INFORMATIONAL BULLETIN # 221
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1 Los Angeles County Office of Education 9300 Imperial Highway, Downey, California (562) Arturo Delgado, Ed.D., Superintendent INFORMATIONAL BULLETIN # 221 April 4, 2012 TO: FROM: Business and Accounting Administrators Los Angeles County School Districts, Joint Powers Authorities (JPAs), and Regional Occupational Centers/Programs (ROC/Ps) Marlene Dunn, Assistant Director Financial Management Services Division of Business Advisory Services Karen L. Rindfleisch, Assistant Director Accounting and Financial Services SUBJECT: Annual Financial Audits In accordance with Education Code (EC) Sections through , all school districts are required to file their annual audit reports for the preceding fiscal year no later than December 15, with the Los Angeles County Superintendent of Schools (County Superintendent), the California Department of Education (CDE), and the State Controller's Office (SCO). This bulletin outlines various aspects of the annual financial audit process and timelines, and the responsibilities of district auditors, school districts, and the Los Angeles County Office of Education (County Office). The bulletin also outlines the report filing deadlines, the process for resolution of audit exceptions, and the recording of audit adjustments. The responsibilities and required actions are listed under the "Audit Timelines" section, and detailed explanations are provided in the remaining sections of this bulletin. Audit Timelines The timelines for the annual financial audit process are as follows: Leading Educators Supporting Students -Serving Communities (Over)
2 Annual Financial Audits April4,2012 Page 2 Due Date' April 1,2012 May 1,2012 November 20, 2012 December 15, 2012 December 15, 2012 January 31,2013 January 31, 2013 February 15, 2013 March 15,2013 May 15,2013 Responsible Party District County District Auditor Auditor District District County District County Action Provide for annual audit (select audit firm from the SCO directory), and submit contract to the County Office (EC Section 41020[b][3]). Provide for annual audit, if district has not done so (EC Section 41020[b][l]). Extension request for audit completion due date must be received by the County Office for processing to the SCO (EC Section [a][i]). Audit completed. Audit report and management letter, if any, submitted to the SCO, CDE, and County Office (EC Section 41020[h]). (Coordination between district and auditor may be required.) Governing Board review of audit report, exceptions, adjustments made, and plan of correction (EC Section ). Final day to input audit adjustments in the PeopleSoft Financial System (PSFS). Send letters, if necessary, regarding audit exceptions, corrections made, and plan of correction to district for response. Corrections made and plan of correction sent to County Office in response to County Office letter. Certification sent to the CDE and the SCO (EC Section 41020[k]). Note: The County Office must approve audit contracts for school districts that have had a disapproved budget, a negative interim report certification, or have been identified as "not a going concern" in the current or either of the two preceding fiscal years (EC Section 41020[b][2]). 1 If the statutory due date occurs on a Saturday, Sunday or holiday, the reporting due date shall be on the following workday.
3 Annual Financial Audits April 4, 2012 Page 3 Audit Contracts Please review the County Office Informational Bulletin No. 191, issued March 5, 2012, for the annual audit contract requirements and required submission to the Division of School Financial Services. If you have questions relating to the annual audit contracts, please contact Ms. Luz Spanks at (562) , or by at Spanks_Luz@lacoe.edu. Attached is the "Los Angeles County K-12 School and Community College Districts List of Auditors" (Attachment No. 1). Audit Report Filing Audit reports for fiscal year must be filed with the appropriate agencies by December 15, (Attachment No. 2). Audit Exceptions EC Sections and specify the responsibilities of county superintendents of schools, school districts, and districts' independent auditors, as they relate to the resolution of audit exceptions. These responsibilities are as follows: Actions Required of School District Auditors School district auditors are required to: code all audit exceptions to indicate whether the State or the County Office has the responsibility of correction follow-up; quantify the dollar value (questioned costs) of the audit exceptions; evaluate whether there is any doubt about the district's ability to continue as a "going concern" for a reasonable period of time; review all corrections or plans of correction for the previous year's audit to determine if the exceptions have been resolved; notify the County Office and the CDE in the event that prior year audit exceptions are not resolved, and restate the exceptions in the current audit report; include management improvement recommendations in the audit report; and upon request, provide the County Superintendent or the State Superintendent of Public Instruction with fiscal information on a district if the County Superintendent determines, If the statutory due date occurs on a Saturday, Sunday or holiday, the reporting due date shall be on the following workday. (Over)
4 Annual Financial Audits April 4, 2012 Page 4 pursuant to EC Section , that the district may not be able to meet its fiscal obligations in the current or subsequent fiscal year (EC Section ). The "Standards and Procedures for Audits of California K-12 Local Education Agencies" ("Standards and Procedures"), issued by the SCO, requires that management letters and reports be submitted as part of the audit report. Actions Required of School Districts By January 31 of each year, the Governing Board of each school district must review the annual audit report for the prior fiscal year at a public meeting. According to EC Section , the review shall include: "... the annual audit of the local education agency for the prior year, any audit exceptions identified in that audit, the recommendations or findings of any management letter issued by the auditor, and any description of correction or plans to correct any exceptions or management letter issue." When describing the corrections or the plans of correction, please include specific actions that are planned or that have been taken. General comments such as "will implement," "accepted the recommendation," or "will discuss at a later date," do not meet EC requirements. If inadequate descriptions such as these are used, additional information will be requested from districts at a later date, as required under the responsibilities of the County Superintendent. Please note that the written description of the corrections or the plans of correction must address not only the items listed in the sections titled "Findings and Recommendations," "Findings and Questioned Costs," or similar headings, but also those comments contained in the management letter. The "Standards and Procedures" specifies that the management letter is considered an integral part of the "Findings and Recommendations" section of the audit report. EC Section indicates that management letter comments are subject to the same requirements for correction as items that appear in the findings section. To ensure accuracy of account balances, the district is also required to make the appropriate reconciling entries to the district's financial accounting records, as specified in the reconciliation section of the audit report. Actions Required of County Superintendent The County Superintendent must: review all audit exceptions contained in the district's audit report; request that the Governing Board of each school district provide the County Superintendent with a description of all corrections or plans of correction by March 15;
5 Annual Financial Audits April 4, 2012 Page 5 review the information provided for adequacy, request any additional information needed, and certify to the Superintendent of Public Instruction and the SCO by May 15, that the staff has: reviewed all audits of school districts under his or her jurisdiction for the prior fiscal year; verified that all exceptions have been corrected or that the district has submitted an acceptable plan of correction; and required all districts with attendance-related audit exceptions to prepare and submit appropriate amended attendance reports for transmission to the CDE. Please note that the County Superintendent cannot certify reports of average daily attendance (ADA) if there are reasons to believe that any of the ADA is from programs with "apportionment-significant noncompliance." The County Superintendent is also authorized to waive any audit exceptions which districts receive as a result of noncompliance with the reporting requirements for: (1) the sufficiency of Instructional Materials per EC Section (e.g., public hearing and board resolution); (2) teacher misassignments per EC Section ; (3) the accuracy of information reported on the School Accountability Report Card per EC Section (EC Section ). Recording Audit Adjustments Resulting from Audit The annual financial audit, prepared by independent auditors, may differ from district-prepared unaudited financial information. The differences, if any, are usually listed in the audit report as supplementary information in the exhibit titled "Reconciliation of Annual Financial and Budget Report with Audited Financial Statements." This schedule shows the impact of the audit adjustments on the ending fund balance for each fund, and on the beginning fund balances. Differences that impact the beginning balance for each fund, if any, require two separate adjustments in : (1) budget revisions, and (2) audit adjustments. The required audit adjustments will change the district's beginning fund balance for the adopted budget. Therefore, it is essential that the district submit corresponding budget revisions increasing or decreasing the components of the fund balance. These budget revisions must be reported on the Budget Adjustment Summary (Form No 503-A), adopted by the district's Governing Board, and submitted to the Division of Business Advisory Services for approval. Audit adjustments must be entered in the PSFS no later than January 31, This will ensure that January month end reports, which are used to prepare and satisfy legal requirements for the Second Interim Report, include audited beginning fund balance adjustments. Whether your audit adjustment has a positive or negative impact on the district, the corresponding budget adjustment should be filed at the same time. (Over)
6 Annual Financial Audits April 4, 2012 Page 6 For detailed information and examples on how to post your audit adjustment journals, we recommend that you refer to Procedure 215, Audit Adjustments, which is located in the California School Accounting Manual. The manual is posted on the following Web site: lcomplete.pdf If you have any questions regarding the posting of audit adjustments, please contact Mr. Bert Rodriguez at (562) , or by at Rodriguez_Bert@lacoe.edu. This bulletin and its attachments are posted on the County Office Web site at the following address; Select "Bulletins" on the left side of the screen under the heading "BAS Resources," and then use the "Find" function to locate a specific bulletin by number or keyword. If you have any questions regarding this bulletin, please contact me at (562) , or by at Dunn_Marlene@lacoe.edu, or Ms. Karen Rindfleisch at (562) , or by at Rindfleisch_Karen@lacoe.edu. Approved: Alexander Cherniss, Ed.D. Chief Business Officer Business Services MD/KLR:jj Attachments Informational Bulletin No. 221 BAS
7 Los Angeles County Office of Education Los Angeles County K-12 School and Community College Districts List of Auditors ABC USD Acton-Agua Dulce Unified Alhambra City USD Antelope Valley CCD Antelope Valley UHSD Arcadia USD Azusa USD Baldwin Park USD Bassett USD BellflowerUSD Beverly Hills USD Bonita USD Burbank USD Castaic Union SD Centinela Valley UHSD Cerritos CC Charter Oak USD Citrus CC Claremont USD Compton USD Covina-Vailey USD Culver City USD Downey USD Duarte USD East WhittierCity SD Eastside Union SD District Name El Camino College/Compton Educational Center El Camino CCD El Monte City SD El Monte UHSD Attachment No. 1 to: Informational Bulletin No. 221 BAS District Auditor Moss, Levy & Hartzheim, LLP (2) Messner and Hadley Nigro&Nigro, PC Vasquez & Company, LLP Moss, Levy & Hartzheim, LLP (1) Brown Armstrong Accountancy Corp. Nigro&Nigro, PC Moss, Levy & Hartzheim, LLP(2) Vasquez & Company, LLP
8 Los Angeles County Office of Education Los Angeles County K-12 School and Community College Districts List of Auditors District Name El Rancho USD El Segundo USD Garvey SD Giendale CC Glendale USD GlendoraUSD Gorman SD Hacienda La Puente USD Hawthorne SD Hermosa Beach City SD Hughes-Elizabeth Lakes Union SD Ingiewood USD Keppel Union SD La Canada USD LA County Office -of Education Lancaster SD Las Virgenes USD Lawndale SD Lennox SD Little Lake City SD Long Beach CC Long Beach USD Los Angeles CCD Los Angeles CCD U>s Angeles USD Los Nietos SD Lowell Joint SD ^ynwood USD Manhattan Beach USD Monrovia USD District Auditor Moss, Levy & Hartzheim, LLP (l) Hosaka, Nagel & Company Moss, Levy & Hartzheim, LLP<2) Moss, Levy & Hartzheim, LLP<2) Jeanette L. Garcia & Associates KPMG, LLP (Financial Statements) Vasquez & Company, LLP ((Program Audit) Simpson and Simpson Quesada, Wong & Associates, Inc.
9 Los Angeles County Office of Education Los Angeles County K-12 School and Community College Districts List of Auditors District Name Montebello USD Mount San Antonio CC Mountain View SD Newhall SD Norwalk-La Mirada USD Palmdale SD Palos Verdes Peninsula USD Paramount USD Pasadena Area CC Pasadena USD Pomona USD Redondo Beach USD Rio Hondo CC Rosemead SD Rowland USD San Gabriel USD San Marino USD Santa Clarita CC Santa Monica CC Santa Monica-Malibu USD Saugus Union SD South Pasadena USD South Whittier SD Southeast ROP Southern California-ROC Sulphur Springs Union SD Temple City USD Torrance USD Valle Lindo USD District Auditor Vavrinek, Trine. Dav & Co., I,I.P Vasquez & Company, LLP Moss, Levy & Hartzheim, LLP (1> Brown Armstrong Accountancy Corp. Wilkinson Hadley & Co. LLP Jeanette L. Garcia & Associates Moss, Levy & Hartzheim, LLP '" Moss, Levy & Hartzheim, LLP (1> McKinney & McPeak, CPA
10 Los Angeles County Office of Education Los Angeles County K-12 School and Community College Districts List of Auditors District Name Walnut Valley USD West Covina USD Westside Union SD Whittier City SD Whittier UHSD WilliamS. Hart UHSD Wilsona SD Wiseburn SD District Auditor Jeanette L. Garcia & Associates Burkey, Cox, Evans, Bradford & Alden, Accountancy Corp.
11 LOS ANGELES COUNTY OFFICE OF EDUCATION Division of Business Advisory Services Audit Report Filing In accordance with Education Code Section 41020(k), school districts are required to file their annual audit reports and management letter, if any, with the agencies listed below: Tracy Minor, Manager Accounting and Financial Services Los Angeles County Office of Education 9300 Imperial Highway, Room 215 Downey, CA (562) California State Controller's Office Division of Audits - Financial Audits Bureau School District Audits P. O. Box Sacramento, CA (916) California Department of Education School Fiscal Services Division Audit Resolution Staff 1430 "N" Street, Suite 3800 Sacramento, CA (916) (3 copies mailed and PDF copy via ) (1 copy) (1 copy) Please provide your audit firm with this mailing information. Attachment No. 2 to; Informational Bulletin No. 221 BAS
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