001Okay. Um, do I have a script? >> You emailed it. >> No, I I just need to find it. Let me If I can't find it, I will. >> Sorry. I got Okay. So, this November 17th, 2025 regular meeting of the Fairfax County Schoolboard Audit Committee will now come to order at 4:03 p.m. Afternoon's meeting virtually due to a medical conflict and is attending this afternoon's meeting from All those in favor of approving St. John Cunning's request. Okay, that's unanous for those at the table. Uh, Miss St. John Cunning, please check your audio and video. >> Hi, I'm here. Can you guys hear me? >> Okay, we hear you. It's very soft, so we're gonna try and get it louder. Can you try again? M >> or can you guys Yes. Can you all hear
002me? Okay. Thank you. >> Loud and clear. Thank you so much. >> Okay. We will now move forward with approving the minutes from the se September 15th, 2025 audit committee meeting. So, okay. Moved by Mr. Moon that the audit committee approve the minutes from the September 15, 2025 meeting with leave for the clerk to correct any formatting, technical, or grammatical errors. Do I have a second? Uh, Nanette. Okay. Um, all those in favor of approving the minutes, uh, unanimous for everyone here. Thank you. So, now we will be moving on to 1.0, which is OAG engagement status updates. So, I call on Miss Danielle Moore for item 1.03. >> Thank you. Good afternoon. I will be providing the OAG internal audit status updates. happy to report that our audits are all on schedule to be
003completed. Um, first we have the local school activity funds audit including the continuous monitoring for FY25. Um, Britney will be presenting that report tonight. That is completed. We have the healthc care claims management audit which also will be discussed tonight. School and office safety. Um the audit is currently in execution phase and we will present later on in FY26. We have our continuous monitoring for FY26. We've started quarter 1. We've done 15 site visits and also three uh the gate receipt procedure at three schools. We also have we're proud to announce that we will be receiving a peer review in January. the week of January 26th through the 30th, we'll be having um some external auditors come in and make sure that we are following our auditing standards. As it relates to other OAG duties,
004um excuse me, we're currently in our risk assessment process where we're doing interviews, benchmarking, surveys, and collecting final in uh financial indicators on our potential FY27 topics. We also have our fraud, waste, and abuse inquiries, which Esther will be talking um about in just a second, as well as our um recommendation audit follow-up. Um the as of October 31st follow-up reporting period will be presented at our January audit committee meeting as well. We have our final topic, which is outreach and education. Um, OAG recently did a training with the office of the comproller back in October where over 100 um, FCPS employees attended and we also have an upcoming training with procurement services um, which will be on January the 9th. So, we're looking forward to that. So, I'll get it back to Rory. >>
005Wonderful. Thank you, Miss Mo. Any questions this piece? >> Okay, moving forward with item 1.04, OAG internal inquiry updates. I call on General Co for an update. >> So, good afternoon and thank you so much for attending the audit committee today. Um, before we get into it, I also want to acknowledge my full auditor's team are here. Um, so that that you can see who is actually behind putting all the reports together. Um, with that, um, if the clerk can put up, uh, the inquiry document, uh, the one after that. So um it's called O a internal inquiry updates. Yes, thank you. So this is a uh presentation format that that is a relatively newer. um on a regular basis I bring to the audit committee about um the numbers of you know cases that
006we receive per themes per categories right so here we can say we we can see that we have conflict of interest documentation etc etc but I know that that uh sometimes we may not be able to uh get a better sense of what those numbers mean so from this uh one forward I have incorporated a column all reportable. So you may ask me what reportable means. When you look at bottom under the reportable uh categories could mean that that there may be credibility of fraud, ways and abuse or maybe there are situations involving schoolboard or leadership team members or some of the situations involving systemic changes that we may need to provide to the uh organization as a whole or other uh necessary uh situations. So we added that column of reportable for each of
007the fiscal year and then we provided a percentage of hey out of how many cases of the total situations that we received what is the percentage of this reportable cases so that you can see the trend is um coming from 4% in fiscal year 22 and until now in fiscal year 26 which is still ongoing we are at 14%. So you can see that the percentage of reportable cases were on the rise and to me this is a good story to tell that we are trying to um remove some kind of challenges or issues before it becomes an issue. Our employees, our constituents, they are very um uh uh proactively coming forward to us for situations that may need to take a look at. Um so with that, I would like to hand the time
008back to the chair and to see if there are any questions. Great. Yes. >> Um, could you talk a little bit about the the it seems like the use of assets category has spiked up a little bit. Could you talk about what kinds of things you're you're seeing in there and if you're concerned about that? >> Thank you, Nette. Um, so at at FCPS we are mainly, you know, the the major expenditures is payroll. So we are contributing our time for the success of the students, right? So when we talks about use of assets, a lot of the time is about how um is there like a proper way to document you know uh FCPS employees are spending time working on FCPS contracted work. So we sometimes may get um situations to say hey a
009certain individual may not be working by certain time and after a certain time. Um so it's mainly time record uh related. So that's how we define that like intangible assets so to speak the most of them. >> Are you concerned about what you've seen so far this year? Because like I said the numbers do seem to be up for the just the first quarter. >> Um no I don't see like notable concern in that. for me is more like an education and it's also great to let everyone know that that especially our employees someone is watching or like our employees may be watching each other because we are not in the 200 schools right so we really could not tell is it that individual is working or not but I'm really grate that that we
010have built up this you know eyes and ears in the schools and people know this method to connect with us if they see you know red flag I have a question on this as well. So, first of all, let me thank you and and your colleagues for um pulling together this document. This is something that came from request I believe from Mr. Moon that we have a better sense of uh you know how to read this chart, right? Um and so these separate columns are helpful. Um but my my question for you is and and this is also something Mr. Moon and I were talking about the other day is Um looking at this um how do you typically how how would auditors typically view this in relation to the success of an audit office?
011Right? If if the number of requests are going up that means the community ostensibly has more trust right in the system to be able to report but obviously if it goes down then that's also a positive for the system. So is is there any correlation effectiveness of the office. >> This is a great question, Ryan. I mean, I have been trying to like think a little bit more about that too, right? When we try to understand what it is is kind of something that really out of the control by the office of auditor general um is not something that the school board approved, right? Each year, let's have like 30 cases that OAG will be looking at. It's kind of like um crystal ball that I could not see how many will be coming in.
012From my perspective, I always looked at it from a holistic perspective. So to me, a successful auditor general office and which by the way, if I can market that a little bit, we will be presenting our annual report in the January 5th meeting. So you can see more about our achievement kind of what we are rating ourself. Uh from my perspective, I really see it as a holistic uh program that we do a lot of outreach and education, right? We have to making sure our employees and constituents is aware of this method to report and then um to let them know kind of like the types of case received. So part of like transparency in it. We could not tell a lot about the details because it's privileged and it's confidential. But I do want
013to raise awareness from like our staff members and constituents so that we know that we take it very very seriously. And we looked at each case very seriously. If you ask my team um for all this how many cases we have 28 so far for this fiscal year. We looked at each one of them with fidelity of in uh diligence. So um I don't know if I have answered your question Ryan but to me I think we have to look at all the aspects of OAG work as a whole. >> Okay seeing no further questions I think we can move on to item 1.05 FY25 quarter 3 and quarter 4 continuous monitoring results and FY25 local school activity funds audit. So for that I call on Miss Britney Hamilton. Thank you, Ryan. So, good afternoon.
014Um, this summary, so 4.1 is the summary outlining OAG's FY25 continuous monitoring for Q3 and Q4 results. Um, these procedures were conducted in the line in line with the audit plan approved by the school board and follows the generally um accepted government auditing standards. Um for this audit, OAG utilized um technology based audit um techniques to analyze patterns, trends, and select transactions uh for testing. Our quarterly testing um and quarterly monitoring covers all um appropriated and non-appropriate funds. And we leverage the non-appropriate transaction data to establish the test the testing data or testing basis for the comprehensive annual LSAF audit. Um therefore all uh non-appropriate exceptions um identified are integrated and in reported with our final FY25 LSAF audit report. So at the end of a sorry the end of page one and two is
015a snapshot of the activity across um 202 sites. Um 103 sites just over half had no exceptions noted at all. 5 sites had exceptions in three or fewer areas and 44 sites did not appear in transaction sample for this period. Um the exceptions were noted um were generally in standard areas and we did not identify any material concerns um that are significant for individual sites. Um I will not dive deep into each exception. Um however I will highlight one atypical instance related to change funds which identified an instance where a change fund was created for a single sporting event. um and it exceeded optional um operational needs and critically was not reconciled separately from the events overall sales. Um so all of the non-appropriated finding findings were incorporated in the final LSAF audit report um
016which we'll discuss next. And with that I'll turn it over to Ryan. >> Okay. Any questions on the local school activity or no on the previous one >> the continuous monitoring? Yes, Mr. McD. >> So, you mentioned that there was one anomalous finding. >> So, just a little it's not typical, just a little different, but yes. Change funds. >> Can you say it was a sporting event? >> Yes. One sporting event >> for one school. >> One school. >> Can you say which one? >> No. Yes. So um for um this particular report we actually looked at it from a systematic divisionwide process and then we identify you know one particular school that they are changed from is more than what the other school normally keep and um I think we can we can mention
017it here is it um Hfield secondary school and then we have been in contact with um their school just to make sure they are aware of the uh regular process of how to keep it. Um and then we will also look at it on a continuous basis right to ensure that that they have fixed the issue going forward. >> How much >> I want to say $800? >> 850 >> $850 out of >> correct? Yes. So not so maybe I think we should I would like to defer this question maybe to our controller office because Sema is here. So I think she may be able to provide the board members a little bit background about what do we normally see right in the change fund. So for change funds, it's just a couple hundred dollars
018that we keep in the change fund, but they should not be co-mingling it with the sales or activities um that are being received for that event. You have to keep it separate and reconcile those things separately. >> Thank you. >> Anything else on the first report? Okay, moving on to local school activities. >> Okay, so for 4.2 to um FY um 25 a local school activity fund um activity or audit report. So let's start with the objectives. The objectives of this performance audit were to determine if cash balances are fairly stated um to assess compliance with applicable uh regulations and policies and determine if internal controls are adequate and functioning as intended and to determine if transactions are reasonable and do not appear fraudulent. So through a combination of continuous monitoring, site visits, and surprise
019um inspections, we completed the scope of this engagement. And so as a result, it's two things. Um OAG was able to determine that cash balances are fairly stated um and that transactions across the division appear to be reasonable and did not appear to be fraudulent. Um we did however identify three specific observations related to internal controls and compliance and I will walk through those now. Um so for observation number one um in our detailed testing across 202 sites we found that 129 sites which is well over half had no exceptions noted. Um 73 exceptions um well 73 sites had exceptions in three or fewer areas. And in the graph on page nine um it will show a breakdown of compliance in the three areas. Um, sorry. Could you go to page nine for me? All
020right. So, we've included the full tables, but I want to highlight the main themes. Um, so A is LSAF accounting procedures, which is on page nine. Um in these areas it's the most frequent exceptions are related to internal controls over documentation specifically ensuring bank reconciliations are properly signed um and dated in timely manner ensuring um fund accounts balances are positive at year end. Um so then we have B which is cash dispersements on page 10. Um cash dispersements show the highest level of compliance um with nearly all sites fully compliant. Um the exceptions here are scattered across ensuring purchases are pre-approved. Um checks have dual um signatures and all transactions had sufficient supporting documentation. And then if we go down to page 11, we have cash receipts. This area is where we noted um several
021control breakdowns related to cash handling. Um activity gate procedures. Um we'll start with um we found instances where all individuals are responsible for both recording sales. Sorry, one individual was responsible for both recording sales and collecting cash and where manual counting was done instead of using control system like EEX. Um timeliness. There were issues with timely deposit into the bank after the financial technician received the funds and also the timely receipts. Um this is where funds were not turned in over to the financial technician um from teachers or sponsors in a timely manner. Um and so we have change funds as well. Um as mentioned in continuous monitoring we saw issues where change funds were coming co-mingled with sales receipts which we spoke about earlier. Um all these exceptions occurred at an individual site level
022and did not ultimately impact the site's um LSA of balance and all noted exceptions and the necessary recommendations have been already communicated to the individual sites following the testing which allows for corrective actions um actions. And so again, OAG concluded that these exceptions when aggregated did not have a material effect on the overall statement or cash counts. Um so cash receipts and dispersements for the school division. And so moving down to observation number two on page 11. Um this is cash receipts internal control environment. Um this observation addresses the process when teachers and um sponsors collect funds. Our primary focus on these um this area it has three areas. So number one the form control. the FS131 deposit form are not pre-numbered and are m are not maintained in numerical sequence. Um this creates a
023risk that cash receipts could be possibly lost, stolen or unrecorded. And then number two, the lack of independent verification. Well, um document documentation is provided to the financial technician, but the process does not allow for sufficient or independent verification or accurate reconciliation of documentation provided to the FT which also heightens the exposure of misappropriation. So then the third one was the tracking mechanism. So because of the financial technician does not maintain a log or a system um or a a schedule of activities that should could be should be collecting funds, it cannot readily determine whether any collections are missing. So while this did not have a material effect, the risk related to cash collections are not fully addressed. So, OAG recommends and that they focus on strengthening the process, updating controls, promoting the use of
024automated systems like MSB and exploring the transition to pre-numbered receipt books or electronic receipt system for uh better traceability. And so, we have observation number three on page 13, which is deposit date control weaknesses in Great Plains. This system allows for um financial technicians to record um deposits using dates from a prior accounting period um including dates a month prior without triggering any alerts, restrictions or compensating controls. This capability is necessary to meet leadership's operational and reporting requirements, but it's unrestricted nature poses risk. But when a deposit entry is delayed or backdated, the uh recorded cash balance can be misstated. Um the deposit can clear in the wrong accounting period and it creates opportunity for for funds to be um concealed or misappropriated without timely detection. So while this observation did not did not have
025material effects, the risk related to entering deposits using a deposit a backdated transaction date are not entirely addressed by the current control activities. So, OAG recommends that management implements controls either a systembased restriction or flag within Great Plains for backdating um entries or policy requirements with mandatory um documented justification or supervisor approval for updated for backdated entries. Um in closing, cash balances are fairly stated. Um the transactions appear reasonable. Our observations focus more on strengthening controls to mitigate um identify compliance and process risk and particularly areas in um in cash receipts in Great Plains deposit entry process. And so OAG um appreciates the cooperation and courtesies extended to our staff um by financial services principles um program managers, finance technicians, and finance um assistants. and so keep going. Okay, so I'll go over to our
026um which is 4.3 the um year-to-year comparison. Um this comparison helps our office understand where controls are improving and where we should um sustain focus. Um and remember that local uh school funds involve funds um it's usually from fees, sales, and donations across our 202 sites. So I'll start with page four. um which is LSAF accounting procedures. This area includes reconciliations, procurement card controls and fund account balances. Um so I'll start with bank reconciliations. Um this category saw a substantial reduction moving from 49 sites in FY29 down to 32 in FY25. Um the fund account exceptions. Um this shows the dramatic positive trend. Um the number of sites with exceptions um for deficit balances at year end decreased from 57 in FY23 to 21 in FY25. um non-bank this category which um primarily tracks procurement
027card compliance um it's remained stable um safeguarding of assets um it did go up by four sites in FY25 um see timely payments um which are late payments to vendors dropped from two in FY24 to zero in FY25 and so if we can go down to page five for cash dispers embersments. Um we have authorized signatures. Um this exception is for improper dual signatures or co-signing by a payee and um it went down to two uh sites in FY25. Um competitive bidding and sales tax. These categories remain low across all three years. Um incorrect account it increased by two in FY25. Um purchasing process and timely payments. These are the most frequent exceptions, but both have declined by six um sites in three sites respectively in FY25. Um timely payments um exceptions saw a large
028flunctuation dropping from 10 in FY24 to three in FY25. And then lastly on page six, we have cash receipts. Um activity gate receipts. This testing category um is new. It started in FY24. Um we saw six exceptions that year. Um but it has dropped to three this um last fiscal year which is FY25. Um change fund and timely receipt. These categories are small but the risk are there. um timely deposit we saw an increase of five in FY25 and timely receipts um decreas decreases significantly um dropping from seven in FY24 um to one in in FY25. Um so in conclusion the data indicates substained um compliance and control effectiveness across um LSAF accounting procedures and cash dispersements. And I'll move it back over. Thank you. Great. This is a lot to absorb. Any questions? >>
029Yes. >> So, my overall question is whether there's any policy about how much these balances should be in the different schools in relation to the annual amount of receipts and dispersements. And the reasons I'm asking is because when when you look at the the detail report you did on all the different schools and it shows how much they took in for receipts and how much they took in for dispersements. It looks like overall for the year they take in about as much as they expend. So then you've got all these balances there. And I understand there's some seasonality. I mean school starts up, you've got expenses that come in and the money is not going to come in right away. So you've got to have some money that starts out through the year. But I
030had a hard time figuring out what the relationship was between what the balance was that the school was holding and what was going out because in most overall it looks like it's about half a year's worth that they start out with and I was like maybe that's the policy but in some cases it was you know a lot more than that in some cases it was a lot less and like say even and even between like the sizes of the schools like if you look at like South County and Thomas Jefferson those are two schools which I may incorrect correct about this, but I think they both have about 2,000 enrolled students, but TJ has a huge balance compared to, you know, they start out the year with $1,200. South County starts out with 350,000.
031Now, I had a kid that went to TJ. There's a ton of clubs there and, you know, different academic competitions. It makes sense that it's more that they're holding on to, but does it have to be that much more? like do you need to have that much money sitting in the schools or could those balances be drawn down somehow to kind of remove the temptation or relieve the burden on parents for fees? I and I just didn't know if there was a policy on that. >> Thank you Nette. Um if I may respond and it's a great question. I I if I understand you correctly is that when you looked at the the trend, right? We have the balance from last the end of last school year and then you have the in and the
032out right and then you have the balance for this year. You may see a lot of fluctuations seems to be the same amount in and out and how about the use of purpose of this audit we focus on the three particular area accounting procedure cash receipt and cash dispersements. So we don't quite looked at it from that angle. So I would like to we have our CFO here and our controller. So if I may defer to you about the policy um that would be great. Thank you. >> Okay. So the way it works for the schools is um these are a local school activity fund account. So each school has different segments within the local school activity funds. They have various accounts and within those accounts they keep balances. Many of the balances that are
033kept high schools are going to be between 78 $800,000 to 1.2 million. Um middle schools less than that half a million and then you have the elementary which is a couple,000. So the accounts that are kept a lot of it is the school activities the clubs that generate the money. They're kept in the accounts and held and can only be spent for the purposes of what they were raised for. So if banned um generates dollars then that money has to sit there till that money is spent. So you have a lot of carryover balances from year to year for for that restriction for our policies because whatever you generate that's what it has to be spent. Then your TJ question um TJ has a lot of money and a lot of money do primarily it's
034a lot of scholarship money and scholarship funds have to they get the scholarship money they manage their own scholarship funds and they sit there within the scholarship accounts but they have to sit there and be used for the intended purpose of that scholarship. So then that school has a lot of that and they also have a lot of clubs and activities as you mentioned and the money also has to sit there and gets carried over from year to year because it can only that purpose and then they have a lot of um money that has been donated to them to be used for science equipment um those kind of things and that also has to sit there for that purpose um but it can't be used for anything else and we do monitor it very
035carefully >> okay thanks so so and that's kind of the way I thought it worked but so there's no overall policy like you should only have x number of months Okay, thank you. >> Great. Thanks. So, I'm first gonna go to Miss St. John followed by Mr. St. John. >> Thank you. I don't know if you guys can hear me. >> Yep, we can hear. >> Okay, perfect. Um, I'm just going to, you know, ask a question. when you went through all of all of this and I mean it's good to see that there's an improvement but my questions in terms of where you found discrepancies or where you found problems if you could list for us uh you know how many were at elementary schools, middle, secondaries and high schools uh and how many
036of those discrepancies resulted of as of somebody that was a new financial uh person in that school. Um I know I've shared several times that uh there's such a huge turnover in elementary schools uh for administrative assistants who also have to do the finance and there seem to always be behind the power curve in terms of learning everything that has to be done. So I think that could help us in terms of making decisions. Uh, so that's some information that I'd like to see um to know what schools had the issues. Was it elementary, middle, high schools? Um, and if the finance technicians were new employees. So, I think those two things are things that we should look at. My other um question was I don't know if it's a question as much as it
037is a one wondering because some of these schools are getting dinged for not getting receipts in in time or what's happening. that sometimes it's not school personnel collecting the money, you know, it's the drama booster person, it's the sports booster person, and they're kind of having to depend on a volunteer to bring that to them. So, it's just a wondering about those processes. >> Thank you, St. John's County. And then, um, this is great question. So let me try to uh respond to them and I likely need to call a friend from the controller office or the CFO to support. Um so the first question about an analysis by uh the school level um we can certainly do that but I think we may also want to put into perspective too that high school and
038middle school they would have more uh transactions right compared to an elementary school level. though it may not be uh fairly compared across because the volume could be very different. Um so that's that's one thought and that's why we haven't done it and we can certainly include that going forward in the comparison PowerPoint uh so that the audit committee and schoolboard and constituents can see that. And the second question about uh financial technician or financial assistants in elementary school that who may be new uh to the school environment or they may not have one for a long time. Um from uh our office perspective we do not quite have the information to keep track of that but I do know that that uh the controller office they do keep track of like who are new
039who are not new and as a matter of fact for us we try to conduct a turnover audit like meaning a deep dive uh school audit when there is a change in principal or finance technician or finance assistant and you will actually hear um one of them which is the West Springfield High School. Um we are going to present to the audit committee next about the um observations that we made. Um, so I think with that maybe I can defer, you know, to the controller office and see if SEMA has any uh comments to add. >> And and I didn't want to limit just to elementary like if the finance technician person is new at any of those schools. >> Um, that's all because it's a lot. It is a lot and all the codes
040and all the different things and like if you've been in the system for a while, you get it. But if you haven't, there's more probability for perhaps unintended error. >> Yep. Yep. Definitely, Mercier, that we include um middle school and high school finance technician change in our selection as well. So, thank you for adding that. >> Okay. So, 40 around 40 of the finance techs and AAS um at the school sites are new. So that's basically they've been here less than a year. The learning curve is really steep and that gives a higher tendency of making mistakes. We see a lot of mistakes happening and the turnover is at the elementary school level because they're doing the AA job and the finance job. And then that in combination with being new and learning, there's we
041we tend to see a lot of the problems in that area. Um, but I can tell you that if you look at the graphics that you're seeing, you're seeing that the trend in a lot of the categories is down because we're doing better because we're trying to emphasize greater review of bank reconciliations, a lot of trainings. We have a lot of videos out there. We have, I think approximately 30 videos now. So that not only do we supplement the training with, you know, in-person attendance, oneto ones at the school sites, but also videos that you can watch and get trained. So we're hoping in combination of all of that, you'll see the bar charts trending downward and improving in the training. And part of the reason that I bring this up is that some of
042these situations are not nefarious situations. It's just that it's new. It's I I don't which is a good thing. It's a good thing that it's not anyone that's, you know, trying to cipher off money or siphon off money. >> Great. Thank you, Mr. >> Over to Mr. McN. >> Um, I wanted to kind of tease off of something that Nette brought up. Um, and I just forgive me for my ignorance here, but the local school activity funds, where does that can you just can staff go over where exactly that money comes from? I think I have an understanding of it, but just to be clear where we collect the different methods of collecting the school activity funds. I know ticket sales and >> yeah maybe I can start and then if controller office would like
043to add to that. Um so uh clerk if you don't mind to pull the powerpoint up to uh yes yes hold on hold on um one down like under sec yes yes so here is the sources of where the local school activity fund is coming from fees and dues sales and donations. Um, Sema, anything else you would like to add? >> I think that covers it. Fees, donations, clubs, a lot of the athletic um, funds that are raised. Yeah, I think that covers fundraising. >> So, it's a feebased fund for the most part. >> Um, I do not have the proportion of this three bullets. >> So, here's where I'm going with this. And I think it was kind of closely mentioned, but if you if you tally up high school plus middle school plus
044elementary and that's $25 million we're sitting on. That's a lot of cash to be sitting on and I kind of compare it to a feebased fund like for example our food nutritional services which I know required to sit on three months of a cash balance. Um, are there any policy controls in place to tell schools at the local school level that you can't just sit on cash? >> So, yes, thank you. I I think I would need to defer, you know, to the controller office, but um but just to clarify, when um Kyle, you mentioned about cash, you include cash and checks too, right? But but it's like quick fun, >> right? So, I mean, and I think this was brought up. So, we've got, if you go to the high school level here on
045this report, you've got Langley, excuse me, Thomas Jefferson at 1.1, which I I kind of get TJ's a little exceptional in air quotes. Um, but our lowest one by a quick scan is 200,000 give or take, 195 I think at Mount Vernon, and then it goes all the way up to 890,000 at West Springfield, TJXI. That's a big delta of of funding that these local school funds are sitting on. So I guess my question is if the funding isn't being used for kids and we're not giving direction on how the funding has to be used, there's no policy or there's no guidance. Who's making the decision as to how to use those funds? because $26 million sitting in a bank account that's not being spent on kids doesn't really matter. >> So >> philosophical question.
046I get that. But that just really jumped out at me. >> Yeah, I I would need to defer to management, you know, to respond to that. But I do know that that like Sema explained that those funds were collected for a specific purpose and the purpose have to be met in order for us to spend it. But I want to see if um >> and I understand encumbered versus unencumbered. I totally get that. But I really want to make sure the money that the that the kids and the families and the parents and the community is paying to go to all of our great activities that's actually being spent on that. I'm gonna just interject a couple examples before Sema and Lee step in, but I one example I remember meeting with the Mount Vernon
047High School band boosters who took I think they said 18 years to raise enough money to finally buy their band uniforms. So some of these schools, they collect money every year. They put it in an account because they don't have enough in any one year to make that full purchase. So it begins to add up. And it's not that they're not intending to spend it on student um items, but it takes a certain amount of money to purchase band uniforms. Um and they were of course sharing that because it's doesn't take that long at other schools to raise money to purchase new band uniforms, right? So, it was more around how do we equitably resource schools around the division, but I think a number of these types of funds are very similar to that where
048they're um collecting money until they have enough to pay for their item. Uh because these are generally student body initiative funds. But I'm going to let them respond in more detail. But that's a sort of a concrete example as I was listening to this that it's not as if this money is just going to sit there. it's actually intended to be there till they can make their purchase. >> No, and I I agree. That's a great example. So, I just it's, you know, large cash back is a cash strapped school system. So, I just want to make sure that, you know, we're doing what we need to do. Um, the next question I have, next line of questioning. So, we're talking about cashbox um cashbox versus uh in-person point of sales systems. Um, and there's
049been some struggles, I guess, with reconciliation the cash. U there was a mention of I don't remember the POSOS system that we're talking about. Do we have any guidance divisionwide on whether or not schools have to use a certain ticket sale or transaction system at the school level if that makes sense? >> Yes. Um, so we have guidance that schools are supposed to use eix for their ticket sales and ticket sale collections and based on what we try to take what audit finds and make those improvements and what we're trying to add now is better equipment so that when when you do the eix ticket collections we can collect things that people actually want to pay with like Apple Pay, Google Pay um, and take in other sources of payment to reduce the amount of
050cash that gets taken in. So we are trying to make enhancements and we are trying to improve the whole ticket collection. >> Thank you. >> Uh Mr. >> Well, thank you, Mr. Chairman. Uh when I first read this report, sites out of 22, I mean to me as a lay person stood out. But on the other hand, we're talking about $45 million worth of local activity funds, script funds. It's a lot of money, a lot of transactions. Uh and people with the new people coming in could There could be some oversight, you know, mistakes and along the way, but is it 73 out of two or two not a number we should be alarmed about or so? Thank you for raising that. So is 73 sites out of the total that we looked at may
051have one or two exceptions, right? So I think I mean not I think we are all human beings, right? So there may be maybe exceptions that that that that someone just maybe forget to do something. So what we try to mention is that we did not see a theme of issue right rise to the level this report is um very significant in a sense that that this the external financial auditor also relies on this report to give their financial opinion on the FCPS system as a whole. So when internal auditors meaning when OAG looked at things we found every single thing we report to the audit committee even one exceptions right. So out of this 70 plus schools even though we found exceptions which we reported upon upon all those bar chart. So we reported
052about what they are the nature of what they are but what we are trying to say that that when we accumulate all the exceptions together it did not meet the threshold of material misstatements when the external financial auditors looked at it. But we have the uh due diligence to report to you all as audit committee members. So we kind of have the laundry list of everything is reported here. So we are saying and again we are saying that it is not significant in a sense to a financial auditors. It's not material misstatements to the financial statement but from a control environment meaning checks and balances standpoint we can do better. So that's why we share with the audit committee about the trends of the nature of the exceptions. >> But you talked about threshold by
053external auditors to look at whether it's a substantive or not. Substantial or not, right? What what is that? What's that? What's the threshold? >> So I haven't been doing external financial audit for a long time. uh even though I am a CPA I may need to defer that to our controller because they work with uh Cherry Backer the most to answer that technical question. See where you want to. So what what external auditors look like look at different than what OAG looks at. O a will look at and bring up oh where well there was one bank reconciliation that wasn't signed bring it to your attention but from a external audit perspective if there's one bank reconciliation that's not signed and dated to them that's not material unless they see 20 30 bank reconciliations consistently
054not signed and dated or 20 in a row not signed out of 200 schools that would be material and significant. So there's a threshold they look at and a lot of it is based on samples that they pull and they review these. But if it's just one or two here and there, that's not material because it will not change your financial statement dollars in a significant way. That's what I wanted to hear whether >> what be it comes threshold whether it's a 1% 2% 10% I'm a numbers person >> okay um so I would say 15 to 20% is material >> 15 that's a lot >> that better be material >> yes so that becomes material >> because then your figures and numbers can change in how you're presenting your revenue, your expenditures to the
055users or those that look at the financial statements. >> So, let me play devil's advocate. You said 15%. >> Does that mean 10% isn't? >> 10% may not it it depends on what I guess it depends on what they're looking at. 10% may be an observation to you. So, for example, it may not be a material misstatement enough to cite you um for doing something wrong, but it may be enough to give you an observ observation or a warning to say there's some control issues here that need to get looked at or or something like that. >> Again, to me, $45 million a lot of money. 10% is 4.5 million. That's a lot of money to >> Well, okay. So, I think I think it changes depending on how you're stating it. So for example,
056I can give you an example. So at year end when we do funds and transactions, we have to make sure things post to the correct fiscal year. I cannot be off more than $30,000 for the school operating fund. So you can tell, you know, school operating fund is$4 billion dollar. So in when they're looking at revenue being off, I cannot be off more than $30,000. If I am in that case, they would count that as material. So the percent of that is a lot smaller, but in that 10 it would be material. But signing and dating a bank reconciliation, they may go as much as like I told you 15% and it still wouldn't be material. >> So I have a couple other questions. Uh so we audit this school activity local school activity funds
057all all of the funds once every year for every school. Correct? >> Did I get that wrong? So the if I may just go in a little bit more details the methodology of how we do it is that every quarter we looked at it from the continuous monitoring perspective meaning that we monitor all the data by setting up certain scripts meaning like like reflex we cannot all my auditors are here so if I tell you that we looked at every transactions then I'm not >> that was going to be my questions how you look at Yeah. So we have to really think about some smarter way right to looked at the population. So we developed some scripts about like reflex meaning that if it exceed like I I don't have a dollar amount I don't
058have that in front of me now there scripts and then to see where the transactions may um may have uh challenges on and then we will request the documents from the site after the continuous monitoring and then they will send us the documents and then we perform the detail reviewed in the office and if we found out oh my goodness it may lead to some other issues then we will go to do site visit at the school. So you may not be requesting any document from some of the scores or many scores >> if they do not have flags from the continuous monitoring except if I may say that except and I'm trying to go through the audit program in my brain now except when there are year end year end balance check and I'm
059going to be a little bit more um accounting auditing related because we at the end of the day we are ascertaining the balance as of June 30th of 25. Right? So we have to check the bank reconciliation as of that day. So there are certain procedures are mandatorily done on every single site, right? Like to confirm the balance is right. But throughout the year that we would develop some scripts like some like methodology of hey here are the 10 things we are checking based upon our experience and then we looked at the entire population during that quarter and then we drill down on those that may be a problematic transactions. >> Okay. I see your entire team right here. Your your team >> what percent of your time gets devoted on this for your entire
060team? >> So I can say that that we have Britney and Kay they are our um sort of school auditors. So they will also work on some other things too but then their focus is on school audits. And I do school audits too. So you may see me in the gay receipt because I like to see if people are doing like like paying. So I will wear my cap and then we be on this on the gay receipt night too. So we all contribute but we have two staff members focusing on school audits. Again as a numbers person if I want to ask you know if I'm if I ask you what percentage of your time you get devoted on this is that would you say two plus part part about 25% of your time
061to this >> to this and also the business process audits which we have one kind of like coming up next like meaning when there are turnover Marcia mentioned like there are changes in principal or finance technician or finance assistant we visit them at the end of the day for schools our bread and butter right so we really take it very very seriously and we devote like you said about 20 25% of resources on it >> okay okay good to know thank you >> okay one last from minute >> um I just want to go back to one comment that was made about the um timeliness of deposits that I don't think got addressed I I think when the money goes into the schools um there was a question about the volunteers and how do you
062handle the volunters But I think volunteers that generally are handling money, they're going to parent organizations. I thought that if a volunteer handled school money, you still had a staff person who was really responsible for it. So if they chose to like let's say yearbook sales. So let's say in elementary school they chose to have a parent help them get the money. There was still a school person who was responsible for getting that and making sure it got deposited in a timely manner. Is that correct? >> Um so if I may defer you know to you know controller Simma you want to respond to that? >> Yes. If it's a school activity and the funds are raised then the school person is responsible. Okay, great. Well, seeing no further questions, we will move on to
063the business process audit West Springfield High School and I will call on on Miss Moore. >> Thank you, Ryan. I will be providing you with the results of the business process audit that we conducted at West Springfield High School. Um, and like Esther mentioned earlier, this audit is more of a deeper dive at the school level. We're looking at non-appropriated and appropriated transactions and processes. And so these are ad hoc audits that we do um and there are triggers um for BPA to be to get started whether it be a change in finance tech and principal um based on any fraud waste and abuse inquiries that we receive um as well as results of continuous monitoring. And in this particular situation, this was a result of continuous monitoring where we say we needed to go
064in and look and dive deeper. So we as a result of this audit we had two findings. One high-risisk finding which was related to timely entry. So we had seven um of those deposit slips that were not enter into great planes in a timely manner. The deposits made it to the bank in a timely manner. However, the finance tech was not entering into the system in a timely manner. And then that high-risisk finding management concurred and we did receive management responses from the principal and the RAZ being that it was a high-risisk finding. The second finding was a low-risisk finding which is related to the purchasing process and these we had three um cash dispersements were made outside of the purchasing process. So the dispersement was ma made prior to getting the purchase order approved.
065So, those are the two findings that we had for West Springfield business process audit. >> Great. Thank you. Uh, Mr. Moon, you your thing is still up. >> Okay, great. Well, it looks like we can move onward to 1.07 healthcare claims management audit. Over to >> Hello. So our office has recently conducted a performance audit of health care healthcare claims management. The scope and the objectives are listed on page two of this report. This the results of this audit will not be shared in a public meeting due to the exemptions listed on page two. >> So um colleagues will have an opportunity to discuss this in close meeting. Well, um, seeing no further questions on this, um, the public meeting is now ended at 52ish. Uh, and the board will now meet in close session.
066The audit committee will now make a motion to go into close meeting to discuss personnel matters pursuant to section 2.2371A1, 2371 A1 the code of Virginia to consult with legal counsel regarding specific matters requiring the provision of legal advice by such council pursuant to section 2.2 3711 A7 A8 and A29 of the code of Virginia specifically contracts and personnel matters do I have a motion Mr. Moon do I have a second Mr. Daniel. All those in favor, everyone at the table is unanimous. Thank you. >> Oh, Marcia, do you want to vote to go into close with us? >> She is away from the table. Thank you.