Finding 1164322 (2023-003)

Material Weakness Repeat Finding
Requirement
P
Questioned Costs
-
Year
2023
Accepted
2025-12-10

AI Summary

  • Core Issue: The District lacks adequate separation of accounting duties, which increases the risk of errors and fraud.
  • Impacted Requirements: Employees should not have access to both physical assets and related accounting records or control all phases of a transaction.
  • Recommended Follow-Up: Explore ways to separate incompatible duties, even with a small staff, to strengthen internal controls.

Finding Text

One of the most critical areas of a District's internal control structure is the separation of accounting duties. The District has inadequate separation of accounting duties. The basic premise is that no one employee should have access to both physical assets and the related accounting records or to all phases of a transaction, including the capability to prepare the billings, receive the cash, deposit the cash, prepare the cash receipts journal, and reconcile the bank accounts. Although the small size of the District's office staff limits the extent of separation of duties, consideration should be made to separate incompatible duties.

Corrective Action Plan

The Board and management are aware of the inadequate separation of accounting duties when reviewing the monthly operations and financial results of the District. As an ongoing mitigating control, at the board meetings management and the board members review the monthly check register of disbursements, interim financial reports, summary of cash and certificates of deposits held, and contract pay applications and construction project status as presented by the project engineer for review and approval by the Board.

Categories

Internal Control / Segregation of Duties HUD Housing Programs

Other Findings in this Audit

  • 1164320 2023-001
    Material Weakness Repeat
  • 1164321 2023-002
    Material Weakness Repeat
  • 1164323 2023-004
    Material Weakness Repeat
  • 1164324 2023-005
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
10.760 WATER AND WASTE DISPOSAL SYSTEMS FOR RURAL COMMUNITIES $1.89M