Purpose/Conclusion: To document for audit the risks for our planning conference brainstorm.

G.1 District Operations

Seattle Parks and Recreation has an agreement with the District to administer certain field and facility
rentals. This agreement is effective through August 31, 2015. Based on PY review of internal controls
over contracts/agreements, we identified weaknesses in controls over collection of facility usage fees
and lack of compliance by 3
rd
parties with contract terms. In addition we
identified lack of sufficient detail and support for billing and lack of monitoring of delinquent accounts
related to facilities revenue. We issued a finding to the District regarding the Districts failure to ensure
facilities usage fees are timely invoiced, adequately supported and that all revenue invoiced is collected.
This is a potential risk to the accountability audit as the District may not have followed up on the finding.
G.1 Key Operational Information
The Seattle School District uses SAP software for Payroll and FAST (Financial Accountability System), the
general ledger module. We believe that the risk of errors in the financial statements is increased due to
the complexities of the SAP system. In the past the District had findings for incomplete financial
statements, but in recent years, they have improved. We have not reported a finding on the financial
statements since the FY 2009 audit. The potential risk to the financial statement audit is the risk of
errors in reporting payroll costs due to the complexities of the SAP system.
G.1 COSO Evaluation
Recent media coverage of inadequate controls over operations and fraudulent activities at the District
have heighted public scrutiny of District spending. The District may feel pressured to understate
administrative costs to minimize criticism from parents, general public and the media.
In prior audits we noted instances in which public assets were misappropriated or susceptible to risk of
misappropriation due to lack of effective policies, management's failure to enforce existing policies
and/or inadequately trained staff.
We communicated internal control weaknesses at the District in areas such as payroll, safeguarding
assets, and cash receipting. The District is unable to promptly address issues by the enforcement of
timely corrective action. Staffing shortages, significant turnover in management, technological
shortcomings, and funding demands contribute to repeated deficiencies in internal controls.
B.1 Entity Environment & COSO
Excessive turnover and transition in leadership poses uncertainties of the tone at the top.
B.1 Required Risks to Assess
ALE program audits will be done by Team Schools Program.
Evaluating the Districts financial condition is required per SAO Schools Planning Guide.

B.1 Red Flags
District has numerous large capital projects scheduled due to BEX IV levy funding. This is a red
flag for bid law compliance. However, we know that the district just hired Internal Auditor to
monitor Capital Project Fund activities. During our brainstorm discussion we assessed this at
low and decided not to review bid law compliance in the current audit.

Accountability over transportation, including undocumented personal use of fleet vehicles, failure to
report personal use of district vehicle to IRS, lack of cross training of transportation salaried employees
resulting in excessive OT charges, no allocation of transportation costs by school.
No centralized budget/cost center for fleet management. No centralized authority over use of fleet
vehicles. No screening procedures to ensure statutory compliance with DOL (auto license is current, no
recent suspensions) No centralized fleet maintenance schedule.
Other Engagements and FAWF
The District implemented a new monitoring system for tracking assets. We will consider review of
internal controls over safeguarding assets and the effectiveness of controls in mitigating risk of loss or
misappropriation.
Payroll OT reporting was identified as a risk in the prior year. Payroll overrides in the SAP system and
payroll transactions made outside the SAP system. Risk that classified employees are being put on the
displaced list and continue to receive a paycheck after their position has been eliminated. Payroll benefit
personal use of District vehicle and inadequate support of reimbursed fuel expense also identified as
risk areas.
Prior SAO audits also identified payouts to contractors prior to signed contract agreement as well as
unnecessary contract procurement for jobs that could be performed in house by Facilities Dept staff.
Prior audit noted risk of the District not providing after hours tutoring services to students although
funding may be available.
District Internal Auditor reported the District does not have sufficient and effective monitoring over
transportation invoice payments, fuel accountability, OT charges, use of take home vehicles and sole
source justification of personal service contracts.
Internal Auditor reported costs associated with fuel usage is not charged to cost center (school/building)
to which the vehicle is assigned. We will consider testing of fuel allocation costs in our brainstorm
session.
There is no understanding of how the central administration accounts are spent for and how they roll-up
into the budget adopted by the Board. Due to other high risk areas we will FAWF for future audit
consideration.
Minutes
The District lacked internal controls to ensure all revenue owed was collected for its numerous
properties and facilities.
Budget constraints, and decreases in funding present a risk of misuse of restricted funds for general
fund expenditures
District signs contingency contracts with prospective employees (stipends paid to students in a teacher
residency program) -- risk of insufficient budget oversight and monitoring of resources to ensure all
program expenditures benefit the District.
New information system for student data collection (Power School)-- risk that enrollment/transfer
activity will be under/overreported during the transition process.
District has numerous public works projects resulting from BEXIV levy funds - risk of non compliance
with statutory laws.
Planning Analytical Procedures:
We identified vendors that were paid a significant increase in FY 2013.
We identified an hourly employee who received a 40% increase over the prior year.