Special Review of. Active Net Payments For Community School Programs

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1 Special Review of Active Net Payments For Community School Programs February 16, 2018 Report #

MISSION STATEMENT The School Board of Palm Beach County is committed to providing a world class education with excellence and equity to empower each student to reach his or her highest potential with

2 MISSION STATEMENT The School Board of Palm Beach County is committed to providing a world class education with excellence and equity to empower each student to reach his or her highest potential with the most effective staff to foster the knowledge, skills, and ethics required for responsible citizenship and productive careers. Robert M. Avossa, Ed.D. Superintendent of Schools School Board Members Chuck Shaw, Chairman Debra L. Robinson, M.D., Vice Chairwoman Marcia Andrews Frank A. Barbieri, Jr., Esq. Karen M. Brill Barbara McQuinn Erica Whitfield Audit Committee Members Noah Silver, CPA, Chairman David H. Talley, Vice Chairman Tammy McDonald Anderson N. Ronald Bennett, CPA Michael Dixon, CPA/PFS Deborah Manzo Richard Roberts, CPA Audit Committee Representatives Frank A. Barbieri, Jr., Esq., School Board Robert M. Avossa, Ed.D., Superintendent of Schools Mike Burke, Chief Financial Officer JulieAnn Rico, Esq., General Counsel Maureen Werner, Principal Representative Justin Katz, CTA President

3 Special Review of Active Net Payments for Community School Programs Table of Contents Page EXECUTIVE SUMMARY i PURPOSE AND AUTHORITY 1 SCOPE AND METHODOLOGY 1 BACKGROUND 2 CONCLUSIONS 1. $53,727 in Missing Payments Recovered by Four Schools 3 2. Written District Guidelines Needed for Active Net Payment Reconciliations 4 3. Execution of Agreement Consistent with School Board Policies and Procedures 5 4. Service Charges Paid Consistent with Agreement 6 APPENDIX A. Management s Response Department of Adult & Community Education 8 B. Management s Response Chief Financial Officer 10

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5 Special Review of Active Net Payments for Community School Programs EXECUTIVE SUMMARY During the Fiscal Year 2017 Internal Funds Audits, we noted some discrepancies for Community Schools registration fees submitted by The Active Network, Inc. (Active Net), our online registration vendor. The primary objectives of this special review were to: (1) assess the adequacy of internal controls for the fee collections through the online system, Active Net, and (2) determine whether service fees charged by Active Net were consistent with the Agreement. This special review produced the following major conclusions. 1. $53,727 in Missing Payments Recovered by Four Schools The OIG s 2016 and 2017 Internal Funds Audits found Active Net payments totaling $53, had not been received by four schools. For each school, the OIG contacted Active Net, through the Adult Education Department, and requested the vendor to confirm the missing payments. Active Net acknowledged that the missing checks had not been cashed, and reissued payment checks to these four schools. To eliminate the occurrence of missing payment checks within the schools, the OIG recommended, which was accepted by staff, that the District consider ACH remittances from Active Net. Beginning in January 2018, Active Net payments will be deposited directly into the schools bank accounts. Management s Responses: Department of Adult & Community Education: Concurs. The Department of Adult & Community Education together with the Treasury Department have established a direct deposit process based on recommendations from the Inspector General s Office and the Treasury Department to ensure all funds are received. Starting January, community education school sites will no longer receive a paper check from Active Net. All remittance payments will be done through a direct deposit process (ACH Credit). The school treasurer will notify a designee of the ACH deposit amounts. In turn, the designee will complete a revised Active Net Remittance ACH Deposit Worksheet to complete the process (See Attachment). (Please see page 8.) Chief Financial Officer: Department of Adult & Community Education, Treasury and Accounting have collaborated on a process to ensure payments are received through ACH (direct deposit to school bank accounts). Two payments have been received to date (January 22, 2018). (Please see page 10.) 2. Written District Guidelines Needed for Active Net Payment Reconciliations While Community School Directors (the Assistant Principals who are responsible for the programs at the schools) have access to online resources as well as monthly face-to-face training, we found that new directors and clerical staff often did not know how to find the i

6 procedures for Active Net setup and reconciliation. There are no written District guidelines to assist staff in how to navigate to these resources. The OIG recommends that written guidelines on Active Net payment reconciliation be developed for all Community Schools. The guidelines should provide specific guidance to locate the needed resources available on the SharePoint website. Management s Responses: Department of Adult & Community Education: The Department of Adult & Community Education will continue to send out monthly communications to all Adult Education Assistant Principals and clerical staff through the Assistant Principal SharePoint site, Monthly Highlight Newsletter, Monthly Assistant Principal Newsletter indicating Active Net instructions. We will also be updating SharePoint s layout and will ensure ease of accessibility to Active Net information. SharePoint s redesign should be completed by August of (Please see page 8.) Chief Financial Officer: The Department of Adult and Community Education is responsible for training staff using Active Net on the reconciliation process. (Please see page 10.) 3. Execution of Agreement Consistent with School Board Policies and Procedures The Product and Services Agreement with The Active Network, Inc. was initiated and executed consistent with School Board Polices and District Guidelines. Management s Responses: Department of Adult & Community Education: We concur. (Please see page 8.) Chief Financial Officer: IG determined execution of agreement was consistent with School Board Policies and District Guidelines. Management has no additional comment. (Please see page 10.) 4. Service Charges Paid Consistent with Agreement The Agreement with Active Net included a schedule of service charges for both online and onsite registrations and credit card transactions. The annual service charges averaged approximately $53,000. Our review concluded that total fees charged by Active Net were reasonable and consistent with the Agreement. Management s Responses: Department of Adult & Community Education: We concur. (Please see page 8.) Chief Financial Officer: IG review concluded fees were reasonable and consistent with agreement. Management has no additional comment. (Please see page 10.) ii

7 THE SCHOOL DISTRICT OF LUNG CHIU, CIG, CPA SCHOOL BOARD PALM BEACH COUNTY, FLORIDA INSPECTOR GENERAL CHUCK SHAW, CHAIRMAN DEBRA L. ROBINSON, M.D., VICE CHAIRWOMAN OFFICE OF INSPECTOR GENERAL MARCIA ANDREWS 3318 FOREST HILL BLVD., C-306 FRANK A. BARBIERI, JR., ESQ. WEST PALM BEACH, FL KAREN M. BRILL BARBARA MCQUINN (561) FAX: (561) ERICA WHITFIELD M E M O R A N D U M To: From: Honorable Chair and Members of the School Board Robert M. Avossa, Ed.D., Superintendent of Schools Chair and members of the Audit Committee Lung Chiu, CPA, Inspector General Date: February 16, 2018 Subject: Special Review of Active Net Payments for Community School Programs PURPOSE AND AUTHORITY During the Fiscal Year 2017 Internal Funds Audits, we noted some discrepancies for Community Schools registration fees submitted by The Active Network, Inc. (Active Net), our online registration vendor. The primary objectives of this special review were to: (1) Assess the adequacy of internal controls for the fee collections through the online system, Active Net. (2) Determine whether service fees charged by Active Net were consistent with the Agreement. SCOPE AND METHOLDOLOGY This special review focused on the Community School Program fee collection records for the period July 1, 2016, through June 30, We interviewed related school and department staff and reviewed the following documents and relevant information: Registration and Fee Collection Reports from the Community School Registration and Fee Collection System (Active Net System). General Ledgers for each school s Internal Funds Accounting System (SchoolCash.net System). Products and Services Agreement with Active Network dated September 30, Florida Administrative Code, Chapter 6A Purchasing Policies School Board Policy Acceptance of Credit and Debit Cards School Board Policy 6.14 Purchasing Department Purchasing Manual, Chapter 3 Purchasing Requirements and Thresholds Purchasing Manual, Chapter 14 Contracts 1

8 Draft findings were sent to staff for management review and comments. We appreciate the courtesy and cooperation extended to us by staff during the review. The final draft report was included in the February 16, 2018, Audit Committee Meeting Agenda. BACKGROUND The Department of Adult and Community Education (Department) provides a program of leisure courses operated through the Community School Programs at 21 selected high schools and middle schools and one virtual site. This program is self-supported and relies on the fees collected to provide the classes. Beginning in Fiscal Year 2013, the Department contracted with Active Network, Inc. (Active Net), an online registration and fee collection system vendor, to process registration and fee collections for the District s Community School Programs. Students can register online and pay class fees with either credit or debit cards. The students can also register in person at school sites and pay the fees by cash or check. However, all registrations are recorded in Active Net regardless of the payment method. Each school is responsible for processing refunds. Cash and check payments are refunded through school checks, while credit card refunds are processed through Active Net. Service charges for transaction fees and processing fees are assessed and retained by Active Net. Active Net remits the balances (online collections less charges) by mailing the checks to the schools on a bi-weekly basis. Products and Services Agreement Active Network, Inc. is the copyright owner for the hosted software and, as such, is bid-exempt pursuant to Florida Administrative Code, Chapter 6A-1.012, Section (11)(b) and School Board Policy 6.14, Section (5)(c)(ii)(D). On July 1, 2013, a single site, one-year agreement was purchased for $5,200 for West Boca Raton High School as a test site during Summer On September 30, 2013, the District executed a Products and Services Agreement (Agreement) with a total cost of $27, with The Active Network, Inc. to provide implementation and training for all Community School sites. Implementation took place in stages and was completed at all sites by the end of Fiscal Year The Agreement was for three years with continuing three-year renewal options until either party provides 12-Month Notice of Termination. 2

9 CONCLUSIONS 1. $53,727 in Missing Payments Recovered by Four Schools The OIG s 2016 and 2017 Internal Funds Audits found remittance payments totaling $53, had not been received by four schools. For each school, the OIG contacted Active Net, through the Adult Education Department, and requested the vendor to investigate the missing payments. Active Net acknowledged that the missing checks had not been cashed. Subsequently, these four schools received the full amount of the missing funds. (See Table 1) School Table 1 Schools with Missing Active Net Payments During Fiscal Years 2016 and 2017 Total Remittance Payments Missing Time Period (Not Deposited into the Schools Bank Accounts) Palm Beach Gardens High Jan 11 through June 26, 2016 $42, Boynton Beach High April 4 through April 17, , Palm Beach Lakes High Sept 19, 2016 through Apr 2, , Forest Hill High Oct 3, 2016 through Jan 22, , Total Payments Not Received $53, Remittance Procedure Changed to Direct Deposit. Presently, schools receive payment checks from Active Net by mail approximately every two weeks for no additional charge. While reviewing the missing payments at each school, we found that incoming mail often did not reach the individual to whom it was addressed. This was especially true in larger schools. Active Net confirmed that checks were mailed to each school and addressed to Community School AP. However, the OIG found that the missing checks were never deposited. One Assistant Principal indicated that although he expected payments from the vendor on a regular basis, he did not actively follow-up with Active Net for payments. Recommendation Pursuant to the Agreement, another remittance option available to the District is payment through ACH every two weeks with no additional fee. To eliminate the issue of misplacing the checks within the schools, the OIG recommended that the District consider implementing ACH remittance from Active Network. In response to the OIG s recommendation, staff agreed and requested the vendor to send all future payments through direct deposit into the schools bank accounts beginning in January An Active Net Remittance ACH Deposit Worksheet will be completed for reconciling the remittance to registrations. The new procedures and process will be provided to the school staff through a webinar on January 16,

10 Management s Responses: Department of Adult & Community Education: Concurs. The Department of Adult & Community Education together with the Treasury Department have established a direct deposit process based on recommendations from the Inspector General s Office and the Treasury Department to ensure all funds are received. Starting January, community education school sites will no longer receive a paper check from Active Net. All remittance payments will be done through a direct deposit process (ACH Credit). The school treasurer will notify a designee of the ACH deposit amounts. In turn, the designee will complete a revised Active Net Remittance ACH Deposit Worksheet to complete the process (See Attachment). (Please see page 8.) Chief Financial Officer: Department of Adult & Community Education, Treasury and Accounting have collaborated on a process to ensure payments are received through ACH (direct deposit to school bank accounts). Two payments have been received to date (January 22, 2018). (Please see page 10.) 2. Written District Guidelines Needed for Active Net Payment Reconciliations Community School Directors (the Assistant Principals who are responsible for the programs at the schools) are required to reconcile each Active Net remittance check received to the student registration records in Active Net. Reconciliations determine the allocation of funds into the correct Internal Funds accounts. Periodic reconciliations also verify that the amount due to the school was received. The Department uses a SharePoint 1 website to communicate program information to individual Community School Directors. The Directors also receive face-to-face training at regular monthly meetings where they receive handouts explaining Active Net setup and registration procedures. However, while we found the reconciliation directions appear on the SharePoint website, they are not easily found by new staff to use when reconciling Active Net payments to student registrations. Our interviews with new directors and clerical staff revealed they often cannot locate procedures regarding Active Net setup and reconciliations. There are no written District guidelines to assist new program staff to navigate to the available online resources. There are advantages to having multiple delivery systems for program guidelines and procedures. For example, electronic guidelines and procedures online can be easily updated, as needed. However, having written procedures provide a permanent record at the school site for reference. 1 SharePoint is a web-based, collaborative platform used as a document management and storage system. 4

11 Recommendation The OIG recommends that written guidelines on Active Net remittance reconciliation be developed for all Community Schools. The guidelines should include specific guidance to locate the available resources on the SharePoint website. Management s Responses: Department of Adult & Community Education: The Department of Adult & Community Education will continue to send out monthly communications to all Adult Education Assistant Principals and clerical staff through the Assistant Principal SharePoint site, Monthly Highlight Newsletter, Monthly Assistant Principal Newsletter indicating Active Net instructions. We will also be updating SharePoint s layout and will ensure ease of accessibility to Active Net information. SharePoint s redesign should be completed by August of (Please see page 8.) Chief Financial Officer: The Department of Adult and Community Education is responsible for training staff using Active Net on the reconciliation process. (Please see page 10.) 3. Execution of Agreement Consistent with School Board Policies and Procedures School Board Policy Acceptance of Credit and Debit Cards states only a vendor awarded a contract shall be authorized to provide credit and debit card transactions. The Agreement dated September 30, 2013, was initiated by the Department of Adult and Community Education, reviewed by the General Counsel s Office, and signed by the Chief Financial Officer on behalf of the District in compliance with School Board Policy Policy 6.14 provides that copyrighted materials, such as computer software, may be purchased through direct negotiation without the need for competitive solicitation and authorizes the Chief Financial Officer to approve these purchases. Therefore, the OIG concluded that the Agreement with Active Net was executed consistent with School Board Policies and Procedures. Management s Responses: Department of Adult & Community Education: We concur. (Please see page 8.) Chief Financial Officer: IG determined execution of agreement was consistent with School Board Policies and District Guidelines. Management has no additional comment. (Please see page 10.) 5

12 4. Service Charges Paid Consistent with Agreement The Agreement with Active Net included a schedule of service charges. Charges are divided into two categories: online (registrations that are entered directly by the student into the Active Net System) and onsite (registrations that are entered into the Active Net System by school staff on behalf of the student). A processing fee is assessed for every registration, whether online or onsite. A transaction fee is added for each online registration paid by credit card, but not to exceed the stated amount in the Agreement (varies depending on transaction amount). Additionally, for each credit card refund processed through Active Net, the school pays $0.10 for each refund transaction. Service charges can be increased by Active Net with a 90-days notice. Beginning July 1, 2016, Active Net increased service charges by 7% after sending a letter to the Department. Below is a table of service charges for the period September 30, 2013, through June 30, 2016, and the new Fee Schedule beginning July 1, (See Table 2). Table 2 Active Net Schedule of Service Charges Fee 9/30/2013 through 6/30/2016 Beginning 7/01/2016 Onsite Processing Fee (cash/checks) 1.5% 1.6% Onsite Transaction Fee n/a n/a Online Processing Fee (credit/debit cards) 2.99% + $ % + $.25 Online Transaction Fee (not to exceed) For charges from $0 - $ % (Note) 6.96% (Note) For charges from $150 - $ % + $5 3.75% + $5 For charges from $500 and up 2.5% + $ % + $10 Onsite refunds n/a n/a Online refunds (credit cards) $0.10 $0.10 Note: Minimum total service charge is $2. The total service charge for online registrations will not exceed the stated Agreement Transaction Fee amount. For example, the total service charge for a $40 online registration is $2.60 [$40 x 6.5% = $2.60, which consists of a processing fee of $1.45 ($40 x 2.99% + $0.25) and a transaction fee of $1.15 ($ $1.45 = $1.15]. Analysis of Service Charges Paid. Table 3 provides the total service charges paid to Active Net since the inception of the Agreement. With all programs fully implemented, the annual service charges were approximately $53,000 on average. We reviewed the total fees charged by Active Net for Fiscal Year 2017 by comparing the service fees retained by Active Net for each transaction to the Schedule of Service Charges. Total fees charged by Active Net appeared reasonable and charged in accordance with the Agreement. 6

13 Table 3 Total Service Charges Paid Fiscal Year # of Schools # of Transactions Online Credit/ Debit Card Onsite Cash/ Check Total Amount Received Total Service Charges Total as a % of Amount Paid $ 767 $ 45 $ 812 $ % , ,954 42, ,281 8, % , , , ,767 52, % , , , ,417 55, % , , , ,985 51, % Totals $2,175,176 $542,086 $2,717,262 $166, % Management s Responses: Department of Adult & Community Education: We concur. (Please see page 8.) Chief Financial Officer: IG review concluded fees were reasonable and consistent with agreement. Management has no additional comment. (Please see page 10.) End of Report 7

14 Appendix A Management s Response Department of Adult & Community Education The Chief Academic Officer and Assistant Superintendent of Choice & Innovation both agreed with the following management s responses. 8

15 Appendix A Management s Response Department of Adult & Community Education 9

16 Appendix B Management s Response Chief Financial Officer 10

Special Review of. Money Collection Records At Pierce Hammock Elementary School

Special Review of. Money Collection Records At Pierce Hammock Elementary School Special Review of Money Collection Records At Pierce Hammock Elementary School April 29, 2016 Report #2016-04 MISSION STATEMENT The School Board of Palm Beach County is committed to providing a world class