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Prepare for Your Audit! Steps 5 & 6: Review and Submit Your Audit 

By EdTec Staff

November 14, 2018

You’ve made your way through the first four steps of the audit cycle – now all that’s left to do is review the audit report and submit!  For California charters, these last two steps occur in November and December.   

Contents of an Audit Report

An audit report contains 14 sections. See the chart below for a summary of the information included in each section, as well as why each section is important.

While all sections of the report contain useful information, the most revealing is the Audit Year Findings section, where the auditor addresses issues identified throughout the auditing process that represent a deficiency in the charter school’s internal controls. There are two types of findings – a material weakness, which is the most severe finding; and a significant deficiency, which represents a less severe finding but still warrants flagging and correction. The auditor’s findings outline what the charter school did or did not do that was incorrect or improper, as well as the generally accepted expectation for what the school should have done. The findings also provide detail around the impact of the deficiencies on the school’s financial statements, as well as recommendations for what school leadership should do to resolve these issues.  

Common audit findings for charter schools include inadequate resourcing or tagging of restricted fund activity; missing documentation such as credit card receipts; lack of adherence to purchase or approval policies and thresholds; untimely deposition of funds; improper capitalization of assets; and compliance issues.  

Reviewing the Audit & Preparing a Response

It is important for school leadership to review the audit report for accuracy of information, as well as to make sure they understand all findings. For example, were the findings a result of a lack of adequate policies in place, or rather a staff violation of existing policies? Then, staff must prepare a response acknowledging or contesting the findings. The response should provide additional context and/or an outline of corrective action to be taken, where appropriate. Perhaps the school plans to draft revised purchasing policies or increase education and training to make sure all staff understand the current policies.  

This response is typically prepared by the school’s business office staff, who may find it helpful to reach out to their back-office services provider for assistance with explaining previous actions, as well as with implementing new policies and processes designed to help prevent future findings.  Some responses may also require consultation with legal counsel. Once complete, the response should be reviewed by the charter school board before submission to the auditor.

The Final Step 

Once the board has reviewed the response and has signed off on the rest of the audit report, the auditor will submit a final report to the designated authority. Audit reports for California charters must be submitted to the California Department of Education by December 15.  

 

 

School Leader Summer Reading: Cleaning Up Your School’s Payment Processes

by Dena Koren, Senior Client Manager

July 3, 2017

Now that your 2017-18 budget is approved, it’s time to start preparing for the upcoming school year. The (slightly) less hectic summer months are a good time to review the school’s financial policies and procedures to make sure everything is in place. With that in mind, here are a few thoughts about one very important topic in this area: payment methods!

For many of our clients across the country, we see the same problems around navigating how to pay for supplies and services: school leaders want to be nimble and responsive to their team, but they also worry about managing the budget and following policies and procedures for the audit. Not an easy task!

As a school, you have several different payment methods at your disposal:

  • requesting a vendor invoice – perhaps matched with an internal purchase order (PO) – and paying that vendor by check
  • reimbursing employees or volunteers
  • maintaining petty cash at your school or central office
  • using a debit card associated with your bank account, or
  • paying by credit card

While there are reasons and occasions to use each of these, I strongly recommend using the invoice (and PO, if you have a PO process) and paying by check as often as possible!

The benefits of an invoice and check are:

  • Visibility into what you’re buying
  • Documentation and authorization that clearly follow your financial policies
  • Savings driven by consolidating orders and purchasing through contracted vendors
  • Cash management because you can readily control when checks are written

Because a well-run invoice and check process is centralized through your business staff, the ostensible drawback is that you are strictly controlling and slowing down the purchasing of materials and services. This may feel limiting to people! One way you can address this is to keep a regular weekly schedule of ordering and negotiate fast shipment times with your vendors. Another method can be purchasing portals like Staples.com or ClassWallet.com or purchasing systems like Procurify, which can allow individuals to order through a single source and follow the approval process.

For other payment methods, limit usage to the needs that they address best. Here are a few examples:

  • Employee reimbursements: mileage and meals when traveling, fingerprinting fees, limited emergency supply purchases
  • Petty cash: making change in the front office for school purposes (e.g., break a $20 or give change for the purchase of a school t-shirt), pay an emergency plumber who only accepts cash
  • Debit card: if you have a school credit card, almost nothing. The reason is that debit cards take money directly out of your account, potentially bypassing internal authorization and increasing the risk of missing documentation. If you don’t have a school credit card, then see the “credit card” section below for some reasons you might need your debit card.
  • Credit card: ah, a necessary evil! Let’s talk about this in greater length . . .

With so many digital purchases done online via credit card now, it is nearly impossible to avoid getting a school credit card. But be sure to create a robust credit card policy to go along with it! Think about both the card uses and the mechanics for your policy:

  1. Who will have a school credit card? Keep this limited, perhaps only the office manager, executive director, and/or principals. Note that it’s likely that either the cardholder or someone else at the school will need to personally guarantee the card. It’s difficult for charters to get small business cards that do not require a guarantee.
  2. What can be purchased on the credit card? Keep this limited as well, for example: travel expenses, team appreciation dinners, conference fees, specialty supplies (can be a slippery slope, so be careful!).
  3. What cannot be purchased on the credit card? Make this list robust to show you’re serious, for example: curriculum, books, school supplies, computer equipment or technology, field trip entry fees, yearbook vendor fees, refills on postage meter.
  4. How will credit card owners document purchases? Several best practices are: require all receipts to be submitted within one week of the close of the CC statement; outline consequences if documentation isn’t provided (e.g., CC usage suspended until receipts submitted); ensure that purchases of a certain level are pre-authorized; and ensure CC statements are reviewed by a supervisor (note: make sure your most senior school leader has a member of the board reviewing and signing off on his or her CC statements monthly).

One final take-away for your financial operations – It’s ok to make purchasing and payment a little inconvenient! The slight inconvenience will help ensure that you are conscious of your spending, you are staying in line with your budget, and you have everything you need when it comes time for your annual audit.