Professional Documents
Culture Documents
Smith, CPA
designed to promote and protect sound management practices, both general and financial in nature. The controls promote:
Financial information that is reliable and timely
Assets and records of the school district that are
safeguarded (not stolen, misused, or accidentally destroyed) The school districts policies being followed Government regulations being met
charged with safeguarding all inflowing monies in the form of tax dollars and other grants and awards and with safeguarding all assets and other resources purchased with these monies. (If you receive tax dollars, you are accountable.) Auditing Standards now call for a risk-based audit, which identifies major control cycles in a district and alerts the auditor to areas of risk that may require more attention during the annual audit. (There may no longer be the concept of auditing around controls.) (New for 2007-2008 audits) School Districts are now, more than ever, being held accountable for the absence of adequate control systems.
Phase I
The Control Environment
The ethics and integrity of the board, the
administration, and the employees of the district The commitment to competence at all levels The administrations operating style and attitude towards controls Human resource policies (and practices) Organizational structure
accounts payable cycle in your district? Are there high expectations for highly ethical behavior surrounding all aspects of ordering and paying for goods and services provided to the district? How would you board react to embezzlement concealed in the accounts payable cycle? Is honesty and integrity important to top-level administration in your district?
Payable Cycle:
No violations of state purchasing laws; No violations of School Board purchasing policies; Authorization for all purchases prior to the purchase being made no exceptions; Best practices in purchasing that will realize the most value for each dollar being spent; Prompt vendor payment within 45 days of the receipt of services/goods.
techniques, and mechanisms that help ensure that district managements directives to minimize risks are carried out. Control activities occur at all levels and functions of the district. They include approvals, authorizations, verifications, reconciliations, performance reviews, and the production of records and documentation.
Understandable Correct
Phase 5 - Monitoring
Any control system must be continually monitored
and updated in order to continue to work effectively. The district should emphasize to managers that they have responsibility for internal control and that they should monitor the effectiveness of control activities as part of their regular duties.
Invoicing by vendor
Accumulation of documents for the claims packet Approval of the claim Payment of the claim Recording of the transaction Reconciliation of cash
Segregation of Duties
No one individual should be responsible for all facets
of the purchasing cycle. The more segregation of the duties in the purchasing cycle, the more difficult it is for someone to commit fraud or for errors to be made in the process. Segregation of duties is vitally important.
Control Activities that will Minimize Risks Associated with Accounts Payable Cycle
Segregation of the duties of: Transaction Authorization Purchase Order Preparation/Approval Claims Preparation Claims Approval Two levels
Account
Control Activities that will Minimize Risks Associated with Accounts Payable Cycle
Responsibilities
for expenditure approval function segregated from those responsibilities for the actual purchase order preparation and purchasing functions.
Both supervisory review and approval and administrative
approval should be given for a purchase transaction before the purchase order is prepared and signed by the purchasing agent.
Supervisor Approves the purchase itself Administrator Approves the account number and affirms that the purchase is allowable per department or program guidelines
purchase order. It is not okay for the purchasing agent to be the only approval for the purchase.
Control Activities that will Minimize Risks Associated with Accounts Payable Cycle
The responsibilities for disbursement/expenditure preparation and approval functions should be segregated from those for recording cash disbursements into ledgers. Approval for purchase (Administrator)
Care must be taken to ensure that the proper account number is being used
Accounts Payable Payment Packet Preparation (Accounts Payable Clerk) Approval of claims packet (Administrator) Approval of Claims Docket (School Board) Preparation of Accounts Payable Checks/Signature of Checks (Automated System)
Recording Cash Disbursements (Automated System) Independent reconciliation of claims docket total to cash disbursements total. Easier when combined with the movement of money to the accounts payable clearing bank account. Accounts Payable Clearing Fund Bank Account Reconciliation (Business
Manager or Designee)
supported by invoices or other forms of documentation. All claims for payment should be approved by a responsible person before they are added to the claims docket.
Invoice matched with requisition, receiving report, and
purchase order copy Invoice checked for mathematical accuracy and applicable discounts Evidence of this review
your auditor. Can you remember a case when you paid an invoice twice? Has this happened more than once?
Effective cancellation can be a part of the overall software. Does someone balance vendor statements each month? Why is this important?
Purchase Orders
Purchase orders are a vitally important document for
Are they properly accounted for? Manual vs. Computer Are they properly approved? Who should approve purchase orders?
Competitive Purchasing
Are state purchasing laws followed?
Does the district have a centralized purchasing
department?
Why this is important? Why training is important
$5,000?
Legal Requirements
Driven by Code Section 31-7-13
Requirements for a single purchase Defined as the
circumvent state law. How do you prevent the splitting of purchase orders?
otherwise acquiring
various supplies, goods, merchandise, furniture, equipment, automotive equipment of every kind, and other personal property.
Small purchases
Purchases not over $5,000 (exclusive of freight and/or
shipping charges) Competitive bids and/or advertising for formal bids not required. Should competitive bids be sought anyway?
Midrange Purchases
Purchases over $5,000 but not over $25,000 (exclusive
of freight and/or shipping charges) Two competitive written quotes must be obtained.
Competitive Written
Large Purchases
Purchases over $25,000 (exclusive of freight and/or
purchase of equipment. (Bid/quote rules apply) Lease-purchase financing may be obtained from the vendor or another source after obtaining at least 2 competitive bids.
Rate is limited to amount permitted by Code Section 75-
17-101 Term is limited to the useful life of the equipment as set by IRS guidelines Must contain an annual allocation dependency clause
for the purchase of commodities or repairs and if the delay that would be caused by the competitive bid process would be detrimental to the School District, then the provisions in state law for competitive bidding do not apply. The purchasing agent of the School District may approve the purchase or repair. At the next School Board meeting, the purchase must be identified and placed in the board minutes.
the School District, such as a flood, fire, explosion, storm, earthquake, epidemic, or riot. Lack of planning does not constitute an emergency. A knowledgeable purchasing agent should help define what constitutes an emergency. Documentation is part of this overall control.
Governmental equipment auctions Prior board approval required Perishable supplies or food for use in the school lunch
Federal Purchases
For all Federal purchases Does a person responsible for program expenditures and knowledgeable of the types of expenditures allowed from each program
Approve the purchase requisition before a purchase order is issued? Review the claims packets prior to final payment?
Paying Claims
Are all disbursements made by check/warrant? Exception for petty cash Are only pre-printed, pre-numbered checks/warrants
used?
Exception for laser checks
Are pre-printed checks controlled? Limited access Logging of useage Physical controls
Are checks/warrants made payable to a specific payee? Is the advance signing of checks/warrants prohibited? What types of signatures are required? Machine generated Manual
used to pay all claims. The bank account is reconciled by a person independent of the accounts payable processing duties. The bank account is reconciled on a timely basis.
vendors. Each quarter, management should run a report from the system showing changes to the vendor master file. New vendors should be added by a person independent of the accounts payable processing function.
account is used to pay all claims. The bank account is reconciled by a person independent of the accounts payable/purchasing duties. The bank account is reconciled on a timely basis. The bank account is fully reconciled.
Bond Employees
Bond employees.
Why? No system of internal controls is 100% effective. State-mandated bonds.
Monitoring Opportunities
State Department Audit
Private Audit Internal Audit