TO: Audit Clearinghouse Task Force & BASC

FROM: Jim Thomas, Deputy Superintendent, Business Services

DATE: December 8, 2010

SUBJECT: Summary of the Audit Guide Committee Meeting of December 1, 2010

The first meeting for the 2011-12 Audit Guide was held on December 1, 2010, at the Office of the State Controller.

In attendance: Arlene Matsuura, Raquel Tucker, Peter Foggiato, CDE; Cassandra Moore-Hudnall, Arturo Ambriz, Vicci Uyeda, SCO; Jim Thomas, CCSESA.

Joining the meeting by telephone: Thomas Todd, Department of Finance.

2010-11 Audit Guide Supplement

There will be no supplement or any changes to the 2010-11 Audit Guide.

2011-12 Audit Guide

1) Instructional Time

CDE proposed technical corrections to Section 19824 which pertains to optional classes that are offered on only a small number of courses or a block of time that are appropriate only for limited numbers of pupils and where courses are scheduled such that pupils may take them only by giving up their lunch period or attending school outside the schedule of district provided bus service.

2) After School Education Safety Program

CDE proposed changes to Section 19846, paragraph 4, which directs auditors to determine whether elementary school pupils participated in the full day of the after school program on every day during which pupils participated, and determine whether pupils in middle or junior high schools attended the after school program a minimum of nine hours a week and three days a week, except as consistent with the established early release policy.

CDE indicated this is a compliance issue, only, which could jeopardize future grants, but would not attach a monetary audit finding.

Early release programs that would provide for absences, such as doctor’s appointments, would not constitute a finding. CDE proposes changes to the Audit Guide so that the nine hours and the three days will not be tested. The only test would be if the students attended a full day on program days that were scheduled.

There was discussion also about testing to determine whether full-time (three day) students are given priority over students attending less than full-time. It was noted that this could be difficult to test. A question also was raised as to whether a student who had been admitted to the program on a part-time basis with space available would be ejected from the program if there was a waiting list that included students requesting full-time attendance. Arlene will check with the department program people on the priority issue to see if a student would be displaced if a full-time student showed up. Arlene believes this procedure is less restrictive than the current Audit Guide provisions. She also indicated that the priority issue might be eliminated if it is determined to be too difficult to test.

3) Juvenile Court Schools

CDE has proposed a procedure to test the ADA on juvenile court schools. AB 1610 requires that this be included in the Audit Guide. The proposed procedures would have the auditors assure that a fixed divisor of 175 days was used. It was noted that juvenile court school students can earn more than one ADA because of the fixed 175 divisor. The procedures would also test to assure that the 240 minute minimum day was met. It was noted that Education Code Section 48645.3 allows for the 240 minutes to be obtained based on an average over a ten day period. It was not felt that there is anything controversial about the proposed audit procedures and Steve Wescoatt has indicated that Perry-Smith has discussed the proposed procedures and does not feel they will be problematic or burdensome.

4) Breakfast in the Classroom

CDE brought forth the discussion to determine whether a procedure needs to be added to test when breakfast is served in the classroom, whether instruction is going on at the same time in order to allow counting of those minutes. It was determined that this will not be put in the Audit Guide.

5) K-3 Class Size Reduction (Additional Testing if Ratio is Greater than 20.4)

Statutes require that there will be additional audit testing if K-3 class sizes exceed 20.4. This no longer applies due to the flexibility that extends through June 30, 2012; however, the code still requires the procedures to be tested. It was determined that this language must remain in the Audit Guide as a result of the statutes, but that the SCO is advising auditors to simply not do the additional testing if class sizes exceed 20.4. SCO will consider sending out an advisory and/or propose putting a footnote in the Audit Guide telling auditors not to do the further testing, but to disclose that the class exceeded 20.4 and that the additional testing was not performed.

6) Clarification of How to Calculate Estimated Dollar Value of Disallowed ADA at P-2 and Annual

CDE indicated that there needs to be clarification as to the dollar value of disallowed ADA due to audit findings at P-2 and Annual. Some programs use P-2 and some use Annual ADA and this needs to be clarified. There was also some uncertainty as to whether opportunity school programs are audited and CDE will look into that for the next meeting. There may be other programs in addition to opportunity schools that need to be considered to be rotated into the attendance testing.

7) SCO Revisions

a. SCO will make technical changes to the Audit Guide according to SAS 115 and 117. Cassandra will work with EAAP on these format issues and definitions. They will not affect the LEA being audited. b. SCO will revise section 19815(e) report components to make technical corrections to be in compliance with OMB A-133.

8) Charter Schools

There is likely to be clarification of the definition of charter schools so that the schedule of ADA will be required to be broken out separately for each charter school. This needs to be further discussed at the next meeting. Steve Wescoatt had indicated that it would be preferable to have charter schools have an aggregate. It was expressed that for corporate operated charter school companies with multiple charter schools, the auditors should be auditing each separate school, and either issuing separate reports or displaying each school’s financial information in separate columns. For districts that run multiple charters, a sampling of the charter schools would be ok.

There was a great deal of discussion about cash flows for charter schools; whether those should be analyzed at the charter school level or at the corporate level for multiple charter corporate entities. Peter Foggiato expressed that aggregate made the most sense.

CDE will talk internally about this issue. The State Controller has been rejecting reports without separate statements; however, they could stop rejecting them. There was concern that the charter corporation could allow an individual charter school to go down even though the corporation, as a whole, was healthy and this could create liability to the chartering LEA that has fiscal oversight of the charter. There were no specific proposals made at this meeting, but it will be discussed further at the next meeting.

The direction seems to be moving toward that charter ADA would be reported by each charter school, plus an additional footnote if the charter was non-classroom based.

The next meeting is scheduled for January 6, 2011 at 9:00AM at the Office of the State Controller, 3301 C Street, Suite 750, Sacramento.