Special Contribution from Weaver |
Separating key duties is one of the most effective ways to ensure oversight, improve accuracy and deter fraud. Even in a small district of 1,000 ADA and a two- or three-person business office, there are ways you can divide processes to protect both the district and yourself.
How can a small district segregate duties, even without a large staff?
- Know what processes should be separated. In general, make sure that no one person controls an entire financial process from beginning to end. For example, your cash disbursement process should separate access to cash/checks, reconciling bank statements, recording transactions, and approving payments (i.e., signing the checks or approving electronic payments). In payroll, the person who enters employee information or payroll adjustments into the system should not also prepare disbursement records or send payroll disbursements.
- Look outside the business office for assistance. Some tasks — such as recording cash and checks received, reconciling ledgers and matching monthly credit card charges with detailed receipts — can be delegated to other district staff. Consider involving someone from the superintendent’s office or campus-level support staff. Other tasks, such as reviewing bank account activity or reviewing additions and deletions to the payroll system, could be performed by the superintendent or even a board member.
- Educate the helpers. When seeking help from people outside the business office, you must train them. They need to understand not only what you’re asking them to do, but also why it’s important. Teach them what risks to be aware of, what to look for in reviews and reconciliations, and what processes should be separated.
- Require vacations or rotate staff. Duties should be segregated over time, not just by process. An employee who resists taking vacation may be very dedicated, but that individual may also be afraid to let anyone else see the checks going out. Rotate duties each quarter to eliminate dark corners.
- Create and review reports to help identify irregularities. For example, reports on budget versus actuals, new vendor set-ups, purchases by vendor, new hires and terminations, and payroll change reports can all highlight unexpected activity so it can be investigated. Data analytics can also be used to uncover suspicious activity, such as discovering a vendor whose address matches an employee’s.
- Stay alert for unusual activity such as transactions or processes that are being handled differently from the rest. There may be a good reason, but such outliers should be carefully scrutinized.
Segregating duties may require some extra time and work, but the benefits are substantial. A few simple precautions can help ensure that your district only makes the headlines for outstanding student achievement.
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About the Author
Sara Dempsey, CPA, is Weaver’s partner in charge of assurance services for government entities, which currently performs financial audits for more than 50 Texas school districts, from very small districts to the largest in the state. Sara sets direction and helps ensure high-quality work for all of Weaver’s public sector clients. See https://weaver.com/industries/government for more information.
