Audit 392208

Criteria: The small size of the School District's office staff limits the extent of separation of duties. The basic premise in an ideal accounting office is that no one employee should have access to both physical assets and the related accounting records or to all phases of a transaction. Some examples of lack of segregation of duties at the School District are as follows: Personnel in the payables function are not completely independent of functions such as general ledger functions and other functions such as mailing checks. Personnel preparing the payroll are not independent of other payroll duties (e.g., timekeeping, distribution and printing of checks, editing the employee master file). The individual who records and maintains the subsidiary ledger for fixed assets also has access to general ledger, cash, purchasing, and payable and capital expenditure authorizing functions. In addition, this individual also is able to make deletions to the fixed assets and is the only individual who reconciles the fixed assets. One individual has access to the handling, recording, and receiving of cash receipts. Condition: The School District has a limited staff responsible for or access to: a. receipts d. fixed asset records b. check writing e. inventory records c. posting to the general ledger f. invoice approval Because of limited staff, we realize segregation of the above duties is not practical, if not impossible. Because of this internal control situation, the responsibility of the Business Manager is greatly increased because the Board must rely on the Business Manager's knowledge of the everyday operations to discover any material changes in the School District's financial position. Cause: The School District does not have the number of employees necessary in the business office to properly segregate all duties. Effect: A lack in separation of duties makes the School District more susceptible to misappropriation of School District assets. Recommendation: Ideally, the School District would hire the number of staff necessary to segregate all duties. However, we realize segregation of duties is not practical, if not impossible. Because of this internal control situation, the responsibility of the Business Manager is greatly increased because the Board must rely on the Business Manager's knowledge of the everyday operation to discover any material changes in the School District's financial position. Views of Responsible Official and Planned Corrective Action: See corrective action plan included in this report package.