October 23, 2024
Brian Freeman, Assistant Superintendent for Business Webster Central School District 119 South Avenue Webster, New York 14580 REVIEW OF EXTRACLASSROOM ACTIVITY FUNDS Dear Audit Committee Members, Extraclassroom activities are defined in the Regulations of the Commissioner of the Education as “Funds raised other than by taxation or through charges of the board of education, for, by or in the name of a school, student body or subdivision thereof.” In more general terms, this relates to student clubs and activities. Extraclassroom activity is often considered a high-risk area in the review of financial internal controls of a school district. As a result of our 2023-24 risk assessment, and in conjunction with the Webster Central School District’s (the District) business office and audit committee, the Extraclassroom activities of the District were selected for further review to identify any possible financial control risks. The scope of our review was the period of July 1, 2023, to April 30, 2024. Procedures Performed To gain an understanding of the current District procedures related to the Extraclassroom activity funds, we interviewed various District employees within the business office. In addition, we obtained an outline from the District of procedures currently in place to ensure that funds which are entrusted to the District are handled efficiently, and that processes meet audit requirements. We performed various walkthroughs of these procedures with members of the District’s business office, assessing the procedures for appropriateness and to identify potential weaknesses in the control structure. For our transaction testing, we performed the following:
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Selected 25 receipts from various clubs related to the Extraclassroom activities to determine that: o o o o o o
The deposit request form was properly completed and approved by both the faculty advisor and club treasurer. The deposit request form was properly approved by the school secretary (when applicable) and the central treasurer. The bank deposit slip agrees to the deposit request form and other supporting documentation. The deposit and supporting documentation agree to the subsidiary ledger. The deposit was recorded on the daily club ledger. The deposit was made in a timely manner and traced to the bank statement. 1
ALBANY • BUFFALO • DALLAS • EAST AURORA • NEW YORK CITY • ROCHESTER • RUTLAND • SYRACUSE • UTICA • VIRGINIA BEACH • WILMINGTON
Selected 25 disbursements from various clubs in the Extraclassroom activity fund to determine that: o o o o
Selected two months from each provided school’s Extraclassroom activity bank account to determine that: o o o
o o o o o
The deposit request form properly records sales tax for the related transaction, where applicable. The receipt form was properly completed and approved by both the faculty advisor and club treasurer. The deposit request form was properly approved by the school secretary (when appliable) and central treasurer. The receipt and calculated sales tax was recorded on the District’s sales tax tracking schedule. The sales tax tracking schedule was reviewed and approved prior to the payment being made. The wire transaction related to the sales tax collected was approved prior to payment being made.
Selected three Fundraising requests from various clubs in the Extraclassroom activity fund to determine that: o o o
The bank reconciliation was completed in a timely manner. The bank reconciliation notes the name and date of the preparer. The bank reconciliation notes the name and date of the reviewer.
Selected 8 receipts to determine if the District properly collected sales tax from various club transactions that were nonexempt in the Extraclassroom activity fund to determine that: o
The disbursement request form was properly completed and approved by both the faculty advisor and club treasurer. The disbursement request was properly approved by the central treasurer. The required supporting documentation including the approved club minutes were included with the disbursement request form. The disbursement was recorded on the daily club ledger.
The fundraiser request form was properly filled out including all required information. The faculty advisor reviewed and approved the fundraiser request. The principal or assistant principal reviewed and approved the fundraiser request.
Selected six Club Charters from various clubs in the Extraclassroom activity fund to determine that: o The Club Charter was properly filled out including the following: o Club Name o Faculty Advisor o Student Officers o The Charter was approved by the school Principal and has the signature.
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Results of Procedures Performed Cash Receipts: Based on our review of 25 receipts selected for testing to determine if the receipts were following the recommended District and State procedures, we noted the following: Exceptions noted: 1. Two of the schools (Schroeder & Spry) were not able to provide daily ledgers managed by the club advisor and attendees to compare against the central treasurer’s notes. 2. Three transactions from Schroeder lacked adequate supporting documentation detailing the source of or reason for the deposit: a. No meeting minutes or source of funded provided for Schroeder Best Buddies receipt of $366.67 on 10/11/23 b. No meeting minutes or source of funded provided for Schroeder Key Club receipt of $155.00 on 12/5/23 c. No meeting minutes or source of funded provided for Schroeder Speech & Debate receipt of $220.00 on 11/6/23 3. There were three instances of receipts at Schroeder lacking signatures from the student treasurer and/or faculty advisor. a. No student or advisor signatures present on form for Class of 2024 receipt of $14.11 on 9/29/23 b. No student or advisor signatures present on form for Class of 2027 receipt of $152.24 on 10/4/23 c. No advisor signature present on form for Schroeder Orchestra receipt of $850.00 on 10/5/23 4. We noted three instances where the gross amount deposited from bank receipt was not reflected in the GL and was instead separated into net proceeds and sales tax as initial entries. a. No sales tax remitted for Schroeder Orchestra receipt of $850.00 on 10/5/23 b. No sales tax remitted for Schroeder Student Council receipt of $256.15 on 2/8/24 c. No sales tax remitted for Spry Student Council receipt of $601.85 on 4/24/2 Cash Disbursements: Based on our review of 25 disbursements selected for testing to determine if the disbursements were following the recommended District and State procedures, we noted the following: Exceptions noted: 1. Two of the schools (Schroeder & Spry) were not able to provide daily ledgers managed by the club advisor and attendees to compare against the central treasurer’s notes. 2. One disbursement was missing the student treasurer’s signature for Schroeder Chorus for $1,800 on 1/25/24 Bank Reconciliation: Based on our review of eight bank reconciliations selected for testing to determine if the reconciliation were following recommended District and State procedures, we noted the following: Exceptions noted: 1. Six of the reconciliations across three schools (Schroeder, Spry, & Thomas) did not have the preparer sign and date the reconciliation upon preparation. 2. Seven of the reconciliations were not dated when they were completed across all schools. 3. Six of the reconciliations across three schools (Spry, Thomas, & Willink) did not have a reviewer sign off and date their approval.
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Based on our review of eight receipts selected for testing, we found no exceptions. Fundraiser Request Form: Based on our review of three request forms selected for testing to determine if they are following the District and State Procedures, we noted the following: Exceptions noted: 1. Spry does not use the district authorized fundraising forms requiring the principal’s signature nor was proof provided that proper sales tax was collected or remitted for the tested fundraiser. Club Charter: Based on our review of six Club charters selected for testing to determine if they are following the District and State procedures, we noted the following: Exceptions noted: 1. Two of the clubs (RLT Art Club & HWS International Club) did not have charters available due to the club not operating during the current academic year. 2. The club charters as they are currently structured do not require the principal of the school to sign off and approve the formation of the club. As a result, we were unable to view any approvals from the school principals. 3. Two clubs (RLT Drama & HWS Chorus) were missing all student signatures except for the student treasurer and another club lacked a vice president signature (Schroeder Theater Co.). Recommendations: Student Activity Treasurer Ledger Based on our testing, it does not appear that the club ledgers are being reconciled by all the ECA treasurers. It would be prudent for every school to ensure that the student ledgers are being tracked accurately with the ECA treasurer in each school to be able to access and review the student-handled ledgers regularly. We recommend the District consider implementing a periodic reconciliation between the student ledgers and the ECA treasurer ledgers to note any discrepancies and ensure that both parties are tracking expenditures and receipts accurately. Sales Tax Reconciliation and Cash Receipts Review Based on our testing and discussions with management, it was noted the District was deducting the taxes paid to procure the goods from the taxes received when selling the goods in the preparation of the quarterly Sales Tax submission to the State. We recommend that the District:
Make use of resale certificates to avoid paying sales tax on the acquisition of goods related to Extraclassroom activities that will be sold. Report and submit all sales tax received for sale of goods related to Extraclassroom activities to the State as part of the quarterly Sales Tax submission. Provide training to the Extraclassroom activity treasurers on the importance of the collection of sales tax on taxable items and detail typical taxable item transactions and non-taxable transactions.
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Additionally, while not an exception, our testing showed that the sales tax from some receipts is being recorded as separate deposits in both the club ledgers and sales tax ledger. A more common practice used with school district sales tax remittance is to enter the gross amount from a receipt into the ledger and make a disbursement/transfer to the sales tax account so that the net flow of money received is tracked within the club ledger and so that the cash receipts reconcile directly with bank deposit slips and receipts held on record. Fundraiser Approval Based on our testing, it was noted that not every fundraiser received the proper number of prior approvals required by district policy to authorize the use of a fundraiser for club activities. We recommend that the District consider communicating to all faculty advisors through the ECA treasurers the importance of having both the faculty advisor and building principal sign off and approve of any proposed fundraiser prior to operation. Club Charter Review Based on our testing, it does not appear that the District had received all required signatures on the Club Charters. There were multiple charters that were missing two or more required student signatures. This procedure is important in ensuring that the District complies with NYS Safeguarding, Accounting and Auditing of Extraclassroom requirements. In addition, the current makeup of the club charters does not require the building principal to approve of their creation and designation as an official school sanctioned club. While it is noted that the club charters are to be returned to the business office upon being filled out, as the charters are currently designed, there is no area on the form to note its receipt or approval by the business office. We recommend that the club charter page be redesigned to include lines for the building principal to sign and date noting their approval, as well as a line for the business office to note receipt and approval of the club charter. Bank Reconciliation Based on our testing, it does not appear that the District is noting the name or date to signify the bank reconciliation is prepared and reviewed at every school. It does not appear that a formal review or approval of the reconciliations exists at every school either. These constitute important controls to ensure the reconciliations are done timely. We recommend the District update the policy related to bank reconciliations to require the individuals’ names and dates of the preparation and review are noted to ensure these events occur timely and that proper oversight is occurring. Board Review Based on our testing, it does not appear that a detailed record of receipts and expenditures are provided at least quarterly to the Board of Education. This procedure is important in ensuring that the District complies with NYS Safeguarding, Accounting and Auditing of Extraclassroom requirements. Based on discussions with District management, it was noted that currently the Board receives a summary of the transactions monthly for board review and approval. We recommend the District provide the Board with a detail of all club receipts and disbursements on an at least quarterly basis.
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We would like to acknowledge the cooperation and the professional conduct of the business office personnel and thank all the School District personnel for the courtesy received during our latest internal audit testing. We are available to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. Very truly yours, BONADIO & CO., LLP
by: Timothy J. Doyle, CPA Partner
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