Audit 372289

Segregation of DutiesCriteria - One important aspect of internal control is the segregation of duties among employees to prevent an individual employee from handling duties which are incompatible. Condition - We noted that the business manager and one other employee has the ability to set up new vendors within the accounting software and those same two employees each have the ability to generate checks which are electronically signed by the software. As a compensating control, the superintendent is obtaining the unopened bank statements each month and reviewing the items that clear the bank. The business manager makes all of the adjusting journal entries to the general ledger which are being reviewed and approved by the superintendent; however, there are no procedures in place to ensure that the superintendent is being provided all of the adjusting entries which were actually made to the general ledger. The business manager has full administrative rights within the accounting software which allows for the opportunity to make changes that would override other compensating controls that have been placed in operation. Cause - Limited number of business office employees and limitation of electronic data access controls. Effect or Potential Effect - The potential effect of this control weakness is that fraud or errors could occur and not be detected by management or others within the District in a reasonable period of time.Context - Pervasive.Identification of Repeat Finding - We found the same condition existed in our prior year audit.Auditor’s Recommendation - We realize segregation of duties is difficult with a limited number of business office employees. However, the District should continually review its procedures to obtain the maximum internal control possible under the circumstances utilizing currently available staff, including elected officials. The District should consider contacting its software vendor to discuss programming changes which could alert others within the District when changes are made by the business manager using the administrative rights; when new vendors are set up; when a transaction has been changed from its original recording; or when a payroll rate or salary amount is changed. Views of Responsible Officials and Planned Corrective Action - We will continue to review our procedures and implement additional controls where possible. Auditor’s Conclusion - Response accepted.