SSD 2013 Audit Issues Report

Seattle School District No. 1

Profile

General Code: 03Seattle-AC13-SA13 Name: Seattle School District No. 1 Group: Central King County Type: 03-School District Location: King Scope: Accountability, Financial, SA Lead: Heidi Wiley Manager: Anastassia Efanova

Issues

ISS.18 - AC_ML: SeattleSD_AC13_Supplemental payments_Principals Prepared By: AB1, 6/4/2014 Reviewed By: JWG, 6/13/2014 Type: Accountability Category: Payroll/Personnel

Issue DRAFT - As of 6/4//2014 (on SharePoint for further review and approval)

The District does not have sufficient procedures in place to make sure that only authorized supplemental compensation is paid to School Principals and Assistant Principals.

The District employees 191 employees who acted in the positions of Principal or Assistant


Reporting Level(s): Management Letter

Unused Dollars at Risk: Questioned Costs:

Principal during school year 2013 and received $19.4 million in compensation. Of the total 191 employees in these two job functions, 104 received supplemental pay for a total of $183,095. This includes cell phone allowance of $46,000, certified administrative compensation of $116,205, and national standard and K8 certification pay in the amount of $20,390.

Certified administrative compensation may be determined by the employee’s hourly rate and the number of additional hours worked, or based on a stipend amount under the purview of a collective bargaining agreement. During our audit we reviewed certified administration compensation and noted that $16,645 out of $116,205 was not earned. The Human Resource department is responsible for processing supplemental compensation pay and assuring that it is authorized, approved and supported by appropriate documentation. We noted that the procedures that the department has currently in place are not sufficient to make ensure that supplemental compensation is paid appropriately.

We recommend the District:

• Implement procedures sufficient to assure that supplemental compensation paid is for authorized activities and in proper amounts.

• Provide training to Human Resource department employees on preparing and processing documentation for supplemental compensation.

NOTES

ISS.7 - SA_E: Time & Effort Certifications Prepared By: HCW, 5/2/2014 Issue


Reviewed By: JWG, 5/5/2014 Type: Single Audit Category: Grants (Federal) Reporting Level(s): Exit Item


We reviewed 131 time and effort (T&E) certifications and determined the following for these grants: CFDA 84.010/84.389 Title I

Semi-Annual Certifications (Single-Cost Objective FTE and non-FTE):

• Four certifications were signed less than 30 days after the T&E reporting deadline.

• Two certifications were signed between 30 and 60 days after the T&E reporting deadline.


Monthly Certifications:

• Two certifications were signed less than 30 days after the T&E reporting deadline.

CFDA 84.388 School Improvement Grant

Semi-Annual Certifications:

• Five certifications were signed less than 30 days after the T&E reporting deadline.


CFDA 84.360 High School Graduation Initiative




• One certification was signed between 60 and 90 days after the T&E reporting deadline.


Monthly Certifications:

• Six certifications were signed less than 30 days after the T&E reporting deadline.


CFDA 93.600 Head Start


• One certification was signed less than 30 days after the T&E reporting deadline.


NOTES We spoke with Grace Ngai, Accounting Analyst III and Kenny Ching, Grants Accountant who agree with the exception. Grace stated her and Kelly Knight, Accounting Analyst will continue to ensure all time and efforts are signed timely and send out email notifications when not signed by the deadline. She and Kenny also stated that the one time and effort signed nine months late was an unusual situation because of the HSGI grant difficulties and turnover, but that should not happen again.


ISS.10 - SA_V: Nutrition Cluster Verification Free and Reduced Meal applications Prepared By: TN, 3/20/2014 Reviewed By: JWG, 5/5/2014 Type: Verbal Recommendation Category: Grants (Federal) Reporting Level(s):


Issue The District’s Nutrition Services department verifies income for a selected number of households that apply for free and reduced meals each year. The department is required to complete the income verification process by November 15th and upload the results to the Superintendent of Public Instruction(OSPI). They are also required to submit the final Verification Summary report to OSPI in February. We found that the department’s income verification process does not include a step to review the accuracy of income assessment and meal category changes before the results are uploaded or submitted to OSPI. Also, they were no controls in place to ensure that the report is completed and submitted on time. In order to ensure that the Verification Summary report contains accurate income assessment and meal category assignments and is submitted on time, we recommend a second person perform a review of the Verification Summary report before it is submitted to OSPI.

NOTES On 3/21/2014, We met with Wendy to discuss the lack of a secondary review of the vefication of free and reduced lunch applications process. She was receptive to the idea however she did express some initial concern that it would cost time and resources. She said that she will check to see if other Districts are performing a similiar step. We asked her how she envisions incorporating such a change and she said that the department might do some sampling in the future.

ISS.1 - SA_V: SEFA preparation Prepared By: HCW, 4/23/2014 Reviewed By: JWG, 5/5/2014 Type: Verbal Recommendation

Issue The District had the following error in the SEFA:


Category: Accounting/Financial Reporting Reporting Level(s):


• The title of CFDA 93.701 was "Trans-NIH Recovery Act Research Support". The correct title of the grant, as shown on the CFDA website, should be "ARRA - Trans-NIH Recovery Act Research Support".

NOTES We informed Kenny Ching, Grants Manager and Kathie Technow, Accounting Manager on February 19, 2014 who agreed. They subsequently provided us with an updated SEFA.

ISS.2 - FS_E: Impaired investments were not marked to market Prepared By: JWG, 5/16/2014 Reviewed By: JWG, 6/18/2014 Type: Financial Statements Category: Accounting/Financial Reporting Reporting Level(s): Exit Item


Issue The District did not mark to market its impaired investments since the investments lost their value in 2008. The District uses initial valuation of $3,655,000 instead of current fair market value determined by King County of $1,125,565 to record the impairement. As the result the District is overstating contra asset account and underreporting cash and cash equivalents by $2,530,345.

Also, when impairment was initially recorded on the books the District made an accounting error that resulted in an understatement of deferred revenues for the amount of impaired investments.

We recommend the District to use actual fair market value determined by King County when recording impaired investments and use guidance prescribed by OSPI when marking impaired investmtns to market.


NOTES We went over our calculation with Barry Tsoi, Senior Accounting Supervisor, on February 18, 2014. He stated that the District does not book the deferred revenue for the unrealized losses for the impaired investments. He stated he would like to look at our calculations in detail before determining whether he would like to make any adjustments.

ISS.6 - AC_V: Controls over HR systems Prepared By: AB1, 6/4/2014 Reviewed By: JWG, 6/13/2014 Type: Verbal Recommendation Category: Payroll/Personnel Reporting Level(s):


Issue Based on our review the approval of salary/grade level is not sufficiently supported by budget records of how increases will be funded. We noted special compensation arrangements for exempt employees are not documented in the Master Data file and do not pass through the normal authorization and budget approval process.

NOTES

ISS.8 - FS_V: Notes to the financial statements Prepared By: HCW, 4/23/2014 Reviewed By: JWG, 5/16/2014 Type: Verbal Recommendation

Issue The District did not verify all tables in the notes to the financial statements foot and crossfoot. We recommend the District review the notes to the financial statements prior to submitting


Category: Accounting/Financial Reporting Reporting Level(s):


to the State Auditor's Office.

NOTES We spoke with Kathie Technow, Accounting Manager on February 26, 2014 who stated she had lots of trouble getting the tables in the Word document to foot and crossfoot correctly because if a change was made in the document she would have to reformat everything below where the change was made. She had reviewed the document prior to submitting to SAO but perhaps the last change was not saved when she was doing the final review. The District subsequently provided corrected notes that were reviewed without exception.

ISS.4 - SA_E: CFDA 84.060 Indian Education Grants to Local Educational Agencies Prepared By: HCP, 2/24/2014 Reviewed By: JWG, 5/5/2014 Type: Single Audit Category: Grants (Federal) Reporting Level(s): Exit Item

Unused Dollars at Risk:

Issue In the prior four audits, we reported findings on CFDA 84.060 Indian Education Grants to Local Educational Agencies. In the prior year audit, we reported a finding for continued noncompliance with grant requirements as the District had not put into effect recommndations from prior audit finding recommendations. In the prior audit we found 23 forms missing and an additional six forms ineligible per grant requirements. These resulted in $6,530 in questioned costs. In the current audit, we followed up on the prior audit and determined the District has put in place audit recommendations. The District hired a new Program Manager who implemented internal controls to make sure the Indian Education grant eligibility forms are completed accurately. The District provides training to school employees, calls parents to update forms and compare the forms to a report that lists the Indian stuedents enrolled in the District for the school year.


Questioned Costs: We reviewed 435 forms and found 17 forms missing and an additional 14 forms ineligible per grant requirements. These resulted in $6,694 in questioned costs. Although the dollar amount has remained consistent with last year's finding, we determined these are residual effects of the prior year finding since the SAO single audit report was not issued until May 2013. In addition the District has implemented procedures to ensure there are controls in place for forms to be eligible by federal regulations. For these reasons we determined the issue should be an exit item and not a finding.

NOTES We communicated this to Kevin Corrigan, Director of Grants & Strategic Partnerships; Janine Tillotson, Native American Education Intervention Coordinator; and Gail Morris, Native American Education Program Manager on 2/24/2014.

ISS.5 - FS_V: Related Parties Controls Prepared By: JWG, 5/16/2014 Reviewed By: AVE, 4/29/2014 Type: Verbal Recommendation Category: Accounting/Financial Reporting Reporting Level(s):


Issue We determined the District does not have adequate controls over related parties. Current procedures are not adequate to identify related parties. We recommend the District develop procedures to identify related parties.


NOTES We communicated this issue to Kathie Technow, Accounting Services Manager, on 2/26/2014 and she agrees more should be done. The District will work to find ways to identify new related parties and maintain a list to be able to provide to SAO when asked.

ISS.9 - SA_E: Title I : HQT Status - Notification to Parents Prepared By: ARC, 3/27/2014 Reviewed By: JWG, 5/16/2014 Type: Single Audit Category: Grants (Federal) Reporting Level(s): Exit Item


Issue Based on requirements set by the No Child Left Behind Act, the District is required to notify parents if their child has been taught by a teacher not meeting Highly Qualified Teacher requirements for four of more consecutive weeks. The District uses the HQT status report submitted to OSPI to identify the teachers who do not meet the HQT requirements. The District did not submit this report before the April 30th deadline and although they received an approved extension, they did not submit the report until after the extension period. Due to this, the District did not send letters to notify parents of teachers not meeting the HQT requirements in the 2012-2013 school year.

NOTES We discussed our audit issue with Michael on 3/17/2014. Michael indicated he did not recieve the required information because the report had not been submitted until after the school year. He agreed that the District was not in compliance with this requirement. He also indicated he would bring this issue to the attention of Kevin Corrigan/Grants Manager and the Superintendent in a meeting next week.

ISS.11 - SA_F: CFDA 84.360 High School Graduation Initiative Unallowed Activities Prepared By: HCW, 5/14/2014 Reviewed By: JWG, 6/18/2014

Issue

Schedule of Federal Audit Findings and


Type: Single Audit Category: Grants (Federal) Reporting Level(s): Finding

Unused Dollars at Risk: Questioned Costs: $61,640.00

Questioned Costs


King County

September 1, 2012 through August 31, 2013 1. The District did not have adequate internal controls to

ensure all High School Graduation Initiative funds were used for allowed activities.

CFDA Number and Title:

84.360 High School Gradu

Federal Grantor Name: U.S. Department of Educat Federal Award/Contract Number: S360A100166 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Questioned Cost Amount: $61,640

Background

In the 2012-2013 school year, Seattle School District received $2.2 million from the U.S. Department of Education’s High School Graduation Initiative (HSGI) grant. The five-year, $12.5 million grant was awarded to the District in September 2010 to support school dropout prevention and reentry efforts. Such activities should raise standards and expectations for disadvantaged students traditionally underserved in schools in order to ensure school completion. In the prior year audit, we found deficiencies in internal controls over compliance


with program requirements that collectively constituted a material weakness and issued a qualified opinion on the District’s compliance with grant requirements. We reported noncompliance with activities allowed and allowable cost compliance requirements and questioned costs of $499,936, or 24 percent of the program total.

Description of Condition During our current year audit we followed up on the prior year audit finding for HSGI. We examined the District’s processes to ensure compliance with grant requirements. We found the District used grant funds to pay for activities that were not allowed by the grant agreement or were not specifically approved by the federal grantor. Specifically:

• The District claimed $61,348 in payroll costs for a Family Support Worker position that were not allowed by the grant.

• The District used $291 of grant funds to purchase a piece of furniture. This expenditure was not made for the purpose of the grant.

Cause of Condition In the prior year audit we found the District did not have adequate internal controls to ensure federal funds were used only for allowed grant activities. We issued the finding in May 2013. Subsequently, the District started to address our recommendations. However, the District was not able to detect and reclassify all non grant activities already charged to the grant prior to 2012-2013 school year-end. Effect of Condition and Questioned Costs The District did not have controls in place to ensure compliance with the activities allowed requirement and used HSGI grant funds to pay for activities not allowed by the program. We are questioning the cost of $61,640.


Recommendation We recommend the District continue to improve internal controls to ensure all HSGI grant funds are used for activities allowed by the grant agreement, or specifically approved by the federal grantor. District’s Response The district concurs. Additional controls were put in place during 2012-2013, and new program managers assigned. The budget was properly revised and approved, however later reviews showed that some services performed were not as described in the budget. These services are valued by the district and have been reclassified to the General Fund during 2013-2014. The district will strive to ensure all reviews are timely to the fiscal year in which services were performed. Auditor’s Remarks Applicable laws and Regulations Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, Section 300, states in part:

The auditee shall: (b) Maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations, and provisions of contracts or grant agreements that could have a material effect on each of its Federal programs.


(c) Comply with laws, regulations, and the provisions of contracts or grant agreements related to each of its Federal programs.

NOTES We informed the District Program Managers and Kathie Technow, Accounting Manager on April 3, 2014 and they agree with the finding. They emphasized that there are internal controls now to mitigate unallowable costs.

ISS.12 - AC_ML: Cost Allocation between Capital Projects fund and General fund Prepared By: HCW, 5/30/2014 Reviewed By: JWG, 6/18/2014 Type: Accountability Category: Payroll/Personnel Reporting Level(s): Management Letter


Issue DRAFT - As of 5/30/2014 (on SharePoint for further review and approval) The District does not have sufficient documentation to support allocating the salaries of eligible employees between the General Fund and the Capital Projects Fund.

The District charged approximately $8.3 million in salaries and benefits to the Capital Projects Fund during the audit period. The District can charge employee salaries and direct expenditures to that fund if the employees are hired or assigned to planning or construction management of capital projects and technology projects to improve business including training and support to students and teachers. The fund can also be charged to support academics including opening new buildings to meet enrollment growth, and improvements to science and computer classrooms, Special Education or other specialized classrooms and skill


centers. The District may split salaries of employees between the General Fund and the Capital Projects Fund based on the percentage of time worked in each category. During the current year audit we followed up on prior year recommendations for payroll charged to the Capital Projects Fund. We found the District does not have sufficient documentation to support splitting the salaries of eligible employees between the General Fund and the Capital Projects Fund. Allocations are based on estimates instead of actual charges. Individual departments calculate an estimated workload of split-funded employees to be charged to the Capital Project fund during the annual budget process. The Departments communicate the percent allocated to the budget office but do not keep documentation to justify the workload on capital projects. The District does not keep track of the actual payroll charges for split-funded employees. During the year payroll costs are charged to the Capital Projects fund. At year end the District reallocates part of the costs to the General fund using an estimated workload percentage. We note that although the District went through a significant amount of turnover in the last year that it remains committed to improve accounting for capital expenditures in accordance with the Schools Accounting Manual. We recommend the District:

• Allocate actual split salaries and benefits from the Capital Projects fund to the General fund monthly rather than once a year.

• Keep track of the actual payroll costs of split-funded employees charged to the capital projects.


• Maintain documentation for capital projects’ workload of employees who split their salaries between funds.

NOTES We recommend the District:

• Allocate actual split salaries and benefits from the Capital Projects fund to the General fund monthly rather than once a year.

• Keep track of the actual payroll costs of split-funded employees charged to the capital projects. • Maintain documentation for capital projects’ workload of employees who split their salaries between funds.

ISS.13 - AC_E: Transportation Allocation Reporting Prepared By: AB1, 6/4/2014 Reviewed By: JWG, 6/18/2014 Type: Accountability Category: Miscellaneous Reporting Level(s): Exit Item


Issue Transportation Allocation Reporting Under new transportation reporting requirements the District submits ridership count information to the state three times per year. We reviewed the data reported for the three count periods to determine whether accurate information was submitted. Based on our review we found that the District over/under claimed ridership for two out of three periods. Cumulative Errors of over/under reporting resulted in a net over reporting of 108 students in the Student Transportation Allocation Reporting System (STARS). We recommend the District

• To strengthen internal controls to ensure information submitted to OSPI is accurate and supported

• To review student transportation allocation data for accuracy and completeness prior to its submission to the state


NOTES

ISS.14 - SA_V: CFDA 10.553/10.555 Nutrition Cluster Verification Appeals Prepared By: TN, 4/7/2014 Reviewed By: JWG, 5/5/2014 Type: Verbal Recommendation Category: Grants (Federal) Reporting Level(s):


Issue SA_V: Nutrition Cluster Verification Appeals. The District’s Nutrition Services department verifies income for a selected number of households that apply for free and reduced priced meals each year. If there is a reduction or termination in the household's meal eligibility, the District is required to notify the household of the change and provide a 10 day advance notice period. Although the District sent the household a notice letter informing them of the change in meal eligibility accompanied with a notification of their right to a 10-day appeal window, we noted that the District changed the eligibility status in the system immediately, effectively changing the meal charges to the student before the 10 day notice period is over. The District did not wait for the 10-day advance notice period to be over before making the change to the student's meal status in the system.

NOTES On 4/8/2014, we communicated this issue to Wendy Weyer, Director of Nutrition Services. Below is her prepared response: Your statement is correct. This appears to have been an oversight by the staff person responsible for processing Verification. The staff person created a change in our software which had immediate effects when processing both a reduction in benefits and a change to a higher eligiblity status as a result of the Verification process. When this was shared with me, I requested that a review be completed to determine the number of students affected by not being offered the 10 day grace period before their status was reduced. We found 8 students had been affected. In following up with PCS which is our software provider for POS and application processing, we have identified that there is a feature that when selected will


trigger the 10 day grace period once the Verification decision is made. We will put this practice in place for the 2014-15 school year. Wendy

ISS.15 - AC_E: Facility Rental Delinquent Acct Receivable Prepared By: AB1, 6/4/2014 Reviewed By: JWG, 6/13/2014 Type: Accountability Category: Billings/Receivables Reporting Level(s): Exit Item


Issue Facility Rentals The Facility Rentals office cannot demonstrate effective monitoring of delinquent accounts receivable as required by District policy. Based on a review of billable events dated September 2012 through August 2013, we noted delinquent invoices dated from September 2012 were sent to collections in November 2013. We identified a balance of approximately $114,020.32 in delinquent accounts as of April 1, 2014. As of the date of our audit, April 2014, invoices totaling approximately $20,000 of the $114,000 delinquent account balance were sent to collections. We recommend the District:

· To ensure Facility Rentals Department and Central Accounting work in partnership to monitor delinquent accounts and coordinate activities for timely reporting of account receivable balances.

· To adopt a policy for write off of accounts delinquent over one year old

· To ensure that organizations with delinquent account balances eliminate delinquency before renting to them again.

NOTES


ISS.16 - AC_E: Fleet Management. The District's does not adequately monitor vehicle assignment, usage, fuel cards, purchases, and inventory procedures Prepared By: TN, 4/29/2014 Reviewed By: JWG, 6/18/2014 Type: Accountability Category: Safeguarding of Assets/Property Reporting Level(s): Exit Item


Issue The District's does not have adequate procedures to ensure effective and efficient management of its fleet. The District has 298 vehicles in its fleet. These vehicles are used for deliveries, maintenance, general transportation, environmental services, and by buildings and grounds staff, among other uses. We reviewed the District's procedures for vehicle assignment and use, fuel card use, vehicle purchases and fleet inventory. Related to these areas, we found: The department responsible for fleet management activities, Facility Operations, does not adequately monitor vehicle assignment and usage. Required forms are missing or not properly filled out all for vehicles and drivers. As a result, Fleet Data isn't up-to-date or accurate enough to be relied on. We found the District's vehicle inventory procedures aren't adequate to ensure that the District can locate vehicles and equipment on the timely manner. We also noted that the District does not keep adequate records to show as evidence that a physical inventory of vehicles was completed. We also examined fuel card purchases and noted the District does not provide sufficient oversight to ensure employees are following fuel card policies and procedures. We noted that not all departments are charged for their fuel expenditures. Department managers don not approve and submit fuel card invoices to Accounts Payable on the timely manner. We noted instances where department managers do not monitor and do not reconcile fuel card expenditures for reasonableness. In addition Facilities Operations Department does not have sufficient system in place to maintain records of use of fuel cards. We noted that Fuel Mileage logs were not consistently submitted and those that were submitted were not kept in organized manner.


We recommend the district: • To develop and implement district-wide fleet management policies and

procedures • To improve current system of keeping track of vehicle assignments to

ensure timely collection of vehicle use information • To develop and follow adequate fuel card usage policies in procedures to

insure no misuse takes place and that all of the departments are charged for their fuel expenditures

• To improve its inventory procedures to allow for more timely detection of missing vehicles and equipment and to require keeping physical inventory records

• To ensure that all leased vehicles are added to its assets tracking database.

NOTES

ISS.19 - AC_V: Reconciliation of Athletic Facility Net Collections Prepared By: AB1, 6/11/2014 Reviewed By: JWG, 6/13/2014 Type: Verbal Recommendation Category: Reporting Level(s):

Unused Dollars at Risk:

Issue Forty-seven (47) of Seattle’s public schools adjoin Parks land or facilities. The Seattle School District (SSD) and the City of Seattle Dept of Parks and Recreation (DPR) have cooperated in planning and jointly using these separately owned facilities and grounds for the benefit of students and community members. Revenue collected by DPR for use of the District's facilities is reported and paid to SSD quarterly. The City DPR now provides an upload of transactions by complex and by day for each quarter to support the fee collection. In exchange the District pays the Parks Dept a percentage of revenue deducted from the gross revenue collected for scheduling services provided by Parks. Under the new agreement the expense paid to the City for its scheduling service has increased from the prior agreement of $2,500 per quarter or $10,000 per year to 9% of gross revenue. We noted the total checks disbursed by DPR did not reconcile to accounting


Questioned Costs: support of all events scheduled by DPR by location and by quarter. The data was uploaded from the City of Seattle database of bookings and utility fees. We also noted the deduction of fees was not evident in the material supplied by Parks. We verified the charges of $2,500 by quarter is still being used as the revised contract has not been signed. We explained the importance of the reconciliation to Kathy Johnson and subsequent to our inquiries she obtained a revenue summary (booking fees & utility fees totaled by quarter for 2014. The variance of 34,600 may be due to timing issues as we noted disbursements from DPR were not provided quarterly per the contract terms. We recommend the District request appropriate data from the City of Seattle and perform a reconciliation of Athletic Facility net collections to cash deposits to ensure fair and equitable use of District facilities per the terms of the Joint Use Agreement.

NOTES

ISS.17 - ML_SeattleSD_ACC13_OvertimeExtraTimeFringeBenefits Prepared By: AB1, 6/4/2014 Reviewed By: JWG, 6/13/2014 Type: Accountability Category: Payroll/Personnel Reporting Level(s): Management Letter


Issue DRAFT - As of 6/4//2014 (on SharePoint for further review and approval) The District does not have sufficient controls in place to ensure that overtime and extra time is properly authorized and the fringe benefit for personal use of vehicles is accurately imputed. The District employs 10 payroll analysts to review and process payroll of $475 million a year for 10,000 employees. The payroll department is responsible for processing overtime, pay under supplemental contracts or extra time, and imputing fringe benefit compensation for personal use of the District’s vehicles. The District anticipates that most errors in recording and authorizing overtime and extra time pay will be detected at the departmental level by immediate supervisors when approving timesheets. The District does not have policies or procedures in place for paying overtime or extra time to exempt employees. In


addition, the District does not have sufficient controls to ensure that the fringe benefit for personal use of District owned vehicles is imputed correctly in the employees’ wages. Overtime The District does not have a policy or procedure in place for paying overtime to exempt employees. The District does not seek guidance from the Compensation Analyst when assigning a pay rate for additional duties performed outside of an employee’s regular job function. The District relies on the discretion of the employee’s immediate supervisor to determine when overtime pay is due to exempt employees on a case by case basis. During our audit we noted 14 exempt level employees who received overtime pay of 1.5 times their regular rate for a total of 1,659 hours. In 11 instances we noted that overtime was paid for immediate duties and was not properly authorized. In three instances we noted employees were paid overtime for performing duties outside their immediate job function. These employees were paid one and a half times their regular pay rate instead of the applicable rate for the job function. Also, we noted no documentation showing that overtime was appropriate or necessary. Supplemental Contracts The District does not require written pre-authorization and justification for extra time from supervisors. We noted in-sufficient documentation of extra duties and/or the duration of additional assignments. Extra time or supplemental pay is awarded to non-represented employees on a case by case basis when an employee works outside the pay cycle or calendar days per the job function. We noted nine non represented employees were paid extra time for a combined total of 509 hours for duties performed outside the assigned work days. The payments were based on verbal agreements made at the departmental level. Fringe Benefits Personal use of a district vehicle includes any activity that is not business related,


including commuting. If the employee does not have a vehicle log and business versus personal use cannot be substantiated, the IRS will assume the vehicle is used entirely for personal use. Any use of a district vehicle that cannot be substantiated as business use is included in income. During the audit period we noted a total of 14 employees were required to report imputed wages based on a commuter benefit on their Form W-2. The imputed wages on the commuter benefit was undervalued in 11 of the 14 instances. In three instances the imputed wages were undervalued by a total of $2,414 due to the use of an incorrect valuation method. The imputed wages based on eight commuter benefit amounts were incorrect due to insufficient records of vehicle usage. In these cases Facility Operations did not keep records or respond to inquiries of total days commuted by each of the eight employees. Based on the insufficient documentation we were unable to determine the total of imputed wages under reported to the IRS. We recommend the District:

• Establish a district wide policy for overtime payments to non-represented exempt employees and a policy for special assignments and/or dual assignments.

• Require written pre-authorization and justification of extra time that would include a reason for an additional assignment, pay scale and duration of duties.

• Require supervisors to consult with the Human Resource Compensation Analyst for appropriate pay scales when allowing employees to undertake additional job functions.

• Provide training to Supervisors responsible for authorizing and approving timesheets.

• Perform random payroll audits at the department level to bolster oversight and monitoring of overtime payments.

• Provide training to Payroll Analysts of IRS regulations (Publication 15B) and adopt a district wide policy for personal use of District vehicles.

• Establish a district wide policy for documentation and retention of commuter activity data for reporting purposes to the IRS.


NOTES

SSD 2013 Audit Issues Report

Documents

Transcript of SSD 2013 Audit Issues Report