being accused of removing cash if a shortage is identified. This is another reason it is vital to ensure that a witness is present whenever money is counted. Startup Cash and Cash or Change Boxes Startup cash is needed to load a cash box with enough cash to make change at events. At the district, the startup cash is often not counted and there is no form with signatures indicating that the amount received matches the amount in the startup cash box. The district has available and uses a cash box request and sign-out form; however, this form is for checking out a cash box, not for identifying how much startup cash was issued or counted. This form could be modified to include a line for startup cash amount and dual counting signatures. One school site’s ASB deposit record form includes a line for startup cash; however, the verification and dual counting signature fields are for the entire deposit, not for the startup cash. Whenever cash is issued or received (including startup cash and cash returned from an event), the cash should be dual counted and both parties should sign the appropriate form. For example, if $200 is put into the cash box as startup cash, the bookkeeper should sign and date the form, indicating that the startup funds counted are $200. When the cash box is received, the individ- ual(s) who obtained the box should recount the cash and also sign and date the form. The form can be a separate startup cash form or, if the cash count form includes startup cash as a separate line item, the startup cash amount and signature and date fields for startup cash count can be included on it. If a cash count form is used, the section for startup cash should have at least two individuals’ initials for the startup cash line items to indicate that the startup funds were dual counted. The district’s ticket control forms also lack fields for a startup cash amount and verification signa- tures and dates. Dual counting and documentation should take place when tickets are sold. Regardless of the specific form used, dual counting of startup cash is required and is an important internal control. Chapter 19 of the FCMAT ASB Manual describes the startup process as one of those that can create vulnerabilities if sufficient internal control measures are not in place: Some events require a cash box containing startup cash to make change. For example, if the ASB bookkeeper has the person sign a form that acknowledges receipt of the startup cash for change and that states the amount (e.g. $400) but does not require them to count the money at that time in their presence, the person could end up with less money than stated on the form (e.g. $300), and as a result be held accountable (i.e. be blamed) for the difference. If the bookkeeper places startup money in the cash box but fails to document it with a cash count form signed by both parties and cash is subsequently stolen or miscounted for any reason, or the individual receiving the startup funds incorrectly identifies a smaller amount than was actually provided, the club will receive less revenue than expected. Some ASB bookkeepers keep a startup cash log and require everyone who receives startup cash to sign it signifying that they have counted the startup cash together with Fiscal crisis & ManageMent assistance teaM 35 CASH CONTROLS the ASB bookkeeper and that they agree regarding the amount. Failure to keep such a log creates the potential for simple errors that can result in allegations of wrongdoing. Recommended Preventive Measures: Always have both the ASB bookkeeper and the person receiving the startup cash count the money, and document this count with signatures signifying agreement regarding the amount. Cash Custody: Tamper-Proof Bank Bags and Courier Services Tamper-Proof Bank Bags The district does not use tamper-proof plastic bank bags to secure cash. Instead, cash boxes and fundraising money are returned in Ziploc bags, envelopes, or zipper bags. Plastic tamper- proof bank bags are used by banks, and once sealed they cannot be opened without cutting or mutilating the bag. This means the funds are secure in the bag and cannot be removed without detection unless the bag is replaced. Cash Courier Service and Bank Deposits Just as cash should not be counted alone, cash should not be transported to the bank alone, not only for security but because if a car accident or other mishap occurs and the funds are taken there is no witness to the event. For school sites that do not have an ASB or that close their ASB, the district currently uses an internal courier to collect cash from food sales at each school. Schools that have closed their ASBs and are using their district site budget to account for cash collections should use the district courier. Recommendations The district should: 1. Require that funds always be dual counted and that both individuals counting sign and date the deposit so there are always two signatures affirming the deposit amount. 2. Emphasize to staff that any ASB representative (including an ASB club advisor, district office ASB bookkeeper or school site ASB accounting tech- nician) who counts ASB funds alone or does not obtain a witness signature for the cash counted can easily become a target for wrongful accusations that they have misappropriated student funds. 3. Review all district ASB forms that have to do with receiving funds, and ensure that each of them includes fields for additional witness signatures and dates. 4. Ensure that the ASB bookkeeper counts any cash received in the presence of one or more witnesses who can confirm that the count is accurate. 5. Establish an approved ASB cash count discrepancy amount (such as $5, $25, $50 or even $100), at or above which an additional second count with a witness is required. Nevada JoiNt UNioN HigH ScHool diStrict 36 CASH CONTROLS 6. Ensure that all discrepancies are reported immediately to the school site administrator and the affected club. 7. Modify the ASB cash count form to include a field that lists the amount of startup cash received. Add signature and date fields associated with this amount for the individual who obtains the startup cash from the ASB bookkeeper to sign and date so that this individual is identified and their confirmation of the amount received is recorded. 8. Require that the individual who receives startup cash initial and date the ticket sales form or cash count form to indicate that they have counted and agree regarding the amount of the startup cash. 9. Modify both the ASB cash count form and the ticket sales form to include the amount of funds counted and to include signature and date fields for two individuals so there is a witness to the amount counted. 10. Use tamper-proof bank bags to transport funds for deposit. 11. Remind all staff that ASB funds should be taken to the bank by two individ- uals to ensure there is a witness. 12. If no individual is available to accompany a depositor to the bank, consider hiring a company to pick up the deposits from the school sites rather than having one individual make the deposit. Fiscal crisis & ManageMent assistance teaM 3377 APPENDDIRXAFT Appendix A Study Agreement Nevada JoiNt UNioN HigH ScHool diStrict 3388 DRAAFPTPENDIX Fiscal crisis & ManageMent assistance teaM 3399 APPENDDIRXAFT Nevada JoiNt UNioN HigH ScHool diStrict 4400 DRAAFPTPENDIX Fiscal crisis & ManageMent assistance teaM 4411 APPENDDIRXAFT Nevada JoiNt UNioN HigH ScHool diStrict 4422 DRAAFPTPENDIX Fiscal crisis & ManageMent assistance teaM