Summary

Summary of Report on Financial Statements

The Palm Beach County District School Board prepared its basic financial statements for the fiscal year ended June 30, 2007, in accordance with prescribed financial reporting standards. 

Summary of Report on Internal Control and Compliance

The District has established and implemented procedures that generally provide for internal control of District operations.  The District generally complied with significant provisions of laws, administrative rules, regulations, contracts, and grant agreements.  However, we did note internal control and compliance findings that are summarized below.

Finding No. 1:  Financial Monitoring and Reporting

The District did not present monthly financial statements to the Board, contrary to State Board of Education Rules.  Additionally, the District submitted its annual financial report to the Florida Department of Education on November 20, 2007, which was 56 days after the approved due date extension.

Finding No. 2:  Information Technology – PeopleSoft Implementation Project Management

Our audit disclosed control deficiencies, management decisions, and contractual compliance issues that may have contributed to the PeopleSoft functionality problems and the additional implementation costs.

Finding No. 3:  Information Technology – PeopleSoft Application Access Controls

Enhancements were needed in the District’s PeopleSoft access controls protecting the PeopleSoft application, the supporting network, and the computer room.

Finding No. 4:  Board Minutes

Board minutes for the regular Board meetings during the 2006-07 fiscal year were not approved, of record, by the Board Chair and Superintendent or approved by the Board at a subsequent meeting. 

Finding No. 5:  Bank Reconciliations

The District staff did not prepare monthly bank reconciliations for all accounts and did not always document the date, preparer, and reviewer’s approval of the reconciliations.

Finding No. 6:  Check Collection Procedures

Improvements were needed in the District’s internal controls over checks received by the District’s Accounting Services Department. 

Finding No. 7:  Cash Management

Advances of cash were not sufficient to meet the immediate needs of the various Federal programs necessitating the use of other non-Federal moneys to temporarily pay Federal costs and resulting in lost investment opportunities for these moneys. 

Finding No. 8:  Tangible Personnel Property Deletions

The District reported deletions for furniture, fixtures, and equipment and audio visual and software with an original cost of $28.5 million; however, none of these disposals were reported to the Board and recorded in the Board minutes, contrary to Florida Statutes.

Finding No. 9:  Payroll Taxes

The Internal Revenue Service assessed penalties, totaling $518,846, to the District for late filings of Federal withholding and social security taxes.  

Finding No. 10:  Salary Overpayments

Due to implementation issues with the new PeopleSoft system, 635 employees were overpaid by approximately $1.8 million during the 2006-07 fiscal year.  Collection procedures have been initiated and should be monitored by the District to ensure subsequent collection of the overpayments. 

Finding No. 11:  Overtime Monitoring

Due to increasing overtime costs, the District should monitor overtime charges to ensure staffing and personnel utilization is adequate.

Finding No. 12:  Architect Insurance

The District did not always ensure that architectural insurance was maintained in accordance with architect agreements.  

Finding No. 13:  Building Certificates of Occupancy

District procedures did not ensure that certain facility deficiencies were timely resolved or that expiration dates were established for temporary certificates of occupancy. 

Finding No. 14:  Annual Facility Inspections

Deficiencies noted on the annual safety inspection reports were not always timely corrected.   

Finding No. 15:  Information Technology – District Security Program

Enhancements were needed in the District’s entitywide security program; including performance of a risk assessment, on-going education and training, and expanding the written security policies and procedures.

Finding No. 16:  Information Technology – Disaster Recovery Plan

The District has not completed a test of its disaster recovery plan needed to ensure efficient and effective recovery in case of an actual disaster. 

Summary of Report on Federal Awards

We audited the District’s Federal awards for compliance with applicable Federal requirements.  The Title I; Migrant Education; Special Education Cluster; Reading First State Grants; English Language Acquisition Grants; and Disaster Grants programs were audited as major Federal programs.  The results of our audit indicated that the District materially complied with the requirements that were applicable to the major Federal programs tested.  However, we did note internal control and compliance findings that are summarized below. 

Federal Awards Finding No. 1:  Allowable Costs/Cost Principles

Enhancements were needed in District procedures for maintaining documentation to support the allocation of salaries and benefits to the Special Education – Grants to States, Reading First, and English Language Acquisition Grants.

Federal Awards Finding No. 2:  Financial Reporting

Enhancements were needed in District procedures regarding the timely preparation and submittal of the annual Distributive Aid and Cash Advance Reconciliation report to the Florida Department of Education. 

Audit Objectives and Scope

Our audit objectives were to determine whether the Palm Beach County District School Board and its officers with administrative and stewardship responsibilities for District operations had:

·        Presented the District’s basic financial statements in accordance with generally accepted accounting principles;

·        Established and implemented internal control over financial reporting and compliance with requirements that could have a direct and material effect on the financial statements or on a major Federal program;

·        Established management controls that promote and encourage:  1) compliance with applicable laws, administrative rules, and other guidelines; 2) the economic, effective, and efficient operation of the District; 3) the reliability of records and reports; and 4) the safeguarding of District assets;

·        Complied with the various provisions of law, administrative rules, regulations, and contracts and grant agreements that are material to the financial statements, and those applicable to the District’s major Federal programs; and

·        Corrected, or are in the process of correcting, all deficiencies disclosed in previous audit reports.

The objectives of the information technology (IT) audit were to determine the appropriateness of the District’s acquisition procedures used in selecting the PeopleSoft ERP software and the vendor to implement the system; and to determine the appropriateness of the District’s management of the implementation process, including contract management policies, procedures, and documentation in promoting, encouraging, and demonstrating compliance with controlling laws and administrative rules and application of prudent business practices in the procurement of IT resources.

The scope of this audit included an examination of the District’s basic financial statements and the Schedule of Expenditures of Federal Awards as of and for the fiscal year ended June 30, 2007.  We obtained an understanding of internal control and assessed control risk necessary to plan the audit of the basic financial statements and Federal awards.  We also examined various transactions to determine whether they were executed, both in manner and substance, in accordance with governing provisions of laws, administrative rules, regulations, contracts, and grant agreements.  Additionally, for the Information Technology portion of this report, our scope focused on selected controls applicable to the acquisition and implementation of the PeopleSoft ERP software during the period July 2006 through March 2007, and selected actions through June 2007.

Audit Methodology

The methodology used to develop the findings in this report included the examination of pertinent District records in connection with the application of procedures required by auditing standards generally accepted in the United States of America, applicable standards contained in Government Auditing Standards issued by the Comptroller General of the United States, and Office of Management and Budget Circular A-133.  In addition, for our Information Technology audit, we interviewed appropriate District personnel, observed District processes and procedures, and performed various other audit procedures to evaluate selected IT controls.

The Superintendent's response to the audit findings and recommendations is included in the full report.