Finding Text
Segregation of duties
Prior year finding number: 2022-001
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 Association does not maintain sufficient segregation of duties to prevent one individual from having control over the disbursements process, as one individual performs posting of disbursements, preparation of checks, and general ledger reconciliation.
Cause: The Association 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 Association 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 significant deficiency in internal control and the cost of eliminating that deficiency may exceed the benefit. Management should continue to provide adequate oversight of these functions if unable to cost effectively segregate duties further.
Management’s
response: The Association has implemented controls to help mitigate the segregation of duties issue noted. The CEO reviews and approves all invoices prior to payment. The Association provides a list of disbursements to the Board of Directors monthly as well as a completed set of financial statements. Management, including the Board of Directors, continues to have discussions regarding cost effective methods to obtain additional controls, including potential new staff and realignment of duties, however, at this time, the Association has determined that the cost of eliminating this deficiency would exceed its benefit.
Conclusion: Response accepted.