Independent School District 701

Inadequate segregation of duties within a significant account or process - significant deficiency Condition - Due to the limited number of District staff, appropriate segregation of duties is not feasible for all accounting and reporting functions. Specific examples include: a. The District places the authority over the year end financial reporting process, including all controls over procedures used to enter transaction totals into the general ledger; initiate, authorize, record, and process journal entries into the general ledger; and record recurring and nonrecurring adjustments to the financial statements with one individual (the business manager) b. The District has several staff that have duties involving both processing and recording transcations into the general ledger. Such duties are involved in the district's cash receipting, disbursing and payroll functions. Several employees have access to the initial processing of the information as well as subsequent recording into the general ledger. Thes same staff are also responsible for reconciliation of related cash accounts. c. The District has several departments that are responsible for the collection of fees charged to students and the general public. The departments are responsible for the collection, processing and reporting to the business office. In most instances, one individual in each department performs those duties. Criteria: A good system of internal control requires an adequate segregation of duties so that no one individual has incompatible responsibilities. No one person should have more than one duty relating to the authorization, custody of assets, record keeping, and reconciliation functions. Cause: Generally the lack of segregation is due to the limited funding available to add additional staff to appropriately divide related duties. Effect: The lack of segregation of duties creates a control deficiency because the design/operation of the control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis creating a more than remote likelihood that a misstatement in the District's financial statements that is more than inconsequential will not be prevented or detected by the District's internal control. Many of the staff reconcile their own work. Context: The lack of segregation of duties exists within the district as a whole over all of its accounting and reporting functions. This is a common circumstance in districts of a similar size. Recommendation: The District's management needs to be cognizant of this situation which may include re-assigning duties, adding additioinal reconciling features, or providing appropriate oversigh responsibility. Views of Responsible Officials and Planned Corrective Actions: The District is aware of the situation and will monitor as it deems appropriate. Monitoring will include educating program managers to provide additional oversight for the interim and year end reporting. Repeat Finding: Yes - Prior year finding noted as 2024-002.

Inadequate documentation over time and effort Condition: The District was unable to provide appropriate documentation under allowable cost/cost principles regarding time-and-effort requirements (employee activity reproting). Criteria: Federal guidance requires the District to appropriately document employee's activites under Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards 2 C.F.R. 200.430 (i) and 200.302(b)(3). Cause: The District had new administrative staff in the position during the fiscal year that were unaware of the requirement to document the time through records delineating time spent by staff between federal and state activities. Effect: The District was unable to provide documentation for all wages and benefist charged to the program other than to utilize job descriptions and budgets. Recommendation: The District should develop appropriate payroll reporting and time-and-effort documenation to support the charges.

Inadequate segregation of duties within a significant account or process - significant deficiency Condition - Due to the limited number of District staff, appropriate segregation of duties is not feasible for all accounting and reporting functions. Specific examples include: a. The District places the authority over the year end financial reporting process, including all controls over procedures used to enter transaction totals into the general ledger; initiate, authorize, record, and process journal entries into the general ledger; and record recurring and nonrecurring adjustments to the financial statements with one individual (the business manager) b. The District has several staff that have duties involving both processing and recording transcations into the general ledger. Such duties are involved in the district's cash receipting, disbursing and payroll functions. Several employees have access to the initial processing of the information as well as subsequent recording into the general ledger. c. The District has several departments that are responsible for the collection of fees charged to students and the general public. The departments are responsible for the collection, processing and reporting to the business office. In most instances, one individual in each department performs those duties. Criteria: A good system of internal control requires an adequate segregation of duties so that no one individual has incompatible responsibilities. No one person should have more than one duty relating to the authorization, custody of assets, record keeping, and reconciliation functions. Cause: Generally the lack of segregation is due to the limited funding available to add additional staff to appropriately divide related duties. Effect: The lack of segregation of duties creates a control deficiency because the design/operation of the control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis creating a more than remote likelihood that a misstatement in the District's financial statements that is more than inconsequential will not be prevented or detected by the District's internal control. Context: The lack of segregation of duties exists within the district as a whole over all of its accounting and reporting functions. This is a common circumstance in districts of a similar size. Recommendation: The District's management needs to be cognizant of this situation which may include re-assigning duties, adding additioinal reconciling features, or providing appropriate oversigh responsibility. Views of Responsible Officials and Planned Corrective Actions: The District is aware of the situation and will monitor as it deems appropriate. Monitoring will include educating program managers to provide additional oversight for the interim and year end reporting. Repeat Finding: Yes - Prior year finding noted as 2023-001

Inadequate segregation of duties within a significant account or process - Significant Deficiency Condition: Due to the limted number of District staff, appropriate segregation of duties is not feasible for all accounting and reporting functions. Specific examples include: (a) The District places the authority over the year end financial reporting process, including all controls over procedures used to enter transaction totals into the general ledger; initiate, authorize, record, and process journal entries into the general ledger; and record recurring and nonrecurring adjustments to the financial statements with one individual (the business manager). (b) The District has several staff that have duties involving both processing and recording transactions into the general ledger. Such duties are involved in the district's cash receipting, disbursing, and payroll functions. Several employees have access to the intitial processing of the information as well as subsequent recording into the general ledger. These same staff are also responsible for reconciliation of related cash accounts. (c) The District has several departments that are responsible for the collection of fees charted to students and the general public. The departments are responsible for the collection, processing and reporting to the business office. In most instances, one individual in each department performs these duties. Criteria: Internal controls should be in place to provide adequate segregation of duties to provide reasonable assurance of compliance with District financial accounting controls and policies. Cause: Generally, the lack of segrgation is due to the limited funding available to add additional staff to appropriately divide related duties. Effect: The lack of segregation of duties creates a control deficiency because the design and operation of the control does not allow management or employees, in the normal course of performing their assigned functions to prevent or detect misstatements on a timely basis creating a more than remot likelihood that a misstatement in the Distirct's financial statements that is more than inconsequential will not be prevented or detected by the District's internal control. Many of the staff reconcile their own work. Context: The lack of segregation of duties exists within the district as a whole over all of its accounting and reporting functions. This is a common circumstance in districts of similar size. Recommendation: The District's managment needs to be cognizant of this situation which may include re-assigning duties, adding additional reconciling features, or providing appropriate oversight responsibility. Views of Responsible Officials and Planned Corrective Actions: The District is aware of the situation and will monitor as it deems appropriate. Monitoring will include educating program managers to provide additional oversight for the interim and year end reporting. Repeat Finding: Yes - prior year finding noted as 2022-001

2022-001 Inadequate segregation of duties within a significant account or process - Significant Deficiency Condition: Due to the limited number of District staff, appropriate segregation of duties is not feasible for all accounting and reporting functions. Specific examples include: a. The District places the authority over the year end financial reporting process, including all controls over procedures used to enter transaction totals into the general ledger; initiate, authorize, record, and process journal entries into the general ledger; and record recurring and nonrecurring adjustments to the financial statements with one individual (the business manager.) b. The District has several staff that have duties involving both processing and recording transactions into the general ledger. Such duties are involved in the district's cash receipting, disbursing and payroll functions. Several employees have access to the initial processing of the information as well as subsequent recording into the general ledger. These same staff are also responsible for reconciliation of related cash accounts. c. The District has several departments that are responsible for the collection of fees charged to students and the general public. The departments are responsible for the collection, processing and reporting to the business office. In most instances, one individual in each department performs these duties. Criteria: Internal controls should be in place to provide adequate segregation of duties to provide reasonable assurance of compliance with District financial accounting controls and policies. Cause: Generally the lack of segregation is due to the limited funding available to add additional staff to appropriately divide related duties. Effect: The lack of segregation of duties creates a control deficiency because the design and operation of the control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis creating a more than remote likelihood that a misstatement in the District's financial statements that is more than inconsequential will not be prevented or detected by the District's internal control. Many of the staff reconcile their own work. Context: The lack of segregation of duties exists within the district as a whole over all of its accounting and reporting functions. This is a common circumstance in Districts of similar size. Recommendation: The District's management needs to be cognizant of this situation which may include re-assigning duties, adding additional reconciling features, or providing appropriate oversight responsibility. Views of Responsible Officials and Planned Corrective Actions: The District is aware of the situation and will monitor as it deems appropriate. Monitoring will include educating program managers to provide additional oversight for the interim and year end reporting. Repeat Finding: Yes - Prior year finding noted as 2021-001

2021-001 Inadequate segregation of duties within a significant account or process - Significant Deficiency Condition: Due to the limited number of District staff, appropriate segregation of duties is not feasible for all accounting and reporting functions. Specific examples include: a. The District places the authority over the year end financial reporting process, including all controls over procedures used to enter transaction totals into the general ledger; initiate, authorize, record, and process journal entries into the general ledger; and record recurring and nonrecurring adjustments to the financial statements with one individual (the business manager.) b. The District has several staff that have duties involving both processing and recording transactions into the general ledger. Such duties are involved in the district's cash receipting, disbursing and payroll functions. Several employees have access to the initial processing of the information as well as subsequent recording into the general ledger. These same staff are also responsible for reconciliation of related cash accounts. c. The District has several departments that are responsible for the collection of fees charged to students and the general public. The departments are responsible for the collection, processing and reporting to the business office. In most instances, one individual in each department performs these duties. Criteria: Internal controls should be in place to provide adequate segregation of duties to provide reasonable assurance of compliance with District financial accounting controls and policies. Cause: Generally the lack of segregation is due to the limited funding available to add additional staff to appropriately divide related duties. Effect: The lack of segregation of duties creates a control deficiency because the design and operation of the control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis creating a more than remote likelihood that a misstatement in the District's financial statements that is more than inconsequential will not be prevented or detected by the District's internal control. Many of the staff reconcile their own work. Context: The lack of segregation of duties exists within the district as a whole over all of its accounting and reporting functions. This is a common circumstance in Districts of similar size. Recommendation: The District's management needs to be cognizant of this situation which may include re-assigning duties, adding additional reconciling features, or providing appropriate oversight responsibility. Views of Responsible Officials and Planned Corrective Actions: The District is aware of the situation and will monitor as it deems appropriate. Monitoring will include educating program managers to provide additional oversight for the interim and year end reporting.

Inadequate segregation of duties within a significant account or process - Significant Deficiency Condition: Due to the limited number of District staff, appropriate segregation of duties is not feasible for all accounting and reporting functions. Specific examples include: a. The District places the authority over the year end financial reporting process, including all controls over procedures used to enter transaction totals into the general ledger; initiate, authorize, record, and process journal entries into the general ledger; and record recurring and nonrecurring adjustments to the financial statements with one individual (the business manager.) b. The District has several staff that have duties involving both processing and recording transactions into the general ledger. Such duties are involved in the district's cash receipting, disbursing and payroll functions. Several employees have access to the initial processing of the information as well as subsequent recording into the general ledger. These same staff are also responsible for reconciliation of related cash accounts. c. The District has several departments that are responsible for the collection of fees charged to students and the general public. The departments are responsible for the collection, processing and reporting to the business office. In most instances, one individual in each department performs these duties.

Inadequate segregation of duties within a significant account or process. Due to a limited number of District staff, appropriate segregation of duties is not feasible for all accounting and reporting functions. Specific examples include: a) The district places the authority over the year end financial reporting process, including all controls over procedures used to enter the transaction totals into the general ledger; initiate, authorize, record, and process journal entries into the general ledger; and record recurring and nonrecurring adjustments to the financial statements with one individual (the business manager) b)The District has several staff that have duties involving both processing and recording transactions into the general ledger. Such duties are involved in the district's cash receipting, disbursing and payroll functions. Several employees have access to the initial processing of the information as well as subsequent recording into the general ledger. These same staff are also responsible for reconciliation of related cash accounts. c) The District has several departments that are responsible for the collection of fees charged to students and the general public. The departments are responsible for the collection, processing and reporting to the business office. In most instances, one individual in each department performs these duties.

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