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Rick Bonner & Julie Rupe

2017 - BMC, Vancouver, WA

Overview

Potential issues

Detail, examples and discussion


In accounting and auditing, internal control is

defined as a process effected by an organization's

structure, work and authority flows, people and

management information systems, designed to

help the organization accomplish specific goals or

objectives.~COSO


Having strong internal controls ◦ Reduces the risk of fraud or misuse of public funds

◦ Ensures the District has accurate financial reporting

◦ Protects the employees from erroneous allegations

◦ Provides the framework for all processes and procedures

at the District


School District 1 – credit card fraud

$118,871 misappropriated

$140,790 questionable charges

-long time employee

-lack of oversight


School District 2

$7,271 misappropriated

$26,819 questionable charges

-Receipts not recorded in cash receipting system

-Lack of review of receipts and deposits


School District 3 – CTE

Overfunding of $181,522 (over 5 years)

Courses not approved by OSPI

Teachers not certified

Endorsement not in alignment with courses taught

Teachers not endorsed in Washington State.


Segregation of Duties

Management Oversight

Technology and Automated Processes

Safeguarding of Assets

Investing in Human Capital


Management should divide or segregate key

duties and responsibilities among different people

to reduce the risk of error, misuse, or fraud.

Control activities related to authority, custody, and

accounting of operations must be separated to

achieve adequate segregation of duties.


This includes separating the responsibilities for:◦ authorizing transactions

◦ processing and recording them

◦ reviewing the transactions

◦ handling any related assets or process so that no one

individual controls all key aspects of a transaction or event.

Compensating control◦ If segregation of duties is not practical within an operational

process because of limited personnel for example, adding

closer supervision, cross-training or frequent reviews may be

an alternative for this control activity.


Management needs to be actively involved in all

aspects of the District. Regular monitoring of key

operations need to occur. Managers should

review all revenues, expenditures, accounts

payable and accounts receivable and any

adjustments made, on a monthly basis

This oversight needs to be deliberate and

observable


Review and sign all journal entries

Review the work of the person preparing the bank

deposit

Perform analytical reviews on budget to actual

revenues and expenditures

Establish a check and balance for all cash

handling locations

Monitor all financial transactions for accuracy


Management needs to ensure proper handling of

assets to ensure accountability of public funds.

Controls need to include tracking and accounting

for all inventory items.


Security for and limited access to assets such

as cash, inventories, and equipment.

Periodically perform a physical count of assets

and compare to control records.

Create security measures for all electronic

information, requiring passwords for access


System reports and financial information should

be reconciled to source documents on a regular

basis to ensure accuracy. Automated and

electronic systems are a great way to save time

and money, as long as you are confident that the

information is accurate.


Perform edit checks of manual data entered in the

system (manual warrants, payroll adjustments)

Review accounting transactions to ensure they are in

numerical sequences and that there are no missing

numbers (cash receipting)

Create procedures to verify information entered in the

system can be reconciled to source documents

(accounts payable, timesheets)

Review daily reports to ensure transactions are recorded

timely (local receipts)


Qualified employees are the most valuable assets

in an agency. Management should invest in

training and professional development

opportunities for staff. This will reduce the risk of

errors and inefficiency in operations by ensuring

that staff has adequate education and experience

to properly perform their job duties.


Implement a training program for new employees

and re-train staff when they take on new job

functions

Set performance goals for staff, evaluate progress

throughout the year and provide feedback.

Encourage staff to express training needs and find

ways to accommodate those needs

Create a positive culture in your District


One person collects the money from the customer

records/receipts the funds at that time.

Another person performs a reconciliation of the

daily receipt log to the actual cash and creates the

deposit.

Someone else verifies that the information is

accurate by performing a monthly reconciliation of

the bank statements to the daily cash receipts and

daily deposits.


Restrictively endorse all checks “for deposit only”,

immediately upon receipt.

Official Pre-numbered receipts should be used for all cash

received.

Deposits made in tact and compared to receipts.

Two people should open the mail, make a list/log of all checks

received, and then compare the amount of revenue received

to subsequently prepared cash receipt and bank deposit

records.

Each employee who receives funds must have a separate

locking container or cash drawer for their funds.


Compare current headcount of employees to budget expectations.

Review personnel action forms or new hire reports for staffing changes.

Look at the current payroll expenditures compared to the prior three months.

Review all timesheet dollars for reasonableness.

Ensure all timesheets are approved by a Supervisor.

Have a second review of all payroll reports prior to processing.

Compare the actual bottom line payroll information after processing to system documentation.

◦ This ensures no additional items were added after the initial review of payroll.


Review access controls to ensure that no employee can initiate disbursement transactions, release the batch of transactions to request production of checks, and then pick-up or obtain the checks.

A second person needs to review the physical checks to the supporting documentation prior to disbursement to the vendors.

Ensure original source documents support all expenditures.


Someone independent of the custodian of any bank account or general disbursement system must perform the monthly bank reconciliation. This person should receive the bank statement directly from the bank unopened.

Review all canceled/redeemed checks for any irregularities.

Agree total cash receipts, by mode of payment, from the accounting records to a bank-validated deposit slip. The deposit slips list the check and cash composition of the deposit.


Rick Bonner

[email protected]

(360) 709-7015

Julie Rupe

[email protected]

(360) 464-6750


mailto:[email protected]

mailto:[email protected]

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