In the approximately 650 smaller enrollment school districts and open-enrollment charter schools (less than 1,000 students) school officials have more limited options for segregation of duties due to the smaller number of staff in central administration; however, no school district or charter school is exempt from the need for appropriate internal controls. In many smaller enrollment districts, central administration is comprised of the superintendent, and a two- or three-person business office that includes the business manager, plus a payroll clerk and/or an accounts payable clerk. The trusted staff in the business office may be allowed to run all payroll-related processes; however, the limited distribution of roles and responsibilities to only the staff in the business office introduces a higher degree of avoidable risk than may be reasonable.
Payroll-related approval processes that may be assigned to the superintendent or other staff that work outside of the business office to strengthen internal controls by expanding segregation of duties include:
- Review and approve additions and deletions of employees in the payroll system, including rate of pay and benefits
- Review and approve changes to employees’ rate of pay and benefits in the payroll system
- Review and sign-off on a report on adjusting journal entries related to payroll and benefits
- Receive unopened monthly bank statements prior to distribution to the business office
- Review detailed payroll distribution reconciliations prior to distribution of payroll
- Review detailed bank reconciliation for the bank account that includes the payroll distribution
The internal control examples listed above are a start and may be supplemented with additional control processes in larger small enrollment districts.