Finding Text
Material Weakness:Criteria - Segregated duties is the means by which no one person has sole control over the initiation,
recording, and authorization functions of a transaction process.
Condition - There is inadequate segregation of duties over the payroll review process. The payroll clerks
record and process monthly payroll, and there is no formal review process of the monthly payroll journals.
Effect - This absence of segregation poses an increased risk of errors, inaccuracies, or fraudulent activities
going undetected, as the control mechanisms are weakened. The individual with combined responsibilities
has the ability to initiate and approve payroll transactions without an independent review, creating a
potential avenue for unauthorized or inaccurate payments.
Cause - There are a limited number of employees involved in the payroll process, and the Board’s policies
and procedures do not provide for a detail review of payroll reports.
Recommendation - It is recommended that the Board promptly implement a segregation of duties policy
for payroll processing. This should involve assigning distinct responsibilities for initiating, approving, and
reviewing payroll transactions to different individuals or departments. By doing so, the Board can enhance
internal controls, mitigate risks, and ensure the accuracy and integrity of payroll processing.
Views of Responsible Officials and Planned Corrective Actions - Management concurs with the finding
and acknowledges the importance of implementing segregation of duties in the payroll processing function.
They commit to reviewing and revising the current procedures to establish a more robust internal control
structure over payroll processes. Management will provide a detailed action plan and timeline for the
segregation of duties implementation in response to this audit finding.