AP Badge #07: Internal Controls-AP Badge #7 Recording

Video Transcription

Video Summary

This module (WASBO Accounts Payable Badge #7) explains internal controls for school district accounts payable. Internal control is a process designed by the board, management, and staff to provide <em>reasonable</em> assurance of reliable financial reporting, legal compliance, and effective operations. Controls should support—not hinder—operations, be cost-effective, and vary by district size and staffing. Weak controls can lead to audit findings, theft, inefficiency, and fraud.

The training emphasizes risk assessment, noting higher-risk AP areas such as purchasing cards, petty cash, travel claims, and especially contracted services (often lacking detail, physical verification, and robust PO controls). Key control activities over vendor payments include approvals and verifications (e.g., three-way match), reconciliations (vendor statements, batch totals, warrant totals), physical controls (securing check stock, microtoner, equipment, records, and system access), segregation of duties, and ongoing review/analysis.

Segregation of duties prevents one person from controlling a transaction end-to-end (vendor setup through payment). Where staffing is limited, compensating controls like W-9 requirements, periodic vendor file reviews, board review of payments, and independent auditing are recommended.

Fraud examples illustrate risks: altered documentation and missing assets; phantom vendor schemes; and a district secretary’s misuse of cards and AP due to lack of oversight. Management and budget managers should review budgets, vendor databases, variances, and delivery addresses to detect anomalies.

Keywords

accounts payable internal controls

school district finance

risk assessment in AP

segregation of duties

three-way match verification

vendor payment approvals and reconciliations

contracted services controls

purchasing cards and petty cash oversight

fraud prevention and detection