Oakfield-Alabama Central School District

Internal Controls Over Cash Receipts and Disbursements -
EXECUTIVE SUMMARY

The Oakfield-Alabama Central School District (District) is governed by the Board of Education (Board) which comprises seven elected members. The Board is responsible for the general management and control of the District’s financial and educational affairs. The Superintendent of Schools (Superintendent) is the chief executive officer of the District and is responsible, along with other administrative staff, for the day-to-day management of the District under the direction of the Board. The Business Administrator is responsible for preparing and maintaining the District’s accounting records and financial reports. The District uses a financial accounting software program for processing its financial transactions and preparing its financial reports. This software program can be tailored to restrict individuals’ access to transactions within the scope of their job responsibilities.

Scope and Objective

The objective of our audit was to evaluate internal controls over the District’s financial operations for the period July 1, 2006 through May 31, 2007. Our audit addressed the following related questions:

• Are internal controls over cash receipts and disbursements appropriately designed and operating effectively to adequately safeguard District assets?
• Did the Business Administrator maintain accounting records that were accurate and timely?
• Did District officials set up access controls over the computerized financial system to provide reasonable assurance that resources were protected?

Audit Results

Internal controls over cash receipts and disbursements were not appropriately designed and operating effectively to adequately safeguard District assets. We found that while the District had written policies governing the cash receipt and disbursement process, they were not specific relative to job duties, and did not properly segregate critical duties, so that no single person controls all phases of a transaction. The District has also not appropriately limited the access rights to its financial software program. Furthermore, all Business Office and cafeteria staff have access to the contents of the safe located in the District Offices. As a result, there is an increased risk that errors or irregularities could occur and remain undetected and uncorrected.

Our review of District accounting records disclosed a significant number of errors and a lack of procedures to verify the accuracy or completeness of financial data. As a result, we question the reliability of reports produced by the accounting system.

Cash receipts testing of wire transfers, fuel sales to municipalities, admission fees for sporting events, and extra classroom activities, disclosed that these transactions were properly recorded and deposited.

Cash disbursements testing disclosed that disbursements posted on the December 2006 bank statements agreed with corresponding cancelled checks, check registers and warrants.

Comments of District Officials

The results of our audit and recommendations have been discussed with District officials and their comments, which appear in Appendix A, have been considered in preparing this report. Except as specified in Appendix A, District officials generally agreed with our recommendations and indicated they planned to initiate corrective action. Appendix B includes our comment on an issue raised in the District’s response letter.