Audit 377082

Condition One basic objective of internal control is to provide for segregation of incompatible duties. In other words, responsibilities should be separated among employees so that a single employee is not able to authorize a transaction, record the transaction in accounts, and be responsible for custody of the asset resulting from the transaction. The following duties are not sufficiently segregated: 1. Accounts payable processing, check writing, payment and recording. 2. Payroll processing, check writing, check distribution and recording. 3. Cash receipting, depositing and recording. Together these functions create an opportunity for misappropriation of the Council’s assets and more than a remote likelihood of a material misstatement. The Council does mitigate control in accounts payable and payroll functions in that the Board, on a monthly basis, reviews the invoices and checks that are written. Criteria Proper segregation of duties mitigates the risk of misappropriation of assets. Effect The impact to the financial statements has not been determined. Cause The Council operates in an environment that is highly regulated and funded by the State of Minnesota through the Department of Education. As a result of this regulatory oversight and the level of funding, the Council did not feel it was at liberty to fund the additional positions necessary to achieve adequate accounting control. Repeat Finding Yes, 2020-001 Recommendation We recommend that Council management develop an accounting and internal control manual that would identify the specific duties of the accounting employees with internal controls and segregation of accounting duties in mind.