Finding Text
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 were inadequate segregation of duties over the payroll review process. The payroll
clerks recorded and processed monthly payroll, and there was no formal review process of the monthly
payroll journals. This finding was identified during the fiscal year 2023 audit; however, beginning in
June 2024, the Board implemented a segregation of duties policy for payroll processing. A formal review
over payroll has been performed each payroll period since June 2024.
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 were a limited number of employees involved in the payroll process, and the Board’s policies
and procedures did not provide for a detail review of payroll reports. This finding was identified during the
fiscal year 2023 audit; however, beginning in June 2024, the Board implemented a segregation of duties
policy for payroll processing. A formal review over payroll has been performed each payroll period since
June 2024.
Recommendation - It was recommended that the Board implement a segregation of duties policy for
payroll processing, and the Board immediately implemented a policy following the fiscal year 2023 audit in
June 2024.
Views of Responsible Officials and Planned Corrective Actions - Management concurred with the
finding and acknowledged the importance of implementing segregation of duties in the payroll processing
function. They committed to reviewing and revising the current procedures to establish a more robust
internal control structure over payroll processes. Management timely implemented a plan for the
segregation of duties implementation in response to this audit finding.