Finding Text
Segregation of Duties Year ended June 30, 2022 Condition and Criteria: Although there is a limited number of personnel in the business office, we noted that different functions within the cash receipts, cash disbursements and payroll cycles, along with the preparation of bank reconciliations are not properly segregated. Effect: A fundamental element of an effective internal control system is the proper segregation of duties. Proper segregation of duties provides for a system of checks and balances and entails assigning responsibilities of authorizing and recording transactions among different people in the District. Generally, assigning different individuals the responsibilities of authorizing transactions, recording transactions, and maintaining the custody of the related assets reduces the opportunities for any individual to both perpetrate and conceal errors or fraud in the normal course of business. Auditor?s recommendation: We recognize that the District has attempted to mitigate the lack of segregation of duties by having other individuals perform certain ancillary duties of record-keeping including: opening the mail; signing of checks; distribution of payroll and vendor checks; and bank reconciliations. These duties could be enhanced by having the individual responsible for the preparation of bank reconciliations compare the reconciled bank balances to the District?s general ledger software on a monthly basis, as currently reconciliations are compared against manual worksheets. In addition, we recommend that the individual responsible for opening mail also maintain a cash receipts log, with someone independent of the cash receipts function reconciling the log to the general ledger and bank statements at certain times during the year. For mitigating controls over the District?s payroll, the District should consider having the Superintendent review a monthly change report showing any changes in pay rates or employees. Finally, for controls over cash disbursements, the Board should account for the sequence of checks for each disbursement register to ensure that all checks are being reviewed. In addition a report should be generated that documents any new vendors added to the payable module. This report could be approved monthly by the Superintendent. District?s Response: The District understands the importance of having strong segregation of duties and will attempt to separate certain responsibilities as outlined above.