Finding Text
Finding #2023-001 – Segregation of Duties (Prior Year Finding #2022-001)
Condition: Management is responsible for the design, installation and maintenance of an appropriate system of internal control. Proper segregation of duties is an important aspect of any control system.
The limited size of the District’s office staff prevents the ideal segregation of functions. The Business Manager is the only employee that records transactions in the general ledger, records cash receipt adjustments in the general ledger, prints accounts payable checks using electronic signatures, performs bank reconciliations, and has access to process payroll.
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.
Cause: Limited number of personnel.
Criteria: Segregation of duties is an aspect of internal control intended to prevent or decrease opportunities of intentional and unintentional errors and fraud. Duties and responsibilities are properly segregated if no single individual either has control over all phases of a transaction or has the ability to both make and conceal an error, whether such error is intentional or unintentional.
Recommendation: We recommend that the Board of Education and the District Administrator continue to monitor the transactions and the financial records of the District. We also encourage the District to continue to identify cost effective opportunities to improve the design of the internal control structure.
Response: We agree with this finding but do not believe it is cost effective to increase the office staff in an attempt to bring about a more effective segregation of duties. The District Administrator approves purchase orders and the Board of Education approves monthly accounts payable checks. Also, the Building Principals review payroll timesheets prior to processing payroll. The Board of Education, District Administrator, and Building Principals will continue to monitor transactions of the District.