042-PGB-0519_Attachment_1_-_2017-2018_Audit_Report.pdf

Required Communications June 30, 2018

December 11, 2018

The School District of Polk County, Florida

Dear School Board:

We are pleased to present the results of our audit of the financial statement of The School District of Polk County, Florida’s (the “District”) Internal Funds for the year ended June 30, 2018.

This report to the School Board and Management summarizes our audit, the report issued and various analyses and observations related to the District’s accounting and reporting in regards to the Internal Funds. The document also contains the communications required by our professional standards.

Our audit was designed, primarily, to express an opinion on the District’s 2018 Internal Funds financial statement. We considered the District’s current and emerging business needs, along with an assessment of risks that could materially affect the financial statement, and aligned our audit procedures accordingly. We conducted the audit with the objectivity and independence that you, the School Board and Management, expect. We received the full support and assistance of District personnel.

At Carr, Riggs & Ingram, LLC (CRI), we are continually evaluating the quality of our professionals’ work in order to deliver audit services of the highest quality that will meet or exceed your expectations. We encourage you to provide any feedback you believe is appropriate to ensure that we do not overlook a single detail as it relates to the quality of our services.

This report is intended solely for the information and use of the School Board and Management and should not be used by anyone other than these specified parties.

We appreciate this opportunity to work with you. If you have any questions or comments, please contact me at 407 644 7455 or jchristensen@cricpa.com.

Very truly yours, Jennifer Christensen

Executive Summary

As discussed with the School Board and Management during our planning process, our audit plan represented an approach responsive to the assessment of risk for the District’s Internal Funds.

Specifically, we planned and performed our audit to:

Perform audit services, as requested by the School Board, in accordance with auditing standards generally accepted in the United States of America and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, in order to express an opinion on the District’s Internal Funds’ financial statement for the year ended June 30, 2018;

Communicate directly with the School Board and Management regarding the results of our procedures;

Address with the School Board and Management any accounting and financial reporting issues;

Anticipate and respond to concerns of the School Board and Management; and

Perform other audit related projects as they arise and upon request.

Florida Administrative Code 6A 1.087 School Board Responsible for Internal Funds states that the School Board is responsible for the administration and control of the internal funds of the district school system and that an audit of internal funds be provided on an annual basis. CRI conducted the audit for the year ended June 30, 2018 and during that process we performed certain control and compliance tests for 100% of the schools. Control and compliance tests were performed in each of the following areas:

Admission events Contracts Deficit balances Deposits Disbursements Fund raising activities Outside organization annual financial reports Pre numbered receipts Pre numbered tickets Purchasing card

We reviewed our findings and recommendations with the principal of each school and obtained the principal’s response to each finding, along with an estimated date when the corrective action will take place and what principal is responsible for implementing the change.

Executive Summary

1.56

1.20

1.42

0.87 0.80

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

125 internal accounts

125 internal accounts

125 internal accounts

143 internal accounts

144 internal accounts

Average Findings per School

Average Findings per School

Below is a graph showing the number of findings per school.

The percentage of schools by number of findings for the year ended June 30, 2018 is as follows:

NUMBER

OF

FINDINGS

NUMBER

OF

SCHOOLS

None 79 55%

1 39 27%

2 11 8%

3 9 6%

4 4 3%

5 or more

2 1%

Total 144 100%

A summary of the activity of the Internal Funds for the year ended June 30, 2018 is as follows:

Balance July 1, 2017 Revenue Expenditures

Balance June 30, 2018

$9,691,542 $12,651,612 ($12,297,190) $10,045,964

No findings 55%1 finding

27%

2 findings 8%

3 findings 6%

4 findings 3%

5 or more findings

1%

Percentage of Schools by Number of Findings

We have audited the financial statement of the District’s Internal Funds for the year ended June 30, 2018, and have issued our report thereon dated December 11, 2018. Professional standards require that we provide you with the following information related to our audit:

MATTER TO BE COMMUNICATED AUDITOR’S RESPONSE

Auditor’s responsibility under Generally Accepted Auditing Standards

As stated in our engagement letter dated July 18, 2018, our responsibility, as described by professional standards, is to express an opinion about whether the financial statement prepared by management with your oversight is fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America (GAAP). Our audit of the financial statement does not relieve you or management of your responsibilities.

As part of our audit, we considered the internal control of the District’s Internal Funds. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.

Client’s responsibility Management, with oversight from those charged with governance, is responsible for establishing and maintaining internal controls, including monitoring ongoing activities; for the selection and application of accounting principles; and for the fair presentation in the financial statement of fiduciary assets and liabilities in conformity with the applicable framework. Management is responsible for the design and implementation of programs and controls to prevent and detect fraud.

Planned scope and timing of the audit Our initial audit plan was not significantly altered during our fieldwork.

Management judgments and accounting estimates The process used by management in forming particularly sensitive accounting estimates and the basis for the auditor’s conclusion regarding the reasonableness of those estimates.

Please see the following section titled “Accounting Policies, Judgments and Sensitive Estimates and CRI Comments on Quality.”

Potential effect on the financial statement of any significant risks and exposures Major risks and exposures facing the District and how they are disclosed.

No such risks or exposures were noted.

MATTER TO BE COMMUNICATED AUDITOR’S RESPONSE

Significant accounting policies, including critical accounting policies and alternative treatments within generally accepted accounting principles and the auditor’s judgment about the quality of accounting principles

See Note 1 to the financial statement.

Significant difficulties encountered in the audit Any significant difficulties, for example, unreasonable logistical constraints or lack of cooperation by management.

None.

Disagreements with management Disagreements, whether or not subsequently resolved, about matters significant to the financial statement or auditor's report. This does not include those that came about based on incomplete facts or preliminary information.

None.

Other findings or issues Matters significant to oversight of the financial reporting practices by those charged with governance. For example, an entity's failure to obtain the necessary type of audit, such as one under Government Auditing Standards, in addition to GAAS.

None.

Matters arising from the audit that were discussed with, or the subject of correspondence with, management Business conditions that might affect risk or discussions regarding accounting practices or application of auditing standards.

None.

Corrected and uncorrected misstatements All significant audit adjustments arising from the audit, whether or not recorded by the District, that could individually or in the aggregate have a significant effect on the financial statement.

All uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented, that were determined by management to be immaterial, both individually and in the aggregate, to the financial statement taken as a whole. Any internal control deficiencies that could have prevented the misstatements.

Please see the following section titled “Summary of Audit Adjustments.”

Major issues discussed with management prior to retention Any major accounting, auditing or reporting issues discussed with management in connection with our initial or recurring retention.

None.

MATTER TO BE COMMUNICATED AUDITOR’S RESPONSE

Consultations with other accountants When management has consulted with other accountants about significant accounting or auditing matters.

None of which we are aware.

Written representations A description of the written representations the auditor requested.

See “Management Representation Letter” section.

Internal control deficiencies Any significant deficiencies or material weaknesses in the design or operation of internal control that came to the auditor’s attention during the audit.

See “Internal Control Findings” section.

Fraud and illegal acts Fraud involving senior management, the School Board or those responsible for internal controls, or causing a material misstatement of the financial statement, where the auditor determines there is evidence that such fraud may exist. Any illegal acts coming to the auditor’s attention involving senior management and any other illegal acts, unless clearly inconsequential.

We are unaware of any fraud or illegal acts involving management or causing material misstatement of the financial statement.

Other information in documents containing audited financial statement The external auditor’s responsibility for information in a document containing the audited financial statement, as well as any procedures performed and the results.

Our responsibility related to documents containing the financial statement is to read the other information to consider whether:

Such information is materially inconsistent with the financial statement; and We believe such information represents a material misstatement of fact.

We have not been provided any such items to date and are unaware of any other documents that contain the audited financial statement. We understand that the District wide audit will reference CRI’s audit.

Accounting Policies, Judgments and Sensitive Estimates & CRI Comments on Quality

We are required to communicate our judgments about the quality, not just the acceptability, of the District’s Internal Funds’ accounting principles as applied in its financial reporting. We are also required to communicate critical accounting policies and sensitive accounting estimates. The School Board may wish to monitor throughout the year the process used to compute and record these accounting estimates. The table below summarizes our communications regarding these matters.

AREA ACCOUNTING

POLICY

CRITICAL

POLICY?

JUDGMENTS &

SENSITIVE

ESTIMATE

COMMENTS ON QUALITY

OF ACCOUNTING POLICY

& APPLICATION

Investments Investments are reported at amortized cost, which approximates fair value.

X Investment value is a sensitive estimate since it is based on a market valuation of the assets.

The School District of Polk County, Florida’s policies appear to be in accordance with accounting principles generally accepted in the United States of America

(GAAP).

Summary of Audit Adjustments

During the course of our audit, we accumulate differences between amounts recorded by the District and amounts that we believe are required to be recorded under GAAP. Those adjustments are either recorded (corrected) by District or passed (uncorrected).

QUALITATIVE MATERIALITY CONSIDERATIONS

In evaluating the materiality of audit differences when they do arise, we consider both quantitative and qualitative factors, for example:

Whether the difference arises from an item capable of precise measurement or whether it arises from an estimate, and, if so, the degree of imprecision inherent in the estimate.

Whether the difference masks a change in earnings or other trends.

Whether the difference changes a net decrease in assets to a net increase, or vice versa.

Whether the difference concerns an area of the District’s Internal Fund’s operating environment that has been identified as playing a significant role in the District’s Internal Funds operations or viability.

Whether the difference affects compliance with regulatory requirements.

Whether the difference has the effect of increasing management’s compensation – for example, by satisfying requirements for the award of bonuses or other forms of incentive compensation.

Whether the difference involves concealment of an unlawful transaction.

ADJUSTING JOURNAL ENTRIES (CORRECTED)

Adjusting Journal Entries JE # 1 To record carryforward effect of prior year audit adjustments to adjust A/R for Ridge and record allowance for doubtful accounts for old receivables (prior to FOCUS).

2729000 Restricted Fund Balance - Other Restrictions 179,935.00 3900000 Revenue – Internal Accounts 179,935.00

Total 179,935.00 179,935.00

Adjusting Journal Entries JE # 2 To fully allow for old accounts receivable from prior to the implementation of FOCUS for the Technical Colleges.

3900000 Revenue – Internal Accounts 101,462.00 9999999 Allowance for Doubtful Accounts 101,462.00

Total 101,462.00 101,462.00

Adjusting Journal Entries JE # 3 To record an additional allowance equal to 80% of amounts from FOCUS from June 30, 2017 or earlier.

3900000 Revenue – Internal Accounts 25,876.00 9999999 Allowance for Doubtful Accounts 25,876.00

Total 25,876.00 25,876.00

Summary of Audit Adjustments

PROPOSED JOURNAL ENTRIES (UNCORRECTED)

Proposed JE # 1 To reduce inventory for cost of yearbooks, which are deemed not to have a ready market value.

4390000 Other Purchased Services 49,237.00 1157000 Inventory – School Stores 49,237.00

Total 49,237.00 49,237.00 Proposed JE # 2 To record carryforward effect of prior year passed adjustments.

3432040 Gain on Investments 15,727.00 2769000 Undesignated Fund Balance 15,727.00

Total 15,727.00 15,727.00

Management Representation Letter

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Financial Statement

1) We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter dated July 18, 2018, including our responsibility for the preparation and fair presentation of the financial statement in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and for preparation of the supplemental information in accordance with the applicable criteria.

2) The financial statement referred to above is fairly presented in conformity with U.S. GAAP and includes all properly classified funds and other financial information of the Internal Funds. There are no component units that are required by generally accepted accounting principles to be included in the financial reporting entity.

3) We acknowledge our responsibility for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statement that is free from material misstatement, whether due to fraud or error.

4) We acknowledge our responsibility for the design, implementation, and maintenance of internal control to prevent and detect fraud.

5) There were no accounting estimates made that are significant to the financial statement.

6) Related party relationships and transactions, including revenues, expenditures/expenses, loans, transfers, leasing arrangements, and guarantees, and amounts receivable from or payable to related parties have been appropriately accounted for and disclosed in accordance with U.S.

GAAP. (None noted.)

7) All events subsequent to the date of the financial statement and for which U.S. GAAP requires adjustment or disclosure have been adjusted or disclosed. No events, including instances of noncompliance, have occurred subsequent to the balance sheet date and through the date of this letter that would require adjustment to or disclosure in the aforementioned financial statement.

8) The effects of uncorrected misstatements are immaterial, both individually and in the aggregate, to the financial statement for the Internal Funds. A list of the uncorrected misstatements is attached to the representation letter. In addition, we are in agreement with the adjusting journal entries you have proposed, however, they will not be posted to the accounts because of timing differences between allowing for doubtful accounts in accordance with generally accepted accounting principles and School Board policy of writing off doubtful accounts.

9) The effects of all known actual or possible litigation, claims, and assessments have been accounted for and disclosed in accordance with U.S. GAAP. (There are no such amounts noted that need to be accounted for or disclosed in the financial statement.)

10) Guarantees, whether written or oral, under which the School District of Polk County, Florida’s Internal Funds are contingently liable, if any, have been properly recorded or disclosed. (There were no such guarantees.)

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Information Provided

11) We have provided you with:

a) Access to all information, of which we are aware, that is relevant to the preparation and fair presentation of the financial statement, such as records, documentation, and other matters.

b) Additional information that you have requested from us for the purpose of the audit.

c) Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.

d) Minutes of the meetings of School Board or summaries of actions of recent meetings for which minutes have not yet been prepared

12) All material transactions have been recorded in the accounting records and are reflected in the financial statement.

13) We have disclosed to you the results of our assessment of the risk that the financial statement may be materially misstated as a result of fraud.

14) We have no knowledge of any fraud or suspected fraud that affects the entity and involves:

a) Management,

b) Employees who have significant roles in internal control, or

c) Others where the fraud could have a material effect on the financial statement.

15) We have no knowledge of any allegations of fraud or suspected fraud affecting the entity’s financial statement communicated by employees, former employees, regulators, or others.

16) We have no knowledge of instances of noncompliance or suspected noncompliance with provisions of laws, regulations, contracts, or grant agreements, or abuse, whose effects should be considered when preparing financial statement.

17) We have disclosed to you all known actual or possible litigation, claims, and assessments whose effects should be considered when preparing the financial statement. (There were no such matters noted.)

18) We have disclosed to you the identity of the entity’s related parties and all the related party relationships and transactions of which we are aware.

Government—specific

19) There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices.

20) We have taken timely and appropriate steps to remedy fraud, violations of laws, regulations, contracts, or grant agreements, or abuse that you have reported to us.

21) We have a process to track the status of audit findings and recommendations.

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22) We have identified to you any previous audits, attestation engagements, and other studies related to the audit objectives and whether related recommendations have been implemented.

23) We have provided our views on reported findings, conclusions, and recommendations, as well as our planned corrective actions, for the required communications letter.

24) The School District of Polk County, Florida has no plans or intentions that may materially affect the carrying value or classification of assets or liabilities.

25) We are responsible for compliance with the laws, regulations, and provisions of contracts and grant agreements applicable to us and we have identified and disclosed to you all laws, regulations and provisions of contracts and grant agreements that we believe have a direct and material effect on the determination of financial statement amounts or other financial data significant to the audit objectives, including legal and contractual provisions for reporting specific activities in separate funds.

26) There are no violations or possible violations of laws and regulations (including those pertaining to adopting, approving, and amending budgets), provisions of contracts and grant agreements and any related debt covenants whose effects should be considered for disclosure in the financial statement, or as a basis for recording a loss contingency, or for reporting on noncompliance.

27) In regards to the nonaudit services (financial statement and footnote preparation services) performed by you, we have—

a. Assumed all management responsibilities.

b. Designated an individual who has suitable skill, knowledge, or experience to oversee the services.

c. Evaluated the adequacy and results of the services performed.

d. Accepted responsibility for the results of the services.

28) The School District of Polk County, Florida has satisfactory title to all owned assets reported on the Internal Funds’ financial statement, and there are no liens or encumbrances on such assets nor has any asset been pledged as collateral.

29) The School District of Polk County, Florida has complied with all aspects of contractual agreements that would have a material effect on the financial statement in the event of noncompliance.

30) The financial statement properly classifies all funds and activities.

31) Investments (reported as cash equivalents and as investments) are properly valued.

32) Deposits and investment securities are properly classified as to risk and are properly disclosed.

33) Provisions for uncollectible receivables have been properly identified and recorded.

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34) With respect to the schedule of revenue, expenditures, and changes in internal accounts payable for the year ended June 30, 2018:

a) We acknowledge our responsibility for presenting the schedule of revenue, expenditures, and changes in internal accounts payable (the “supplementary schedule”) for the year ended June 30, 2018) in accordance with accounting principles generally accepted in the United States of America, and we believe the supplementary schedule, including its form and content, is fairly presented in accordance with accounting principles generally accepted in the United States of America. The methods of measurement and presentation of the supplementary schedule has not changed from those used in the prior period, and we have disclosed to you any significant assumptions or interpretations underlying the measurement and presentation of the supplementary information.

b) If the schedule of revenue, expenditures, and changes in internal accounts payable for the year ended June 30, 2018 is not presented with the audited financial statement, we will make the audited financial statement readily available to the intended users of the supplementary information no later than the date we issue the supplementary information and the auditor’s report thereon.

Internal Control Findings

The School Board of Polk County, Florida and Management Bartow, Florida

In planning and performing our audit of the financial statement of fiduciary assets and liabilities for the School District of Polk County, Florida’s (the “District”) Internal Funds as of and for the year ended June 30, 2018, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, we considered the District’s Internal Funds’ internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statement, but not for the purpose of expressing an opinion on the effectiveness of the District’s Internal Funds’ internal control. Accordingly, we do not express an opinion on the effectiveness of the District’s Internal Funds’ internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statement will not be prevented, or detected and corrected, on a timely basis.

Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses. Given these limitations during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

We did identify matters that we feel are appropriate to communicate to the District for improving the efficiency of the present accounting system and the operation of the schools’ Internal Funds.

We included this in the accompanying chart our recommendations for Management’s consideration. We also noted specific matters involving the internal control of the individual schools and their compliance with applicable laws and regulations that we included in our report dated December 11, 2018.

This communication is intended solely for the information and use of Management, and the School Board of Polk County, Florida and is not intended to be, and should not be, used by anyone other than these specified parties.

CARR, RIGGS & INGRAM, LLC

Orlando, Florida

Internal Control Findings

The following legend should be used in conjunction with reviewing the “Rating” of each of the identified internal control items:

IP =

Improvement Point

D = Control Deficiency

SD =

Significant Deficiency

MW =

Material Weakness

CONTROL

NUMBER RATING AREA ITEM NOTED SUGGESTION MANAGEMENT

ACTION

18 01 IP Information

Technology General Control (ITGC) Change Management

Although there is a change management policy, we noted that it does not address the situation when emergency changes are needed for application development and SAP development. Also, the policy does not address the system development life cycle methodology for logical access controls, availability and quality testing.

Policies and procedures relating to guidelines on emergency changes needed for applications and on the minimum requirements for program changes should be developed, reviewed and established in writing, as necessary.

Management will review this comment.

Internal Funds

FINANCIAL STATEMENT

For the Year Ended June 30, 2018

Table of Contents For the Year Ended June 30, 2018

REPORT

Independent Auditor’s Report 1

FINANCIAL STATEMENT

Statement of Fiduciary Assets and Liabilities 3

Notes to Financial Statement 4

Supplemental Schedule of Revenue, Expenditures, and Changes in Internal Accounts Payable 8

Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 9

Summary of Recommendations for Improvements in Internal Control Over Financial Reporting and Compliance with Certain Laws and Regulations

INDEPENDENT AUDITOR’S REPORT

To the School Board of Polk County, Florida Bartow, Florida

We have audited the accompanying statement of fiduciary assets and liabilities of the School District of Polk County, Florida’s Internal Funds, a component unit of the School District of Polk County, Florida, as of June 30, 2018, and the related notes to the financial statement, which collectively comprise the School District of Polk County, Florida’s Internal Funds’ financial statement, as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of this financial statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statement that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statement referred to above presents fairly, in all material respects, the financial position of the School District of Polk County, Florida’s Internal Funds as of June 30, 2018, in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As discussed in Note 1, the financial statement presents only the statement of fiduciary assets and liabilities of the School District of Polk County, Florida’s Internal Funds, and does not purport to, and does not, present fairly the financial position of the Polk County School District, as of June 30, 2018, in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

Other Matters

Supplementary Information Our audit was conducted for the purpose of forming an opinion on the basic financial statement of the School District of Polk County, Florida’s Internal Funds. The accompanying supplemental schedule of revenue, expenditures and changes in internal accounts payable for the year ended June 30, 2018 is presented for purposes of additional analysis and is not a required part of the basic financial statement.

The supplemental schedule of revenue, expenditures and changes in internal accounts payable for the year ended June 30, 2018 is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statement. Such information has been subjected to the auditing procedures applied in the audit of the financial statement and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statement or to the financial statement itself, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplemental schedule of revenue, expenditures and changes in internal accounts payable for the year ended June 30, 2018 is fairly stated in all material respects in relation to the financial statement as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 11, 2018, on our consideration of the School District of Polk County, Florida’s Internal Funds’ internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the School District of Polk County, Florida’s Internal Funds’ internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School District of Polk County, Florida’s Internal Funds’ internal control over financial reporting and compliance.

Statement of Fiduciary Assets and Liabilities

See accompanying notes to financial statement.

June 30, 2018

ASSETS

Cash and cash equivalents 634,324$

Investments 8,839,075

Accounts receivable, net of allowance for doubtful accounts of $127,338 73,983

Inventory 529,251

10,076,633$

LIABILITIES

Accounts payable 30,047$

Sales tax payable 622

Internal accounts payable 10,045,964

10,076,633$

Notes to Financial Statement

NOTE 1: NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of the Operations

The School District of Polk County, Florida (the “District”) Internal Funds are comprised of individual student activity account balances of the public schools located within the geographical boundaries of the Polk County School District.

The School Board of the School District of Polk County, Florida (the “School Board”) is the governing body of the Schools, and its Board is composed of seven elected members. The appointed Superintendent of Schools is the executive officer of the School Board. The School Board is part of the State of Florida system of public education under the general direction and control of the State Board of Education.

The School District of Polk County, Florida’s Internal Funds are included as agency funds in the District’s comprehensive annual financial report. The accompanying financial statement presents only the School District of Polk County, Florida’s Internal Funds and is not intended to present fairly the financial position and results of operations of the District, in conformity with accounting principles generally accepted in the United States of America.

Basis of Accounting

In accordance with Florida Statutes, the School District of Polk County, Florida accounts for its student activity accounts (Internal Funds) as agency funds. This fund is organized into sub funds to account for each school in the District. The operations of each sub fund are accounted for with a separate set of self balancing accounts that comprise each school’s assets, liabilities, revenues and expenditures. Each sub fund is further divided into student activity/project classifications. These classifications are athletics, music, classes, clubs, or departments, trust funds, property deposits, stores, instructional aids, and general.

The financial statement of the District’s Internal Funds has been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units.

Deposits and Investments

Banks qualified as public depositories under Florida law hold the cash deposits. All deposits are collateralized with securities held in Florida’s multiple financial institution collateral pool as required by Chapter 280, Florida Statutes and certain deposits below $250,000 are insured by Federal depository insurance. Amounts in excess of the Federal depository insurance as of June 30, 2018, are approximately $384,000. Cash and cash equivalents include those accounts used as demand deposit accounts.

Notes to Financial Statement

NOTE 1: NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Deposits and Investments (Continued)

The District also has an investment management agreement with the Florida Fixed Income Trust (FIT), and its custodian. The investment pool operates under investment guidelines established by Section 215.47, Florida Statutes, and are considered a Securities and Exchange Commission 2a7 like external investment pool and is similar to money market funds in which shares are owned in the fund rather than the underlying investments. All such investments are reported at fair value, which approximates amortized cost.

The District categorizes its fair value measurements with the fair value hierarchy established in accordance with generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs. See Note 2 for types and amounts of investments held at June 30, 2018.

Accounts Receivable

Accounts receivable consists of amounts owed to the District for Technical College tuition fees. The District provides an allowance for uncollectible amounts as disclosed on the statement of fiduciary assets and liabilities.

Inventory

Inventory consists of school store items and cattle inventory, and is valued at the lower of cost (determined on first in, first out method), or market.

Capital Assets

All capital assets acquired with the proceeds of internal funds are reported as cash disbursements in the accompanying supplemental schedule of revenue, expenditures and changes in internal accounts payable. All personal property acquired with internal funds becomes the property of the District.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.

Notes to Financial Statement

NOTE 2: INVESTMENTS

Investments and average maturities consist of the following at:

June 30, 2018 Fair Value Average Maturity

Valuation Measurement Method/Level

Corporate Notes Various 1,272,073$ 3 10 years Fair Value Level 2 Federal Agency Notes Various 126,267 3 years Fair Value Level 2 United States Treasury Notes 3,157,736 3 5 years Fair Value Level 1 Ultra short Income Portfolio (Held by Morgan Stanley) 2,277,824 53 days Fair Value Level 1 Florida Fixed Income Trust: Cash Pool (FL FIT CP) 96,744 95 days Fair Value Level 1 Florida Fixed Income Trust: Enhanced Cash Pool (FL Enhanced Cash)

1,908,431 .48 years Fair Value Level 1

8,839,075$

The debt securities classified as Level 2 of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices.

Interest Rate Risk

The District has a formal investment policy as authorized by Section 218.415 Florida Statutes that limits investments to a maximum of five years, but may exceed five years when there is opportunity to achieve a greater return and /or the average life is expected to be less than five years.

Custodial Credit Risk

All securities are held in the District's name, either directly by the District or by the District's third party custodians per the School Board's investment policy and Florida Statute.

Notes to Financial Statement

NOTE 2: INVESTMENTS (Continued)

Credit Risk

The District's investment ratings by Standard & Poor’s are as follows as of:

June 30, 2018 Rating

Fixed Income Investments Between (Held by Fifth Third Bank) AA+ and BBB+ Ultra short Income Portfolio (Held by Morgan Stanley) AAAf Florida Fixed Income Trust: Cash Pool (FL FIT CP) AAAf Florida Fixed Income Trust: Enhanced Cash Pool (FL Enhanced Cash) AAAf

Concentration of Credit Risk

The District is at risk for the Corporate Notes held by the District, which represent 14.4% of total investments. The remaining investments are issued or explicitly guaranteed by the United States Government or are in mutual funds, external investment pools, and other pooled investments which do not require disclosure for concentration of credit risk.

SUPPLEMENTAL SCHEDULE

Supplemental Schedule of Revenue, Expenditures and Changes in Internal Accounts Payable

See independent auditors’ report.

For the year ended June 30, 2018

REVENUE

Internal funds revenue 12,593,447$

Interest 58,165

Total revenue 12,651,612

EXPENDITURES

Internal funds expenditures 12,297,190

Excess of revenue over expenditures 354,422

Internal accounts payable beginning of year 9,691,542

Internal accounts payable end of year 10,045,964$

INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER

MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the School Board of Polk County, Florida Bartow, Florida

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statement of the School District of Polk County, Florida’s (the “District”) Internal Funds as of and for the year ended June 30, 2018, and the related notes to the financial statement, which collectively comprise the School District of Polk County, Florida’s Internal Funds financial statement, and have issued our report thereon dated December 11, 2018.

Internal Control Over Financial Reporting

In planning and performing our audit of the Internal Funds financial statement, we considered the District’s internal control over financial reporting (“internal control”) for Internal Funds to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the Internal Funds financial statement, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statement will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the District’s Internal Funds financial statement is free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

We noted certain matters that we reported to the School Board and management of the District, on the subsequent pages and in a separate letter dated December 11, 2018. The Schools provided responses to these matters in the subsequent pages and in the separate letter dated December 11, 2018. The Schools’ responses were not subjected to the auditing procedures applied in the testing of the internal control and compliance mentioned above and accordingly, we express no opinion on the responses.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Summary of Recommendations for Improvements in Internal Control Over Financial Reporting and Compliance with Certain Laws and Regulations

Acceleration & Innovation

Finding # Document Doc Date Amount Finding Description School's Response None noted.

Summary of Recommendations for Improvements in Internal Control Over Financial Reporting and Compliance with Certain Laws and Regulations

Alta Vista Elementary

Summary of Recommendations for Improvements in Internal Control Over Financial Reporting and Compliance with Certain Laws and Regulations

Alturas Elementary

Summary of Recommendations for Improvements in Internal Control Over Financial Reporting and Compliance with Certain Laws and Regulations

Anna Woodbury Elementary

Finding # Document Doc Date Amount Finding Description School's Response

1 The ticket inventory report was not signed by the Principal. The Internal Accounts Manual for Student Activity Funds states that the ticket inventory report should be completed and signed by the Principal to verify the ticket inventory information stated in the report.

Without this signature, there is no evidence of segregation of duties of the ticket sales process.

Proper compliance with admission ticket sale procedures ensures that cash controls around ticket sales are properly documented and monitored to decrease the risk of misappropriation of funds.

Response: I somehow overlooked the forms and thought that all the forms were signed. I will pay more attention this summer with my forms before I turn them in. We will try not to overlook any forms and ensure that they be signed.

Estimated Completion Date:

September 5, 2018

Principal Responsible:

Alex Wise

ADMISSION EVENTS

Summary of Recommendations for Improvements in Internal Control Over Financial Reporting and Compliance with Certain Laws and Regulations

Athletics

Summary of Recommendations for Improvements in Internal Control Over Financial Reporting and Compliance with Certain Laws and Regulations

Auburndale Central Elementary

Finding # Document Doc Date Amount Finding Description School's Response

1 Official receipt numbers 393272, 393274, and 393275 could not be located or were voided and not all copies were submitted to the Internal Accounts Department. The school did not provide an explanation for the missing documentation. The Internal Accounts Manual for Student Activity Funds requires that all copies of the voided receipt be immediately turned in to the Internal Accounts Department.

Missing supporting documentation could be the result of misappropriated funds.

Response: The files were checked to locate the missing documents. The files were not located. As the school administrator, I will make sure the procedures regarding book keeping are properly followed.

Estimated Completion Date:

September 25, 2018

Principal Responsible:

Octavia May

PRE NUMBERED RECEIPTS

Summary of Recommendations for Improvements in Internal Control Over Financial Reporting and Compliance with Certain Laws and Regulations

Auburndale High

Finding # Document Doc Date Amount Finding Description School's Response

1 5101156631 5/18/2018 255.16 The purchase order was approved on February 14, 2018, while the goods or services were purchased on January 19, 2018. A purchase order must be completed each time an individual requests to make a purchase greater than $100 and must be approved by the principal prior to the purchase.

Expenditures that do not have approval prior to the purchase could result in overspending or misappropriation of funds.

Response: Due to a turnover in staff at BSN, the wrong invoice was sent with reference to our open purchase request. The invoice was inadvertently attached to the open purchase request because it was the only PO we had at the time. The bill was to have been paid by Legion Ball. In the future, we will cross reference all invoices to ensure items and receipts match the open purchase requests.

Estimated Completion Date:

September 7, 2018

Principal Responsible:

Tye P. Bruno

DISBURSEMENTS

Summary of Recommendations for Improvements in Internal Control Over…