South Glens Falls Central School District Internal Controls Over Selected Financial Operations - Executive SummaryThe South Glens Falls Central School District (District) is governed by the Board of Education (Board) which comprises nine 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. Scope and Objective The objective of our audit was to evaluate the internal controls over cash receipts and disbursements, payroll, and purchasing for the period July 1, 2004 to November 15, 2006. Our audit addressed the following related question:
Audit Results A good system of controls requires that the position of system administrator be separate from positions functioning in the Business Office. However, the District Treasurer is the system administrator for the District’s computer operations. This enables the District Treasurer to add new users to the system, update an individual user’s access rights, and perform other administrative functions including management overrides of the system. In addition, user rights in the accounting software are not assigned in a manner to ensure that District personnel only have access to those areas of the system necessary for the performance of their job duties. For example, the payroll clerk has access to the payroll and purchasing functions and the ability to print checks and make changes to user rights in the system. The tax collector has access to cash receipts and various purchasing functions, and has check printing capabilities. As a result, users may have access to areas of the system that conflict with their day-to-day job duties. We determined that the District had not established adequate segregation of duties over the cash receipts and disbursements, and payroll functions. The Board had not established written policies governing cash receipts and disbursements and job duties related to cash receipts and disbursements were not properly segregated. There is a lack of segregation of key duties because the District Treasurer has the authority to prepare and print District checks, create journal entries, and access banking information. Furthermore, key duties over payroll such as entering new employees, updating salary information, and processing payroll had not been properly segregated. One employee, the payroll clerk, handled most aspects of payroll processing with little managerial oversight. The weakness in internal controls over cash receipts and disbursements and payroll significantly heightens the chance that errors as well as fraud could occur and not be detected in a timely manner. In addition, the system of internal controls over the District’s purchasing processes have significant weaknesses. Although the District has formally established certain purchasing policies, the policies have not been strictly enforced and District personnel do not always comply with all the prescribed provisions. For example, District officials failed to ensure that District personnel documented verbal and/or written quotes in the claims packets as required by the District’s procurement policy. As a result, the District may not acquire goods and services in an economical manner, which can result in excessive costs to District taxpayers. 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. District officials generally agreed with our recommendations and have initiated, or indicated they planned to initiate, corrective action. |