Internal Audit Report
Overall Assessment from FY15-16
Campus Based Controls Audits
August 15, 2016
Office of Internal Audit
Executive Summary
In accordance with the fiscal year (FY) 2015-2016 Audit Plan, the Office of Internal Audit has
completed its campus based controls audits. The purpose of this report is to identify common
deficiencies in controls at both campus and administrative levels. While our individual audit reports on
campus based controls provided recommendations on how to address the noted deficiencies this
report attempts to identify the root causes of the deficiencies. Additionally, we hope this report brings
an awareness to both District Administration and Trustees on District operations as they relate to
campus activities.
Audits on campus based controls were conducted at Cochran Elementary, Henry W. Longfellow
Career Exploration Academy and North Dallas High School. Audit procedures were performed on
activity funds, purchasing activity, payroll activity, food and child nutrition operations, PEIMS
compliance, campus safety plans, credit recovery, campus improvement plans, grant compliance and
dual credit operations. Our audit procedures identified several opportunities for improvements in
controls at the campuses and with processes at the District Administrative level.
The following issues were noted as root causes to a majority of the deficiencies identified:
1. The current District Leadership structure has caused a lack of acceptance of responsibility for
activities that cross different business areas (examples of business areas include; school
leadership, finance, operations, information technology, etc…). On several occasions we
identified that operations such as campus dual credit activities, employee coding and position
control reporting rely on two or more business areas to produce a finished product. The fact
that no one business area owns the specific operation has led to inconsistency in operations,
little to no guidance provided to the campuses and an overall lack of oversight that would help
ensure internal or external compliance. Internal Audit has also faced difficulties with obtaining
management responses to the identified risks, because no one department wants to claim
responsibility to the issues identified.
2. Campus Office Managers are relied upon to do a number of key activities that support the
business operations at their campuses. The Office of Internal Audit surveyed 118 Office
Managers to gain an understanding of the number of activities they are asked to perform and
identified 138 separate responsibilities they could possibly be required to do (responsibilities
include payroll processing, activity fund management, AESOP responsibilities, Title 1
compliance management, etc…). We noted on several occasions that the number of
responsibilities combined with the lack of overall authority the position holds made it difficult to
monitor and maintain compliance with operations.
3. Monitoring and reconciliation procedures are key to operations at both the Administrative and
campus levels. They help to ensure internal controls are operating effectively and can identify
problems that occur in a timely manner. However, we noted a number of noncompliance issues
with both internal and external regulations that occurred because of a lack of established
monitoring and reconciliation procedures. All three schools audited had instances of
noncompliance that could have been mitigated with the proper implementation of reconciliation
procedures.
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4. The Office of Internal Audit takes requests to perform audits of activity funds every year.
Requests are made when either a new principal or Office Manager comes to a campus. Internal
Audit tries to provide assistance for all requests. However, the volume of requests has made it
impossible to complete an audit timely enough to benefit the new campus management. The
high number of requests gives Internal Audit insight on the amount of turnover at the campus
management level. All three campuses audited had new management within the current fiscal
year and all stressed difficulty obtaining comprehensive understandings of their campus’
operations. The District has not established or emphasized the importance of documenting
daily procedures at the campus level. Without documented procedures to help guide new
management, continuity of operations cannot be ensured. This issue, in combination with the
other overall issues noted, has led to both a lack of understanding on required activities and a
continuance of improper operations that were inherited from previous management.
Objective, Scope and Methodology
The overall objectives of our audits were to:
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Determine if the campuses were in compliance with selected applicable District policies as well
as regulatory requirements
Determine if the campuses had adequate internal controls established and implemented to
limit exposure to unauthorized or inappropriate transactions
Verify that the campuses had retained appropriate supporting documentation for transactions
associated with activity funds.
The scope of the audits was to review and/or analyze key personnel, procedures, processes and
data/information for the 2014-15 fiscal year as well as the current fiscal year.
The audits focused on evidence that provided reasonable, but not absolute, assurance that controls
were operating with sufficient effectiveness during the scope of the audit. Our methodology included
reviews of procedures and analysis of selected documents and transactions.
Background
The Office of Internal Audit’s 2015-2016 annual Audit Plan included several audits of Campus-Based
Controls. The specific campuses selected for these audits were based on input from School
Leadership Executive Directors as well as the Finance and Accounting Support to Campuses
department.
The first campus chosen for audit was Nancy J. Cochran Elementary (Cochran). Cochran had an
enrollment of approximately 525 students that range from Pre-Kindergarten through the fifth grade.
The campus is in the third year of Improvement Required (IR) status and went through reconstitution
of staff last school year. Reconstitution of staff involved a turnover of 80% of all teachers and other
staff. For this reason, there are additional federal fund dollars available to this campus that are not
available to other locations.
Henry W. Longfellow Middle School (Longfellow) was the second campus selected for audit. This
school had an enrollment of approximately 422 students that range from sixth through eighth grade
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selected through the magnet process. The students receive the same basic middle school program
offered in all Dallas Independent School District middle schools. However, special focus is placed on
the exploration and development of each student's interests and abilities. Additionally, students have
opportunities to take a variety of Pre-Advanced Placement courses for high school credit.
North Dallas High School (North Dallas) was the third and last campus selected for audit. North Dallas
has been rated by the Texas Education Agency for 2015 as “Met standard” in Academic Achievement,
Student Progress, Closing the Achievement Gap and College Readiness. This campus has an
enrollment of approximately 1,187 students that range from ninth through twelfth grade. The students
receive the basic high school program offered in all Dallas Independent School District high schools.
In addition, the Athletics department offers opportunities for students to participate in many different
sports, there are numerous organizations and clubs for the students to join and several different Career
and Technical Education paths. Students are also provided opportunities to take a variety of dualcredit courses for college credit enabling them to begin college with course work already behind them.
Observations, Recommendations and Management’s Action Plan
Issue 1: A Lack of Identified Responsible Parties
The current District leadership structure places each business area’s Chief at the same level of
authority. This structure appears to cause disconnect between departments when key activities cross
business areas and places no one department with the responsibility of developing consistent
procedures or providing oversight to ensure complaint processes. No designated responsible party
was found to lead to:
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Confusion with external requirements
Lack of established oversight procedures to monitor for compliance
Lack of provided training at the end user level
Lack of documented procedures and inconsistency with processing
Examples of these issues are noted below:
Audit procedures over employee coding found that, with no responsible party to provide guidance,
there was a lack of understanding on how employees were required to be coded. In addition to this,
documented procedures had never been created to help ensure consistency with employee coding.
To process employee account codes, the Budget Office receives coding information from Human
Capital Management. Human Capital Management’s understanding of how to code employees was
found to be flawed. Employees were inaccurately coded in a number of instances, meaning that the
District has been incorrectly reporting expenditures to the state and to the District’s Trustees. Trustees
rely on financial information to make critical decisions for the District. If accuracy is not maintained
then possible overspending or inequitable spending could result.
Audit review of dual credit procedures at the North Dallas campus found that the College and Career
Readiness (CCR) department prepared the annual contract with the Dallas County Community
College District (DCCCD) for placing students in their classes. CCR, under the supervision of the
Deputy Superintendent’s business area, works with Counseling Services (CS) within the School
Leadership business area to operate the dual credit program. CS role in the dual credit process is to
disseminate the procedures for enrolling students in dual credit courses to the campuses. However,
there was no documented guidance on how campuses were to actually process students and no
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developed monitoring procedures to ensure the District was in compliance with the DCCCD contract.
The lack of monitoring caused CCR to be unaware that a certified dual credit teacher suddenly quit
her job and was replaced with two teachers that had not been accredited by DCCCD. At the end of
the school year, because these teachers were not DCCCD accredited, students received failing grades
on their college transcripts. Negotiations had to be held with DCCCD to remove the grades completely
from the students’ transcripts.
In other audit procedures over the District’s position control process, auditors found that while Human
Capital Management is responsible for providing the final report on position control, the information
used to develop the report is received from School Leadership, Finance, individual campuses, etc.
None of these departments had created a common understanding of how full time equivalents (FTE)
were to be identified or processed. The number of inconsistencies in the processing across business
areas led auditors to note that the accuracy of the position control reports was undeterminable.
Business and government operations can be structured so that a single individual has authority over
multiple business areas. This individual holds an overview of the activities that cross different business
areas and can enforce the common achievement towards a goal. For example, one individual could
be responsible for business operations which would include finance, construction, building
maintenance, information technology and human capital management. This individual could provide
the authority to make needed change occur.
Risk Level- HH
Recommendation:
Internal Audit recommends that the Superintendent review the adequacy of the current District
leadership structure. Leadership roles should be developed that are provided authority over
development and monitoring of key activities.
Management's Response:
The Dallas ISD Organizational Chart provides the reporting structure for the Superintendent’s
leadership structure. The Chief of Staff will: provide clarity with regard to external requirements when
two or more parties cannot agree; establish an oversight process to monitor for compliance; provide
training for the end user level; implement a committee to provide a documented procedures manual
for campus office managers.
Action Steps:
Research best practices in other large urban districts
Establish a committee of practitioners to discuss issues: job roles, responsibilities, barriers to
effective work
Estimated Implementation Date:
October 2016
Individual Responsible for Implementation:
Dr. Cynthia Wilson, Chief of Staff
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Issue 2: Office Manager Responsibilities
Meeting with campus management and gaining an understanding of how daily activities are conducted
is an essential part of the audit process. Walkthroughs of operations at the campuses identified that a
number of responsibilities rest with the campus Office Managers. In order to get a better understanding
of Office Manager activities, we surveyed the majority of campuses across the District and asked
Office Managers to provide lists of their responsibilities. One hundred and eighteen Office Managers
responded to the information request and provided a more comprehensive view on the tasks they are
requested to perform. The compiled lists identified 138 separate tasks Office Managers were
responsible for (the complied list of tasks can be found on Appendix A of this report). These tasks
ranged from management of the campus Title 1 compliance binder to monitoring security cameras.
A large number of the tasks performed by the Office Managers are key to their campus’ operation and
appear to expand beyond normal support staff duties. Internal Audit reviewed the Office Manager job
descriptions and found that the requirements to obtain this position do not go beyond a high school
education and three years of administrator assistant experience. While campus principals are
ultimately responsible for management of the campuses budget and District compliance requirements,
they rely heavily if not completely on their Office Managers to maintain these activities. Audit
procedures found that because of the number of tasks assigned to the Office Managers and the
complexity of the operations, there were a number of instances where federal, state and District
requirements were not being met. In addition to the number of tasks, Office Managers also do not
have enough authority to enforce compliance with the campus staff. For example, if a federal funded
teacher does not submit their time and effort reports to the Office Manager, that Manager has no
authority to make the teacher comply.
Recommendation:
Internal Audit recommends that the Chief of School Leadership verify the adequacy of the Office
Manager position requirement as it relates to the tasks they are requested to perform. In addition,
Office Manager workloads should be assessed to determine if one individual is sufficient to perform
all of their duties.
Risk Level- HH
Management Response:
School Leadership along with the Finance will develop and provide required professional development
for all campus Office Managers for the 2016-2017 school year once a month for the office managers.
Departments will work with the Implementation Team to determine PD topics – prioritized by greatest
need. SL will review the Office Manager job description with the principal focus group for any revision,
deletions, and additions.
The Office of the Chief of Staff will provide technical assistance to School Leadership and the Finance
Department to schedule and monitor attendance and compliance for all PD
Estimated Implementation Date:
December 2016
Individual Responsible for Implementation:
Stephanie Elizalde, Chief of School Leadership
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Issue 3: Undeveloped Monitoring and Reconciliation Procedures at both Administrative and
Campus Levels
The Government Accountability Office’s Standards for Internal Controls document states that a welldeveloped control system includes the following;
“Management performs ongoing monitoring of the design and operations and
operating effectiveness of the internal control system as part of the normal course
of operations. Ongoing monitoring includes regular management and supervisory
activities, comparisons, reconciliations, and routine actions.”
The majority of issues found in the audits of campus based controls were caused by a lack of
monitoring or reconciliation activities. Expenditures at the campuses audited were not reconciled,
which led to issues with technology inventory, employee pay, Title 1 expenses, activity fund revenue
and expenses and employee leave. The District has not established a requirement to have monitoring
activities or standard account reconciliation procedures established to help ensure controls are
operating as intended.
Established monitoring procedures with the above noted instances over employee coding, dual credit
process and position control would have helped in the identification of breakdowns in controls in a
timely manner. If identified timely, issues with improper reporting to the state and Trustees could have
been prevented.
Recommendation:
Internal Audit recommends that the Superintendent, in conjunction with District leadership, emphasize
the establishment of monitoring controls throughout the District. In addition, monthly reconciliation of
accounts, by the account owners, should be required to be performed on a regular basis to help identify
and address any possible breakdown in established controls at the campus and administrative levels.
Risk Level- HH
Management's Response:
The Finance Department will provide a quarterly monitoring calendar for monitoring and reconciliation
activities. Campus expenditures will be reconciled quarterly and a final annual report will be provided
to ensure controls are operating as intended. As needed, campus procedures may require monthly
reviews.
Estimated Implementation Date:
October 2016
Individual Responsible for Implementation:
Stephanie Elizalde, Chief of School Leadership
James Terry, Chief Financial Officer
Dr. Cynthia Wilson, Chief of Staff
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Issue 4: Campus Management Turnover
Throughout the year Internal Audit receives requests to review campus’ financial compliance from new
principals and Office Managers. For the current fiscal year, Internal Audit received 30 requests
because of new campus management. During the previous fiscal year 20 audits were performed from
these requests. Audit procedures from these reviews identified that the major cause of non-compliance
issues stems from a lack of training and a lack of documented processes. The District does offer
annual training for both principals and Office Managers, however, we have found that not all of school
operations are covered in these trainings.
To cover all activities of school management in a training session would be extremely difficult for the
District to accomplish. In addition, every district campus’ operations differ in some way making
comprehensive training unachievable. Documented policies and procedures at the campus level
would assist in ensuring continuity of processes that are in-line with federal, state and District
requirements. The Government Accountability Office’s Standards for Internal Controls document
states that documented policies and procedures help identify responsibilities that are created to
achieve objectives. Currently, the District has no requirement for campuses to document their
procedures.
Recommendation:
Internal Audit recommends that the Chief of School Leadership work with School Leadership Executive
Directors and campus principals to develop documented procedures for each campus. Documented
procedures should be developed so that operations can continue in the event of the absence of key
employees. Procedures should also be reviewed on an annual basis to identify any changes.
Risk Level- HH
Management's Response:
The establishment of an implementation team charged with developing a standard practices - roles
and responsibilities procedures manual for use by all Office Managers that will lead to clarity of roles
and responsibilities will result in less turnover at the Office Manager position. Providing supports
that will assisting Office Managers achieve greater effectiveness in their roles will result in lower
turnover. Finance, School Leadership (representatives), Professional Development and the Chief of
Staff office will collaborate to develop operating procedures for the Office Manager position to ensure
a match between candidates and the role.
Estimated Implementation Date:
Spring 2017
Individual Responsible for Implementation:
Stephanie Elizalde, Chief of School Leadership.
Conclusion
Internal Controls are continuous built-in components of operations that provide reasonable (not
absolute) assurance that an organization’s objectives will be achieved. The District has not adopted a
set standard of internal controls on which to base its operations. The Committee of Sponsoring
Organizations of the Treadway Commission (COSO) Guidance on Internal Controls and the United
States Government Accountability Office’s Standards for Internal Control (Green Book) are two widely
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used documents that could help the District identify internal control procedures. Consideration should
be given to these documents as they relate to the District’s operations. Additionally, the District should
provide a greater emphasis on the establishment and benefit of internal controls at all levels to help
mitigate risks to the achievement of goals.
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