In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of certain activities of Helen Y. Davis Leadership Academy Charter Public School (DLA) for the period July 1, 2014 through June 30, 2017. In addition, we reviewed DLA’s personnel policy and the former executive director’s employment contracts for fiscal years 2003 through 2014 to determine the amount of sick time accrued during her employment.
We conducted this performance audit in accordance with generally accepted government auditing standards. However, in performing audit testing related to Objective 1, we could not obtain any transaction information regarding DLA’s PayPal account, or gain access to the account, and therefore could not review detailed account activity. As a result, we could not obtain sufficient, appropriate evidence to reach a conclusion about whether DLA’s board of trustees provided adequate financial oversight of PayPal transactions made through the operating cash account during the audit period. Generally accepted government auditing standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. Apart from the above issues, we believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
Below is a list of our audit objectives, indicating each question we intended our audit to answer, the conclusion we reached regarding each objective, and where each objective is discussed in the audit findings.
To achieve our audit objectives, we gained an understanding of the internal controls we determined to be relevant to the objectives through inquiries and observations. We evaluated the design and effectiveness of controls over financial oversight.
In addition, we performed the following procedures.
Financial Activities and Oversight
- Financial Position and Performance: We analyzed the financial statement information in DLA’s annual financial reports to determine DLA’s financial position and performance during our audit period.
- Former Executive Director Employment Agreements: We reviewed the former executive director’s employment agreements that were in effect during fiscal years 2003 through 2017. We evaluated the reasonableness of compensation and benefits included in the agreement for fiscal years 2016 and 2017.
- Credit Card Use: We reviewed the documentation related to all 36 credit card statement reconciliations performed during the audit period as well as all 2,287 credit card purchases made during the audit period. We noted whether reconciled statements were approved by the board and whether all reconciliations had sufficient documentation (approved purchase requisitions, packing lists, receiving reports, vendor bills, or other documentation to validate authorized accounts-payable transactions) as required by DLA’s financial policies and procedures. We reviewed all available documentation related to the credit card purchases to determine whether they were appropriate (i.e., related to the business of the school) and properly authorized and documented. During our review, we noted purchases made with a PayPal account that was linked to the school’s credit card. However, we could not perform audit procedures for the PayPal account (see Finding 5).
- Expenditure Processing: We selected a random, nonstatistical sample of 60 out of a population of 1,861 check transactions from the audit period and traced them to the bank statements. For the same transactions, we requested all supporting documentation (approved purchase requisitions, packing lists, receiving reports, vendor bills, or other documentation to validate authorized accounts-payable transactions). We analyzed this information for approvals and to determine whether expenditures were processed in accordance with school policies and procedures.
- Questionable Transactions: We reviewed DLA’s detailed general ledger for questionable transactions during the audit period and noted multiple payments to employees that were recorded as “advances to employees” and one electronic fund transfer recorded as an “uncategorized asset.” We obtained an understanding of all questionable transactions and reviewed DLA fiscal policies and procedures to determine whether these payments were appropriate.
Compliance with Board Member Obligations and Responsibilities
- Board Member Compliance with General Laws: We obtained a report from the Department of Elementary and Secondary Education’s Board Member Management System3 on 14 people who had been members of DLA’s board of directors during our audit period. We judgmentally selected 8 of those board members to determine their compliance with the following requirements: submission of the Certificates of Receipt of Open Meeting Law Materials (in accordance with Sections 18–25 of Chapter 30A of the General Laws), annual filing of Disclosure of Financial Interest Forms (in accordance with Section 89[u] of Chapter 71 of the General Laws), annual filing of written acknowledgement of receipt of the Summary of the Conflict of Interest Law for State Employees (in accordance with Section 27 of Chapter 268A of the General Laws), and proof of completion of the Commonwealth’s Conflict of Interest Law Online Training Program within 30 days of becoming board members and every two years thereafter (in accordance with Section 28 of Chapter 268A of the General Laws).
- Board Meeting Minutes: We reviewed copies of all minutes from 28 meetings of the board of trustees, 7 meetings of the finance committee, 10 meetings of the governance committee, and 4 meetings of the development committee held during the audit period, to determine whether the minutes complied with the Open Meeting Law.
- Board of Trustees’ Meeting Observation: We attended the February 13, 2018 meeting of DLA’s board of trustees to observe how the meeting was conducted and how school affairs were addressed.
Board Officer Term Limits
- We compared the amount of time each of DLA’s current board members had served on the board to the term limits for board members established in DLA’s bylaws to ascertain whether any members had served beyond the specified term limits.
We obtained information from DLA’s general ledger maintained in the QuickBooks Online program, which contains all financial transactions recorded by the school. We conducted information security testing by using a questionnaire, conducting interviews, reviewing supporting documentation, and performing observations to determine the reliability of the information obtained from QuickBooks Online. We traced transactions from the general ledger to the bank statements and canceled checks as well as additional supporting documentation. We determined that the bank statements and supporting documentation were sufficiently reliable to support audit testing using information in QuickBooks Online.
Whenever sampling was used, we applied a nonstatistical approach, and as a result, we could not project our results to the entire population.
|Date published:||November 19, 2018|