Finding Text
2023-001 - Internal Control over Financial Reporting – Lack of Segregation of Duties – Significant Deficiency
Condition & Criteria: The small size of the Township’s office staff does not allow for adequate segregation of duties. Standard practice regarding the design of a good system of internal controls relies at least in part on a system of checks and balances accomplished by having different employees performing various functions within the accounting cycle. These checks and balances are not possible when the same person performs all of an interrelated series of tasks. Although the Township does have some compensating controls in place, there are still a number of situations where one person is responsible for all aspects of a transaction.
Effect: The condition could result in errors being made in the accounting records and going undetected due to the lack of “cross-checking” and could result in the undetected misappropriation of Township assets.
Cause: The size of the Township, and its budget, make it impractical for the Township to hire the additional personnel needed to provide for optimum segregation of duties.
Recommendation: The division of duties that does exist among the office staff is considered a compensating control, as is the close involvement of the Board of Supervisors in the financial transaction and reporting process. We urge the Board to continue their close involvement in all financial aspects.
Views of Responsible Officials and Planned Corrective Actions: The Township understands the potential effects of the condition described above but agrees that it would not be cost beneficial to hire additional personnel in order to provide for more adequate segregation of duties at this time. The Board continues to closely monitor the financial transaction process; and has in place a number of control procedures over the financial transaction process to provide for as much segregation of duties as is possible given the size of the Township’s staff. At their monthly public meetings, the three Township Supervisors personally review and formally approve the list of all bills proposed for payment and each month’s complete financial statements. The Township has in place a requirement that two authorized signatures are required on all check, and at least one member of the Board must personally sign all checks issued by the Township. In addition, the Township Treasurer is bonded. The Board intends to continue its close involvement in, and oversight over, the financial transaction process.