Finding 1146401 (2023-001)

Financial Statement Finding-Lack of Segregation of Duties- Criteria: A fundamental concept in a good system of internal controls is the segregation of duties. Duties should be separated so that no one person performs incompatible duties or has complete control of any type of transaction. Condition: The Organization does not currently have an internal control system to allow for proper segregation of duties in certain areas of the accounting duties. Cause: Due to the relatively small size of the Organization’s staff, the Organization is not able to attain segregation of duties to the extent required for ideal internal control. This is not unusual in a company of this size, and generally it is not economically feasible to provide for complete adherence to the segregation of duties concept. Effect: Proper segregation of duties helps minimize the chance of undetected errors and if not mitigated there is potential of misappropriation of assets. Recommendation: Due to the small size of the Organization, there is limited options available to them. Under this situation, the most effective control is management and the board’s oversight and knowledge of the matters relating to the operations of the Organization. Views of Responsible Officials and Planned Corrective Actions The Organization’s management is aware of this condition and believes that it is not economically feasible to attain the ideal segregation of duties. Management attempts to mitigate the associated risks by doing the following: (1) Identifies areas where the lack of segregation of duties exists and where there are higher risks of errors or fraud occurring. (2) Implements limited segregation to the extent possible to reduce risks without impairing efficiency. (3) Uses the knowledge that management and the Board of Directors has of operations by having them review certain accounting records and reports. (4) Monitors the effectiveness of the above actions and makes changes as considered appropriate.