Finding Text
Finding --- Internal controls over financial statement reporting lack segregation of duties. Criteria --- In order to detect, prevent and correct errors in financial reporting, a system of internal controls should be designed in order to overcome any lack of segregation of duties. Condition --- The controller reconciled bank accounts, created adjusting journal entries, prepared the Annex B and the Schedules of expenditures of federal awards and state financial assistance, maintained the general ledger and controlled the financial reporting process. Context --- The audit team assessed the design of internal controls surrounding this area and there was no evidence of review at a level higher than the controller, the person preparing the books and records. Effect --- When critical duties are not segregated, there is an increased risk of financial misstatement, whether by error or intentional, due to fraud. Cause --- Due to the size and nature of the Organization, accounting personnel are limited. Many critical duties are combined and assigned to employees with little management oversight. Recommendation --- The Organization should continue to seek out qualified personnel, board members or an external certified public accountant to perform reviews of accounting functions. The Organization should also develop written procedures for the annual financial closing process. A review should be performed by someone other than the preparer to ensure all adjustments are posted for a complete and accurate set of books. Management and the board should continue to try and reassign tasks that could improve segregation of duties. Management response --- Due to the state of the overall economy, management faced challenges in recruiting and retaining personnel for the executive director position. The Organization hired an executive director whose role in the business office will be to assist in providing segregation of duties.