FINANCIAL MANAGEMENT
This chapter discusses the financial management of Raymondville Independent School District (RISD) in three sections:
- A. Organization, Management and Staffing
- B. Districtwide Planning and Budgeting
- C. Accounting and Internal Control
C. ACCOUNTING AND INTERNAL CONTROL
A district's internal control structure includes three elements: the control environment, the accounting system and control procedures.
- The control environment reflects the overall attitude, awareness and actions of the board of trustees, management and others concerning the importance of controls.
- The accounting system consists of the methods and records established to identify, assemble, analyze, classify, record and report transactions and to maintain accountability for the related assets and liabilities.
- Control procedures are those policies and procedures in addition to the environment and accounting system that management has established to provide reasonable assurance that specific objectives will be achieved.
The business office prepares the district's accounts payable and payroll checks. Checks are prepared using the district's financial computer system and require two board member signatures. Checks are signed electronically and the district superintendent and the business manager have the authority to initiate the check preparation process. After checks are prepared, they are presented to the board for approval during regular board meetings.
FINDING
RISD manages and maintains an excessive number of bank accounts, including nine general operating accounts and seven campus activity accounts. The business office maintains the operating accounts while the schools maintain the student activity accounts. The operating accounts consist of:
- an interest and sinking fund,
- a construction fund,
- a health insurance fund,
- a local maintenance fund,
- the Wil-Cam Co-op Fund,
- a WCED Successor in Interest Fund,
- a food service fund,
- the Consolidated Application Fund and
- the payroll fund.
The campus activity accounts consist of:
- Raymondville High School,
- the central cafeteria,
- L.C. Smith Elementary,
- RISD Special School Fund,
- Myra Green Middle School,
- Wil-Cam Activity Fund and
- Pittman Elementary.
The business office maintains signature cards only for the operating accounts and the schools maintain their own signature cards. Checks written against the operating accounts require signatures of both the board president and the board secretary and checks are signed electronically. The business manager and the superintendent are authorized to execute check preparation within the financial system. Prior to her departure, the chief financial officer was responsible for reconciling the operating bank accounts.
The schools make their own deposits, issue their own checks and reconcile the student activity bank accounts. Although the chief financial officer is provided a copy of the reconciliation, there is an internal control issue with the current process due the schools reconciling their bank statements while also making deposits and issuing checks. Proper internal controls require that reconciliation of bank accounts be prepared by individuals that do not prepare deposits or issue checks whenever possible.
TEA's FASRG prescribes two common methods of activity fund accounting. One method is centralized: funds are controlled and disbursed through the district's accounting department. The other is decentralized: funds are accounted for and controlled by the various schools.
Some of the advantages of centralizing activity funds accounting are:
- better internal controls, since all receipts and disbursements flow through one central accounting system rather than systems that can vary from school to school;
- easier access for internal and external audits;
- consistency;
- better control of cash management operations including assurance of proper collateralization of cash and investment balances;
- more consistent district policies and procedures; and
- a reduced need for audit funds.
Mount Pleasant ISD uses an effective, centralized method of accounting for the activity funds, which strengthens the district's internal controls and fosters efficient fund operations. This saves administrative effort and reduces financial monitoring activities. The district maintains all financial records for these funds in the central accounting office and uses established control processes to disburse all funds, reducing the potential for errors and inappropriate use of funds.
Recommendation 51:
Combine campus activity bank accounts into a single account and centralize management and reconciliation.
Combining the seven campus activity accounts into one account will reduce banking fees and leave fewer accounts to be reconciled. Reconciliation of the accounts should be performed by the Business Office to improve internal controls. The schools can continue to make deposits and issue chicks but should provide the Business Office with necessary documents so that the accounting can be performed for the single account.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The business manager prepares a recommendation for consolidating bank accounts and submits it to the board for approval. April 2002 2. The board approves the consolidation of bank accounts. May 2002 3. The business manager closes the unneeded bank accounts. June 2002 4. The business manager develops procedures for managing the single bank account for campus activity funds. June 2002 5. The business manager trains district personnel to use the new procedures for administration of the consolidated campus activity funds. June 2002 FISCAL IMPACT
This recommendation could be implemented with existing resources.