Herman Roy Andress.

Impact analysis of audit reports of selected Florida public community colleges / online

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ing the benefits ... to the College v/hich
accrued from the professional leave" is
rendered as a criticism, when the preced-
ing Finding "mandates" denying and taking
away leave from the employee on authorized
leave with pay. SEE Regulation 6A-8.7251
states :

Professional leave is defined as leave
granted to an employee to engage in
activities which will result in his
professional benefit or advancement,
including earning of college credits
and degrees, or that will contribute
to the profession of teaching or to the
benefit of the institution. ■ . . . and
will be primarily for his benefit or
that of the teaching profession, and
only incidentally for the benefit of
the board.



13 3



It is respectfully requested that if the
College benefits as stated in this Finding
then the employees are entitled to leave
and all other benefits granted by the
District Board of Trustees.

Auxiliary Fund

Comment: The following deficiencies were noted in the
operating procedures of the bookstores:

1. Procedures used to calculate Florida
sales tax payable on bookstore sales
were not adequate. The accounting sys- ■
tem does not provide separate accounts
to record taxable and nontaxable sales
to facilitate the recording of sales
taxes collected. A review of the prepa-
ration and recording of bookstore sales
summaries for the month of June 1974
showed two amounts recorded .as interde-
partmental sales which were actually
sales taxes payable.. The classification
errors resulted in an underpayment for
the month of June 1974 of $157.07 to
the State of Florida, Department of
Revenue.

2. Interdepartmental sales by central
stores were not recorded until a, check
was issued in payment of the sale.

Response: 1. Bookstore sales are not currently broken
down into taxable and nontaxable cate-
gories. Therefore, the only way to
determine the amount due the State is
to use the amount recorded as sales
tax payable. If a misclassif ication
occurs, remittance to the State will
not be proper. Solicitations are being
requested for the Bookstore operation
under a lease arrangement. Interde-
partmental sales will be removed from
the Bookstores and placed under the
Business Affairs Offices at each Campus
with a Central Warehouse. This should
eliminate this finding in future audits.



134



2. A restructuring of all invoices and
sales is planned. It is anticipated
. that this will be accomplished by
July 1, 1975.

Comment: The Board's Auxiliary Fund statements do not
include the cost of renewal or replacement
of equipment of the direct and indirect
expenses, such as salaries and utilities,
paid by other funds for these enterprise
activities .

Response: Concur.

Comment: Periodic operational reports prepared for
auxiliary services, in my opinion, did not
provide all of the necessary information
for efficient management purposes. State-
ments that were prepared were not furnished
to all levels of management. Some examples
are (1) operating statements were not pre-
pared for each bookstore facility so that
operational results by location would be
clearly apparent; (2) bookstore managers
were not furnished periodic operating
statements to evaluate their performance
and from which corrective operational pro-
cedures may be effected; (3) only two
statements of operations were generated
during the fiscal year for bookstore opera-
tions and were for the periods July 1, 1973,
to January 31, 1974, and July 1, 1973, to
June 30, 1974.



Response: Concur.

Comment: The Board's Internal Auditor in the report

"Recommended Bookstore Financial Statements'
dated August 19, 1974, suggests methods by
which operational statements could be made
more effective.

Response: No comment. This is a statement of fact.



135



Comment: The Board provides a textbook buy-back
operation for the College students and
resells the used books through the book-
stores. Textbook buy-back operational
overages and shortages v;ere not identified
or recorded in the accounting records.
Controls should be established to ensure
that these transactions are properly
recorded .

Response: This problem is minor and will be remedied
immediately.

Comment: The Board did not have on hand at June 30,
1974, the food service vendor's performance
bond which was required by the agreement
between the parties to be posted prior to
the start of the vending operations.
Proof of the vendor's performance bond was
obtained after the close of the audit period,



Response: No comment.

7 . Loan Fund

Comment: Board policy, section 5.3, authorizes the
College President to establish a Financial
Aid Board with authority to approve all
financial assistance policies. The College's
Operations Manual, Section 605.3, states that
the Financial Aid Board established by the .
College President shall develop criteria
for awarding tuition waivers, scholarships,
loans, grants-in-aid, work programs, and
financial assistance to students-. Although
this was called to the attention of the
Board of Trustees in audit report No. XXXX,
I could not find any written policies and
procedures approved by this Board or any
evidence that a Financial Aid Board was
functioning. The Director of Financial
Aid, however, did establish and follow
guidelines for the granting of financial aid.



135



Response: The Financial Aid Board has been formed.
They will continue making recommendations
on priorities and procedures. A copy of the
charge to the Financial Aid Board will be
filed with the Board of Trustees.

Comment: The procedures approved by the District
Board of Trustees, relative to the Delta
Community College (DCC) Student Loan Fund
state that "This loan is to cover the cost
of tuition, matriculation, and special fees
only." It was noted that 74 of these loans
approved for the winter semester 1973-74
also included authorizations for the pur-
chase of books and/or supplies.

Response: When this discrepancy was called to the
attention of the Financial Aid Office by
the Auditor it was discontinued immediately.
Funds from the DCC Student Loan Fund are no
longer provided to cover the purchase of
books and/or supplies.

Comment: Disclosure by the Board of the "truth in

lending" provisions of the Consumer Credit
Protection Act to students receiving finan-
cial aid was not made. Disclosure is re-
quired by the agreement with the Department
of Health, Education, and Welfare, and
should be made at the time the loan commit-
ment is made and at the time the loan repay-
ment schedule is executed.



Response: When this discrepancy , was called to the at-
tention of the Financial Aid Office by the
Auditor, immediate corrective steps \-jere
taken. Presently Truth, and Lending state-
ments are executed in the case of all stu-
dent borrowers for whom the College acts
as lender. In all other cases, in which
the College acts as an intermediary, the
Truth and Lending statement is obtained by
the Lender.



137



Comment: During the fall semester of the 1973-74

academic year, short-term loan authoriza-
tions were issued in excess of the amount
of cash available to cover such loans.
This procedure created delays in writing
checks to some recipients as well as creat-
ing record keeping problems. I recommend
that procedures be adopted by the Board
to ensure that loans are not authorized in
excess of the funds available.

Response: Better computer printout records are now
available that enable the Financial Aid
Office to know more accurately what balances
are in the various short term loan accounts.
These records are carefully monitored to
prevent a reoccurrence of this situation.
The Financial Aid Board will be asked to
review procedures to insure safeguards are
adequate in this area.

Comment: Internal controls for the Loan Fund opera-
tions needed improvement. The custodian of
the notes receivable was in possession of a
$2,000 change fund, collected payments on
the notes receivable, and v;as permitted to
originate general ledger entries to the
notes receivable accounts. Consideration
should be given to the following recommenda-
tions for changes in the Loan Fund operations
(1) elimination of the change fund, (2) re-
quire notes receivable collections to be
made by the cashier, and (3) transmit a
copy of the receipt to the custodian of the
notes for appropriate action.

Response: Concur. Steps are currently being taken to
remedy this situation.



Comment: A fiscal agent in Winston-Salem, North

Carolina, handled current collections of
of the National Direct and Federal Nursing
Student Loans. The Board during the audit
period, continued to maintain a demand



138



deposit bank account and a clearing account
in North Carolina with a fiscal agent.
Section 6A-8. 13 (1) (b) , Rules of the State
Board of Education, requires Board funds to
be deposited in banks authorized to do busi-
ness in the State of Florida. These ac-
counts were closed by the College after
June 30, 1974.

Response: Concur.

Comment: The Board used collection letters, an attor-
ney, and a collection agency to secure pay-
ment on delinquent loan accounts-. Notifica-
tion to the student recipient relative to
past-due accounts appeared to be timely.
Collection expenses were correctly recorded
as operating costs of the General Current
Fund. The collection agency agreement pro-
vided for a commission at the rate of twenty-
five (2 5) percent of the amount collected to
be paid to the collection service upon the
collection of delinquent accounts. The
agreement with the collection service
terminated on May 15, 1974, and was not
renewed .



Response: No comment.

Comment: Individual students' notes receivable

balances were selected on a test basis and
confirmation letters were mailed direct to
the students. The results of my tests
substantially verified the accuracy of the •
notes receivable. I did note,, however, that
approximately 10% of the confirmation
letters mailed were returned by the post
office as undeliverable , indicating the
College's records of these debtors is not
currently maintained.

Response: Due to the transient nature of the DCC

student population, it is extremely diffi-
cult to maintain accurate address records.



139



However, Financial Aid applicants are ad-
vised in their Financial Aid Application
and Award Letters that they must keep the
Financial Aid Office advised of their ad-
dress at all times. The Financial Aid
Board will be asked to review the procedure
to see if it can be improved.

Comment: Delinquent loan accounts totaling $1,881
were v/ritten-off during the fiscal year
pursuant to the Rules of the State Board
of Education, Section 6A-8.191. The Board's
provision for uncollectible accounts, at
June 30, 1974, in the amount of $600 does
not appear to be sufficient.

Response: Concur. Flowever, this involves additional
historical data to establish a more ade-
quate rate.

8. Scholarship and Endowment Fund

Comment: Funds for Federal Law Enforcement Scholar-
ship loans and Florida Student loans re-
quiring repayment of the award or loan in
money or services were accounted for in
the Scholarship and Endowment Fund. The
American Council on Education recommends
that student financial aid, which by its
nature provides for repayment of funds
advanced either in cash or services rendered
be classified as loan funds rather than
scholarship funds. After the close of the
audit period, these funds v.'ere transferred
to and accounted for in the Loan Fund.

Response: No comment.

9. Agency Fund

Comment: Deposits refundable, as shown on. exhibit A,
totaled $8,753.18 and is primarily composed
of bid deposits. A detail listing of
vendors and amounts making up the $8,763.18



140



was not furnished me upon my request. I
recommend that a review of these deposits
be made, and a detailed subsidiary record
be established to support the amount shown
on the financial statement.

Response: A review of these deposits is being made
currently and a subsidiary record will be
established.

10. Unexpended Plant Fund

Comment: The scheduled contract completion date for
the recreational facilities at DCC was
April 9, 1974; however, the facilities
were not completed at June 30, 1974, and
there were no change orders to authorize
any extension of the original completion
date nor had any penalties been assessed.

Response: Concur. Resolution is in process.

11. Debt Service Fund
None .

12. Investment in Plant Fund

Comment: During the fiscal year, tangible personal
property totaling $2,633.78 was presented
to and approved by the Survey Board to be
written off the records. An inventory of
library books made during the audit period
resulted in books totaling $75,749.27 being
written" off the accounting records due to
loss or theft over a three year period.
The District Board of Trustees should re-
view all of its physical facilities where
books are kept, as well as control pro-
cedures established for the use of books,
in an effort to improve controls over these
assets .



141



Response: This problem relates back to a problem cor-
rected approximately two years ago. The
recent loss record appears to be very low.

Security for books has been increased by
the addition of walls to control traffic
flow. A study is currently underway to
determine if electronic book detection de-
vices would further protect library materi-
als. A review of book control procedures
is made on a once-a-term basis to remove
high risk books from general "circulation"
status to a more secure "reserve" status.



Epsilon Community College



Fiscal Management
Comment :



Current assets were in excess of current
liabilities; however, in the Restricted
Current Fund, liabilities totally $1,742.77
had not been recorded and were not reported
in the balances at June 30, 1974.



Response: Goods received prior to June 30, 1974, v;ere
not fully checked and accepted for payment
until subsequent to June 30, 1974. However,
such items were shown in the statements as
encumbrances (purchase orders issued for
such goods) and were reflected as restricted
fund balances at June 30, 1974.



Comment: The Board is required by Section 5A-8.11,
Rules of the State Board of Education, to
submit an annual report on or before August
15 of each year to the Director of the
Division of Community Colleges. The report
for 1973-74 was not submitted until August
27, 1974. Audit report No. XXXX, paragraph
12, discussed the late submission of the
report for 1971-1972.

Response: The report for 1973-74 was submitted to the
Board at the regular August 1974 meeting



142



which was held subsequent to the August
15th submission date. HovN'ever, for 1974-
75 the Board held a special meeting to
insure that the annual report was submitted
as required.

Comment: The Board's minute book did not contain an
alphabetical index. The marginal index
which was used does not provide an adequate
reference source. It is recommended that
for easy reference to actions taken by the
Board that an alphabetical index be main-
tained.

Response: An alphabetical index of major actions of the
Board is currently being developed and
should be completed in the immediate future.



Comment: Journal entries made
adequately supported
Many journal entries,
approved by a proper
the persons who prepa
example :
Journal Voucher
Prepared by
Central Cashier



Payroll Accountant
and Computer
Programmer/Operator



during 1973-74 were
and properly explained.

however, were not
administrator above
red the vouchers, for

Journal Voucher Numbers

028 ; 888 ; 926 ; 955 ; 972 ; 991 ;
1013;1033;1057;1282;
1312; and 1320.



002;078;8877913; and
1105.



Response: Our review of Journal Vouchers made during
1973-74 indicated that the Business Manager
and/or Chief Accountant had approved the
Journal Vouchers developed by subordinates.
However, in the future a closer review of
Journal Vouchers will be established to
insure that no one below the position of
Chief Accountant may approve a Journal
Voucher.



143



Comment: The library collected book fines, charges
for lost books, and fees for copies fur-
nished to individuals. When library col-
lections were remitted for deposit, the
central cashier wrote receipts for these
monies. The collections were not remitted
more often than once a month. There was no
Board policy of the amounts to be charged
for overdue books.

Response: The librarian has been instructed to remit
collections to the Business Office at least
every two weeks and more often if receipts
total a certain amount. Further, in the
immediate future an internal procedure will
be developed indicating the amount to be
charged for overdue books.

Comment: The following deficiencies in internal con-
trol should be corrected:

1. Listings were not made of collections
received by mail. A list of collections
should be prepared by each person open-
ing the mail, and the list should later
be compared by another person to the
records of amounts deposited by the
cashier.

2. The central cashier was responsible for
maintaining the records of accounts
receivable. These records should be
kept and controlled by someone that does
not handle collections.

3. Operation of the . check signing machine
was not always observed or verified by

a person other than the person operating
the machine. This should be done and
made a matter of record.



Response: Internal control deficiencies:

As to (1) - A system of listing collections
by various individuals who receive mail with'
collections appears to be inadequate for
the current function of the College. However,
all monies that are receipted by any



144



individual are immediately turned over to
the central cashier and a receipt is de-
veloped for each payee. Unlike as in many
other business entities, mail and/or remit-
tances are not submitted to one office and
it is not uncommon for almost every office
in the College to receive some collections
throughout the year. However, we will study
further this recommendation to see if it may
be implemented in a manner which could en-
hance internal control.

As to (2) - Because of the size of the Busi-
ness Office, it is the responsibility of the
central cashier to maintain accounts re-
ceivable. However, cross references as to
the accounts receivable are maintained by
such offices as the Student Financial Aid
Office Chief Accountant's Office, and the
largest amount of accounts receivable —
student loans — is handled by a special
service which sends control accounts of
these receivables directly to the Chief
Accountant rather than to the central
cashier. Hopefully, in this manner con-
trols are developed which will not impede
the internal control because the central
cashier maintains the accounts receivable.
We will study this area of internal control
to see if a better system may be developed
in the immediate future.

As to (3) - A detailed listing of all daily
disbursements is provided to the Business
Office and periodically verified with the
check signing log. However, initialing of
the check signing log by someone other than
the individual who operates the check sign-
ing machine will begin in the immediate
future .

Comment: Accounts receivable reported by the Board in
the General Current Fund totaled $19,791.67
at June 30, 1974. This amount erroneously
includes $1,623.25 for various accounts



145



which were paid or canceled prior to that
date .

Response: The amount of $1,623.25 which was errone-
ously shown in accounts receivable resulted
in duplicate billings being recorded in
accounts receivable. Immediately subse-
quent to the field audit work when this item
was noted, duplicate billings were made in
a different color and were marked "duplicate
billing". Subsequent to this corrective ac-
tion, the detailed subsidiary accounts have
been balanced to the General Ledger without
any duplication and it is felt that this has
corrected the problem.

Comment: The July 1, 1973, balance for the General
Current Fund as reported in the Board's .
summary of fund operations, exhibit B,
included investments in United States
Treasury Notes totaling $123,756.05 that
were not properly recorded at their cost of
$121,570.31, a $2,185.74 difference. These
notes were sold by the Board during 1973-74
and due to the value errors, the interest
earned was not properly recorded in 1972-73
and 1973-74.

Response: Noted. Future investments will be reported
at cost.



2 . Budgets
None .

3 . Revenue



Comment: The Board reported $37,662.27 in the Re-
stricted Current Fund as being support from
the State. This was actually funds from
the Federal Government that were distributed
through the State and which should have been
reported as support from the Federal Govern-
ment .



146



Response: The amount of $37,662.27 was erroneously
posted and controls and information to
the cashier have been issued to insure
that such posting error should not recur.

Comment: Adequate records were not maintained to

show that required fees had been collected
from some students registered for noncredit
courses. Fees were not charged for four
noncredit courses. Board minutes did not
show whether or not fees were to be charged,

Response: Subsequent to the audit period, all non-
credit courses were taken to the Board
and proper fee schedules were indicated in
the Board minutes. Further, several in-
ternal forms indicating such courses are
maintained by the academic section for
auditors' review.

4 . Expenditures

Comment: Although prior employment v;as used as a

factor in computing salary rates, evidence
showing verification of prior employment
was not on file for some employees as re-
quired by Board policy.

Response: Verification of prior employment was not
maintained on some non-instructional,
administrative and faculty personnel.
However, subsequent to the audit period,
all full-time faculty members hired have
verification of employment letters on file.
It should be noted that on most non-
instructional personnel and some adminis-
trative personnel that the College does
not verify all employment data in writing.
The College uses some written employment
verification and other forms of verifica-
tion to insure work experience.



14 7



Comment: The Board did not have signed authorizations
on file for the deduction of group life in-
surance premiums for some employees.

Response: All employees now have on file a deduction
form for all payroll deductions, other than
statutory required.

Comment: Leave records contained numerous mathematical
errors .

Response: Corrected.

Comment: Personnel files maintained for some part-
time employees contained only a copy bf
each employee's W-4 form and loyalty oath.
It is suggested that all personnel files
include an application for employment and
any other pertinent information.

Response: An application which will include general
employment data and other pertinent infor-
mation will be developed and implemented in
the immediate future for part-time per-
sonnel.

Comment: Filing equipment used for personnel files
for some terminated employees did not ap-
pear to meet the fire protection require-
ment as specified by Section 6A-8.751(3),
Rules of the State Board of Education.

Response: Corrected immediately after notification
by the field auditor of the deficiency.

5. Educational and General Funds



None .

6 . Auxiliary Fund

Comment: Auxiliary Fund enterprises are intended to
be self-supporting; however, except for
long-distance telephone services, overhead



148



expenses were not charged to the book-
store .

Response: Future reports will allocate some overhead
expenses to the Bookstore operation.

Comment: The bookstore made charge sales to other

College departments on prenumbered invoices
that were periodically submitted to the
accounting department for processing.
Charge sales were also made to students
under the Veterans Administration - Voca-
tional Rehabilitation Program, State Voca-
tional Rehabilitation Program, and the
Bureau of Medical Surgery Program. Students
in these programs that charged books and
supplies were required to sign a form
showing items purchased, date, quantity,
unit price, and total price. For better
controls over charge sales to these stu-
dents, the Board should use prenumbered in-
voices .

Response: Subsequent to the audit period, prenumbered
charge sale slip were developed by the
Bookstore for use in all charge sales.

7. Loan Fund


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Online LibraryHerman Roy AndressImpact analysis of audit reports of selected Florida public community colleges / → online text (page 8 of 11)