LENOX COMMUNITY SCHOOL DISTRICT

One important aspect of the internal control structure is the segregation of duties among employees to prevent an individual employee from handling duties which are incompatible. We noted one individual has control over portions of one or more of the following areas for the District relating to major federal programs; cash, inventories, receipts, disbursements, payroll, wire transfers, transfers, computer systems and manual journal entries. See finding 2023 001.

One important aspect of the internal control structure is the segregation of duties among employees to prevent an individual employee from handling duties which are incompatible. We noted one individual has control over portions of one or more of the following areas for the District relating to major federal programs; cash, inventories, receipts, disbursements, payroll, wire transfers, transfers, computer systems and manual journal entries. See finding 2022 001.

Segregation of Duties Criteria - Management is responsible for establishing and maintaining internal control. A good system of internal control provides for adequate segregation of duties so no one individual handles a transaction from its inception to completion. In order to maintain proper internal control, duties should be segregated so the authorization, custody, and recording of transactions are not under the control of the same employee. This segregation of duties helps prevent losses from employee error or dishonesty and maximizes the accuracy of the District?s financial statements. Condition - One important aspect of the internal control structure is the segregation of duties among employees to prevent an individual employee from handling duties which are incompatible. One individual has control over one or more of the following areas for the District: 1) Cash - handling and recording cash, posting and reconciling. 2) Investments - investing, detailed recordkeeping, custody of investments and reconciling earnings. 3) Receipts - collecting, recording, depositing, journalizing, posting and reconciling. 4) Disbursements - check preparation, mailing and recording. 5) Payroll - recordkeeping, preparation, posting, and distribution. 6) Wire Transfers - processing and approving. 7) Transfers - processing and approving. 8) Computer systems - performing all general accounting functions and controlling all data input and output. 9) Journal entries - writing, approving, and posting. 10) School lunch program - journalizing, posting, reconciling, purchase order processing, check preparation, mailing and recording. Cause - The District has a limited number of employees and procedures have not been designed to adequately segregate duties or provide compensating controls through additional oversight of transactions and processes. Effect - Inadequate segregation of duties could adversely affect the District?s ability to prevent or detect and correct misstatements, errors, or misappropriation on a timely basis by employees in the normal course of performing their assigned functions. Recommendation - We realize that with a limited number of office employees, segregation of duties is difficult. However, the District should review its control procedures to obtain the maximum internal control possible under the circumstances.