SEGREGATION OF FINANCIAL DUTIES IN THE SMALLER PUBLIC SCHOOL TO IMPROVE FINANCIAL INTERNAL CONTROLS

Transcription

1 SEGREGATION OF FINANCIAL DUTIES IN THE SMALLER PUBLIC SCHOOL TO IMPROVE FINANCIAL INTERNAL CONTROLS

2 Special appreciation to IASB for staff support in the development of this document.

3 Contents Student Activity Funds Gate / Admission Fees in the one, two or three person office One Person Office: Petty Cash, Cash in Bank, Investments... 6 Receipts, Revenues, Receivables Payables, Expenditures, Disbursements / Credit Cards Payroll Financial Reporting Two Person Office: Petty Cash, Cash in Bank, Investments Receipts, Revenues, Receivables Payables, Expenditures, Disbursements / Credit Cards Payroll Financial Reporting Three Person Office: Petty Cash, Cash in Bank, Investments Receipts, Revenues, Receivables Payables, Expenditures, Disbursements / Credit Cards Payroll Financial Reporting WHAT IS SEGREGATION OF DUTIES? No single person should have control over two or more phases of a task, process or transaction OR another way to say that is More than one person should be required to complete any task WHY IS SEGREGATION OF DUTIES SO VERY, VERY IMPORTANT?? Greater accuracy Finds errors quickly Deters mismanagement/fraud Provides checks & balances! Protects the and YOU! Direct inquiries to: Iowa Association of School Business Officials 62 Hidden River Ct. Tipton, IA iowaasbo@yahoo.com all rights reserved by Iowa ASBO 3

4 The following suggestions for Models in segregation of duties for improved internal fiscal controls were prepared by Iowa ASBO in response to an increasing number of requests by School Business Officials (SBO), Boards of Education and s. They were seeking assistance in reducing or eliminating insufficient internal controls and segregation of duties comments in the annual district financial audit. A small workgroup of SBOs worked with the state auditor s office, IASBO members who had previously served as private auditors and experienced SBOs to develop suggestions for models that could be considered in school district business offices with one, two or three staff. The materials were categorized into sections for districts with a one-person business office staff, a two-person business office staff and a three-person business office staff. Districts with larger staff may want to assign other office staff to duties identified in this packet. District staff is encouraged to review the sections applicable to their situation and discuss the suggestions with their superintendent and board of education to determine those that may be most appropriately applied. It is also suggested that local district audit firms be included in the discussion for their understanding, suggestions and support. Many districts will adopt suggestions slowly to identify what works and doesn t work in their district, and others will embrace many / all of the suggestions. It has been understood for some time that the list of duties and responsibilities rarely is exactly the same in any two district business offices. It has also been understood that a more complete compliance with segregation of duties and improvement of internal controls would require attention by others outside of the business office. These external sources may include other district employees or community volunteers for functions such as non-accounting and verification checking tasks. It is also understood that segregation of duties will not assure total compliance and elimination of any financial malfeasance though it will assuredly reduce the likelihood through the inclusion of others review of each individual s work. The project was initiated by the Iowa Association of School Business Officials with a great deal of appreciation due to Patti Schroeder (former Des Moines School Chief Financial Officer and current IASB financial resource) for coordinating the project. Others who contributed to the project include: Andy Nielsen and Pam Bormann at the State Auditor s Office, Mary Babinet at Notle, Cornman & Johnson PC and Iowa SBOs Kevin Baccam, Kristy Weiss, Ryan Eidahl, Johna Clancy, Shonna Trudo, Jill Gavin and Sue Huls. What should be segregated? Three A s (of Assets) Custody, control or handling of asset: Cash; checks; receipts; deposits; credit cards; safes; lock boxes Equipment; receipt of new purchases; inventories Paycheck/vendor checks - printing or distribution Reviewing and approval of task or transaction or operation such as approval of: Bank account adjustments or transfers; purchase orders or requisitions; use or disposition of an assets; changes in pay or benefits; timesheets or leave requests; change orders; IT programming changes; adjusting journal entries Creating or maintaining records, such as cash receipts, requisitions Maintaining inventory records 4 all rights reserved by Iowa ASBO

5 STUDENT ACTIVITY FUNDS - GATE / ADMISSION FEES SEGREGATION OF DUTIES MODEL - ONE, TWO or THREE PERSON DUTY Approves creation or dissolution of a cash or change box SBO Principal or Provides cash box upon approval of creation of cash box Central Office Secretary (1) Prepares accounting entries to create or dissolve cash or change boxes Provides pre-numbered tickets and records first and last number given out Receives admission fee, provides ticket, makes change Individual One Collection of pre-numbered ticket at the door of event: tear in half or deposit in a receptacle prior to entrance to event Prepares Form. Records cash collected; reconciles it to the number of tickets used; records numbers of beginning and ending tickets, and pre-numbered tickets that were unused. Records, amount of cash received, and short and long amount versus number of tickets sold. Both individuals sign Form. Cash/change box turned into Administrator acting as custodian of the cash at the event Take cash collection to night depository; Provides deposit slip to Business Office next day Hands in left over pre-numbered tickets and Form to Business Office Business Office matches Form amounts to bank deposit slip. Reconciles pre-numbered tickets used to what is shown on Form Individual Two Both Individuals Individual One or Two Administrator One of the Individuals Central Office Secretary(1) Verifies and records beginning and ending tickets used, and the numbers of the unused pre-numbered tickets. Initiates appropriate accounting entries to record revenue received (1) Central Office Secretary could be another person in the Business Office. Models: Two Individuals (either two district employees outside the business office or parents) required at the event for proper segregation of duties. Should not use the same two Individuals all the time. Consider point of sale barcoding or other technology to eliminate cash transactions. all rights reserved by Iowa ASBO 5

6 PETTY CASH, CASH IN BANK, INVESTMENTS SEGREGATION OF DUTIES MODEL - ONE PERSON DUTY SBO Initiates request to open/close bank/investment accounts and public depositories Petty Cash Approves/signs off on opening/closing of bank/investment accounts and public depositories Board Approves/signs off on creation or dissolution of a petty cash fund Acts as custodian of petty cash Signs voucher when receives cash Periodically reviews and reconciles petty cash and initiates appropriate accounting entries Reviews reconciliation, approves and signs off on all petty cash accounting entries School Secretary Person receiving cash School Secretary School Principal Approves/signs off on all petty cash accounting entries (reconciliation attached) Monitors frequency of petty cash replenishments Cash In Bank Is one of two required signatories on district bank accounts Board President Prepares bank account transfers documents Approves/signs off on bank account transfers documents requiring dual authorization codes Receives unopened monthly bank statement and prepares detailed, documented bank reconciliation Treasurer (if none, done by a designee outside Business Office) Reviews, approves, and signs off on bank reconciliation Prepares adjusting journal entries based on bank reconciliation Approves/signs off on adjusting journal entries based on reconciliation Maintains control over supply of unused checks and voided checks Clerk/Supt s Secretary/IT (2) person 6 all rights reserved by Iowa ASBO

7 DUTY SBO Investments Initiates all electronic investment transfers in and out of cash in bank Authorizes/approves/signs off on electronic investment transfers in and out of cash in bank; approves/signs off on all accounting entries Is present for physical inspection of investments both parties must be present Board member, Held off site (ie. bank) Reconciles documents to investment records; reconciles investment earnings to accounting records Treasurer or designee outside the Business Office (1) s should be done by someone not otherwise involved in cash receipt, payroll or disbursement functions including signing checks, or handling or recording cash. (2) IT Information technology person outside the Business Office to accounting programs is limited to those with a legitimate need for access. all rights reserved by Iowa ASBO 7

8 RECEIPTS / REVENUES / RECEIVABLE SEGREGATION OF DUTIES MODEL - ONE PERSON Cash and checks received through the mail DUTY SBO Immediately stamps each check received For Deposit Only. Cash/Checks received are recorded in a journal or a receipt log; Sends cash/checks intact with remittances and a copy of the journal or log to Another Secretary/Clerk. Cash and checks received in by district Responsible for securing unused and returned used prenumbered receipt books and maintaining a log of receipt book dispersion and return. Periodically accounts for the numerical sequence of all receipt books. Investigates all variances. Immediately stamps each check received by walk-in or mail For Deposit Only. Cash/Checks received are recorded in a pre-numbered receipt book. One receipt is always given to the payer. Receipts marked Void are kept in the book. Prepares listing of Cash/Checks received and submits Cash/Checks intact with listing to Another Secretary/Clerk. Electronic Funds Transfers credited to district bank accts Daily scans on-line bank account for EFT postings to district s account. Creates a clearing account until investigation yields appropriate revenue coding to be used. Appropriately records EFT activity to accounts receivable or revenue accounts. Generally / Prepares deposit from journal /log/cash register tape/listing of receipts from receipt book, reconciling all to cash/checks received; Makes deposit at bank; Sends bank validated deposit slip and log/journal/tape/listing to SBO and Treasurer. Maintains accounting records of amounts due, but unpaid. Makes appropriate ledger entries, either to satisfy accounts receivable or to other revenue accounts; or if unknown to a clearing account until investigation yields appropriate revenue coding to be used. Periodically, as part of bank reconciliation process, matches journal or listing to validated deposit slips and accounting records to ensure all revenue is deposited and recorded. Pursues any notifications of un-cashed checks to determine reasons for not being deposited on a timely basis. Periodically reconciles the general ledger to subsidiary account receivable ledgers. Investigates and resolves all variances. (2) Secretary/Clerk Teacher Athletic Director Club Adviser Administrative Office Secretary (2) Secretary/Clerk Teacher Athletic Director Club Adviser Another Secretary/Clerk Administrative Secretary/Clerk (1) Treasurer or designee outside the Business Office to revenue/receivable systems is limited to those with a legitimate need for access. (1) s should be done by someone not otherwise involved in cash receipt, payroll or disbursement functions including signing checks, or handling or recording cash. (2) For Deposit Only stamps should be used by anyone in the district that receives checks. 8 all rights reserved by Iowa ASBO

9 NOTES all rights reserved by Iowa ASBO 9

10 PAYABLES / EPENDITURES / DISBURSEMENTS / CREDIT CARDS SEGREGATION OF DUTIES MODEL - ONE PERSON DUTY SBO Purchasing /Expenditure/ Disbursements Cycles Prepares requisition/e-requisition Prepares purchase order/e-purchase order Approves/signs off on purchase order prepared and submits to Business Office Receives, approves/signs off on goods/services received and compares to requisition and purchase order and delivers goods/services to staff originally requesting goods/services; sends receiving documentation to Business Office Requesting Staff Secretary Supervisor / Principal Separate designated School employee not preparing P.O. Receives invoices and matches them to purchase orders, and receiving documentation showing proof of receipt of goods/services submitted from designated school employee; initiates accounts payable Approves/signs off on computer generated listing of accounts payables/ payments of claims Approves payment of accounts payable - See Code Section Board Approves/signs off on addition of new vendors Initiates check payment of claim and accounting entries Prints vendor payment checks and sends to vendors; sends check register to Administrative Secretary Maintains control over supply of unused checks and voided checks Approves/signs off on all check writing signature plate changes Clerk / IT(1) person Clerk / IT(1) person Initiates and first approves electronic funds transfer (EFT) Approves/signs off on all electronic funds transfers (EFT) EFT completed requiring dual authorization codes Matches check register to supporting documentation; reconciles differences Adm Secretary 10 all rights reserved by Iowa ASBO

11 DUTY SBO Credit Cards Review Issues Credit Cards; maintains log of holders; if "district/ building" credit card, maintains log of date/time checked out/in (receipts to Supervisor/Principal) Reviews, signs off on monthly listing of credit card charges, sends list on with receipts Approves, signs off on employee listing of credit card charges, matching charges to receipts provided; submits listing to Business Office; contact B.O. if unauthorized charges Individual credit card holder tsupervisor / Principal Receives monthly listings, calculates total and compares to credit card invoice; prepares accounting entries Researches unauthorized charges to payables/expenditures/disbursements/credit card systems is limited to those with a legitimate need for access. (1) IT Information technology person outside the Business Office all rights reserved by Iowa ASBO 11

12 PAYROLL SEGREGATION OF DUTIES MODEL - ONE PERSON DUTY SBO Approves addition/deletion of employees to payroll, including rate of pay and benefits Board Enters personnel information into the HR/payroll system; matches to Board approval documents Approves and signs off on all personnel information entered into the HR/payroll system, including changes to rates of pay and benefits Approves/signs off on time off requested - prior to employee taking time off Obtains, verifies timesheet to prior authorized requests, and approves/signs off on timesheets Enters all payroll entries from timesheets into the payroll system (hourly employees, absences, substitute pay, additional compensation, etc.) and turns reports into the Business Office after entry into the payroll system Prints payroll entry reports and verifies, approves/signs off on accuracy of payroll entry reports to timesheets HR Employee Supervisor/Principal Supervisor/Principal School/Dept. Secretary A Different school/ dept. Secretary/ bookkeeper Calculates payroll and runs reports; verifies to payroll entry reports Re-verifies payroll calculations tracing to timesheets and signs off on payroll reports School/Dept. Secretary Authorizes printing of payroll checks Prints checks and direct deposit stubs and delivers directly to A Different School Secretary for distribution; or mails out check stubs Distributes paychecks and direct deposit stubs (electronically if possible) and maintains custody of undistributed checks/stubs Maintains control over supply of unused payroll checks and voided payroll checks Approves/ signs off on all check writing signature plate changes Clerk/IT(2) person A Different School/ Dept. Secretary/ Bookkeeper Clerk/IT(2) person Creates electronic direct deposit file Approves/signs off on electronic direct deposit file that is to go to the bank Sends direct deposit file to the bank requiring dual authorization codes 12 all rights reserved by Iowa ASBO

13 DUTY SBO Prints payroll check reports and compares check register and direct deposit file Pays 941 taxes, send 403b wire, and file all other applicable reports (IPERS, 403bs, state taxes, etc.) Verifies, authorizes/signs off on all 403b wire transfers and payment of taxes Makes bank transfer requiring dual authorization codes Receives unopened monthly bank statements prepares detailed, documented bank reconciliation including reconciliation of payroll transactions to bank statements (1) Treasurer (if none, done by a designee outside B.O,) Reviews, approves and signs off on and approves bank reconciliation Prepares adjusting journal entries based on bank reconciliation Approves/signs off on adjusting journal entries based on reconciliation to payroll and accounting systems is limited to those with a legitimate need for access. For example, if payroll timesheets are maintained on line, employees should only have access to their own timesheet; Supervisors should only have access to those employees under their supervision; Moreover, HR personnel should not have access to the payroll system; and Payroll specialists should not have access to HR system. (1) s should be done by someone not otherwise involved in cash receipt, payroll or disbursement functions. (2) IT Information technology person outside the Business Office all rights reserved by Iowa ASBO 13

14 FINANCIAL REPORTING SEGREGATION OF DUTIES MODEL - ONE PERSON DUTY SBO Approves reporting format Board Reviews/approves and signs off on a monthly IT generated listing of changes to chart of accounts and another listing showing all adjusting journal entries made during the reporting period. or designee outside B.O. with knowledge of accounting Prepares financial reports and compares to accounting records; Performs analytical review(1) Performs timely critical review; Approves/signs off on analytical review and financial reports; Ensures all financial reports (external, internal, federal/state) are supported by either accounting records or other supporting documentation Treasurer or by a designee outside of the B.O. Ensures all requirements (Board, State or Federal) for filing financial reports are being met to the financial reporting systems is limited to those with a legitimate need for access. - Ideally financial reports should be prepared by someone who does not have access to assets, nor does daily accounting. In lieu of that, critical review of prepared statements should be done by someone who did not prepare the statements. - to assets should not be necessary when defining roles in financial reporting. (1) Analytical Review - making comparisons between financial information to determine accuracy or to point out irregularities. - General ledger to sub-ledger - Budget to actual - Current year to prior year - YTD - Large variations 14 all rights reserved by Iowa ASBO

15 NOTES all rights reserved by Iowa ASBO 15

16 PETTY CASH, CASH IN BANK, INVESTMENTS SEGREGATION OF DUTIES MODEL - TWO PERSON DUTY SBO PERSON 2 Initiates request to open/close bank/ investment accounts and public depositories Petty Cash Approves/signs off on opening/closing bank/ investment accounts and public depositories Board Approves/signs off on creation or dissolution of a petty cash fund Acts as custodian of petty cash Signs voucher when receives cash School Secretary Person receiving cash Periodically reviews and reconciles petty cash and initiates appropriate accounting entries Reviews reconciliation, approves and signs off on all petty cash accounting entries Approves/signs off on all petty cash accounting entries (reconciliation attached) Monitors frequency of petty cash replenishments Cash in Bank Is one of two required signatories on district bank accounts Board President Prepares bank account transfers documents Approves/signs off on bank account transfers documents requiring dual authorization codes Receives unopened monthly bank statement and prepares detailed, documented bank reconciliation (1) Treasurer (if none, done by a designee outside B.O.) Reviews, approves and signs off on bank reconciliation Prepares adjusting journal entries based on bank reconciliation Approves/signs off on adjusting journal entries based on reconciliation Maintains control over supply of unused checks and voided checks Clerk/Supt s Secretary/IT(2) person 16 all rights reserved by Iowa ASBO

17 DUTY SBO PERSON 2 Investments Initiates all electronic investment transfers in and out of cash in bank Authorizes/approves/signs off on electronic investment transfers in and out of cash in bank; approves/signs off on all accounting entries Is present for physical inspection of investments both parties must be present Held offsite (i.e. bank) Reconciles documents to investment records; reconciles investment earnings to accounting records Treasurer or designee outside the Business Office (1) s should be done by someone not otherwise involved in cash receipt, payroll or disbursement functions including signing checks, or handling or recording cash. (2) IT Information technology person outside the Business Office to accounting programs is limited to those with a legitimate need for access. all rights reserved by Iowa ASBO 17

18 RECEIPTS / REVENUES / RECEIVABLE SEGREGATION OF DUTIES MODEL - TWO PERSON Cash and checks received through the mail DUTY SBO PERSON 2 Immediately stamps each check received For Deposit Only. Cash/Checks received are recorded in a journal or a receipt log; Sends cash/checks intact with remittances and a copy of the journal or log to Another Secretary/Clerk. Cash and checks received in by district Responsible for securing unused and returned used prenumbered receipt books and maintaining a log of receipt book dispersion and return. Periodically accounts for the numerical sequence of all receipt books. Investigates all variances. Immediately stamps each check received by walk-in or mail For Deposit Only. Cash/Checks received are recorded in a pre-numbered receipt book. One receipt is always given to the payer. Receipts marked Void are kept in the book. Prepares listing of Cash/Checks received and submits Cash/Checks intact with listing to Another Secretary/Clerk. Electronic Funds Transfers credited to district bank accts Daily scans on-line bank account for EFT postings to district s account. Creates a clearing account until investigation yields appropriate revenue coding to be used. Appropriately records EFT activity to accounts receivable or revenue accounts. Generally / Prepares deposit from journal /log/cash register tape/ listing of receipts from receipt book, reconciling all to cash/ checks received; Makes deposit at bank; Sends bank validated deposit slip and log/journal/tape/listing to SBO and Treasurer. Maintains accounting records of amounts due, but unpaid. Makes appropriate ledger entries, either to satisfy accounts receivable or to other revenue accounts; or if unknown to a clearing account until investigation yields appropriate revenue coding to be used. Periodically, as part of bank reconciliation process, matches journal or listing to validated deposit slips and accounting records to ensure all revenue is deposited and recorded. Pursues any notifications of un-cashed checks to determine reasons for not being deposited on a timely basis. Periodically reconciles the general ledger to subsidiary account receivable ledgers. Investigates and resolves all variances. to revenue/receivable systems is limited to those with a legitimate need for access. (2) Secretary/Clerk or Teacher or Athletic Director or Club Adviser Administrative Office Secretary (2) Secretary/Clerk or Teacher or Athletic Director or Club Adviser Another Secretary/ Clerk (1) Treasurer or designee outside the Business Office (1) s should be done by someone not otherwise involved in cash receipt, payroll or disbursement functions including signing checks, or handling or recording cash. (2) For Deposit Only stamps should be used by anyone in the district that receives checks. 18 all rights reserved by Iowa ASBO

19 NOTES all rights reserved by Iowa ASBO 19

20 PAYABLES / EPENDITURES / DISBURSEMENTS / CREDIT CARDS SEGREGATION OF DUTIES MODEL - TWO PERSON Purchasing /Expenditure/ Disbursements Cycles DUTY SBO PERSON 2 Prepares requisition/e-requisition Prepares purchase order/e-purchase order Approves/signs off on purchase order prepared and submits to Business Office Receives, approves/signs off on goods/services received and compares to requisition and purchase order and delivers goods/services to staff originally requesting goods/services; sends receiving documentation to Business Office Requesting Staff Secretary Supervisor / Principal Separate designated School employee not preparing P.O. Receives invoices and matches them to purchase orders, and receiving documentation showing proof of receipt of goods/services submitted from designated school employee; initiates accounts payable Approves/signs off on computer generated listing of accounts payables/ payments of claims Approves payment of accounts payable - See Code Section Board Approves/signs off on addition of new vendors Initiates check payment of claim and accounting entries Prints vendor payment checks and sends to vendors; sends check register to Administrative Secretary Maintains control over supply of unused checks and voided checks Approves/signs off on all check writing signature plate changes Clerk/IT(1) person Clerk/IT(1) person Initiates and first approves electronic funds transfer (EFT) Approves/signs off on all electronic funds transfers (EFT) EFT completed requiring dual authorization codes Matches check register to supporting documentation; reconciles differences Adm Secretary 20 all rights reserved by Iowa ASBO

21 DUTY SBO PERSON 2 Credit Cards Issues Credit Cards; maintains log of holders; if "district/ building" credit card, maintains log of date/time checked out/in(receipts to Supervisor/Principal) Review Reviews, signs off on monthly listing of credit card charges, sends list on with receipts Approves, signs off on employee listing of credit card charges, matching charges to receipts provided; submits listing to Business Office; contact B.O. if unauthorized charges Individual credit card holder Supervisor / Principal Receives monthly listings, calculates total and compares to credit card invoice; prepares accounting entries Researches unauthorized charges to payables/expenditures/disbursements/credit card systems is limited to those with a legitimate need for access. (1) IT Information technology person outside the Business Office all rights reserved by Iowa ASBO 21

22 PAYROLL SEGREGATION OF DUTIES MODEL - TWO PERSON DUTY SBO PERSON 2 Approves addition/deletion of employees to payroll, including rate of pay and benefits Board Enters personnel information into the HR/payroll system; matches to Board approval documents Approves and signs off on all personnel information entered into the HR/payroll system, including changes to rates of pay and benefits Approves/signs off on time off requested - prior to employee taking time off Obtains, verifies timesheet to prior authorized requests, and approves/signs off on timesheets Enters all payroll entries from timesheets into the payroll system (hourly employees, absences, substitute pay, additional compensation, etc.) and turns timesheets into the Business Office after entry into the payroll system Supervisor/ Principal Supervisor/ Principal School/Dept. Secretary Prints payroll entry reports and verifies, approves/signs off on accuracy of payroll entry reports to timesheets Calculates payroll and runs reports; verifies to payroll entry reports Re-verifies payroll calculations tracing to timesheets and signs off on payroll reports School/ Dept. Secretary Authorizes printing of payroll checks Prints checks and direct deposit stubs and delivers directly to the different secretary for distribution; or mails out check stubs Distributes paychecks and direct deposit stubs (electronically if possible) and maintains custody of undistributed checks/stubs Maintains control over supply of unused payroll checks and voided payroll checks Approves/ signs off on all check writing signature plate changes Clerk/IT(2) person A Different School/Dept. Secretary/ Bookkeeper Clerk/IT(2) person Creates electronic direct deposit file Approves/signs off on electronic direct deposit file that is to go to the bank Sends direct deposit file to the bank requiring dual authorization codes 22 all rights reserved by Iowa ASBO

23 DUTY SBO PERSON 2 Prints payroll check reports and compares check register and direct deposit file Pays 941 taxes, send 403b wire, and file all other applicable reports (IPERS, 403bs, state taxes, etc.) Verifies, authorizes/signs off on all 403b wire transfers and payment of taxes Makes bank transfer requiring dual authorization codes Receives unopened monthly bank statements, prepares detailed, documented bank reconciliation including reconciliation of payroll transactions to bank statements (1) Treasurer (If none, by a designee outside B.O.) Reviews, approves and signs off on and approves bank reconciliation Prepares adjusting journal entries based on bank reconciliation Approves/signs off on adjusting journal entries based on reconciliation to payroll and accounting systems is limited to those with a legitimate need for access. For example, if payroll timesheets are maintained on line, employees should only have access to their own timesheet; Supervisors should only have access to those employees under their supervision; HR personnel shouldn t have access to the payroll system; and Payroll specialists shouldn t have access to HR system. (1) s should be done by someone not otherwise involved in cash receipt, payroll or disbursement functions. (2) IT Information technology person outside the Business Office all rights reserved by Iowa ASBO 23

24 FINANCIAL REPORTING SEGREGATION OF DUTIES MODEL - TWO PERSON DUTY SBO PERSON 2 Approves reporting format Board Reviews/approves and signs off on a monthly IT generated listing of changes to chart of accounts and another listing showing all adjusting journal entries made during the reporting period. Prepares financial reports and compares to accounting records; Performs analytical review(1) Performs timely critical review; Approves/signs off on analytical review and financial reports; Ensures all financial reports (external, internal, federal/state) are supported by either accounting records or other supporting documentation Ensures all requirements (Board, State or Federal) for filing financial reports are being met to the financial reporting systems is limited to those with a legitimate need for access. - Ideally financial reports should be prepared by someone who does not have access to assets, nor does daily accounting. In lieu of that, critical review of prepared statements should be done by someone who did not prepare the statements. - to assets should not be necessary when defining roles in financial reporting. (1) Analytical Review - making comparisons between financial information to determine accuracy or to point out irregularities. - General ledger to sub-ledger - Budget to actual - Current year to prior year - YTD - Large variations 24 all rights reserved by Iowa ASBO

25 NOTES all rights reserved by Iowa ASBO 25

26 PETTY CASH, CASH IN BANK, INVESTMENTS SEGREGATION OF DUTIES MODEL - THREE PERSON DUTY SBO PERSON 2 PERSON 3 Initiates request to open/close bank/ investment accounts and public depositories Petty Cash Approves/signs off on opening/closing bank/ investment accounts and public depositories Board Approves/signs off on creation or dissolution of a petty cash fund Acts as custodian of petty cash Signs voucher when receives cash School Secretary Person receiving cash Periodically reviews and reconciles petty cash and initiates appropriate accounting entries Reviews reconciliation, approves and signs off on all petty cash accounting entries Approves/signs off on all petty cash accounting entries (reconciliation attached) Monitors frequency of petty cash replenishments Cash in Bank Is one of two required signatories on district bank accounts Board President Prepares bank account transfers documents Approves/signs off on bank account transfers documents requiring dual authorization codes Receives unopened monthly bank statement and prepares detailed, documented bank reconciliation (1) Reviews, approves and signs off on bank reconciliation Prepares adjusting journal entries based on bank reconciliation Approves/signs off on adjusting journal entries based on reconciliation Maintains control over supply of unused checks and voided checks Clerk/Supt s Secretary/IT(2) person 26 all rights reserved by Iowa ASBO

27 DUTY SBO PERSON 2 PERSON 3 Investments Initiates all electronic investment transfers in and out of cash in bank Authorizes/approves/signs off on electronic investment transfers in and out of cash in bank; approves/signs off on all accounting entries Is present for physical inspection of investments both parties must be present Held offsite (i.e. bank) Reconciles documents to investment records; reconciles investment earnings to accounting records (1) s should be done by someone not otherwise involved in cash receipt, payroll or disbursement functions including signing checks, or handling or recording cash. (2) IT Information technology person outside the Business Office to accounting programming is limited to those with a legitimate need for access. all rights reserved by Iowa ASBO 27

28 RECEIPTS / REVENUES / RECEIVABLE SEGREGATION OF DUTIES MODEL - THREE PERSON DUTY SBO PERSON 2 PERSON 3 Cash and checks received through the mail Immediately stamps each check received For Deposit Only. Cash/Checks received are recorded in a journal or a receipt log; Sends cash/checks intact with remittances and a copy of the journal or log to Another Secretary/Clerk. Cash and checks received in by district Responsible for securing unused and returned used pre-numbered receipt books and maintaining a log of receipt book dispersion and return. Periodically accounts for the numerical sequence of all receipt books. Investigates all variances. Immediately stamps each check received by walk-in or mail For Deposit Only. Cash/Checks received are recorded in a pre-numbered receipt book. One receipt is always given to the payer. Receipts marked Void are kept in the book. Prepares listing of Cash/Checks received and submits Cash/Checks intact with listing to Another Secretary/Clerk. Electronic Funds Transfers credited to district bank accts Daily scans on-line bank account for EFT postings to district s account. Creates a clearing account until investigation yields appropriate revenue coding to be used. Appropriately records EFT activity to accounts receivable or revenue accounts. Generally (2) Secretary/Clerk or Teacher or Athletic Director or Club Adviser (2) Secretary/Clerk or Teacher or Athletic Director or Club Adviser / Prepares deposit from journal /log/cash register tape/ listing of receipts from receipt book, reconciling all to cash/checks received; Makes deposit at bank; Sends bank validated deposit slip and log/journal/tape/ listing to SBO and Treasurer. Another Secretary/Clerk Maintains accounting records of amounts due, but unpaid. Makes appropriate ledger entries, either to satisfy accounts receivable or to other revenue accounts; or if unknown to a clearing account until investigation yields appropriate revenue coding to be used. Periodically, as part of bank reconciliation process, matches journal or listing to validated deposit slips and accounting records to ensure all revenue is deposited and recorded. Pursues any notifications of un-cashed checks to determine reasons for not being deposited on a timely basis. Periodically reconciles the general ledger to subsidiary account receivable ledgers. Investigates and resolves all variances. to revenue/receivable systems is limited to those with a legitimate need for access. (1) (1) s should be done by someone not otherwise involved in cash receipt, payroll or disbursement functions including signing checks, or handling or recording cash. (2) For Deposit Only stamps should be used by anyone in the district that receives checks. 28 all rights reserved by Iowa ASBO

29 NOTES all rights reserved by Iowa ASBO 29

30 PAYABLES / EPENDITURES / DISBURSEMENTS / CREDIT CARDS SEGREGATION OF DUTIES MODEL - THREE PERSON DUTY SBO PERSON 2 PERSON 3 Purchasing /Expenditure/ Disbursements Cycles Prepares requisition/e-requisition Requesting Staff Prepares purchase order/e-purchase order Secretary Approves/signs off on purchase order prepared and submits to Business Office Supervisor / Principal Receives, approves/signs off on goods/services received and compares to requisition and purchase order and delivers goods/services to staff originally requesting goods/services; sends receiving documentation to Business Office Separate designated School employee not preparing P.O. Receives invoices and matches them to purchase orders, and receiving documentation showing proof of receipt of goods/services submitted from designated school employee; initiates accounts payable Approves/signs off on computer generated listing of accounts payables/ payments of claims Approves payment of accounts payable - See Code Section Board Approves/signs off on addition of new vendors Initiates check payment of claim and accounting entries Prints vendor payment checks and sends to vendors; sends check register to Person 2 Clerk / IT(1) person Matches check register to supporting documentation; reconciles differences Maintains control over supply of unused checks and voided checks Clerk / IT(1) person Approves/signs off on all check writing signature plate changes Initiates and first approves electronic funds transfer (EFT) Approves/signs off on all electronic funds transfers (EFT) EFT completed requiring dual authorization codes Matches check register to supporting documentation; reconciles differences 30 all rights reserved by Iowa ASBO

31 DUTY SBO PERSON 2 PERSON 3 Credit Cards Issues Credit Cards; maintains log of holders; if "district/building" credit card, maintains log of date/ time checked out/in(receipts to Supervisor/Principal) Review Reviews, signs off on monthly listing of credit card charges, sends list on with receipts Individ credit card holder Approves, signs off on employee listing of credit card charges, matching charges to receipts provided; submits listing to Business Office; contact B.O. if unauthorized charges Supervisor / Principal Receives monthly listings, calculates total and compares to credit card invoice; prepares accounting entries Researches unauthorized charges to payables/expenditures/disbursements/credit card systems is limited to those with a legitimate need for access. all rights reserved by Iowa ASBO 31

32 PAYROLL SEGREGATION OF DUTIES MODEL - THREE PERSON DUTY SBO PERSON 2 PERSON 3 Approves addition/deletion of employees to payroll, and rate of pay and benefits Board Enters personnel info into the HR/payroll system; matches to Board approval documents Approves and signs off on all personnel information entered into the HR/payroll system, including changes to rates of pay and benefits Approves/signs off on time off requested - prior to employee taking time off Obtains, verifies timesheet to prior authorized requests, and approves/signs off on timesheets Enters all payroll entries from timesheets into the payroll system (hourly employees, absences, substitute pay, additional compensation, etc.) and turns timesheets into the Business Office after entry into the payroll system Supervisor / Principal Supervisor / Principal School/Dept Secretary Prints payroll entry reports and verifies, approves/ signs off on accuracy of payroll entry reports to timesheets Calculates payroll and runs reports; verifies to payroll entry reports Re-verifies payroll calculations tracing to timesheets and signs off on payroll reports Authorizes printing of payroll checks Prints checks & direct deposit stubs & delivers to A Different Secretary for distribution; or mails out check stubs Maintains control over supply of unused and voided payroll checks Clerk/IT(2) person Clerk/IT(2) person Approves/ signs off on all check writing signature plate chg. Creates electronic direct deposit file Approves/signs off on electronic direct deposit file that is to go to the bank Sends direct deposit file to the bank requiring dual authorization codes Prints payroll check reports and compares check register and direct deposit file 32 all rights reserved by Iowa ASBO

33 DUTY SBO PERSON 2 PERSON 3 Distributes paychecks and direct deposit stubs (electronically if possible) and maintains custody of undistributed checks/stubs A different school/dept. Secretary/ bookkeeper Pays 941 taxes, send 403b wire,- files all applicable reports -IPERS, 403b, state taxes, etc. Verifies, authorizes/signs off on all 403b wire transfers &payment of taxes Makes bank transfer requiring dual authorization codes Receives unopened monthly bank statements, prepares detailed, documented bank reconciliation including recon payroll transactions to bank statements (1) Reviews, approves and signs off on and approves bank reconciliation Prepares adjusting journal entries based on bank reconciliation Approves/signs off on adjusting journal entries based on reconciliation to payroll and accounting systems is limited to those with a legitimate need for access. For example, if payroll timesheets are maintained on line, employees should only have access to their own timesheet; Supervisors should only have access to those employees under their supervision; Moreover, HR personnel should not have access to the payroll system; and Payroll specialists should not have access to HR system. (1) s should be done by someone not otherwise involved in cash receipt, payroll or disbursement functions. (2) IT Information technology person outside the Business Office. all rights reserved by Iowa ASBO 33

34 FINANCIAL REPORTING SEGREGATION OF DUTIES MODEL - THREE PERSON DUTY SBO PERSON 2 PERSON 3 Approves reporting format Board Reviews/approves and signs off on a monthly IT generated listing of changes to chart of accounts and another listing showing all adjusting journal entries made during the reporting period. Prepares financial reports and compares to accounting records; Performs analytical review (1) Performs timely critical review; Approves/signs off on analytical review and financial reports; Ensures all financial reports (external, internal, federal/state) are supported by either accounting records or other supporting documentation Ensures all requirements (Board, State or Federal) for filing financial reports are being met to the financial reporting systems is limited to those with a legitimate need for access. - Ideally financial reports should be prepared by someone who does not have access to assets, nor does daily accounting. In lieu of that, critical review of prepared statements should be done by someone who did not prepare the statements. - to assets should not be necessary when defining roles in financial reporting. (1) Analytical Review - making comparisons between financial information to determine accuracy or to point out irregularities. - General ledger to sub-ledger - Budget to actual - Current year to prior year - YTD - Large variations 34 all rights reserved by Iowa ASBO

35 NOTES all rights reserved by Iowa ASBO 35

36 MISSION: (OUR IDEAL) To provide programs and services that promote the highest standards of school business management practices and professional growth. VISION: (OUR DREAM) To support the needs of our members by equipping them to be leaders in their schools, profession and community. IOWA ASSOCIATION OF SCHOOL OFFICIALS 62 Hidden River Ct. Tipton, IA WEBSITE: PHONE: