Special Review of

Freedom Shores Elementary School’s

Parent School Organization

July 15, 2014

Report #2014-05

E. Wayne Gent

Superintendent of Schools

School Board Members Audit Committee Members

Chuck Shaw, Chair Noah Silver, CPA, Chair

Frank A. Barbieri, Jr., Esq., Vice Chair David H. Talley, Vice Chair

Marcia Andrews N. Ronald Bennett, CPA

Karen M. Brill Gregory S. Daniel

Jennifer Prior Brown, Esq. Michael Dixon, CPA/PFS

Michael Murgio Richard Roberts, CPA

Debra L. Robinson, M.D. Bill Thrasher, CGFO

Representatives

Frank A. Barbieri, Jr., Esq., School Board Member

E. Wayne Gent, Superintendent of Schools

JulieAnn Rico, Esq., General Counsel

Stephanie Nance, Principal Representative

CTA Representative

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.

Special Review of

Freedom Shores Elementary School’s

Parent School Organization

Table of Contents

Page

PURPOSE AND AUTHORITY 1

SCOPE AND METHODOLOGY 1

BACKGROUND 2

LAW ENFORCEMENT INVOLVEMENT AND BANK ACCOUNT CLOSED 2

CONCLUSIONS

1. Disbursements Without Supporting Documentation 2

2. Purchases From Personal Business 4

3. Questionable Expense Record Forms 5

4. Delayed Deposits and Inadequate Documentation for Revenue Collections 5

5. Other Internal Control Weaknesses 6

APPENDICES – Management’s Responses

A. Principal of Freedom Shores Elementary 7

B. President of Freedom Shores Elementary’s Parent School Organization 8

C. Chief Operating Officer of the School District 9

This page intentionally left blank.

1

M E M O R A N D U M

TO: Honorable Chair and Members of the School Board

E. Wayne Gent, Superintendent of Schools

Chair and Members of the Audit Committee

FROM: Lung Chiu, CPA, Inspector General

DATE: July 15, 2014

SUBJECT: Special Review of Freedom Shores Elementary School’s Parent School Organization

PURPOSE AND AUTHORITY

In response to the request of the Principal of Freedom Shores Elementary School, we have

conducted a special review of the school’s Parent School Organization (Freedom Shores PSO)

financial records for the period July 1, 2012, through December 4, 2013. The primary objective

of this special review was to determine the appropriateness of disbursements by Freedom Shores

PSO.

Authority to Audit the School’s Parent School Organization

Since Freedom Shores PSO is an independent legal entity and maintained a separate bank

account outside of the school’s Internal Funds, the Office of Inspector General does not have the

authority to audit its financial records. Subsequently, on October 31, 2013, the school’s

Principal and Area Superintendent contacted us and indicated that Freedom Shores PSO’s Board

of Directors requested our department to review its financial records.

SCOPE AND METHODOLOGY

This review was conducted during November 20, 2013, through December 18, 2013, and

included reviewing Freedom Shores PSO’s:

General Ledger,

Bank statements, and

Supporting documentation for disbursements.

Draft findings were sent to Freedom Shores PSO’s Board of Directors and the school principal

for comment. Management responses are included in Appendices. We appreciate the courtesy

and cooperation extended to us by Freedom Shores PSO and District staff during the review.

The final draft report was presented to the Audit Committee at its July 15, 2014, meeting.

THE SCHOOL DISTRICT OF LUNG CHIU, CIG, CPA SCHOOL BOARD PALM BEACH COUNTY, FLORIDA INSPECTOR GENERAL CHUCK SHAW, CHAIRMAN

FRANK A. BARBIERI, JR, ESQ., VICE CHAIRMAN OFFICE OF INSPECTOR GENERAL MARCIA ANDREWS 3318 FOREST HILL BLVD., C-306 KAREN M. BRILL WEST PALM BEACH, FL 33406 JENNIFER PRIOR BROWN, ESQ. MICHAEL MURGIO (561) 434-7335 FAX: (561) 434-8652 DEBRA L. ROBINSON, M.D. www.palmbeachschools.org E. WAYNE GENT, SUPERINTENDENT

2

BACKGROUND

During our Annual Audit of the school’s 2013 Internal Funds, the Principal of Freedom Shores

Elementary expressed concerns that the treasurer of Freedom Shores PSO:

May have purchased items from her personal business with Freedom Shores PSO funds,

which might have conflict of interest and ethical implications.

Got irate at school staff when staff accidently opened a bank statement for Freedom

Shores PSO.

LAW ENFORCEMENT INVOLVEMENT AND BANK ACCOUNT CLOSED

Our review concluded several instances of irregularities. We recommended to the Parent School

Organization that a report be filed with the appropriate law enforcement agency for necessary

actions. Subsequently, Boynton Beach Police Department referred the case back to the School

Police Department for further investigation. School Police completed its investigation in April

2014, and the conclusions were forwarded to the State Attorney for further actions.

In December 2013, Freedom Shores PSO closed its bank account. Since then, Freedom Shores

PSO’s funds and financial records have been maintained in the school’s Internal Funds.

CONCLUSIONS

1. Disbursements Without Supporting Documentation

a) $8,850.82 in Disbursements Without Supporting Documentation. According to Freedom

Shores PSO’s bank statements, a total of $77,674.46 (including checks, ATM, bank

charges, and debit card transactions) was disbursed from Freedom Shores PSO’s

checking account during July 1, 2012, through November 30, 2013. Our review of the

expenditure records found that 25 transactions, totaling $8,850.82, did not have

supporting documentation for the expenses.

# Date Paid By * Payee Amount

1. 10/10/2012 Check #1272 Enjoy the City $2,240.00

2. 10/13/2012 Check #1273 PTO Today 795.00

3. 12/10/2012 Debit Card #6135 (PSO’s treasurer) Cash Withdrawal 100.00

4. 12/21/2012 Debit Card #8972 (PSO’s ex-president) Cracker Barrel 15.98

5. 3/11/2013 Debit Card #8972 (PSO’s ex-president) Wayfair Wayfair 202.40

6. 3/25/2013 Check #1283 Powerline Promotion 150.00

7. 4/11/2013 Debit Card #6135 (PSO’s treasurer) Cash Withdrawal 200.00

8. 5/13/2013 Check #1286 Aloha Ice 100.00

9. 5/28/2013 Debit Card #6135 (PSO’s treasurer) Little Caesars 25.00

10. 6/6/2013 Debit Card #6135 (PSO’s treasurer) Publix 100.00

11. 6/6/2013 Debit Card #6135 (PSO’s treasurer) Little Caesars 25.00

12. 6/10/2013 Check #1290 Above & Beyond Balloons 254.00

3

# Date Paid By * Payee Amount

13. 6/11/2013 ACH Debit Harland Clarke CHK Orders $195.50

14. 6/14/2013 Debit Card #8972 (PSO’s ex-president) Benchmark Education Co 154.00

15. 6/14/2013 ACH Debit Harland Clarke CHK Orders 37.15

16. 6/17/2013 Check #1292 Free the Children 1,000.00

17. 6/25/2013 Check #1291 Heifer International 1,000.00

18. 7/8/2013 Debit Card #8972 (PSO’s ex-president) Panera Bread 20.10

19. 9/18/2013 Debit Card #3421 (PSO’s current president) Thirty-One ** 661.69

20. 9/18/2013 Debit Card #3421 (PSO’s current president) Thirty-One ** 11.58

21. 10/24/2013 Debit Card #4853 (PSO’s ex-vice-president-1) Thirty-One ** 343.44

22. 10/24/2013 Debit Card #4853 (PSO’s ex-vice-president-1) Thirty-One ** 32.16

23. 11/8/2013 Debit Card #4853 (PSO’s ex-vice-president-1) Thirty-One ** 395.07

24. 11/12/2013 Debit Card #6135 (PSO’s treasurer) Thirty-One ** 552.80

25. 11/12/2013 Debit Card #6135 (PSO’s treasurer) Office Depot 239.95

Total $8,850.82

* Debit cards for Freedom Shores PSO’s checking account were issued to four Freedom Shores PSO officers:

current president, ex-president, ex-vice-president-1, and treasurer.

** Both Freedom Shores PSO’s ex-vice-president-1 and treasurer were sales agents of Thirty-One, a catalog

sales vendor.

As required by Article V, Section 4.f. of Freedom Shores PSO’s Bylaws,

“The Treasurer is responsible for ensuring that all disbursements from the PSO

account are properly recorded and that disbursements are not made without a

completed PSO Expense Record accompanied by required documentation.”

In addition, Article VIII of the Bylaws requires that

“All funds raised must be placed in the PSO bank account. All funds that leave

the PSO account must be accounted for using an expense record.”

b) $447.88 in Gift Cards With Inadequate Supporting Documentation. Another seven

purchases totaling $447.88 ($440 in gift-cards and $7.88 in activation fees) for 20 gift-

cards did not have documentation for the recipients of the gifts. In absence of supporting

documentation for the recipients, there is no assurance that these 20 gift-cards were

properly handled.

Date Purpose Amount

10/01/2012 McDonalds thank you gifts

(Six $10 Starbucks gift-cards)

$60.00

10/27/2012 Winner of fundraiser

(One $50 Visa gift-card)

53.94

10/27/2012 Winner of fundraiser

(One $50 gift-card)

53.94

12/21/2012 Staff appreciation gift

(One $20 Dunkin’ Donuts gift-card)

20.00

03/04/2013 Administration appreciation

(One $10 Starbucks gift-card)

10.00

06/06/2013 Teachers retirement

(Four $25 Publix gift-cards)

100.00

09/25/2013 6 Winners for Enjoy the City

(Six $25 Target gift-cards)

150.00

Total $447.88

4

2. Purchases From Personal Business

Freedom Shores PSO’s ex-vice-president-1 and the treasurer were consultants (i.e. sales

agents) with a catalog sales company (Thirty-One) which sells “Trendy and Affordable

Purses, Totes, Bags and Accessories.” The review of April through November 2013 bank

statements found that Freedom Shores PSO made 15 purchases, totaling $8,607.12, from

Thirty-One:

Six purchases, totaling $4,895.71, were charged to the debit card issued to the

treasurer.

Six purchases, totaling $2,940.74, were charged to the debit card issued to the current

president.

Three purchases, totaling $770.67, were charged to the debit card issued to the ex-

vice-president-1.

Six purchases, totaling $1,996.74, did not have any supporting documentation.

The Expense Record Forms for six purchases, totaling $4,397.41, were submitted by

the treasurer.

The Expense Record Form for one purchase (for $997.75) did not have the signature

of the requestor/submitter.

Date Paid By Expense Report

Submitted/Signed By Amount

8/26/2013 Debit Card #3421 (PSO’s current president) PSO’s treasurer $694.02

9/18/2013 Debit Card #3421 (PSO’s current president) No supporting documentation 661.69

9/18/2013 Debit Card #3421 (PSO’s current president) No supporting documentation 11.58

10/15/2013 Debit Card #3421 (PSO’s current president) PSO’s treasurer 460.32

10/18/2013 Debit Card #3421 (PSO’s current president) PSO’s treasurer 420.25

10/22/2013 Debit Card #3421 (PSO’s current president) PSO’s current president * 692.88

10/24/2013 Debit Card #4853 (PSO’s ex-vice-president-1) No supporting documentation 343.44

10/24/2013 Debit Card #4853 (PSO’s ex-vice-president-1) No supporting documentation 32.16

11/8/2013 Debit Card #4853 (PSO’s ex-vice-president-1) No supporting documentation 395.07

4/9/2013 Debit Card #6135 (PSO’s treasurer) PSO’s treasurer 2,242.54

4/22/2013 Debit Card #6135 (PSO’s treasurer) Not signed 997.75

5/31/2013 Debit Card #6135 (PSO’s treasurer) PSO’s treasurer 84.72

10/28/2013 Debit Card #6135 (PSO’s treasurer) PSO’s current president * 522.34

10/29/2013 Debit Card #6135 (PSO’s treasurer) PSO’s treasurer 495.56

11/12/2013 Debit Card #6135 (PSO’s treasurer) No supporting documentation 552.80

Total $8,607.12

* According to Freedom Shores PSO’s current president, she did not sign the forms. As a result, the signatures

that appeared on the forms were allegedly forged.

According to Thirty-One, their consultants receive a 25% commission on the sales

(excluding sales tax and shipping and handling fees). Freedom Shores PSO’s ex-vice-

president-1 and the treasurer would have received commission up to an estimated total of

$2,151.78 from Freedom Shores PSO’s $8,607.12 purchases with Thirty-One.

5

3. Questionable Expense Record Forms

Of the 15 purchases from Thirty-One, six purchases (totaled $2,940.74) were charged to the

debit card issued to Freedom Shores PSO’s current president. Two purchases (totaled

$673.27) did not have any supporting documentation. The Expense Record Forms for

another three purchases (totaled $1,574.59) were signed and submitted by the treasurer

instead of Freedom Shores PSO’s current president (card holder).

Moreover, the Expense Record Forms for two purchases, totaling $1,215.22, indicated that

they were signed and submitted by the current president. One purchase (for $692.88) was

paid with the debit card issued to the President and the other one (for $522.34) was paid with

the card issued to the treasurer. However, the current president indicated that the signatures

on the related Expense Record Forms were not hers.

Due to the alleged fraudulent signatures on the forms, we recommended to the Parent School

Organization that a report be filed with the appropriate law enforcement agency for necessary

actions.

4. Delayed Deposits and Inadequate Documentation for Revenue Collections

No Record for Collections. According to the bank statements, a total of $57,421.01 was

deposited into Freedom Shores PSO’s checking account during July 1, 2012, through

November 30, 2013. However, there was no documentation available to verify the sources

and accuracy of the monies deposited. According to the Treasurer, the documentation was

discarded at the time after the collections were deposited.

$13,736.14 in Freedom Shores PSO Funds Kept by the Treasurer at Her House. The only

supporting documentation for collections was for the Great American Opportunities

fundraiser event. However, the money was not deposited after collection; and was kept in

the closet of the treasurer’s home. On December 3, 2013, Freedom Shores PSO’s president

obtained a total of $13,736.14 from the treasurer’s home. Our review of the fundraiser order

forms found that a total of $11,435.31 in merchandise was purchased.

Delay in Deposit. We also noted that a total of $107 ($47 in cash and $60 in two checks)

was found in Freedom Shores PSO’s office on December 3, 2013. One $20 check was dated

September 23, 2013, and another $40 check was dated September 26, 2013. Money that was

apparently collected in September 2013, was left in the office for over two months, instead of

being deposited into the bank.

6

5. Other Internal Control Weaknesses

Debit cards for Freedom Shores PSO’s checking account were issued to four Freedom Shores

PSO officers: current president, ex-president, ex-vice-president-1, and the treasurer. These

debit card holders are allowed to withdraw funds from the checking account and authorize

purchase payments without the approval of a second person. This practice is contrary to the

purpose of dual-control for withdrawing funds from Freedom Shores PSO’s checking

account as required by Freedom Shores PSO’s Bylaws. Specifically, Article VIII of the

Bylaws requires that “Two signatures shall be required on all PSO checks” to ensure the

proper check and balance.

Overall Management’s Responses

Principal of Freedom Shores Elementary: Upon careful review of the draft report

regarding the Parent Student Organization at Freedom Shores Elementary School; I

acknowledge your independent findings based on the evidence provided. (Please see

page 7.)

President of Freedom Shores PSO: Concurs. (Please see page 8.)

Chief Operating Officer of the School District: I have reviewed your report on the

Special Review of Freedom Shores Elementary School’s Parent School Organization

(PSO) and the response provided by Robynne Kruse, PSO President and Patricia Trejo,

Principal of Freedom Shores Elementary School. As the specific audit recommendations

have already been addressed I have nothing further to add. (Please see page 9.)

– End of Report –

Appendix A

Management’s Response

Principal of Freedom Shores Elementary

7

Appendix B

Management’s Response

President of Freedom Shores Elementary’s Parent School Organization

8

Appendix C

Management’s Response

Chief Operating Officer of the School District

9