Finding 581380 (2023-003)

Segregation of Duties - ESSER Federal Agency: US Department of Education Federal Program Name: Elementary and Secondary School Emergency Relief Assistance Listing Number: 84.425U Federal Award Identification Number and Year: S425U210044 Pass-Through Agency: Wisconsin Department of Public Instruction Pass-Through Number(s): 2022-586692-DPI-ESSERFIII-165 Award Period: 3/13/2020-9/30/2024 Type of Finding: • Material Weakness in Internal Control over Compliance Criteria or Specific Requirement: Segregation of duties is an internal control intended to prevent or decrease the occurrence of errors or intentional fraud. Segregation of duties ensures that no single employee has control over all phases of a transaction. Condition: The District has one position that handles all payroll related transactions from setting up new employees and entering wage rates to processing time cards each pay period to preparing the direct deposit transfer for each pay period. The District Accountant and Superintendent collaborated in preparing the annual report but there was no review of the data entered into DPI's Wisegrants system by the accountant prior to submitting it. Accordingly, this does not allow for a proper segregation of duties for internal control purposes. Questioned Costs: None Context: When pulling documentation for our initial payroll sample for testing, the District found that it had the incorrect wage rate in the payroll system and had underpaid one employee for the entire school year. There were no exceptions noted in the rest of our payroll sample testing. When reviewing the annual report, it was noted that the District Accountant and Superintendent collaborated in preparing the report, but no one reviewed report before submitting the document to Wisconsin Department of Public Instruction. Cause: The lack of segregation of duties is due to the limited number of employees and the size of the District’s operations. In addition, the annual report was a new report for 2022-23 and the employee that normally reviews reports assisted the Accountant in preparing the report instead. 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. Repeat Finding: No. Recommendation: We recommend the District review its processes related to entering approved wage rates and salary amounts into the payroll system and implement a control where someone other than the payroll position review a report of all payroll rate changes and compare that to Board approved rates to help ensure the proper amount is used. We also recommend that the District implement a formal review process over the reporting requirement relating to ESSER annual reports. View of Responsible Officials: There is no disagreement with the audit finding.