Audit of Margaret Murray Washington Career High School, December 23, 1998

AUDIT OF THE DIRECT ACTIVITY PURCHASE SYSTEM AND THE STUDENT ACTIVITY FUNDS AT THE MARGARET MURRAY CAREER HIGH SCHOOL OCTOBER 1,1996 TO JANUARY 1998

I. Introduction and Purpose
II. Background
III. Scope, Objective and Methodology
IV. Summary and Conclusions
V. Findings and Recommendations

Exhibit 1-Schedule of Salaries Paid from the SAF Account (Fiscal Years 1997 and 1998)
Exhibit 2-Schedule of DAPS Disallowed Costs (Fiscal Years 1997 and 1998)
Exhibit 3-Schedule of SAF Questioned Costs (Fiscal Years 1997 and 1998)
Exhibit 4-Schedule of DAPS Questioned Costs (Fiscal Years 1997 and 1998)
Exhibit 5-Difference Between the Reconciled Bank and Book Balances Indicated on the SAF Reconciliation Forms
Exhibit 6-Agency Response

INTRODUCTION AND PURPOSE

The Office of the Inspector General (OIG) has conducted an audit of the Direct Activity Purchase System (DAPS) funds and the Student Activity Funds (SAF) maintained at Margaret Murray Washington Career High School (M.M. Washington). The audit was performed at the request of the District of Columbia Public Schools (DCPS) Chief Financial Officer (CFO) due to concerns raised during an internal audit of the funds by the CFO. The objective of the audit was to determine whether M. M. Washington complied with policies and procedures established by DCPS for administering the SAF and DAPS funds.

BACKGROUND

The mission of the DCPS is to provide a viable and comprehensive system of publicly supported education for students from pre-kindergarten through grade twelve. DCPS provides comprehensive programs at the elementary, junior and senior high school levels. Additionally, DCPS provides educational services for students with special needs and career training opportunities for adults at the career development centers.

DCPS established the DAPS in connection with the school based management philosophy aimed at reforming and improving schools. The DAPS is a process that gives local schools more flexibility to purchase and pay for goods and services. The DAPS delegates limited procurement and payment authorities to the local school principals by allowing principals to purchase certain supplies, materials, and services when needed without prior approval from the central offices. The Office of the Chief Financial Officer (OCFO) allocates DAPS funds to schools receiving DAPS on a quarterly basis. The OCFO allocated $14,927 for the DAPS fund in fiscal year 1997 and $50,000 in fiscal year 1998 to M. M. Washington.

The "General Guidelines to the DAPS," dated May 1996, provide the policies and procedures for the schools to administer DAPS funds, along with requirements related to internal controls, accounting, record keeping and reporting. These guidelines for DAPS were updated by the school system in October 1997 through its issuance of the "DAPS Policies and Procedures Manual." Unlike the procedures prescribed in May 1996, subsequent October 1997 procedures include procurement requirements for the schools when purchasing items. These requirements dictate that schools must obtain approval for certain purchases which did not require such approval in fiscal year 1997. The procedures also increased the spending limitation to $5,000 per day. In fiscal year 1997, the spending limitation was $ 1,000 per day for regular schools and $2,000 per day for enterprise and charter schools.

The purpose of the SAF is to promote the general welfare, education and morale of the students, and to finance recognized extra-curricular activities of the student body. The funds are raised by school activities approved by the principals, which are not otherwise prohibited by law or DCPS regulations. The "SAF Policy Manual," dated June 1996, provides the policies and procedures for administering the SAF. The manual indicates the items that the school can and can not purchase with the SAF, along with the internal controls, accounting, recordkeeping and reporting requirements.

SCOPE. OBJECTIVE AND METHODOLOGY

The audit covered the period October 1, 1996 through January 31, 1998. We reviewed all DAPS expenditures for M. M. Washington, which totaled $39,002, and the related invoices, receipts, canceled checks, and other supporting documentation. In addition, we reviewed all bank statements, bank statement reconciliations, and financial activity reports prepared during the audit period.

The objective of the audit was to determine whether M. M. Washington complied with policies and procedures established by DCPS for administering the DAPS and SAF funds.

We judgmentally selected SAF for the period October l, 1996 through January 31, 1998, which totaled approximately $ 109,000, from a universe total of approximately $ 195,300. For these expenditures, we reviewed the related invoices, receipts, canceled checks, and other supporting documentation. In addition, we reviewed all bank statements, bank statement reconciliations, and financial activity reports prepared during the audit period. We reviewed selected SAF receipts for the audit period. We compared the receipts to the deposits indicated on the bank statements.

Additionally, we conducted interviews with M. M. Washington personnel responsible for recordkeeping and other functions related to the administration of the SAF and DAPS funds. We also held discussions with officials at the DCPS, Division of Finance.

We did not assess the reliability of the Student Activity II computer systems used to record SAF transactions. The Student Activity II Program was used to record SAF transactions for fiscal year 1997. In fiscal year 1997, DAPS transactions were manually recorded. The Quicken System was used to record SAF and DAPS transactions for fiscal year 1998.

The audit was conducted in accordance with generally accepted government auditing standards as promulgated by the Comptroller General of the United States.

SUMMARY AND CONCLUSIONS

The audit noted that M. M. Washington did not comply with SAF and DAPS policies and procedures for administering the SAF and DAPS funds. The funds were used improperly and were not being set aside for student-related activities. Instead, the funds were used, for example, primarily to pay employee salaries, which is specifically disallowed. Also, there was no documentation to support some of the purchases and other expenditures. As a result, our audit of the SAF and DAPS funds showed $104,868 in disallowed costs and $22,291 in questioned costs. M. M. Washington officials explained to us that they were not aware of all the SAF and DAPS policies and procedures. We believe that management inattention to the operation of these funds and a willingness to circumvent requirements may have contributed to the improper use of these funds.

The internal controls exercised over the funds within both the DAPS and SAF at M. M. Washington were inadequate. Expenditures were not recorded accurately and timely, and bank statements were not reconciled properly. Additionally, our audit disclosed that M. M. Washington did not submit timely financial reports on the status of the DAPS funds to the DCPS, Division of Finance, and did not submit all the required financial reports for the SAF. As a result, DCPS could not accurately track expenditures of the SAF and DAPS funds made by M. M. Washington; and the funds were not protected against theft and irregularities. We believe that such practices existed to circumvent requirements of the DCPS policies and procedures.

We recommended that the Superintendent, DCPS, take measures to ensure that the deficiencies identified in this report are corrected. Also, that appropriate administrative and/or disciplinary action is taken against personnel who have not adhered to prescribed policies and procedures for handling the funds. In response to our draft report, the new principal of M. M. Washington stated that such measures would be implemented. The details of these measures are included after each recommendation and the full response is included as Exhibit 6 to this report.

FINDINGS AND RECOMMENDATIONS

Disallowed Costs

During our review, we noted $89,652 in disallowed costs for SAF and $15,216 in disallowed costs for DAPS funds. The aggregate total of disallowed costs for both funds was $104,868. The disallowed costs noted by OIG were for expenditures that were made without prior approval, non-school-related expenditures, and for specifically disallowed categories of costs, such as salaries and furniture and fixtures. More details are provided below.

Student Activity Funds

During the period covered by our audit, we determined that M. M. Washington paid employee salaries totaling approximately $87,929 from October 1, 1996 through January 31, 1998 using the SAF (see Exhibit 1). The use of SAF for salaries is prohibited in the SAF policies and procedures. As a result, funds designated for student activities, such as field trips, projects, senior prom, etc. may not be available when needed.

We were informed by the school principal that some SAF funds were temporarily used to pay salaries of evening school teachers who were on the regular payroll. However, the principal stated that personnel action forms were not forwarded to the DCPS Payroll Office in time to allow for the paychecks to be processed in the regular payroll. Also, we found that officials at M. M. Washington used the SAF to pay substitute teachers who were not regularly employed by DCPS and administrative staff who were employed by DCPS. These employees should have been paid by DCPS. In addition to the improper use of this fund, the appropriate amount of payroll taxes was not withheld.

Section VI (C)(5) of the SAF Policy Manual provides that unallowable expenditures include: "...Salaries for services that are a responsibility of the school system or are for school system assignments.... " Section VI (C)(10) of the manual provides that unallowable expenditures include: "...Purchases of equipment, supplies, and services for rooms and areas not used primarily for student body activities.... "

Section VI (C)(8) of the SAF Policy Manual provides that unallowable expenditures include: "...Disbursements which are primarily for the benefit of the school staff or other DCPS employees, such as gifts, socials, meals, retirement functions or other staff social activities. However, disbursements for such purposes may be made from funds derived solely from staff donations or other staff activities, or from funds donated for that specific purpose by a PTA booster club, or student organization.... "

In fiscal year 1998, we noted that M. M. Washington used funds totaling $1,323 from the general fund sub-account to pay for luncheons and catering events for staff. The table below shows the disallowed costs from October 1997 through January 1998.

Table 1. Schedule of Disallowed Costs from October 1997 through January 1998

Additionally, we noted that in fiscal year 1997, the SAF fund included a $39,000 Pell Grant. M. M. Washington receives Pell Grant funds for the adult students that attend various programs (practical nursing, dental technology, physical therapy, etc). We noted that M. M. Washington transferred $35,000 of the $39,000 out of the Pell Grant sub account and put the funds in the general fund sub-account. The Pell Grant funds were designated to be used for a specific purpose. However, once deposited in the general sub-account, they become co-mingled with all other funds and may not be available when needed for a specific purpose.

Direct Activity Purchase System Funds

Our audit identified $15,214 of disallowed costs for the DAPS funds. Of this amount, the DCPS officials did not obtain prior approval for $ 13,099 and purchased items totaling $2,117 specifically disallowed by DAPS policy. Failure to obtain required approvals for purchases can result in procurement errors and may lead to improprieties (i.e., fraud, waste, etc.). The officials at M. M. Washington told us they were not aware of the requirement to get approval for the items. (Exhibit 2 is a schedule of the DAPS disallowed costs for fiscal years 1997 and 1998).

Section C (2) of the General Guidelines to the DAPS provides: "... The list of supplies and services which may not be purchased using the DAPS process includes, but is not limited to, the following: ...All furniture and fixtures, (object class 701) .... "

Section IV (B) of the DAPS Policies and Procedures Manual provides: "Object Classes 405 and 406 "Equipment Maintenance " and "Repairs and Building Maintenance and Repairs ", are considered allowable costs only when the following events have occurred:

"With the exception of instructional equipment, (i.e., tape recorders, overheads), Object Class 702 "Equipment and Machinery" purchases (i.e., computers, printers) are allowable only when the following events have occurred:

During our audit, we noted that the disallowed items were classified incorrectly, with respect to their object class. For example, the computers and the refrigerator were classified under object class 204 (Educational Supplies), instead of object class 702 (Equipment and Machinery). Also, a carpet purchased was classified under object class 424 (Conference and Convention Fees and Registrations), instead of object class 406 (Land and Building Maintenance). In fiscal year 1997, schools did not have to get approval for purchases under object codes 405, 406, and 702. The OIG was unable to determine if the incorrect codes were used in error or if the codes were used to circumvent policies and procedures.

Recommendations:

Agency Response:

DCPS has hired a new business manager knowledgeable about fiscal administration, purchasing, payroll, time and attendance, and business management. (See Exhibit 6.)

Questioned Costs

The audit revealed questioned costs of $11,061 for the SAF and $1 1,230 for DAPS funds, respectively. The costs were questioned because M. M. Washington did not maintain supporting documentation for these expenditures. As a result, we could not determine what items were actually purchased and/or whether the expenditures were made for the intended purpose of the funds. We were informed that school staff did not always submit invoices or receipts as evidence for expenditures when requesting reimbursements. (See Exhibit 3 for SAF questioned costs and Exhibit 4 for DAPS questioned costs). The school staff was reimbursed for expenditures without proper documentation. Also, the bookkeeper did not maintain adequate documentation for purchase of supplies.

Section F (2) of the General Guidelines to the DAPS provides: "...Files must be maintained in check number sequence for all paid invoices, receiving reports and other supporting evidence. The files must be properly documented, organized and available at all times for inspection by internal and external auditors...." Section VIII, page 7 of the DAPS Policies and Procedures Manual provides: "...AII checks disbursed from the DAPS account shall be supported by written documentation in some form, such as an invoice. In addition, the request for check distribution form must be completed and maintained in the audit file...."

Section VII (C)(4)(c) of the SAF Policy Manual provides: "...At the time of the audit or review, the following records shall be made available to the auditor(s): Paid vouchers and invoices..."

The M. M. Washington did not maintain supporting documentation for 44 of the 340 SAF expenditures reviewed and did not maintain supporting documents for 26 of the 98 DAPS expenditures examined.

Recommendations:

Agency Response:

Both the new principal and business manager have been trained and are aware of the responsibilities in the purchasing procedures and have informed the staff of the new procedures and will work along with the assistant principal to assure that everyone adheres to the District policies. (See Exhibit 6.)

Inadequate Internal Controls

M. M. Washington did not have adequate internal controls in place to safeguard the SAF and DAPS funds. We found that one person (the bookkeeper) performed all of the functions related to recording the transactions, authorizing the disbursements and maintaining custody of both funds. The bookkeeper was also responsible for reconciling the SAF and DAPS bank statements. As a result, the funds were not protected against theft because errors and/or irregularities could be perpetrated, concealed, and not detected. The principal informed us that persons handling the funds do not receive additional income, and therefore, there is no incentive for individuals to perform the SAF and DAPS-related functions.

Section VII, page 5 of the DAPS Policies and Procedures Manual and Section IV (A) of the SAF Policy Manual provides: "...The most important principle of internal control is the separation of duties, so that no one person controls all aspects of a transaction...."

M. M. Washington violated the DAPS and SAF guidelines by permitting only the bookkeeper to record the transactions, authorize the disbursements and maintain custody of the SAF and DAPS fund.

Other internal control related deficiencies noted during our review of both funds include the following:

Recommendations:

Agency Response:

The new principal stated that the school will adhere to the DAPS and SAFS guidelines by assuring that all internal controls are in place; that no one person will control all aspects of a transaction. At least two signatures will be obtained as required. All transactions, disbursements, and the custody duties and function of the business manager is defined, separated and shared with the principal and assistant principal and the three understand the roles in the entire process. (See Exhibit 6.)

Bank Reconciliations Not Prepared Accurately

M. M. Washington's bookkeeper did not prepare bank statement reconciliation forms for three consecutive months in the SAF account. Also, the bookkeeper did not often prepare accurately the required reconciliation forms for both the SAF and DAPS. (Exhibit 5 shows the differences between the reconciled bank and book balances on the reconciliation fortes). As a result, due to lack of reconciliations, we could not be assured that all funds were properly accounted for. The bookkeeper explained that she had difficulty in reconciling the SAF account and sought help from the DCPS, Division of Finance, but no help was provided. We believe these operating deficiencies exist because of management's inattention to the operations of these funds and the lack of training for DPCS staff.

Section VIII, page 8 of the DAPS Policies and Procedures Manual under the heading "Preparing the Bank Reconciliation" provides: "... The bank statement must be reconciled to the checkbook each month, preferably as of the last day of the month." Section IV (E)(5) of the SAF Policy Manual provides "... The principal shall review the statement, the cancelled checks, and other statement documents and thereafter arrange for a reconciliation of the statement...." Section 8, page 18 of the User's Guide to Managing the DAPS, dated October 1997, provides the following when the reconciled bank and book balances on the bank reconciliation forms do not agree: "...If the difference is not zero: find the difference between your register and the statement and correct it...."

Student Activity Funds

At the beginning of our audit, reconciliation forms for October 1997 through January 1998 had not been prepared. The transactions for that period had not been posted in the Quicken System, which was the system used to account for these funds. The bookkeeper posted the transactions during our audit and subsequently provided the reconciliation forms. The SAF account was last properly reconciled in February 1996.

All reconciliation forms prepared by the bookkeeper for fiscal years 1997 and 1998 were inaccurate with no adequate documentation provided. The bookkeeper did not find the differences between the book and bank balances, which was needed for subsequent corrections (see Exhibit 5). Also, the bookkeeper did not prepare reconciliation forms for July 1996, August 1996 and September 1996 because she did not post transactions for those months in the automated program used to account for SAF funds.

There were often no lists detailing the individual checks to support the outstanding check amounts on the forms. Only one list was provided, which supported the October 1996 reconciliation form. The total amounts for outstanding checks for that month was overstated by $8,523, which overstated the cash balance. Some checks identified as outstanding appeared on earlier bank statements and some had been voided. In October 1996, the bookkeeper incorrectly recorded the bank statement balance at the month end and double posted funds that were received. We noted that the list of outstanding checks for October 1996 included checks that were written in fiscal year 1995. The SAF guidelines do not have provisions for handling checks that had been outstanding for greater than ninety days. However, in our opinion, checks that are not cashed within 90 days should be voided.

Direct Activity Purchase System

Monthly bank reconciliations were not correctly prepared for three months during fiscal year 1997. The differences between bank and book balances were not supported for the months of April, May and June 1997. The bookkeeper did not explain the differences between the bank and the book balances. Furthermore, on the June 1997 reconciliation form, the bookkeeper simply changed the ending balance on the books to match the balance on the bank statement. As a result, the book balance for the cash account was unknown. We found that adequate DAPS records existed to reconcile the book balance with the bank balance; however, the bookkeeper did not reconcile the account. After researching the book errors, we were able to reconcile the account for the above three months.

We noted that the reconciliation form prepared for September 1997 was not accurately prepared although the reconciled bank balance agreed with the book balance. To determine the reconciled bank statement balance, the outstanding check amount must be deducted from the ending balance of the bank statement. The bookkeeper recorded the beginning balance of the bank statement and deducted the checks that had cleared (that is, the checks that were processed by the bank) during the month.

The Quicken System Improperly Used

The DAPS account had not been accurately reconciled in fiscal year 1998 because the bookkeeper did not understand the Quicken System. As a result, there were no controls in place to ensure that the cash on hand was properly recorded and reconciled in a timely manner. This led to the possibility of over spending with no safeguards over the DCPS assets. If the expenditures are properly recorded, the Quicken System will automatically reconcile the account.

In fiscal year 1997, DAPS transactions were manually recorded. For the October 1997 bank reconciliation, the bookkeeper included check numbers 418 through 423 as outstanding. In our review of the October 1997 bank reconciliation and account register, it was noted that only check numbers 418 and 419 were outstanding and two checks had been voided. The bookkeeper was not adhering to the SAF regulations in reconciling the accounts.

When the bookkeeper started using Quicken in fiscal year 1998, there were some checks written in September 1997 that had not cleared the bank. The User's Guide to Managing the DAPS with Quicken, dated October 1997, does not provide the procedures for handling outstanding checks from the previous fiscal year. However, the guidelines for the SAF account states the procedures for handling outstanding checks.

Section 3, page 6 of the User's Guide to Managing the SAF with Quicken, dated October 1997, provides: "...lf you have outstanding checks/transactions at the time you are recording your opening balance, you MUST take special care to account for them in the system so that your SAF account can be properly reconciled with your bank statement every month over the course of the year. If you have uncleared transactions, follow these steps.... Record all outstanding checks/transactions in your account register.... "

Recommendation:

We recommended that the Superintendent, DCPS, train staff to ensure expenditures are entered into the Quicken System and that bank statements are properly reconciled.

Agency Response:

The new principal stated that she and the new business manager understood the new financial system. She stated that DCPS reports will be submitted timely and all bank statements will be reconciled in a timely and efficient manner. (See Exhibit 6.)

Financial Activity Reports Not Submitted

Student Activity Funds

We determined that M. M. Washington did not submit to the DCPS, Division of Finance, the SAF quarterly and annual expenditure and revenue reports in fiscal year 1997, as required; and also had not submitted the first quarterly expenditure and revenue report in fiscal year 1998 (which was due on January 15, 1998). As a result, DCPS has been unable to track SAF expenditures and revenues at the school.

The bookkeeper told us that personnel of the DCPS, Division of Finance, told her not to submit the reports since the account was not reconciled. However, no documentation was provided to us by the bookkeeper to support this statement.

Section VII (D)(3) of the SAF Policy Manual provides: "...At the end of each fiscal seal year, the treasurer/bookkeeper shall prepare and furnish to the Controller, the annual SAF financial report consisting of the following:

During the audit, M. M. Washington submitted the quarterly financial report for October 1, 1997 through December 31, 1997 to the DCPS.

Direct Activity Purchase System Funds

In fiscal years 1997 and 1998, all of the DAPS quarterly reports were submitted late. The bookkeeper stated that the reports were submitted late due to a lack of time since she is also a teacher at M. M. Washington. As a result, M. M. Washington was not in compliance with the General Guidelines requirements of submitting reports to DCPS by the 1 5th day following the close of the quarter. Therefore, DCPS could not review how the prior quarter funds were expended before allocating additional DAPS funds to M.M. Washington.

Section B (4) of the General Guidelines to the DAPS provides: "...By the 15th day following the close of the quarter, each participating school is required to submit a quarterly financial report to the Division of Finance, Office of Fiscal and Personnel Services...."

Section III (7) of the DAPS Policies and Procedures Manual provides: "...By the 15th day of each month following initial disbursement, each participating school/department head is required to submit a monthlyfinancial report...to the Office of the Chief Financial Officer to the attention of the Cash Management Supervisor. In order to benefit from the privilege of having a DAPS account these guidelines must be strictly adhered to...."

We noted that funds were allotted to M. M. Washington in fiscal year 1997 although the DAPS guidelines provide that the Division of Finance will advance quarterly allotments upon review of the quarterly reports or upon receipt for reimbursement by the school. We noted that funds were allotted to the school in fiscal year 1998 although the guidelines provide that the reporting requirements have to be followed in order for schools to have DAPS accounts.

The table below shows the due dates for the quarterly and monthly reports and the number of days that the reports were issued late.

Table 2. Schedule of Report Submissions

Reporting Period	Report Due Date	Number of Days Late
10/96-12/96	01/15/97	245
01/97-03/97	04/15/97	157
04/97-06/97	07/15/97	67
07/97-09/97	10/15/97	14
10/97	11/15/97	61
11/97	12/15/97	71
12/97	01/15/98	40

Recommendations:

We recommended that the Superintendent, DCPS, take immediate action to ensure that:

Agency Response:

The new principal stated that since she and the new business manager understood the new financial system, DCPS reports will be submitted in a timely and efficient manner. (See Exhibit 6.)

DAPS Procurement Regulations Not Followed

We noted that in fiscal years 1997 and 1998, M. M. Washington did not comply with the DAPS procurement regulations. M. M. Washington staff made purchases that exceeded the established DAPS spending limitations and did not follow ordering procedures. The bookkeeper and principal indicated that the ordering procedures were not followed because they were unaware of the requirements. We believe this demonstrates management inattention and lack of training in the implementation of the DAPS regulations.

Section E (1)(c) of the General Guidelines to the DAPS provides: "...No single purchase shall exceed $1000 per day per vendor for regular schools, and no single purchase shall exceed $2000 per day per vendor for Enterprise Schools and Charter Schools. Purchases shall not be subdivided or split to qualify under these procedures...."

Section VII, page 5 of the DAPS Policies and Procedures Manual under the heading of "Spending Limits ($5000) provides: "No single purchase shall exceed $5, 000 per day for all schools (Charter schools and Enterprise schools included); and no purchases shall be subdivided or split to qualify under these procedures.... " In addition, the Section VII, page 6 provides: "... Orders from $5, 001 and greater should not be purchased with DAPS funds...."

In fiscal year 1997, M. M. Washington staff made two purchases that exceeded the $1,000 spending limitation. Both purchases were for uniforms. The staff also exceeded the spending limitation in fiscal year 1998. It purchased several computers in December 1997, valued at $10,138. The staff wrote three separate checks for the computers. Two checks were written for $5,000 each, and one check was written for the remaining balance, $138.

Recommendation:

We recommended that the Superintendent, DCPS, require M. M. Washington to follow DAPS procurement procedures. If the appropriate procedures are not followed, the Superintendent should discontinue DAPS funds for future use.

Agency Response:

The new principal stated that the school will adhere to the DAPS and SAF guidelines by assuring that all internal controls are in place. (See Exhibit 6.)

SAF Funds Deposited in the Incorrect Sub-account

The registration fees totaling $7,050 for the adult education classes were improperly deposited into the general fund sub-account. As a result, registration fees designated for the adult education classes were co-mingled with other funds and may have not been used for the intended purpose. The bookkeeper stated that the registration fees were put in the general fund sub-account to help pay the employees' salaries.

In fiscal year 1997, M. M. Washington offered several courses, which included emergency medical service, dental technology, physical therapy, and practical nursing, to the adult population. In addition to the course fees, M. M. Washington required the students to pay a $50 registration fee. The course fees that the students paid were deposited in the designated sub- accounts for the programs; however, the registration fees that the students paid were deposited into the general fund sub-account. The reconciliation report indicates that the general funds were used to pay salaries and for other purposes unrelated to the adult program. However, due to inadequate documentation, we were unable to validate how the funds were actually used because M. M. Washington comingled the funds for the different sub-accounts from the school's activities and the general fund sub-account had a negative balance of approximately $9,819.

Recommendation:

We recommended that the Superintendent, DCPS, monitor sub-accounts to ensure that funds designated for specific activities are deposited into the proper sub-account and used for the intended purpose.

Agency Response:

The new principal stated that the school has established proper sub-accounts for funds to be deposited and disbursed for the purpose for which they were intended. (See Exhibit 6.)

EXHIBITS

Exhibit 6-Agency Response

DISTRICT OF COLUMBIA PUBLIC SCHOOLS
Office of the Chief Financial Officer
825 North Capitol Street N.E., 7th Floor
Washington, D.C 20002-4232
202-442-5300, fax: 202-442-5304
www.k12.dc.us

Please find attached MM Washington's response lo the Inspector General's Audit Report.

TO: Ralph Neal, Assistant Superintendent, District of Columbia Public Schools, Secondary Division

As you are aware my business manager and I attended a meeting regarding the, recently completed, audit conducted by the Inspector General's office. As the new principal of M.M. Washington ton Career and Vocational I High School, I was shocked and appalled at the fiscal mismanagement exhibited by the former administration. I can assure you that the administration of funds will be strictly according to system guidelines and policies under my direction. Our recently hired business manager. Vanessa Knox, and I have instituted some policies and procedures for the entire staff so that everything will be done in a timely, efficient, and effective manner. The actions that I have taken have put some constraints in piece so that our fiscal health will be permanently restored. These actions include:

We are well aware of the delicate nature of the responsibilities and the obligation that we have in maintaining the accounts at M.M. Washington. We will seek whatever training that is available so that we renain knowledgeable and capable in our duties. consequently, restoring the reputation and respectability to the school and staff. Please let us know if we need provide any other assurances, statements, or recommendations to you relative to this situation.

I sincerely hope that the former principal will be prosecuted to the fullest extent. This entire situation has caused me a great deal of anguish and frustration since I have not been able to access any financial resources since assuming the principalship and the entire staff is demoralized in the wake of all that has occurred. At the least. the perpetrators should be forces to reimburse the monies so that the students can benefit since it was intended for them in the first place. We certainly need it.

Audit of the Direct Activity Purchase System and the Student Activity Funds at the Margaret Murray Washington Career High School, October 1, 1996 to January 31,1998 December 23, 1998

Student Activity Funds

Table 1. Schedule of Disallowed Costs from October 1997 through January 1998

Direct Activity Purchase System Funds

Agency Response:

Questioned Costs

Agency Response:

Agency Response:

Student Activity Funds

Direct Activity Purchase System

The Quicken System Improperly Used

Agency Response:

Student Activity Funds

Direct Activity Purchase System Funds

Table 2. Schedule of Report Submissions

Agency Response:

Agency Response:

Agency Response:

Exhibit 6-Agency Response

Audit of the Direct Activity Purchase System and the Student Activity Funds at the Margaret Murray Washington Career High School, October 1, 1996 to January 31,1998
December 23, 1998