Finding Text
2023-004 — Journal Entry Approval Process – Material Weakness in Internal Control Over
Compliance and Noncompliance
Federal program information:
Funding agencies: U.S. Department of Interior and
U.S. Department of Education
Titles: Assistance to Tribally Controlled Community
Colleges; Higher Education Institutional Aid; and
Education Stabilization Fund
ALN Number: 15.027, 84.031, and 84.425
Award years: Various
Criteria: A fundamental concept in a good system of internal control is a proper segregation
of duties. Without adequate segregation of duties, the risk of an error or irregularity occurring
and going undetected increases. Journal entries should be independently reviewed by
someone other than the preparer of the entries prior to posting into the general ledger. No
single individual should manage too many functions within a transaction cycle, and proper
documentation should be maintained to show the review and approval process.
Condition: Journal entries selected as part of our single audit testing were not reviewed or
approved by anyone other than the preparer. Additionally, there was no documentation
showing the review and approval process. The journal entries provided did not contain
sufficient supporting documentation.
Questioned Costs: N/A
Cause: The College has limited staff and therefore proper segregation of duties has been
difficult to accomplish.
Effect: Without strong segregation of duties, there is an increase in the likelihood of errors or
fraud.
Auditor’s Recommendations: Establishing journal entry controls including an independent
review and approval process for all entries and ensuring sufficient documentation is
maintained for each entry.
Management’s Response: Management concurs with this finding.