c

Everett School District No.2

Exit Conference May 14.. 2012

Meeting Agenda
The purpose of our exit conference is to share the results of our independent audit and to provide a forum for open discussion. We are pleased to review our draft reports and discuss other topics as listed below with you. Accountability audit report Financial statement audit report and other required communications Federal grant compliance audit report Recommendations not included in our audit reports Status of prior audit recommendations Agreed-upon services Report publication Your next scheduled audit Customer service survey

Preliminary audit results and recommendations were shared in detail with District management and personnel as they were developed during the audit. We would like to thank staff for their cooperation and timely response to our requests during the audit. We take seriously our responsibility of serving citizens by promoting accountability, fiscal integrity and openness in state and local government. We believe it is critical to citizens and the mission of the District that we work together as partners in accountability to prevent problems and constructively resolve issues. As such, we encourage your comments and questions.

---------_.-._"

-r-" ----

government. We believe it is critical to citizens and the mission of the District that we work together as partners in accountability to prevent problems and constructively resolve issues. As such, we encourage your comments and questions.

Accountability Audit
Report
Our draft accountability report summarizes the results of our risk-based audit work related to safeguarding of public resources and legal compliance. The report does not include any findings.

Financial Statement Audit

Other Required Communications
Professiona l auditing standards require us to communicate the following information to the Board: There were no significant difficulties encountered or disagreements with entity management during the audit. There were no uncorrected misstatements in the audited financial statements. We noted one corrected material misstatement:
Type (Known or Likely)

Opinion Unit

Statement I Schedu le

Description

Capital Projects Fund

Income Statement

A sample test of all Capital Project fund expenditures indicated the District recorded $5,151,101 in the wrong year. These expenditures coded to FY2012 should have been coded to FY2011 . Therefore the Capital Project expenditures were understated by this amount.

Known

Report
Our draft financial statement report includes our opinion on the District's financial statements. It also includes our report on internal control over financial reporting and on noncompliance and other matters as required by Government Auditing Standards. An unqualified opinion will be issued on the financial statements , which means that we believe they are presented fairly, in all material respects. The following deficiencies in internal control over financial reporting were identified and reported as a finding : The District should improve its internal controls over accounting and financial statement preparation to ensure accurate and complete reporting. _ v\o..,J, i~"'"r,,-\ c.of\\-\-ro \

Page \ 2

.,
\

No instances of noncompliance were identified that could have a direct and material effect on the determination of financial statement amounts.

Federal Grant Compliance Audit

Report
Our draft report discloses the results of our audit of compliance and internal controls over federa l grant programs. We issued an unqua lified opinion on the District's compliance with requirements applicable to its major federal programs. We reported no findings that are required to be disclosed under section 510(a) of OMB Circular A-133. The follow ing were major programs during the period under audit: CFDA No. 84.010 84.389 84.367 84.027 84.173 84.318 84.386 84.391 84.392 84.394 84.410 Program Title Title I Part A ARRA - Title I Part A Title II Improving Teacher Quality Special Education Cluster - Grants to States (IDEA, Part B) Special Education Cluster - Preschool Grants (IDEA Preschool)" Title II Part D ARRA - Title II Part D ARRA - Special Education Cluster, IDEA Part B (Recovery Act) ARRA - Special Education Cluster, Preschool Grants (Recovery Act) ARRA - State Fiscal Stabilization Fund - Education State Grants Education Jobs Funds

Recommendations not included in the Audit Reports

Management Letter
The management letter communicates issues not significant enough at this time to include as a finding in our report . It is referenced in the report. Take home vehicles.

Exit Items
We have provided the following exit recommendations for management's consideration. They are not referenced in the aud it report . Title 1 grant - adeguate yearly progress Schools that do not meet Adequate Yearly Progress (AYP) going into FY2011 must send a letter to parents of students which , among other things, states how long the schools have been so identified as not making AYP in the Title 1 grant (CFDA 84.010/389). We noted that Hawthorne Elementary letters did not state how long the school has not made AYP. We recommend the District include the number of years which the school has not made AYP on the lelters sent to parents in order to meet the grant requirements.

Page

13

Special Education grant - time and effort Federal guidelines require Districts to ensure monthly time and effort certifications are submitted for any employee charging time to more than one cost object ive, such as the Special Education grant (CFDA 84.027/173/391 /392) and another unrelated program . During fiscal year 2011 the District paid two employees $59,000, for work in Special Education. These employees also worked in another program , requiring the District to obtain monthly time certifications . According to federal guidelines, monthly certifications for actual time worked on the Special Education program must be reconciled quarterly to the budgeted hours actually paid by the grant. We found the District did not receive monthly time certifications from these employees or reconcile the actual time to the budgeted time quarteriy for September, October, November and December until February and March of 2011 . We recommend the District improve internal controls to ensure the monthly timesheets and quarterly reconcil iations are performed timely and documented to comply with federal requirements (Circular A-8?). Title 1 grant - allowable costs During our review of Title 1 (84.010/389) expenditures, we noted that the District spent $31,352.68 in non-payroll related Title 1 ARRA funds during the 2011 fiscal year. We identified one transact ion totaling $36.70 which was for an unallowable purpose (the District gave science kits away in a raffle that were purchased with Title 1 funds) . We recommend the District verify items purchased with federal funds are used for allowable purposes according to the grant requirements. Federal reimbursement review Requests for reimbursements of Federal funds for the following grants are not reviewed for accuracy before they are subm itted for reimbursement: Education Jobs Fund CFDA 84.318/84.3 86 Special Education Cluster CFDA 84.027/84.173/84.391/84.392 Title I grants.CFDA 84.010 /84.389

If reimbursements are submitted inaccurately the District could be overpaid or underpaid without knowing. We recommend the District include a review of reimbursements by someone other than the person that prepares them to ensure accuracy. Apportionment - transportation ridership reporting During our review of the transportation ridership reporting, we noted errors in reporting for five routes. These errors were caused by incorrect calculations of the average ridership in the week , or by inconsistent reporting of data from the Driver's count logs to OSPI. In addit ion, the District did not maintain adequate support to tie specific students from the Public Transportation ridership log sheets to specific State Route numbers.

Page

14

We recommend the District improve its internal controls to ensure accurate ridership data is submit to aSPI and the District retain support to show which students using public transportation were reported by the State Route.

Status of Prior Audit Recommendations

Prior Exit Items Resolved Unresolved

Segregation of duties (ASB Treasurer) Alternative Learning Education Restrictively endorse checks (Everett High School) Fundraising for charitable organizations

X X X* X

*Disbict management has determined it will take responsibility for any possibility of loss in this area. We subsequently will discontinue our recommendations about this area.

bJ Exit document

Additional Services
Comprehensive Annual Financial Report (CAFR)
In addition to our audit, we performed procedures at your request related to the additional information included in the District's CAFR. A letter certifying the additional review was provided to the District on April 18, 2012.

Concluding Comments
Report Publication
Audit reports are published on our website and distributed via e-mail in an electronic .pdf file. We also offer a subscription service that allows you to be notified by email when audit reports are released or posted to our website. You can sign up for this convenient service at: www.sao.wa.gov/EN/News/Subscriptions

Your Next Scheduled Audit

Your next audit is scheduled to be conducted in Winter 2012-2013 and will cover the following general areas: Accountability for Public Resources Financial Statement

Your Next Scheduled Audit

Your next audit is scheduled to be conducted in Winter 2012-2013 and will cover the following general areas: Accountability for Public Resources Financial Statement Additional Services - CAFR

The estimated cost for the next audit based on the current billing rate is $63,666 plus traver expenses. This preliminary estimate is provided as a bUdgeting tool and not a guarantee of final cost.

Customer Service Survey

An invitation to complete a customer service survey will be emailed to Gina Zeutenhorst, Accounting Manager. Your feedback is important to our commitment to continually develop and improve our audit process. Please don't hesitate to contact our Office throughout the year when you have questions. Our website also offers many resources, including a client HelpDesk for your auditing and accounting questions.