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
Seattle School District No. 1
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 employees 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
Type: Single Audit
Category: Grants (Federal)
Reporting Level(s): Exit Item
Unused
Dollars at Risk:
Questioned Costs:
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 I mprovement 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

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.
Two certifications were signed between 90 and 120 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
Type: Verbal Recommendation
Reporting Level(s):
Unused
Dollars at Risk:
Questioned Costs:
Issue
The Districts 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 15
th
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 departments 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
Issue
The District had the following error in the SEFA:

Category: Accounting/Financial Reporting
Reporting Level(s):
Unused
Dollars at Risk:
Questioned Costs:
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
Type: Financial Statements
Unused
Dollars at Risk:
Questioned Costs:
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
Reporting Level(s):
Unused
Dollars at Risk:
Questioned Costs:
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
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
Reporting Level(s):
Unused
Dollars at Risk:
Questioned Costs:
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
Type: Single Audit
Unused
Dollars at Risk:
Issue
In the prior four audits, we reported findings on CFDA 84.060 Indian Education
Grants to Local Educational Agencies. I n 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. I n
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; J anine 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
Reporting Level(s):
Unused
Dollars at Risk:
Questioned Costs:
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
Type: Single Audit
Unused
Dollars at Risk:
Questioned Costs:
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
Issue
Schedule of Federal Audit Findings and
Type: Single Audit
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 Educations 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 programrequirements that collectively constituted a material weakness and
issued a qualified opinion on the Districts 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
programtotal.

Description of Condition

During our current year audit we followed up on the prior year audit finding for
HSGI. We examined the Districts 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.

Districts Response

The district concurs. Additional controls were put in place during 2012-2013, and
new programmanagers 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.

Auditors 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
Unused
Dollars at Risk:
Questioned Costs:
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.

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
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
Category: Miscellaneous
Unused
Dollars at Risk:
Questioned Costs:
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
Reporting Level(s):
Unused
Dollars at Risk:
Questioned Costs:
Issue
SA_V: Nutrition Cluster Verification Appeals. The Districts 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
Category: Billings/Receivables
Unused
Dollars at Risk:
Questioned Costs:
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.

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
Category: Safeguarding of Assets/Property
Unused
Dollars at Risk:
Questioned Costs:
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. I n 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
Category:
Reporting Level(s):
Unused
Dollars at Risk:
Issue
Forty-seven (47) of Seattles 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. I n 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 J ohnson 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 J oint Use
Agreement.

NOTES

ISS.17 - ML_SeattleSD_ACC13_OvertimeExtraTimeFringeBenefits
Unused
Dollars at Risk:
Questioned Costs:
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 Districts 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 fromthe Compensation
Analyst when assigning a pay rate for additional duties performed outside of an
employees regular job function.

The District relies on the discretion of the employees 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 fromsupervisors. 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 FormW-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.


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.
Performrandompayroll 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

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