PIKE COUNTY BOARD OF EDUCATIONLocal Government

Criteria - Segregated duties is the means by which no one person has sole control over the initiation, recording, and authorization functions of a transaction process. Condition - There were inadequate segregation of duties over the payroll review process. The payroll clerks recorded and processed monthly payroll, and there was no formal review process of the monthly payroll journals. This finding was identified during the fiscal year 2023 audit; however, beginning in June 2024, the Board implemented a segregation of duties policy for payroll processing. A formal review over payroll has been performed each payroll period since June 2024. Effect - This absence of segregation poses an increased risk of errors, inaccuracies, or fraudulent activities going undetected, as the control mechanisms are weakened. The individual with combined responsibilities has the ability to initiate and approve payroll transactions without an independent review, creating a potential avenue for unauthorized or inaccurate payments. Cause - There were a limited number of employees involved in the payroll process, and the Board’s policies and procedures did not provide for a detail review of payroll reports. This finding was identified during the fiscal year 2023 audit; however, beginning in June 2024, the Board implemented a segregation of duties policy for payroll processing. A formal review over payroll has been performed each payroll period since June 2024. Recommendation - It was recommended that the Board implement a segregation of duties policy for payroll processing, and the Board immediately implemented a policy following the fiscal year 2023 audit in June 2024. Views of Responsible Officials and Planned Corrective Actions - Management concurred with the finding and acknowledged the importance of implementing segregation of duties in the payroll processing function. They committed to reviewing and revising the current procedures to establish a more robust internal control structure over payroll processes. Management timely implemented a plan for the segregation of duties implementation in response to this audit finding.

Material Weakness:Criteria - Segregated duties is the means by which no one person has sole control over the initiation, recording, and authorization functions of a transaction process. Condition - There is inadequate segregation of duties over the payroll review process. The payroll clerks record and process monthly payroll, and there is no formal review process of the monthly payroll journals. Effect - This absence of segregation poses an increased risk of errors, inaccuracies, or fraudulent activities going undetected, as the control mechanisms are weakened. The individual with combined responsibilities has the ability to initiate and approve payroll transactions without an independent review, creating a potential avenue for unauthorized or inaccurate payments. Cause - There are a limited number of employees involved in the payroll process, and the Board’s policies and procedures do not provide for a detail review of payroll reports. Recommendation - It is recommended that the Board promptly implement a segregation of duties policy for payroll processing. This should involve assigning distinct responsibilities for initiating, approving, and reviewing payroll transactions to different individuals or departments. By doing so, the Board can enhance internal controls, mitigate risks, and ensure the accuracy and integrity of payroll processing. Views of Responsible Officials and Planned Corrective Actions - Management concurs with the finding and acknowledges the importance of implementing segregation of duties in the payroll processing function. They commit to reviewing and revising the current procedures to establish a more robust internal control structure over payroll processes. Management will provide a detailed action plan and timeline for the segregation of duties implementation in response to this audit finding.