Audit Buzz Newsletter Winter 2019

Despite the cold and snowy days which have frequented us so often this winter, OAG continues to stay busy (and warm) completing audits and other projects in a timely manner!

In this issue of Audit Buzz, we provide an overview of the different school audit types performed by OAG, highlight OAG's FY 2019 Mid-Year Report, and summarize key takeaways from recently completed audits.  We also highlight OAG's break-out session at the January 2019 School Finance Conference and provide a look into current and future OAG work.

As always, we appreciate the cooperation and courtesies extended to our staff by FCPS management and staff during all past, current, and future audit engagements.

Types of School Audits

OAG is currently in the process of preparing for the annual Local School Activity Fund (LSAF) audit, where procedures are performed to validate whether local school financials and year-end (i.e. June 30) cash reporting are not materially misstated. 

But did you know that OAG performs other school audits in addition to the annual LSAF audit?  School principals, finance technicians, and administrative assistants should be aware of the following school audit types OAG performs throughout the year:

• Local School Activity Fund (LSAF) Audit - In accordance with the Code of Virginia (8VAC20-240-40), all Local School Activity Funds (at approximately 200 FCPS sites) shall be audited annually.  The LSAF audit process is performed throughout the school year and after fiscal year-end.  The scope of an LSAF covers procurement, revenues, disbursements, and reconciliations. Non-appropriated funds are reviewed during the audit.  Each school receives an on-site visit at least once every three years, but OAG may visit more frequently if deemed necessary, including at the request of schools. 
• Business Process Turnover Audit (BPTA) - These site audits are performed on an ad hoc basis throughout the year, generally as a result of a change in key personnel (principal or finance technician) or as a result of continuous audit testing.  The scope of BPTA covers procurement, revenues, disbursements, and reconciliations.  Appropriated and non-appropriated funds are reviewed during the audit.
• Continuous Audit - This audit, which is performed throughout the year, is meant to supplement the annual LSAF audit by identifying potentially high-risk transactions for review on an ongoing basis.  Both appropriated and non-appropriated disbursements and P-card transactions are included in the scope of continuous audit. 

Recently Completed Audits and Other Updates

FY 2019 Mid-Year Report

At the School Board work session on February 12, 2019, OAG presented its first Mid-Year Report to highlight OAG results for the first half of FY 2019.  The purpose of this report is to raise awareness of OAG’s mission and accomplishments, highlight the internal audit process within Fairfax County Public Schools, as well as share the results of recent audits and communicate upcoming projects.

OAG’s mission is to independently determine whether the ongoing processes for controlling fiscal and administrative operations and performance throughout Fairfax County Public Schools are adequately designed, functioning in an efficient, effective manner, and fully accountable to the citizens of Fairfax County.

OAG would like to thank the Fairfax County School Board and members of the Audit Committee for their continued support as well as FCPS Superintendent and Leadership Team for fostering a collaborative work environment that promotes Fairfax County Public Schools achievement of its strategic goals, particularly in the area of resource stewardship.

The full FY 2019 Mid-Year Report is available here: 

https://www.boarddocs.com/vsba/fairfax/Board.nsf/files/B8XMB85312FF/$file/OAG%20FY19%20Mid-Year%20Report.pdf 

ISD and DIT Specific Contracts Audit

In accordance with the FY 2019 audit plan, OAG completed a performance audit of Instructional Services (ISD) and Information Technology (DIT) specific contracts in December 2018.  Overall, both ISD and DIT demonstrated appropriate contract management responsibilities; however, OAG identified a disconnect between the departments and OPS as it relates to the assignment of contract management responsibilities for certain contracts.  While this finding was identified during the departmental specific contract audit, this appears to be a division-wide systemic issue rather than isolated to these two departments.

As a result of this audit, OAG recommended the Chief Operating Office (COO) lead in developing regulation(s) which provides authority to assign contract management responsibility.  The Chief Operating Office agreed that assigning an owner for procurement processes should be included in a regulation and plans to complete the corrective action by April 30, 2019.

The full ISD and DIT Specific Contracts audit report is available here:

https://www.boarddocs.com/vsba/fairfax/Board.nsf/files/B892PB6179B9/$file/Contracts%20Audit%20Report.pdf

Business Process Turnover Audits (BPTA)

At the January 23, 2019 Audit Committee meeting, OAG presented the results of BPTAs performed at four schools.  During the performance of these BPTAs, OAG identified three low risk findings and six moderate risk findings.  Findings related to the following were noted (risk rating italicized in parenthesis):

• Timeliness and completion of reconciliations (three moderate; one low)
• Bank reconciliation accuracy (one moderate)
• Timeliness of receipts (one low)
• Timeliness of deposits (one moderate)
• Fund account usage (one low)
• Pre-approval of purchases (one moderate)

Moderate risk findings are identified when "compliance with subject FCPS policies and established procedures is inadequate; and controls were not consistently applied which increased the severity of the risk."  OAG obtains a management response for all moderate (and high) risk BPTA findings.

January 2019 BPTA reports are available here on the OAG website.  

Finance Conference

OAG had a break-out session at the School Finance Conference held at Gatehouse on January 17, 2019.  Throughout the day, OAG presented to nearly 200 school finance technicians and administrative assistants.  In addition to educating the finance technicians and administrative assistants about OAG's role at FCPS, participants were provided the opportunity to test their audit IQ by reviewing actual school finance documentation to identify potential red flags.

During OAG's session, participants reviewed documentation related to:

• Cash Disbursements, including purchase orders, invoices, and p-card statements, to identify required pre-approvals, past due balances, and finance charges.
• Cash Receipts, including the School Finance Deposit Slip (FS-131), to identify the timeliness of receipts, deposits, and appropriate sufficient documentation.
• Accounting Procedures, including Financial Management Reports (FMR) and Bank Reconciliation, to identify the timeliness, completeness, and accuracy of reconciliations, as well as compliance with FCPS policy and regulation.

OAG would like to thank Financial Services for allowing us to present at the Finance Conference!

Current Work

• Use of Trades and Staffing Reserve Audit - OAG is currently performing an audit of the effectiveness and efficiency of the trades and staffing reserve processes, and whether usage is consistent with applicable federal, state, and FCPS policies and regulations.  OAG expects to present the audit results at the March 2019 Audit Committee meeting.
• Medicaid Reimbursement Program - The preliminary objectives of this audit are to assess whether FCPS Medicaid Reimbursement program follows the relevant compliance requirements; determine if EasyTrac, the system established in 2015 to generate Medicaid claims for submission to the Virginia Department of Medical Assistance Services, serves its intended purpose; and to evaluate the effectiveness of FCPS’ process to identify qualifying students for Medicaid benefits.  OAG expects to present the audit results at the April 2019 Audit Committee meeting.
• Business Process Turnover Audits - These audits are performed on an ad-hoc basis throughout the year, depending upon key school employee turnover.
• FY 2020 Risk Assessment - OAG is conducting the annual risk assessment to evaluate areas against a variety of risk factors including financial implication, likelihood of errors, and frequency of audits, prior audit issues, complexity, and turnover.  The result is a combination of qualitative and quantitative data that assists in the prioritization of audit topics. 

Upcoming OAG Projects

• Payroll Oversight and Process - The preliminary objective of this audit is to determine whether payroll practices were in compliance with applicable federal and state requirements, established FCPS policies, regulations and procedures, and whether these practices and relevant internal controls effectively reduce the risk of potential payroll irregularities.  This performance audit is scheduled to begin in February 2019 and is estimated to take four months to complete.
• Safety and Security Compliance - The preliminary objectives of this audit are to validate whether FCPS follows the Code of Virginia (22.1-279.8) and the relevant requirements, and meets the school safety reporting requirements of the Virginia Department of Education.  This performance audit is scheduled to begin in March 2019 and is estimated to take four months to complete.
• FY 2019 LSAF Audit - OAG will perform the audit of FCPS local school activity funds (LSAF) for the year ended June 30, 2019.

Welcome Recent and New OAG Hires

Lorena Villarroel - Auditor I - Lorena joined OAG full-time as an Auditor I in January 2019. Lorena previously served as an audit intern with OAG.

Chris Elliott - Auditor III - Chris became an Auditor III in January 2019.  Chris previously served as an Auditor II within OAG.

Fraud, Waste & Abuse Hotline:
(571) 423-1333 (anonymous voicemail)
InternalAudit@fcps.edu (email is not anonymous)

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