Finding 1054381 (2023-003)

INTERNAL CONTROL DEFICIENCIES U.S. Department of Agriculture Assistance Listing Number 10.415 – Rural Rental Housing Program Assistance Listing Number 10.427 – Rental Assistance Program 2023-003 Segregation of Duties Prior Year Finding Number: 2022-003 Criteria Segregation of duties should be in place to ensure appropriate checks and balances and to mitigate incompatible duties being performed by one individual over key financial and compliance functions. Condition The Agency does not maintain sufficient segregation of duties to prevent one individual from having control over each of the following areas: 1) Cash receipts – detailed record keeping, custody, reconciling, and posting to the general ledger. 2) Disbursements – check preparation, and positing to and maintaining the general ledger. 3) Federal compliance requirements – eligibility determinations, allowable activities, allowable costs, reporting. Cause The Agency does not have sufficient staffing to ensure multiple individuals are involved in all significant accounting controls and transaction cycles. Effect One individual may have complete control over certain transactions without adequate checks and balances or reviews being implemented. Recommendation Resolving the deficiency may require the Agency to hire additional personnel necessary to adequately separate accounting responsibilities. This solution may result in a substantial increase in operating costs. The other action would be to accept that by definition there is a material weakness in internal control and the cost of eliminating that material weakness may exceed the benefit.