Internal Control System

The policies and procedures outlined in this manual are based upon a principle of internal controls.

Internal controls are designed to limit the risk of misstatement due to errors, theft and misappropriation of district assets. The control environment reflects the overall attitude, awareness, and action of the Board, Administration, and others concerning the importance of control and its emphasis in the district. The accounting system establishes a method to identify, assemble, analyze, classify, record, and report the district’s transactions and to maintain accountability for the related assets and liabilities. Quickbooks is the district’s official accounting system. No other system should be used to track or record financial transactions or data. Using additional systems weakens the information in Quickbooks, wastes resources, and is ineffective. Every effort has been made to establish policies and procedures that balance the effectiveness of controls with the costs associated with implementing them. Commitment to internal controls is necessary at all levels of the district in order for the controls to be effective.

Beaver County School District follows the internal control framework described in the GAO Auditing Standards (yellow book):

The Internal Control--Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) provides guidance on internal control. As discussed in the COSO framework, internal control consists of five interrelated components, which are (1) control environment, (2) risk assessment, (3) control activities, (4) information and communication, and (5) monitoring. The objectives of internal control relate to (1) financial reporting, (2) operations, and (3) compliance. Safeguarding of assets is a subset of these objectives. Management designs internal control to provide reasonable assurance that unauthorized acquisition, use, or disposition of assets will be prevented or timely detected and corrected.

The five components of internal control are described as follows:

Control Environment

- Integrity and Ethical Values

- Commitment to Competence

- Board of Education and Audit Committee

- Management’s Philosophy and Operating Style

- Organizational Structure

- Assignment of Authority and Responsibility

- Human Resource Policies and Procedures

Risk Assessment

- District-wide Objectives

- Process-level Objectives

- Risk Identification and Analysis

- Managing Change

Control Activities

- Policies and Procedures

- Security (Application and Network)

- Application Change Management

- Business Continuity / Backups

- Outsourcing

Information and Communication

- Quality of Information

- Effectiveness of Communication

Monitoring

- On-going Monitoring

- Separate Evaluations

- Reporting Deficiencies

Beaver County School District uses many control activities to help the organization accomplish its objectives and maintain internal control at reasonable levels. Control activities are the specific policies and procedures used to achieve specific objectives. The most important control activities involve segregation of duties, proper authorization of transactions and activities, adequate documents and records, physical control over assets and records, and independent checks on performance. A short description of each of these control activities appears below.

Segregation of duties requires that different individuals be assigned responsibility for different elements of related activities, particularly those involving authorization, custody, or recordkeeping. For example, the same person who is responsible for an asset's recordkeeping should not be responsible for authorizing use and expenditure of the asset. Having different individuals perform these functions creates a system of checks and balances.

Proper authorization of transactions and activities helps ensure that all company activities adhere to established guidelines unless responsible managers authorize another course of action.

Adequate documents and records provide evidence that financial statements are accurate. Controls designed to ensure adequate recordkeeping include the creation of invoices and other documents that are easy to use and sufficiently informative; the use of pre-numbered, consecutive documents; and the timely preparation of documents.

Physical control over assets and records helps protect the district's (and public’s) assets. These control activities may include electronic or mechanical controls (such as a safe, employee ID cards, fences, cash registers, fireproof files, and locks) or computer-related controls dealing with access privileges or established backup and recovery procedures.

Independent checks on performance, which are carried out by employees who did not do the work being checked, help ensure the reliability of accounting information and the efficiency of operations. For example, a supervisor verifies the accuracy of a clerk's cash drawer at the end of the day. Internal auditors may also verify that the supervisor performed the check of the cash drawer.

The district’s internal control system is designed to eliminate significant deficiencies in the internal control organizational structure in the district that would otherwise put assets, program funding, and services to children in jeopardy.