Transcript School District Business Operations – Efficiencies and

School District Business Operations –
Efficiencies and Internal Controls
Laura E. Cowburn, PRSBA
Asst. to Supt. for Business Services
Columbia Borough School District
Matthew J. Malinowski
Business Manager
Susquehanna Township School District
PASBO Conference 3/15/07
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PASBO Conference
3/14/2007
Introduction
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Internal controls:
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A process effected by the entity’s board,
management, and other personnel, designed to
provide reasonable assurance regarding the
achievement of objective in effectiveness and
efficiency of operations, reliability of financial
reporting, and compliance with applicable laws
and regulations.
PASBO Conference
3/14/2007
Internal Control Myths an Facts
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MYTHS
Internal control starts with a
strong set of policies and
procedures
Internal control – That’s why we
have external/internal auditors.
Internal control is a finance
thing
Internal controls are essentially
negative, like a list of “thoushalt-nots.”
Internal controls take time away
from our core activities –
serving students.
PASBO Conference
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FACTS
Internal control starts with a
strong control environment
While external/internal auditors
play a key role in the system of
control, management is the
primary owner of internal
control
Internal control is integral to
every aspect of business
Internal control makes the right
things happen the first time
Internal controls should be built
“into,” not “onto” business
processes.
Segregation of Duties
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Segregation of duties means separating the
recordkeeping function from the operational
responsibility of that activity and from those who
exercise physical control over the records.
Categories of duties:
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Authorization
Custody
Record keeping
Reconciliation
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State Audit
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Internal Control Review (sample questions)
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Is cash deposited in tact and on a timely basis?
Are checks restrictively endorsed immediately upon receipt?
Are changes in employment, salaries, wage rates, and payroll deductions
authorized by the board and the dollar amounts listed in the minutes?
Are employee files maintained by a person independent of payroll
processing?
Is the payroll register approved by authorized personnel prior to final
processing?
Are invoices checked in the business office against purchase orders and
evidence of receipt noted prior to payment?
Are the purchasing and receiving functions separate?
PASBO Conference
3/14/2007
Assessment Criteria
A Balanced Assessment should take into
account the following:
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Significance- The degree of harm that
could result
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Likelihood of Occurrence- What is the
probability the a given risk will materialize?
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Inherent Risk – Where will there always be
risk?
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Example of Maintaining the Three
Separate Functions
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Purchasing person issues a purchase order
based on a requisition completed
beforehand.
Person who ordered the item verifies that the
goods are received (Sign off on PO copy)
Separate Person in the business office
issues or authorizes payment.
PASBO Conference
3/14/2007
Identifying Potential Risks
Assertions to ensure that all significant risks
are identified in a purchasing cycle:
1) Has a purchase been recorded for goods
not yet received? Has a vendor been paid
twice?
2) Have purchases been made, but not
recorded?
3) Were all purchases properly authorized?
4) Were charges to appropriate accounts?
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Compensating Controls
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Control related policies to compensate for
risks.
Examples:
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Purchases orders must be approved by
department head or other designated official.
Policy to only pay off of an original invoice
Reconcile encumbrances to open purchase
orders
PASBO Conference
3/14/2007
What are you reporting to your board?
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Treasurers Report on all Cash Balances
Special Fund Reports (Food Service, Capital,
Special Revenue, Activity)
YTD Budget Report
Budget Transfers
All Tax Exonerations
Bill List (Include monthly, emergency, wires)
PASBO Conference
3/14/2007
Common Types of Public Sector Fraud
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Payroll Fraud
Benefit Fraud
Double Payments
Charge Off Fraud
Disposal Fraud
Travel Claim Fraud
PASBO Conference
3/14/2007
Examples of Internal Controls
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Budget preparation, monitoring
Purchasing/Payroll functions
Tax Collection/Reporting
Investments
Records
PASBO Conference
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Other Examples
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Internal Control Components
Assessment Factors
Risk Evaluation
Occupational Fraud and Abuse
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Quiz – What’s Your Fraud IQ?
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Additional Resources/Information
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U.S. Government Accountability Office (GOA) – New
Edition Yellow Book –
http://www.gao.gov/govaud/ybk01.htm download.
See pages 81-87.
Roslyn School District, New York http://www.osc.state.ny.us/localgov/audits/2006/scho
ols/roslynfoll.pdf (a real life scandal)
AICPA https://antifraud.aicpa.org/Resources/CPA+Services
+for+Fraud+Prevention+and+Detection.htm
PASBO Conference
3/14/2007