No. 38772 (Amendment): Section R277-113-4. LEA Responsibilities

(Amendment)

DAR File No.: 38772
Filed: 08/15/2014 06:14:16 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Section R277-113-4 is amended in response to S.B. 93, Internal Audit Amendments, from the 2014 General Legislative Session.

Summary of the rule or change:

The amendments to the rule provide procedures for all local education agencies (LEAs) to establish audit or finance committees, and for an LEA with 10,000 or more students to establish its own internal audit program and annual review of programs administered by the LEA.

State statutory or constitutional authorization for this rule:

• Subsection 53A-1-402(1)(e)
• Subsection 53A-1-401(3)

Anticipated cost or savings to:

the state budget:

The additional requirements for all LEAs to establish an audit or finance committee and for an LEA with 10,000 or more students to establish its own internal audit program and annual review likely will not result in a cost or savings to state government because the requirements apply specifically to LEAs.

local governments:

LEAs with less than 10,000 students will likely have no fiscal impact. Because LEAs with 10,000 students or more are required to have an annual review and internal audit of LEA programs, an LEA will likely have additional costs as a result of employing qualified staff to perform internal reviews and audits, or contracting with an audit service outside of the LEA for services. Costs are speculative but could be as much as $2,900,000 total for all qualifying LEAs.

small businesses:

The additional requirements within this rule likely will not result in a cost or savings to small businesses because the requirements apply specifically to LEAs.

persons other than small businesses, businesses, or local governmental entities:

The amendments to this rule provide requirements that apply specifically to LEAs which likely will not result in a cost or savings to persons other than small businesses, businesses, or local government entities.

Compliance costs for affected persons:

The amendments provide requirements for LEAs to establish an audit or finance committee, and for LEAs with 10,000 or more students to establish their own internal audit program and annual review of the LEAs' programs. It is anticipated that LEAs will act consistent with state law and Board rule which will likely not result in any compliance costs for affected persons.

Comments by the department head on the fiscal impact the rule may have on businesses:

I have reviewed this rule and I believe that there is likely no fiscal impact on businesses.

Martell Menlove, State Superintendent

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Education
Administration
250 E 500 S
SALT LAKE CITY, UT 84111-3272

Direct questions regarding this rule to:

• Carol Lear at the above address, by phone at 801-538-7835, by FAX at 801-538-7768, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

10/01/2014

This rule may become effective on:

10/08/2014

Authorized by:

Carol Lear, Director, School Law and Legislation

RULE TEXT

R277. Education, Administration.

R277 113. LEA Fiscal Policies and Accountability.

R277-113-4. LEA Responsibilities.

A. LEAs shall develop, have approved by local/charter boards and implement [the]written fiscal policies as required [in]by R277-113-5[ before September 15, 2013]. LEAs shall review[These] policies [shall be in writing]annually.

B. LEAs shall also develop a plan for training LEA and public school employees, at least annually, on policies enacted by the LEA specific to job function.

(1) These policies shall be available at each LEA main office, at individual public schools, and on the LEA's website.

(2) The LEA fiscal policies and training may have different components, specificity, and levels of complexity for public elementary and secondary schools.

(3) LEAs may have one[ policy] or more [than one]policies to satisfy[ing] the minimum requirements of this rule.

[(4) An LEA policy shall address how often the policy shall be reviewed, including periodic updates or training and resource manuals.

] ([5]4) An LEA policy may reference specific training manuals or other resources that provide detailed descriptions of business practices which are too lengthy or detailed to include in the LEA policy.

C. [An]Each LEA board shall designate board members to serve on an audit or finance committee, consistent with Section 53A-30-102(1). The LEA audit or finance committee has the following responsibilities:

(1) establish and annually review an internal audit program that provides internal audit services for the programs administered by the LEA, consistent with Section 53A-30-103 (required only if LEAs have 10,000 or more students);

(2) receive a report of the risk assessment process undertaken by the LEA management in [developing the system of internal controls]conjunction with internal audit, if applicable;

([1]3) ensur[ing]e that the LEA management properly develops and adheres to a sound system of documented internal controls consistent with the requirements of R277-113-5;

([3]4) develop[ing] a process to review LEA management's financial [information]reporting practices, financial statements, LEA financial position, and LEA and individual school records on a regular basis;

(5) report the fiscal position of the LEA to the LEA board monthly;

[(4) ensuring that management conducts a competitive RFP process to hire external auditors and other professional services and making a recommendation to the LEA board on the results of the RFP process consistent with the State Procurement Code;

](6) determine the appropriate scope of the independent audit, determine the appropriate scope of nonaudit services to be performed by the independent auditor, manage the audit procurement process in compliance with State Procurement Code Section 63G-6a, and make recommendations to the LEA board on the results of the procurement process;

[(5) receiving communication from or meeting with the external auditors annually and receiving a direct report of the audit findings, exceptions, and other matters noted by the auditor;

](7) facilitate regular direct communication with independent auditors, receive independent audit report and financial statements, ensure management implements corrective actions, assess performance of the independent auditors, and review disagreements between independent auditors and management;

(8) determine the appropriate scope of contracts with management companies that provide business services and student services, manage the procurement process in compliance with Section 63G-6a, make recommendations to the LEA board on the results of the procurement process, assess the performance of management companies, and ensure management implements sufficient internal controls over the functions of the management company;

(9) prioritize internal audit plan, receive audit reports from internal auditors or contractors providing internal audit services and other regulatory bodies, and provide an independent forum for internal auditors or internal audit contractors or other regulatory bodies to report findings of management abuse or control override;

(10) conduct or advise the LEA board in an annual evaluation of internal audit personnel or contractor;

(11) ensure that issues and exceptions reported by external audits, internal audits, or other regulatory bodies are resolved in a timely manner; and

([6]12) [reporting]present the annual audit reports and findings or other matters communicated by the external auditor or other regulatory bodies to the LEA board in a public meeting[;].

[(7) ensuring that matters reported by external audits, internal audits, or other regulatory bodies are resolved in a timely manner.

] D. The definition of school sponsored and requirements of R277-113-4[F]G do not apply to activities, fundraising events, clinics, clubs, camps, or activities organized by a third party which have not been designated by the LEA as school sponsored. All transactions pertaining to nonschool sponsored events shall be conducted at arm's length; revenues and expenditures shall not be commingled with public funds.

E. For nonschool sponsored events, funds may be managed or held by a public school employee, only consistent with R277-107.

F. The definition of school sponsored and requirements of R277-113-4[F]G do not apply to non-curricular clubs specifically authorized and meeting all criteria of Sections 53A-11-1205 through 1208.

G. LEAs and individual public schools shall comply with the following regarding school and nonschool sponsored activities:

(1) may enter into contractual agreements to allow for fundraising and use of LEA facilities. An agreement shall take into consideration the LEA's fiduciary responsibility for the management and use of public funds. LEAs should consult with the LEA insurer or legal counsel, or both, to ensure risks are adequately considered and managed;

(2) shall annually review fundraising activities that support or subsidize LEA or public school-authorized clubs, activities, sports, classes or programs to determine if the activities are school sponsored consistent within R277-113-1H;

(3) shall ensure that revenues raised from school sponsored activities and funds expended from the proceeds are considered public funds consistent with R277-113-1G;

(4) shall maintain adequate records to ensure that funds collected from or during school sponsored activities are in compliance with LEA cash handling policies as required by R277-113-5;

(5) shall maintain adequate records to show that expenditures made to support activities from LEA or public school funds are in compliance with LEA expenditure of funds policies as required by R277-113-5; and

(6) shall make records of activities available to parents, students, and donors and shall maintain the records in sufficient detail to track individual contributions and expenditures as well as overall financial outcome. Records may be private or protected consistent with Sections 63G-2-302, 303, 305, and the Family Educational Rights and Privacy Act (FERPA), 20 U.S.C. Section 1232g[;].

H. Public Education Foundations established by LEAs shall follow the requirements provided in Section 53A-4-205.

 

KEY: school sponsored activities, public funds, fiscal policies and procedures, audit committee

Date of Enactment or Last Substantive Amendment: [November 7, 2013]2014

Authorizing, and Implemented or Interpreted Law: Art X, Sec 3; 53A-1-401(3); 53A-1-402(1)(e)

 

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