I was hired as an internal field auditor in 2001 and was fortunate to have great mentors, a determination to do well, and the drive to learn more. In 2005, I began studying to become a Certified Internal Auditor (CIA). At the time, the certification involved a four-part exam that was offered twice a year. I was balancing full-time work and small children, so I studied for one part of the exam at a time. I passed the final section in 2007. I was promoted to senior auditor and served in that role until I moved to a different school district in 2018. I complete 40 continuing professional education hours per year to maintain my CIA certification.
The Evolving Role
Our district had approximately 35 schools and two or three auditors. The auditor position originated as someone who compiled local school financial data before the financial records were computerized and reported them to the central office. The role evolved through the years.
The internal team followed an audit program that covered typical areas, mainly receipts/revenues, expenses, inventory, bank reconciliations, and compliance with federal and state laws and regulations and board policy. Internal auditors visited each school many times throughout the year to complete portions of the audit program.
Often the most vital component of an audit is critical thinking.
Typically, auditors worked at the central office only two or three days per month, constantly moving from one school to the next and working from the bookkeeper’s office or the conference room of a school where they had easy access to records, the ability to observe internal control and procedures, and the opportunity to be visible and build relationships with administrators, faculty, and staff members. Being in the schools was an added value to our internal audit function.
Internal Auditors as a Resource
The internal audit team was a resource, the first point of contact for a local school. We trained new bookkeepers on job responsibilities, procedures, and the accounting software. We answered questions related to coding, allowable purchases, documentation, and fundraisers. We solved software and printer issues, and referred problems to the information technology (IT) department or the software vendor when necessary.
As an extended finance function, the internal audit team was responsible for reviewing and merging monthly local school financial information with the central office data so that the district finances could be reported as a whole. We provided local school training and support for annual functions, such as budgeting and issuing 1099s. The team was also responsible for merging school data with the central office data.
Locally, the district used the internal audit team for financial audits, but internal auditors can be useful in other areas as well. An internal audit team can monitor community education and after-school care programs. Audit programs can test IT, human resources functions, payroll, compliance, risk management, and governance. However, an internal audit is not limited to the business aspects of education; school academic programs and policies, curriculum, and school safety are other internal audit areas.
Audit Must: Looking Beyond the Numbers
Even though the benefits of an internal auditor or internal audit team may easily support the cost, the financial resources to employ them may not be available. We do not have an internal auditor in my current district, but I incorporate some of my most valuable lessons into our functions. Although these checks and balances will not provide the same level of review as an audit program, they can provide invaluable “red flags” signaling that a deeper inquiry is needed.
Often the most vital component of an audit is critical thinking. It is necessary to look beyond the numbers and see how those numbers relate to the big picture. Examples of a few audit functions that can be accomplished within minutes by someone with little training include the following:
Cash. Money is the motivator for most fraud. Conducting a thorough audit of bank reconciliations each month is crucial. Staff awareness of this review may be the best fraud deterrent. Several areas are tested:
- Bank statement balance for the bank reconciliation.
- Bank reconciliation “foots.”
- Cash balance per bank reconciliation tied to trial balance.
- Journal entries made to cash with adequate documentation.
- Reconciliation items with adequate documentation appearing reasonable.
- Void checks with adequate documentation appearing reasonable.
- Checks issued in sequence with no gaps.
- Checks issued to vendors appearing reasonable/recognizable and do not include unnecessary employees.
Missing items. Verifying expenses and receipts on your books is important, but just as important is recognizing that there may be transactions that are not on your books, but should be. A glance through a few reports for reasonableness or tracking data with a spreadsheet can signal the need for a more thorough analysis. Each local school should have records to show that:
- The number and amount of checks issued per month appear reasonable and consistent.
- Routine monthly expenses were paid (e.g., utilities, copier).
- The number and amount of deposits per month appear reasonable.
- Deposits included cash and checks (unless restricted by district).
- Deposit was made for each athletic gate or major activity (use school calendar).
- Invoices were paid using a vendor-issued invoice number.
- Multiple invoices were paid to common vendors (invoices are not paid in one lump sum).
- New vendors have adequate documentation and proper classification.
- Activity balances are positive and not allowed to operate in the negative.
Announcements. Ask for copies of the schools’ electronic communications with parents. Depending on the number of schools in your district, you may divide monitoring these communications among multiple employees who will be alert to activities involving school finance and legal ramifications, such as:
- Fundraisers. Is the fundraiser allowable by district guidelines? Has the proper approval paperwork been submitted? Are procedures in place to collect the funds as described?
- Fees and donations. Is the fee allowable? Is the amount requested reasonable? Can the funds be used in the manner outlined? Will an employee personally benefit from the funds being collected (bereavement, illness, house fire)? Has a request been made for “cash only” and if so, is that reasonable?
- Are students being penalized for not paying for an item when that item has to be provided to them because of public education?
- Does the sale of food and candy compete with the school lunch program?
- Is school correspondence being used to promote a business or political campaign?
These communications may also alert you to issues that do not necessarily fall under finance but may require the attention of another department.
Taking on the Charge
The responsibilities of a school business official are broad reaching, but detailed in nature. We are charged with taking what we have and meeting as many needs as possible. By conducting regular internal audits or incorporating internal audit functions into our routine reviews, we can ensure that we are operating efficiently and effectively. We can also protect organizational assets as well as the integrity and reputation of our district.