Report 2014-135R Recommendation 13 Responses

Report 2014-135R: Magnolia Science Academies: Although the Financial Condition of These Charter Schools Has Improved, Their Financial Controls Still Need to Be Strengthened (Release Date: May 2015)

Recommendation #13 To: Los Angeles Unified School District

To improve communication between the inspector general and the division, LAUSD should develop procedures for discussing relevant findings in draft form and for determining how those findings should affect the decisions that the division or the board makes.

1-Year Agency Response

In furtherance of responding to recommendation #13 of California State Auditor Report 2014-135R, the Office of the Inspector General (OIG) has developed procedures for discussing relevant findings with the LAUSD Charter Schools Division (CSD). The procedures have been added to the OIG's Internal Audit Manual as Appendix F to Chapter 7 entitled "Other Types of Reports Issued by Internal Audit." The appendix describes the procedures that will be followed when an audit or forensic accounting project is prepared by the OIG or its designee in support of the CSD's oversight function. These procedures also include the steps taken to determine the scope of projects as well as the parameters of how the information in forensic accounting projects will be used by the CSD in the event that such information is provided to the CSD in draft form. The OIG worked with the CSD to develop these procedures. These procedures serve as a contingency and do not change the overriding policy that audits and forensic accounting projects will only be provided to the CSD in final form.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

The District's 6-month implementation report is as follows:

In furtherance of responding to the recommendation, the OIG will prepare an additional appendix to be included in Chapter 7 of its Internal Audit Manual. Chapter 7 is entitled "Other Types of Reports Issued by Internal Audit." This appendix will describe the procedures that will be followed when a forensic accounting project is to be prepared by the OIG or its designee in support of the Charter Schools Division oversight function. These procedures will include the steps taken to determine the nature, scope and timing of the project as well as the steps that will be taken to ensure that there is agreement by all parties as to the parameters of how the information in the forensic accounting project will be used by the CSD in the event that such information is provided to the CSD in draft form. These procedures will be shared with the CSD prior to adoption by the OIG. The development of these procedures will be done as a contingency and will not change the overriding policy that forensic accounting projects will typically only be provided to the CSD by the OIG when they are in final form.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The Office of Inspector General ("OIG") is an independent, statutorily created entity the functions of which include investigating whether a law, regulation, rule or school district policy has been violated. (Ed. Code, section 35400 et seq.) To avoid any future issues that may arise as a result of draft forensic accounting review reports or portions thereof being used as the basis for decisions and actions by the District and/or the Board of Education, the OIG will provide CSD with copies of final forensic review reports. This will be done unless the report is confidential since it is part of an investigation. (Ed. Code, section 35401(c).) OIG audit reports will undergo the regular procedures for gathering comments from the audited entities as required by generally accepted government auditing standards.

California State Auditor's Assessment of 60-Day Status: Partially Implemented

Although the LAUSD's response states that the inspector general will provide the division with final reports, it does not indicate that it has developed procedures for discussing relevant findings in draft form or procedures for determining how those findings should affect the decisions that the division or the board make. Without such procedures the LAUSD risks making decisions on incomplete information.

All Recommendations in 2014-135R

Agency responses received are posted verbatim.