Audit 326496

1)      Segregation of duties: We noted that from time to time one individual within the management company of the Organization has control over each of the following areas: 1) Disbursements –invoice processing, check writing, mailing, reconciling and recording. 2) Financial Reporting and Budgeting – preparing and reconciling. Criteria: An important aspect of internal control is the segregation of duties among employees to prevent an individual employee from handling duties which are incompatible. We noted during the audit that the management agent has complete access to check/electronic debit initiating and dual authorization is not needed. While all purchasing decisions are segregated from the management agent, there is still opportunity for unauthorized spending. Cause: There is a limited staff size that makes having an appropriate segregation of duties difficult for the Organization. Effect: The Organization’s internal control system is not as strong as it could be with a proper segregation of duties. A lack of oversight could result in a failure to detect or remedy an improper action taken by the management agent. Recommendation: The Board of Directors has a responsibility to ensure there is proper oversight of all disbursements, financial reporting, reconciling, etc. The Board should be as involved as much as possible to ensure there is not an opportunity for misappropriation of assets. We recommend that the board review bank statements regularly each month to ensure there is no improper spending. Response: The Organization will review its control procedures to obtain the maximum internal control possible under the circumstances posed by being comprised of a very small population. The Board of Directors will take appropriate steps to ensure there is proper oversight in all suggested areas. Conclusion: Response accepted.

1)      Segregation of duties: We noted that from time to time one individual within the management company of the Organization has control over each of the following areas: 1) Disbursements –invoice processing, check writing, mailing, reconciling and recording. 2) Financial Reporting and Budgeting – preparing and reconciling. Criteria: An important aspect of internal control is the segregation of duties among employees to prevent an individual employee from handling duties which are incompatible. We noted during the audit that the management agent has complete access to check/electronic debit initiating and dual authorization is not needed. While all purchasing decisions are segregated from the management agent, there is still opportunity for unauthorized spending. Cause: There is a limited staff size that makes having an appropriate segregation of duties difficult for the Organization. Effect: The Organization’s internal control system is not as strong as it could be with a proper segregation of duties. A lack of oversight could result in a failure to detect or remedy an improper action taken by the management agent. Recommendation: The Board of Directors has a responsibility to ensure there is proper oversight of all disbursements, financial reporting, reconciling, etc. The Board should be as involved as much as possible to ensure there is not an opportunity for misappropriation of assets. We recommend that the board review bank statements regularly each month to ensure there is no improper spending. Response: The Organization will review its control procedures to obtain the maximum internal control possible under the circumstances posed by being comprised of a very small population. The Board of Directors will take appropriate steps to ensure there is proper oversight in all suggested areas. Conclusion: Response accepted.