Overview
SDE lacked adequate segregation of duties for its Inmate Benefit Canteen Fund (IBCF), Civil Process Enterprise Fund (CPEF), and Police Detail Fund (PDF). As a result, SDE could not be certain that funds were adequately protected from potential theft, loss, or misuse.
In our review of internal controls over the IBCF and CPEF, we found that one person maintained the general ledger, processed receipt records, authorized and processed disbursements from the funds, and completed the monthly account reconciliation. Another person had sole responsibility for the PDF, including receiving receipts and making bank deposits, processing payment documentation for the detail officers, maintaining the general ledger, and completing monthly bank statement reconciliations. There was no evidence of any oversight of these two people.
Authoritative Guidance
Section 10.04 of OSC’s June 2015 Internal Control Guide states,
Management should divide or segregate key duties and responsibilities among different people to reduce the risk of error, misuse, or fraud. This includes separating the responsibilities for:
- authorizing transactions,
- processing and recording them,
- reviewing the transactions, and
- handling any related assets or process so that no one individual controls all key aspects of a transaction or event.
Reasons for Inadequate Controls
SDE lacked written policies and procedures for the processing of the IBCF, PDF, and CPEF. SDE management stated that there were not enough employees to process the funds, which resulted in the lack of segregation of duties.
Recommendations
- SDE should implement policies and procedures for the processing of its fund accounts.
- SDE should segregate duties for authorizing transactions, recording transactions to the general ledger, and reconciling transactions for its funds or, because of limited personnel, implement closer supervision or more frequent reviews.
Auditee's Response
SDE has historically struggled with maintaining minimum staffing thresholds, due to budget restraints. Other Sheriff departments with similar or lesser inmate populations typically have double or more administrative and finance staff. That said, the individual responsible for reconciling Civil Process, Police Detail, and Inmate Canteen, will now share this responsibility with a newly hired Budget Analyst and a soon to be hired Assistant Budget Director. This cross-training will alleviate this compliance issue. Additionally, internal auditor roles will be added to other members of the staff for periodic independent review of activities of these accounts.
Auditor's Reply
Based on its response, SDE is taking measures to segregate duties for authorizing, recording, and reconciling transactions. However, it should also implement policies and procedures for the processing of its fund accounts.
| Date published: | August 27, 2018 |
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