Many schools will have noticed that there has been an increased focus on segregation of duties in our audit findings letter this year. This is because we consider that this point is common across many schools. In fact due to the small average size of many New Zealand organisations, segregation of duties is an issue across all sectors.

There has been, and unfortunately will continue to be, frauds in schools.  And whilst we may not be raising any specific concerns in respect of your own school it is important to make people aware of potentially weak areas in the school administrative and accounting functions.

The reason for the point is that in most schools the Executive Officers or equivalent usually have full access to the accounting systems, as well as cash receipts and other aspects of the administration function, including posting of journals.

This is common in small organisations, such as a school, because of the limited number of staff and resources available.  We also appreciate that your accounting service providers often can access your information and act as a supervisory control.  However, they do not restrict processing or in many cases serve to provide a segregation of roles within the accounting system.

Therefore, we are just making the Board aware that this scenario heightens the potential risks.  Therefore the management team and Board should continue to be diligent as regards monitoring of the financial affairs of the school.

Having an alternative person to undertake the Executive Officer role serves as an opportunity for another pair of eyes to review and possibly question, where necessary, any unusual items.   It is also a useful form of operational insurance to have someone else able to perform parts of your Executive Officer’s role should they be unexpectedly absent.

We reiterate the point made in the audit findings letter that this is in no way a reflection on your team members and we are not bringing into question the integrity of individuals.  Rather our aim is to highlight the situation given the constraints, and encourage the continued diligent approach of all concerned.

As Board members can change three yearly by rotation, it is important that they are aware of the need to monitor closely the financial operations of the school and the inherent weaknesses that exist in internal controls. Our management letter is the way in which we communicate these issues to them.

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There is no point in saying this when some schools have no one or funding to carry out this but to say that we need to segreate duties to be compliant makes you feel like you have done your job and leaves us with a problem that is not solvable given we dont have resources to carry it out

Greg Roebuckreply

Apologies for the delay in responding. As you’ll be aware it’s a hectic deadline time of year for us and all hands to the pumps. Great to see the New Lynn School audit already signed off and thanks to your team for assistance in this.

I acknowledge and understand your frustration relative to our Segregation of Duties reminder point. We also fully appreciate the practical funding realities. You may be interested to learn that this issue also applies to many other NZ organisations in the wider not-for-profit sector as well as in the commercial world. It is a challenge due to the small average size of our entities in NZ and how tightly we are required to manage the funding for these.

Our aim is in no way to absolve our responsibility in this area. In fact quite the opposite. It is our responsibility to highlight risks that we see. Sadly we get to occasionally deal with the corrosive financial and human impact results of entities subject to fraud. A lack of appreciation of the segregation of duties risk is often a factor. Hence even if an entity does not have the funds to employ more to enable better segregation of duties, being aware of the risk and especially management and the governing body taking a closer interest in financial results and operations is often a strong risk mitigation factor.

Greg, I hope this helps provide more context and to better understand where we are coming from in trying to at least better raise awareness of the issue. All the best for a very positive year at New Lynn School

Craig Fisher

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