Finding Text
Finding 2023-001: Segregation of Duties
Criteria: A strong internal control structure requires that duties be segregated so that one person does not have the ability to control all aspects of accounting functions. Adequate segregation of duties should exist among those who review and approve payments and those who prepare and submit the requests for payment.
Statement of Condition: RTOG Foundation, Inc. (Foundation) does not have adequate segregation of duties present for the approval of payments to subcontractors, which are reflected as federal subcontracts expense on the financial statements. During 2023, the project manager, who was responsible for reviewing and approving the subcontractor’s invoices in preparation for payment authorization by members of the Foundation’s Board, was employed by the subcontractor.
Cause: The Foundation does not have employees and is operated by a volunteer Board of Directors. The project manager had the knowledge and availability to review the invoice submissions and related supporting documents on behalf of the Foundation.
Effect: A lack of segregation of duties increases the risk that errors or fraud relating to subcontractor invoices could occur and not be detected or that unallowable costs could be incurred.
Recommendation: We recommend that the Foundation designate a person independent of the subcontractor to perform the initial review of the subcontractor’s requests for payment in advance of the payment authorization by the Foundation’s Board.
Views of Responsible Officials: Management agrees with finding; see separate corrective action plan.