Audit 387339

Finding #2025-001 – Lack of Segregation of Duties Over Payroll (Prior Year Finding #2024-001) Condition: Management is responsible for the design, installation and maintenance of an appropriate system of internal control. Proper segregation of duties is an important aspect of any control system. The limited size of the District’s office staff prevents the ideal segregation of functions over payroll. The Payroll and Human Resources Administrative Assistant is the only employee responsible for entering employee salaries and hourly pay rates and has access to process payroll. Effect: Errors or intentional fraud could occur and not be detected timely by other employees in the normal course of their responsibilities as a result of the lack of segregation of duties over payroll. Cause: Limited number of personnel. Criteria: Segregation of duties is an aspect of internal control intended to prevent or decrease opportunities of intentional and unintentional errors and fraud. Duties and responsibilities are properly segregated if no single individual either has control over all phases of a transaction or has the ability to both make and conceal an error, whether such error is intentional or unintentional. Recommendation: We recommend employee salary and hourly pay rates be reviewed and approved by someone independent of the payroll process. We also recommend an independent review and approval of payroll registers prior to distribution or direct deposit processing. Response: We agree with this finding. Due to staffing limitations, full segregation of payroll duties is not currently feasible, however, the District will implement additional compensating controls, including independent review and approval of employee salaries and hourly rates and payroll registers prior to processing.