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THE SCHOOL BOARD OF MIAMI-DADE COUNTY, FLORIDA Ms. Perla Tabares Hantman, Chair

Dr. Lawrence S. Feldman, Vice Chair Dr. Dorothy Bendross-Mindingall

Mr. Carlos L. Curbelo Mr. Renier Diaz de la Portilla Dr. Wilbert “Tee” Holloway

Dr. Martin Karp Dr. Marta Pérez

Ms. Raquel A. Regalado

Mr. Alberto M. Carvalho Superintendent of Schools

Mr. Jose F. Montes de Oca, CPA

Chief Auditor Office of Management and Compliance Audits

Contributors to this Report:

Ms. Maria T. (Maite) Gonzalez, CPA

Assistant Chief Auditor, School Audits

Mr. Trevor L. Williams, CPA Assistant Chief Auditor, Operational and Performance Audits

June 23, 2011

Members of The School Board of Miami-Dade County, Florida Members of The School Board Audit Committee Mr. Alberto M. Carvalho, Superintendent of Schools Ladies and Gentlemen: The proposed audit plan for fiscal year 2011-2012 was developed by supervisory personnel from the Office of Management and Compliance Audits applying a systematic risk assessment that assist us in deciding the audits that should be conducted this coming year. This year, school audits will again follow a plan whereby schools with a change of principal since the previous audit and schools with high audit risk will be given top priority. District-wide audits will encompass a wider spectrum of areas such as: grants, credit card purchases, internal control over cafeteria receipts and IT controls and security, among others. We will also conduct follow-ups to the FY 2009-10 Auditor General’s Operational and Single Audit reports and our previously published reports, as deemed appropriate. Although the primary responsibility for the audit plan rests with the Chief Auditor and the Office of Management and Compliance Audits, we encourage and welcome input from the School Board and Audit Committee members, the Superintendent, and senior management staff, to make this plan complete and successful. Any changes or additions to the plan will be incorporated into the final audit plan and brought to the September 2011 Audit Committee meeting for the Committee’s consideration and approval. Respectfully yours, Jose F. Montes de Oca, CPA, Chief Auditor Office of Management and Compliance Audits

1

Planning Process

Based on: Budget Analysis

Risk Based:

Materiality Past Audit Coverage Audit Risk

Input from: School Board Audit Committee Superintendent of Schools Senior Management

RISK BASED

DESIGNING THE ANNUAL

AUDIT PLAN

IDENTIFY TARGET PROGRAM AND/OR PROCESSES AND RISKS

UNDERSTAND SCHOOL DISTRICT’S MISSION, GOALS, STRATEGY & ENVIRONMENT

UNDERSTAND SCHOOL DISTRICT’S PROCESSES, CONTROLS & RISKS, AND PERFORMANCECRITERIA

DETERMINE SCHOOL BOARD, AUDIT COMMITTEE & SUPERIN- TENDENT’S EXPECTATIONS

STEPS:

1. PROGRAMMATIC BUDGET ANALYSIS 2. PROGRAMMATIC RISK ASSESSMENT 3. MANAGEMENT INPUT FOR AUDIT PLAN 4. DEVELOP AUDIT PLAN 5. AUDIT PLAN APPROVAL

2

School Audits Division

Universe Comprised Of 363 Schools And Centers

Financial statements of internal funds;

Payroll;

Purchasing Credit Card Program;

Federal Funds/Title I;

Florida Education Finance Program/FTE;

Selected aspects of School Site IT and School Site;

Cafeteria Management; and

Property Audits.

3

School Audits Division Changes To Audit Coverage To Maximize Resource Allocation:

Internal Funds to be audited at 70-80% of schools – Audit priority to schools with change of Principal, schools with

prior year’s audit exceptions and 2-year audits – Selection based on audit risk – Selected group of low-risk schools to be audited every two-three

years

Payroll, Credit Card, Title I FEFP audits, selected aspects of school site IT and cafeteria management to be conducted at selected schools

– A projected decrease in FTE audit volume to be expected this coming year since FTE audit staff will be assisting as audit liaison for the State of Florida’s AG in the upcoming FEFP Audit of MDCPS

Property Audits at schools following audit plan.

4

District Audits Division Internal Audits

Areas of Audit Coverage

Various district support functions including:

Financial operations

Facilities operations

Grants management

Food service operations

5

District Audits Division

Seven Internal Audits

Pre-Construction Services (In progress) Food & Nutrition Cafeteria Receipts (In progress) Grants Management and Controls (In progress) Miami Partnership In Action Community Task Force (MPACT) Grant (In progress) Maintenance Dept. Procurement Process (In progress) Energy Management (Carryover from FY 2010-11) Audit of Procurement Credit Card Controls (New)

Three IT Audits

School Site Network & Information Security (Ongoing) District Offices Network & Information Security (Ongoing) ERP/SAP – User Survey (Carryover from FY 2010-11)

6

District Audits Division Pre-Construction Services

In January 2009, the OMCA published an internal audit report on construction claims, allowances, and contingencies, which reported the District’s average change order rate to be 7%, with $5.7 million in change order and contingency adjustments for M-DCPS projects. $862,000 of that amount were believed to have been preventable through pre-construction discovery.

We are in the process of reviewing the pre-construction services provided to the District by contracted firms to determine their compliance with contract deliverables and expectations.

7

District Audits Division Food & Nutrition Cafeteria Receipts

Receipts for meals served in M-DCPS cafeterias are accounted for centrally. The annual cafeteria receipts average approximately $30 million, and the FY 2010-11 YTD receipts through May 2011 are approximately $25 million.

We are in the process of evaluating internal controls over the cash receipts, deposit, and reconciliation processes to ensure that controls are adequate and the necessary safeguards are in place.

8

District Audits Division

Grants Management and Controls

M-DCPS currently manages more than 190 non-Title I grants totaling $597 million. These grants are funded by various federal, state, and local agencies, and private entities.

We are in the process of reviewing the internal controls over the District’s grants management function to ensure that adequate safeguards are in place.

9

District Audits Division Miami Partnership In Action Community Task Force (MPACT) Grant

The district received approximately $4 million in grant funds from the Department of Labor to fund a youth gang and crime prevention program managed by School/District Operations. The program utilized on-the-job training and classroom instructions to MDCPS students and other at-risk youths in the community to achieve its stated goals.

Our audit objectives are to determine the propriety of the related granted funds and to ensure that adequate internal controls were in place over the management and use of said funds.

10

District Audits Division Maintenance Dept. Procurement Process

To maintain and repair MDCPS’ facilities, Maintenance Operations uses various vendor service contracts to procure goods and services. The awarded contract value of these service contracts is reported to be over $80 million.

Our objective is to review the design of the contracting process, assess the level of internal controls in place, and recommend areas for improvement, where needed.

11

District Audits Division Energy Management

The District Inspections, Operations and Emergency Management (DIOEM) Department is responsible for monitoring and programming the District’s energy management system. Energy services costs for FY 2011-12 are projected at $90 million. DIOEM also manages approximately $4 million in long-term contracts for systems performance monitoring and verification and equipment maintenance and services.

The audit will focus on identifying efficiencies and cost savings opportunities that may be achieved by having good systems in place, as well as establishing energy conservation programs at schools and district offices.

12

District Audits Division Audit of Procurement Credit Card Controls

The District procures a substantial amount of goods and services using P-cards. During FY 2010-11, P-card transactions executed more than 500 cards maintained totaled $13 million.

Our audit objective will be to evaluate the effectiveness of the internal controls in place over P-cards and the propriety of related expenditures.

13

District Audits Division IT Audits School Site Network & Information Security

A substantial amount of the district’s functions uses applied technology, including the web. IT audit and oversight is needed to provide reasonable assurance that leading practices and controls are embedded in the system and they are performing as designed, and that schools are in compliance with M-DCPS’s Network Security Standards.

Working through the six ITS Network Support groups, we will determine whether adequate internal controls and leading practices are in place at a selection of individual schools to ensure network security and adherence with current District Network Security Standards.

14

District Audits Division

District Offices Network & Information Security

District departments store and manipulate vast amounts of data, including student, personnel, business, and accounting records. This data may come under attacks from internal and external threats.

Our objective will focus on providing reasonable assurance that the risk of unauthorized access, modification, disclosure, loss, theft, disposal, or removal of data is minimized. We will also assess the level of technological support provided by ITS, and adherence to current District Network Security Standards.

15

District Audits Division ERP/SAP – User Survey

The District has implemented SAP America Public Sector, Inc. (SAP) enterprise resource planning (ERP) software to support various administrative functions. Due to it’s recent implementation dates, staff’s use of the system is still maturing and provides opportunity to receive valuable feedback.

The audit objective will be to assess the functionality of SAP in terms of user comfort and it’s usefulness in streamlining the work process. We will seek to identify areas for improvement in training and communication between the user and the ERP/SAP implementation team.

16

District Audits Division (Long Range)

Two Long Range Audits

Audit of Capital Construction Direct Purchases

Audit of Information Technology Security Controls

17

District Audits Division (Long Range)

Audit of Capital Construction Direct Purchases

The School District’s Proposed Five-Year Capital Plan has identified almost $603 million of estimated facilities needs. The costs of materials used in the underlying project could range between 40-50% of the facilities costs, and are normally subject to 7% sales tax unless purchased directly by the District.

We will sample new construction and renovation projects and evaluate the propriety of the amount of direct purchases received and the internal controls over managing these purchases.

18

District Audits Division (Long Range)

ITS - Information Technology Security Controls

The District relies extensively on information technology (IT) systems and electronic data to support its programs. Accordingly, the security of these systems and data is essential to avoiding disruptions in critical operations, data tampering, and inappropriate disclosure of sensitive information.

Our objective will be to evaluate and report on general IT controls, including: Security Management, Access Controls, Configuration Management, Separation of Duties, and Contingency Planning.

19

Forensic/Investigative Audits/Charter Schools Audits Division

Perform Forensic Audits In The Following Areas:

Misappropriation of Funds Missing Inventory/Equipment Payroll Fraud and Other Fraudulent Activity Charter School Misfeasance/Malfeasance Attestation services or similar audit services related to charter schools as requested by the School Board and/or Audit Committee

Oversee Investigations Conducted By:

Civilian Investigative Units – CIU Support And Collaborate With:

Miami-Dade School Police Office of Professional Standards – OPS State Attorney’s Office Inspector General – IG District Offices

20

Forensic/Investigative Audits/Charter Schools Audits Division

Investigation of Academy of Arts & Minds Charter School

Request for investigation from District/School Operations received by our office in May 2011

Basis for request is written complaint from parents of students attending charter school

Our office plans to conduct the requested investigation and bring the results to the Audit Committee.

21

Forensic/Investigative Audits/Charter Schools

Audits Division

Attestation-Agreed Upon Procedures – Pursuant to the March 9, 2011 School Board Meeting

Agenda Item H-27 was approved by the School Board, our office is responsible for reviewing a charter school cost analysis report prepared by MDCPS administration.

– Charter school cost analysis report associated with the district’s administrative and oversight costs of charter schools for FY 2009-10.

– The attestation-agreed upon procedures should provide a level of assurance as to the accuracy of the costs being reported by the administration.

– We plan to present our agreed upon procedures report at the September 2011 Audit Committee meeting.

22

Property Audits Property Inventories

Perform physical inventory counts of all property with a cost of $1,000 at approximately 400 work locations. Results of school property audits reported as part of school audits.

During FY 2010-11, our Property Auditors accounted for approximately 95,000 items with an approximate cost of $378 million.

Audit of Year-End Inventories In support of the District’s financial audit, year-end physical inventories are observed and inventory controls are tested at:

Food and Nutrition, Transportation, Maintenance Materials Management, Stores and Mail Distribution, Textbook Inventory Services

23

Other Non-Audit Services

Community Based Organization Fiscal Review During FY 2010-11 the District contracted with three (3) community-based

organizations primarily for alternative education. Activities were conducted at five (5) campuses serving up to 672 students at a cost of approximately $2.8 million. We will review audits submitted by these entities and present them to the Audit Committee for its review, input, and transmittal to the School Board.

Charter School Fiscal Review

During FY 2010-11, the District sponsored as many as 92 charter schools with student enrollment of approximately 35,375 at an estimated cost in excess of $260 million. As the sponsoring school district, M-DCPS is statutorily responsible for substantial monitoring and oversight, including fiscal, operational, health/safety, and academic performance. We will review audits submitted by these schools and present them to the Audit Committee for its review, input, and transmittal to the School Board.

Facilitate the District’s process for addressing charter schools meeting one

or more conditions of financial emergency statute.

24

Other Non-Audit Services Active Participation On Various Charter School Related Committees (As Non-voting Members):

Technical Assistance Team Initial technical review of charter school applications

Application Review Committee

Evaluation of charter school applicants to recommend approval/denial to Superintendent of Schools

Contract Review Committee

Negotiate contract terms of approved charter school applications and amendment to charter school contracts.

25

Other Non-Audit Services

Review of External Audit Reports

Certified financial statements are provided by other agencies per contract and Board rules

Coordinate And Provide Contract Oversight Of External Auditors

District financial statements, Single Audit, Impact Fees, WLRN, Magnet Education Choice Association, Inc., Miami-Dade Coalition for Community Education, Inc., Dade Schools Athletic Foundation, Inc. and The Foundation for New Education Initiatives, Inc. all require audits from external CPAs. We will review these audits and submit them to the Audit Committee for its review, input and transmittal to the School Board.

26

Other Non-Audit Services Prior Audit Recommendations Follow-Up

Audit follow-up is a function of the internal audit process and is required by School Board Rule 6Gx13- 2C-1.14, Article IV.B.

Implementation of prior audit recommendations will continue to be monitored and reported to the Audit Committee

At the special request of the Audit Committee, our office will conduct follow-up reviews of staff’s implementation of the recommendations contained in the State of Florida Auditor General’s FY 2009-10 Operational and Single Audits of MDCPS.

27

INTERNAL AUDIT/CIVILIAN INVESTIGATIVE UNIT STAFFING

Resource Allocation 2011 2012 ∆ Comments

Chief Auditor & Administrative Support Staff 4 4 No Change

School Audits Division 15 15* See comments

One staff member returned from medical leave in April 2011. One position reassigned to Non-School Audits.

Non-School - Operational & Performance Audits Division 5** 5 See

comments

One position eliminated as a result of the District’s reduction in force during the year. One position reassigned from School Audits to this division.

Information Technology Division 2 1 -50% One position eliminated as a result of the District’s reduction in force toward the end of this year.

Property Audits Division 5 5 See comments

No change; however, one staff member on medical leave.

Audit Investigative Division 3 3 No Change

Civilian Investigative Unit 3 3 No Change

Totals 37 36 -3%

Notes: * Two positions fully dedicated to FTE audits and one position dedicated to Title I audits. **2010 staffing level shown is the final budget adopted in September 2010 and does not reflect the loss of three positions between June and September 2010. This attrition impacted the number of audits completed in FY 2010-11 and could have a similar effect in FY 2011-12.

28

INTERNAL AUDIT/CIVILIAN INVESTIGATIVE UNIT COMPARATIVE BUDGET During FY 2010-11 the Florida Auditor General performed the district’s financial statement and single audits at no cost to the District. During FY 2011-12 these audits will be performed by the external auditing firm of McGladrey & Pullen at a total cost of $335K. The remainder will cover cost of external audits of certain direct support organizations and the impact fees to be provided by Sharpton, Brunson & CO., and C Borders-Byrd, CPA LLC, respectively. In FY 2012, the budget for the KPMG ERP project is in the ERP department, and fund transfers are made to MCA when payments are due.

3,356,249

Non-Salary49,975

77,000

3,108,856

27,406

383,000

-

1,000,000

2,000,000

3,000,000

4,000,000

2011 Annual Budget 2012 Tentative Budget

Non-Salary

Salary

Audit and Professional

Fees

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