Audit Committee Training Sessions

Consolidated Questions & Answers

Table of Contents

Pre-Training Modules # 1 & 2- Education in the Province of Ontario & Education Funding

Introduction: Overview of the Provincial Initiatives – Audit Committees & internal Audit

Module 1 – Roles, responsibilities and Relationships

Module 2 – Assessing Risk and Risk Management

Module 3 – Evaluation of internal controls

Module 4 – Internal Audit

Module 5 – Financial Statements

Module 6 - External Audit

Module 7 – Highlights of the Audit Committee Regulation & Evaluation of the Audit Committee

Highlights of the Audit Committee Regulation

Evaluation of the Audit Committee

Module 8 – Compliance Matters and Other Topics

Compliance

Operational Review Process

How to Stay Up to Date

Pre-Training Modules # 1& 2- Education in the Province of Ontario & Education Funding

Question / Answer
On slide 28, what does “funding is flowed on a monthly basis to match expenses” mean? / School boards receive a percentage of their annual allocation on a monthly basis that closely mirrors their expenditure patterns. It is as follows: 13% in September, 8% from October to June and 6% in July and August.
Do revenues from sources other than the Ministry of Education reduce the amount of funding boards receive through the Grants for Students Needs (GSN) Funding Model? For example if a school board received a large donation. (Slide #29) / No, the GSN funding model is calculated based on a formula which is not impacted by other sources of revenue, such as school generated funds, donations, etc.
What can proceeds from the sale of school buildings be used for? / Proceeds of sales, leases and other dispositions of real property, which includes school buildings, must be spent only for the acquisition by lease or by purchase for the following:

School sites that provide or are capable of providing pupil accommodation, and additions or improvements to such school sites;
School buildings, fixtures of school buildings, fixtures of school properties, and additions, alterations, renovations or major repairs to school buildings, fixtures of school buildings or fixtures of school properties;
Furniture and equipment to be used in school buildings;
Library materials for the initial equipping of libraries in school buildings; or,
Installations on school properties to supply school buildings on the properties with water, sewer, septic, electrical, heating, cooling, natural gas, telephone or cable services, and alterations, replacements or major repairs to those installations.

The proceeds can be used as long as they meet the criteria for capitalization of a tangible capital asset as set out in the document entitled “School Board and School Authority Tangible Capital Assets: Provincial Accounting Policies and Implementation Guide”, revised April 2010 available at:

When will the special education grants be adjusted? / Special education is a very complex grant allocation. There is currently a consultation process underway that is looking at this funding component. As the consultation process is not yet complete, we cannot comment on when or how the special education grants will change in the future.
Some grants fall under the category of “EPO” and others fall under the category of “GSN”. Why is there a difference and do they eventually become one? For example, Early Learning grants are currently under EPO. / EPO grants stand for Education Program Other grants. These grants usually are one-time grants or grants that are not yet at maturity. Typically, if a grant is permanent in nature, it will be moved from EPO to GSN upon full implementation of the initiative.
Is there a monitoring mechanism to track if school boards spend more than is allocated for special education? If the board overspends, where does the money come from? / Special education funding is enveloped, which means that the allocation for special education must be spent on special education. In order to ensure compliance with this requirement, school boards are required to report to the Ministry of Education their special education spending versus their special education allocation.
If a school board spends more than it’s allocation, the additional funds would be taken from other grants that are not enveloped.
In some cases, special education students enrol in the Catholic board and then move to the public board after a few days (or vice versa). Will the board where the student finally ends up receive the funding? / Special education funding is largely calculated using two elements:

The average daily enrolment of students on 2 count dates, October 31st and March 31st and,
A claims-based process completed by the district school and approved by the Ministry of Education.

Therefore the funding will flow to the school board where the student is enrolled on the two count dates and should specialized equipment be purchased by a school board, the equipment will follow the student.
There is an initiative in New Brunswick to provide all students with netbooks. Is Ontario discussing this? / No, this is not being discussed at the current time.
In the GSN, how much represents the amount for the teacher pension transfer? / The teacher pension transfer is not part of the GSN. This amount is provided by the province outside of the GSN.
What are the major factors for the increase in GSN over the past few years? / The major changes to the GSN for 2010-11 are as follows:

support for the Provincial Framework Agreements;
funding to address cost pressures in key areas (student transportation, community use of schools, and school operations);
funding to increase the management capacity of boards;
increased special education funding and a new component added to the measure of
variability; and,
Structural reforms.

Regarding ESL grants, is there no allowance made for a child born in Canada to non-English speaking parents? / Yes there is consideration for those students as ESL grants are made up of two components:

“The Recent Immigrant” component which provides a total of $10,160.80 per eligible pupil over four years and is based on the number of recent immigrant pupils born in countries other than Canada, Great Britain, Ireland, the United States, Australia, and New Zealand.
“The Pupils in Canada” component is based on the 2006 Census data on the number of children whose language spoken most often at home is neither English nor French.

How do municipalities determine how much of an educational tax levy to collect and remit to school boards? / Under the present system, the government, not the municipalities, sets a uniform tax rate, based on a current-value assessment system, for the education portion of property taxes for all residential properties in the province. The Province also sets a rate that varies by municipality for the education portion of business property taxes. Municipalities collect the education portion of property taxes for the school boards in their communities on behalf of the Province and remit it to the school boards.
Of the $20.2 billion in total GSN funding, how much funding comes from the municipalities? / Of the $20.2 billion in total GSN funding, approximately $6.6 billion comes from property tax revenue.
What is the trend in enrolment over the past five years? / Since 2002-03, the enrolment of students has declined overall by 5.6% which represents a decrease in average daily enrolment of 113,812. The majority of school boards in the province of Ontario are currently experiencing a decline in enrolment.
Is there school board discretion in how they spend grants that have no restrictions? / Yes. As long as there are no restrictions over the grant, the school board can use discretion in spending the funds received. Education funding recognizes that school boards need flexibility to decide how best to allocate resources within their budgets.
What happens when a district school board over or under spends on enveloped grants? / When over spending occurs, a school board must cover the shortfall from funding sources that are not enveloped.
Any under spending of grant allocations that are enveloped must be deferred for future expenditures on the specific enveloped grant.
Is enrolment or average daily enrolment (ADE) driven by registration or attendance? / ADE is based on attendance.
The calculation of ADE is based on the two count dates within the school year – October 31 and March 31. The ADE is the full-time equivalency status of students at October 31 and March 31 weighted at 0.50 for each of the count dates.
How far along is the implementation of tangible capital assets reporting into the school boards financial statements? / The tangible capital asset initiative has been fully implemented by district school boards. As of 2009/10, tangible capital assets are reported on the “face” of the financial statements. During the implementation phase of 2008/09, there was a note disclosure in regards to tangible capital assets in the financial statements.
Who enforces student attendance between the ages of 6-18? / Per the Education Act, parents or guardians are the ones who are required to enforce school attendance by children. It is the principal’s duty to ensure that the school contacts the parents of a pupil to find out why the pupil has not been in attendance. This responsibility is often delegated to a school secretary and where attendance because an issue, an attendance counsellor.
There is insufficient funding for the Program Enhancement grant to support the arts and physical education. Where can we find out what other jurisdictions (i.e. other provinces) are doing to promote the arts and physical education so that we can compare them? / Most provinces post their grant structures online allowing you to perform some analysis of the differences in the funding models.
Is there a legal liability to a school board if a student fails to succeed or graduate? / It is everyone’s responsibility to ensure that the students of Ontario are given every opportunity to succeed. However, there is no legal ramifications should students not be successful.
Are there any provincial schools for the deaf? / Yes, there are. Click on the following link for more information:

Unorganized townships do not pay education taxes. Has this changed? / Unorganized areas do pay education taxes. The element that has changed is that effective 2009, the Ministry of Revenue has contracted with the City of Thunder Bay to collect provincial land tax (PLT) in all unorganized areas on behalf of the Province. After the City of Thunder Bay has collected the taxes, it will remit it to the Ministry of Revenue. The Ministry of Revenue will then remit the education tax portion to the district school boards in the respected areas.
Is funding for new schools included in the school renewal grant? / No, the funding for new schools is being provided under the Debt Service Allocation, previously known as the New Pupil Places Allocation.
Do junior kindergarten and senior kindergarten students receive the same levels of funding as students from grade 1 to 8? / No, JK and SK students receive half-time funding irrespective of their attendance as full-time or half-time students.
Where is the funding for the additional half day JK and SK programs coming from? / It is being funded by the Ministry of Education through Education Program Other (EPO) Grants which are outside of the GSN funding model.
The Ministry has imposed a restriction on the amount of reserves that can be utilized by school boards to balance their budgets in a given year. Can you explain what the limit is and how school board can then use their reserves? / Under the new amendments to the financial accountability sections of the Education Act, school boards are limited to a maximum of 1% of the board’s operating revenues to balance their budgets through the use of reserves. Should a school board need to access an amount greater than 1% of operating revenues, it must seek the Minister’s approval to do so.
Are the school boards going to get funding to maintain their operating costs as they continue to experience declining enrolment? / Much of a school board’s revenue is determined by enrolment. As enrolment goes down,so does revenue. This is appropriate because when there are fewer students boards nolonger need the same number of teachers and other supports. Board costs, however, do not decline in a way that is strictly proportional to declining enrolment, such as operating costs. To recognize that these other types of costs cannot be adjusted easily or quickly, the Declining Enrolment Adjustment (DEA) provides funding to school boards, on a sliding scale, over a 3 year-period in order to provide time to realign cost structures.
Which grants have to be applied for and which are allocated by using the funding formula? / The majority of the grants under the GSN are formula based. However, there are some portions of the grants, such as special education that are claims based. An application must be made for those claims.
How often are the funds collected through property tax given to school boards? / For the March 31st payment, section 257.11(1) of the Education Act requires municipalities to pay 25 percent of the previous calendar year (2009) amount levied for education taxes. On June 30, the amount of the payment is to be 50% of the amount to be levied for the current calendar year less the March 31st payment. The September 30th payment is to be 25 percent of the amount levied for the current calendar year and the December 15th payment is to be the balance owing for the current calendar year. Please note that because the March 31st payment is based on the previous year, the enrolment share proportions on Table A do not come into effect until the June 30th payment. Boards and municipalities can also arrange for a different instalment payment schedule by entering into an agreement as defined under section 257.11(5) of the Act.
Where census data is used to calculate grants, is the most current data always used? / The 2010/11 GSN funding formula uses the 2006 census data which is the most recent census data that is available to be used at this time. The 2011 census package will delivered to every dwelling in Canada in May of 2011.
Does the Ministry of Education publish the amounts each board gets through the GSN? / The Ministry of Education releases an annual document called “School Board Funding Projections”. This document projects the level of funding that each school board is expected to receive in the upcoming school year based on the best information available to the Ministry of Education prior to the start of the upcoming school year. For more information on the 2010-11 school board projections, please follow this link:

Is there a limit to the amount a district school board can collect from taxes? / Yes there is a limit as school boards no longer have taxing authority. The funds collected by municipalities and remitted to school boards are based on a provincially established amount. (See first question on page 4)
In the future, will the Ministry take feedback from the audit committee, including external members, on the funding formula? / The Ministry always welcomes feedback from all stakeholders regarding the GSN funding formula.
Are school board financial statements submitted to the Ministry of Education every month? / The audited financial statements are submitted to the Ministry once every year. The due date for the 2009-2010 Financial statements was November 15, 2010 and for 2010-11 the date will be November 15, 2011.

Introduction: Overview of the Provincial Initiatives – Audit Committees & internal Audit

Question / Answer
Is the $5 million allocated for internal audit an annual amount? / Yes, this amount is an annual amount. Since it’s introduction, the annual funding amounts have been as follows: 2009-10, $2 million, 2010-11 and going forward $5 million.
Does the Ministry know what the long-term savings will be from the regional internal audit initiative? / It is difficult to demonstrate the benefits of the internal audit function through the investments made. Stakeholders and management look for cost savings in order to ensure transparency and accountability. The internal audit function should not be measured strictly on savings to the board just as the effectiveness of life guards should not be based strictly on the number of lives saved. The following list provides some performance indicators that could be used to rate the effectiveness of the internal audit function:

Elapsed time for issue of reports (completion of audit work to draft report or draft report to final)
Number of unsatisfactory audit opinions (as % of total)
Number of audit assignments completed (versus number planned)
% of recommendations accepted
% of actions fully implemented
Number of positive unsolicited comments about internal audit
Number of complaints
Number of repeat audit findings
Amount of direct savings potential as a result of audits
Number of major process improvements implemented as a result of audits
Percentage of customer satisfaction (i.e., from surveys)
% of key risks audited in the year
Extent of reliance external audit can place on internal audit
Cost versus budget
Extent of advice given
Number of best practice ideas shared