TOWNSHIP OF MONTAGUE SCHOOL DISTRICT COUNTY OF ...

TOWNSHIP OF MONTAGUE SCHOOL DISTRICT COUNTY OF SUSSEX

AUDITORS' MANAGEMENT REPORT ON ADMINISTRATIVE FINDINGS - FINANCIAL,

COMPLIANCE AND PERFORMANCE YEAR ENDED JUNE 30, 2018

TOWNSHIP OF MONTAGUE SCHOOL DISTRICT COUNTY OF SUSSEX

AUDITORS' MANAGEMENT REPORT ON ADMINISTRATIVE FINDINGS - FINANCIAL,

COMPLIANCE AND PERFORMANCE YEAR ENDED JUNE 30, 2018 TABLE OF CONTENTS

Cover Letter General Comments:

Scope of Audit Administrative Practices and Procedures:

Insurance Officials in Office and Surety Bonds Tuition Charges Financial Planning, Accounting and Reporting: Examination of Claims Payroll Account and Position Control Roster Reserve for Encumbrances and Accounts Payable Classification of General and Administrative Expenditures Board Secretary's Records Treasurer's Records Elementary and Secondary Education Act (E.S.E.A.) as amended by the

Every Student Succeeds Act (Not Applicable) Other Special Federal and/or State Projects T.P.A.F. Reimbursement Travel Expenses and Travel Reimbursement Policy Testing for Lead of all Drinking Water in Educational Facilities School Purchasing Programs: Contracts and Agreements Requiring Advertisement for Bids School Food Service Fund Student Body Activities Application for State School Aid Pupil Transportation Facilities and Capital Assets Management Suggestions Status of Prior Year's Findings/Recommendations Schedule of Meal Count Activity (Not Applicable) Schedule of Net Cash Resources (Not Applicable) Schedule of Audited Enrollments Excess Surplus Calculation Summary of Recommendations

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15-18 19-20 21-23

NIsIv accIALLP

Certified Public Accountants & Advisors

Mount Arlington Corporate Center 200 Valley Road, Suite 300 Mt. Arlington, NJ 07856

973-328-18251973-328-0507 Fax

Lawrence Business Center 11 Lawrence Road Newton, NJ 07860

973-383-6699 I 973-383-6555 Fax

January 18, 2019

The Honorable President and Members of the Board of Education Township of Montague School District County of Sussex, NJ

We have audited, in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of the Board of Education of the Township of Montague School District in the County of Sussex for the year ended June 30, 2018, and have issued our report thereon dated January 18, 2019.

As part of our audit, we performed procedures required by the New Jersey Department of Education, and the findings and results thereof are disclosed on the following pages, as listed in the accompanying table of contents. This letter does not affect our report dated January 18, 2019, on the financial statements of the Board.

We will review the status of the comments during our next audit engagement. We have already discussed these comments and suggestions with various management personnel, and we will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations.

This report is intended for the information of the Township of Montague School District's Board of Education, management and the New Jersey Department of Education. However, this report is a matter of public record and its distribution is not limited.

NISNOCCIA LLP

~~

William F. Schroeder Licensed Public School Accountant #2112 Certified Public Accountant

Independent Member of BKR International

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TOWNSHIP OF MONTAGUE SCHOOL DISTRICT ADMINISTRATIVE FINDINGS - FINANCIAL, COMPLIANCE

AND PERFORMANCE YEAR ENDED JUNE 30, 2018

Scope of Audit

The audit covered the financial transactions of the Board Secretary/School Business Administrator and Treasurer of School Monies, the activities of the Board of Education, the records of the various funds under the auspices of the Board of Education.

Administrative Practices and Procedures

Insurance

Multi-peril insurance coverage was carried in the amounts as detailed on Exhibit J-20, Insurance Schedule contained in the District's CAFR.

Officials in Office and Surety Bonds

Name

Position

Coverage

Tina Palecek Michelle La Starza

School Business Administrator/Board Secretary Treasurer of School Monies

$ 200,000 200,000

Tuition Charges

A comparison of tentative tuition charges and actual certified tuition charges was made. The actual costs were different than estimated costs. The Board made a proper adjustment to the billings to sending districts for the change in per pupil costs in accordance with N.J.A.C. 6A:23A-3.l(t)3.

Financial Planning, Accounting and Reporting

Examination of Claims

An examination of claims paid, on a test basis, during the period under review indicated discrepancies with respect to signatures, certification or supporting documentation, except as noted below.

Findings:

1.) During the course of our audit, it was noted that several purchase orders did not have a claimant's signature, superintendent's signature, and/or receipt of goods signature prior to the payment of bills.

2.) The District opened a debit card linked to their General Fund bank account to make certain online payments. As per Local Finance Notice 2013-17 and N.J.A.C. 5:30-9A, school districts are not authorized to utilize debit cards.

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TOWNSHIP OF MONTAGUE SCHOOL DISTRICT ADMINISTRATIVE FINDINGS - FINANCIAL. COMPLIANCE

AND PERFORMANCE YEAR ENDED JUNE 30, 2018

Financial Planning, Accounting and Reporting (Cont'd)

Examination of Claims (Cont'd)

Recommendations:

It is recommended that:

1.) All authorizing signatures be obtained prior to the payment of bills.

2.) The District discontinue use of the debit card as per Local Finance Notice 2013-17 and N.J.A.C. 5:30-9A.

Management Responses:

1.) All authorizing signatures will be obtained prior to the payment of bills.

2.) The District will discontinue use of the debit card as per Local Finance Notice 2013-17 and N.J.A.C. 5:30-9A.

Payroll Account and Position Control Roster

The net salaries of employees of the Board were deposited in the Payroll Account. Employees' payroll deductions and employer's share of fringe benefits were deposited in the Payroll Agency Account.

All payrolls were approved and certified by the Superintendent, the Board President and the Board Secretary/School Business Administrator.

The required certification (E-CERTl) of compliance with requirements for income tax on compensation of administrators (superintendent, assistant superintendents and business administrators) to the NJ Department of Treasury was not filed by the March 15 due date.

Findings:

1.) It was noted that the required certification (E-CERTl) report of compliance with requirements for income tax on compensation of administrators was not filed with the NJ Department of Treasury.

2.) Health Benefit premiums were not updated on January 1, 2018 which caused a miscalculation of employee health benefit contributions. However, since this error was rectified before year end, no formal recommendation is deemed warranted.

Recommendation:

It is recommended that the required certification (E-CERTl) is filed annually by March 15th with the NJ Department of Treasury.

Management Response:

The District will ensure that the required certification (E-CERTl) is filed annually with the NJ Department of Treasury by March 15th.

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TOWNSHIP OF MONTAGUE SCHOOL DISTRICT ADMINISTRATIVE FINDINGS - FINANCIAL. COMPLIANCE

AND PERFORMANCE YEAR ENDED JUNE 30. 2018 Financial Planning. Accounting and Reporting (Cont'd) Reserve for Encumbrances and Accounts Payable A review of outstanding issued purchase orders was made on a test basis as of June 30, for proper classification of orders as reserve for encumbrances and accounts payable. Classification of Expenditures The coding of expenditures was tested for proper classification in accordance with NJ.AC. 6A:23A-16.2(t) as part of our test of transactions of randomly selected expenditure items. We also reviewed the coding of all expenditures included in our compliance and single audit testing procedures. In addition to randomly selecting a test sample, our sample selection specifically targeted administrative coding classifications to determine overall reliability and compliance with NJ.AC. 6A:23A-8.2. The following exception was noted. Finding: Our review of the District's accounting records revealed that not all expenses were charged to the proper budget line item accounts in accordance with the "Uniform Minimum Chart of Accounts for the New Jersey Public Schools" and the "Budget Guidelines." Recommendation: It is recommended that all expenses are charged to the proper budget line item accounts in accordance with the "Uniform Minimum Chart of Accounts for the New Jersey Public Schools" and the "Budget Guidelines." Management Response: The District will review the "Uniform Minimum Chart of Accounts for the New Jersey Public Schools" and the "Budget Guidelines" in order to ensure that all expenses are charged to the proper budget line item accounts. Board Secretary's Records In planning and performing our audit of the financial statements of the Board, we considered the condition of the Board Secretary's records for the purpose of expressing our opinion on the financial statements and not to provide specific assurance on the condition of the records. Based on these procedures, we have the following comments and recommendations.

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TOWNSHIP OF MONTAGUE SCHOOL DISTRICT ADMINISTRATIVE FINDINGS - FINANCIAL, COMPLIANCE

AND PERFORMANCE YEAR ENDED JUNE 30, 2018

Financial Planning, Accounting and Reporting (Cont'd)

Board Secretary's Records (Cont'd)

Findings:

1.) The Board Secretary's and Treasurer's reports for December 2017 were not submitted to the executive county superintendent within 60 days of the December month-end, pursuant to NJ.A.C. 6A:23A-16.10(c)(4)(iv). Also, the annual report was not submitted to the executive county superintendent by August 1, pursuant to N.J.S.A. lSA:17-10.

2.) The District did not obtain the County Superintendent's approval for transfers from any general fund appropriation account that on a cumulative basis exceed 10 percent of the amount of the account included in the budget certified for taxes as required by N.J.S.A. 18A:22-8.l, for transfers to an appropriation account identified as administration that on a cumulative basis exceed 10 percent of the amount of the account included in the budget certified for taxes as required by N.J.S.A. 6A:23A-13.3(g) and for transfers to capital outlay for facilities acquisition and construction services as per N.J.A.C. 6A:23A-13.3(h).

3.) Several budget line item accounts were over-expended during the year. Although transfers were made by the District, they were not formally approved by the governing body.

Recommendations:

It is recommended that:

1.) The December month-end and annual reports are submitted to the executive County Superintendent by the appropriate deadlines.

2.) The District obtain the County Superintendent's approval for all transfers as required by N.J.S.A. 6A:23A-13.3.

3.) More care is taken in monitoring budget expenditures to ensure budget line item accounts are not over-expended.

Management Responses:

1.) The December month-end and annual reports will be submitted to the executive County Superintendent by the appropriate deadlines.

2.) The District will obtain the County Superintendent's approval for all transfers as required by N.J.S.A. 6A:23A-13.3.

3.) The District will monitor budget expenditures to ensure line item accounts are not over expended.

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TOWNSHIP OF MONTAGUE SCHOOL DISTRICT ADMINISTRATIVE FINDINGS - FINANCIAL. COMPLIANCE

AND PERFORMANCE YEAR ENDED JUNE 30, 2018

Financial Planning, Accounting and Reporting (Cont'd)

Treasurer's Records

In planning and performing our audit of the financial statements of the Board, we considered the condition of the Treasurer's records for the purpose of expressing our opinion on the financial statements and not to provide specific assurance on the condition of the records. Based on these procedures, we have no comments except as noted on the previous page.

Elementary and Secondary Education Act (E.S.E.A.) as amended by the Every Student Succeeds Act (Not Applicable)

Other Special Federal and/or State Projects The District's Special Projects were approved as listed on Schedule A and Schedule B located in the CAFR. Our audit of the federal and state funds on a test basis indicated that obligations and expenditures were incurred during the fiscal year or project period for which the project was approved. The financial exhibits are contained within the Special Revenue Section of the CAFR.

This section of the CAFR documents the financial position pertaining to the aforementioned special projects.

Findings: 1.) During the course of our audit, it was noted that the District did not obtain the 90 percent return

rate of parental consent forms for all Medicaid eligible students as set forth in N.J.A.C. 6A:23A5.3(e).

2.) Expenditures per the final expenditure report for the fiscal year 2018 I.D.E.A Basic grant program do not agree with the District's accounting records. Under the direction of the Business Administrator, certain allowable expenditures were reclassified.

Recommendations:

It is recommended that:

1.) The District obtain the required 90 percent return rate of parental consent forms for all Medicaid eligible students as set forth in N.J.A.C. 6A:23A-5.3(e).

2.) Expenditures reported on the grant final expenditure report for the I.D.E.A. Basic grant are reconciled to the District's accounting records.

Management Responses:

1.) The District will obtain the required 90 percent return rate of parental consent forms for all Medicaid eligible students as set forth in N.J.A.C. 6A:23A-5.3(e).

2.) The District will ensure that the expenditures reported on the I.D.E.A. Basic grant final expenditure report will be reconciled to the District's accounting records.

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