Finding Text
Criteria - Segregation of duties is a key internal control to minimize the occurrence of errors, irregularities, and fraud to financial records whereby no person is performing tasks within more than one of three of the following functions, 1-authorization, 2-recordation and reconciliation, and 3-custody. Condition - We noted that during 2022, KMNH’s chief executive officer performed accounting functions, including posting of journal entries to the general ledger, recording cash receipts and disbursement transactions, and reconciliation of the monthly bank statement balances to cash balances in the general ledger. Cause- Due to unforeseen circumstances, the contracted third-party accountant who was providing certain accounting services to KMNH in previous years resigned. Due to its limited number of employees, there was no other employee with the knowledge and skills to take over those accounting functions other than the chief executive officer. Furthermore, management’s on-going efforts to replace the accountant have not been successful since the resignation. Effect - Without proper segregation of duties, there is a reasonable possibility that a material misstatement of KMNH’s financial statements will not be prevented, or detected and corrected, on a timely basis. Further, the lack of segregation of duties increases the opportunity for the misappropriation of assets or for intentional misstatements in the financial statements. Identification of a Repeat Finding - This finding was reported as a federal award finding in the immediate previous audit as Finding No. 2021-001. Recommendation - To ensure proper segregation of duties, we again recommend that KMNH continue its efforts to engage an accountant to provide relevant services and to develop appropriate policies and procedures to ensure proper segregation of duties. Views of Responsible Officials and Planned Corrective Action - KMNH agrees with the finding and recommendation and will continue its efforts to recruit a bookkeeper.