Audit 380376

Inadequate segregation of duties within a significant account or process - significant deficiency Condition - Due to the limited number of District staff, appropriate segregation of duties is not feasible for all accounting and reporting functions. Specifiic examples include: a. The District places the authority over the year end financial reporting process, including all controls over procedures used to enter transaction totals into the general ledger; initiate, authorize, record, and process journal entries into the general ledger; and record recurring and nonrecurring adjustments to the financial statements with one individual (the business manager) b. The District has several staff that have duties involving both processing and recording transcations into the general ledger. Such duties are involved in the district's cash receipting, disbursing and payroll functions. Several employees have access to the initial processing of the information as well as subsequent recording into the general ledger. c. The District has several departments that are responsible for the collection of fees charged to students and the general public. Thr departments are responsible for the collection, processing and reporting to the business office. In most instances, one individual in each department performs those duties. Criteria: A good system of internal control requires an adequate segregation of duties so that no one individual has incompatible responsibilities. No one person should have more than one duty relating to the authorization, custody of assets, record keeping, and reconciliation functions. Cause: Generally the lack of segregation is due to the limited funding available to add additional staff to appropriately divide related duties. Effect: The lack of segregation of duties creates a control deficiency because the design/operation of the control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis creating a more than remote likelihood that a misstatement in the District's financial statements that is more than inconsequential will not be prevented or detected by the District's internal control. Context: The lack of segregation of duties exists within the district as a whole over all of its accounting and reporting functions. This is a common cirucumstance in districts of a similar size. Recommendation: The District's management needs to be cognizant of this situation which may include re-assigning duties, adding additional reconciling features, or providing appropriate oversigh responsibility. Views of Responsible Officials and Planned Corrective Actions: The District is aware of the situation and will monitor as it deems appropriate and as resources and stagging abilities arise. The District considers this an on-going process. Repeat Finding: Yes - Prior year finding noted as 2024-002