Finding Text
2023-006 Improve Segregation of Duties over Expenditure Approvals Federal Program Information Federal Agency: U.S. Department of Education Award Name(s): COVID-19 Education Stabilization Fund Assistance Listing Number(s): 84.425 Award Year: 2023 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Type of Finding Internal Control over Compliance – Significant Deficiency SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Criteria or Specific Requirement Per Uniform Guidance (2 CFR § 200.303) and sound internal control practices, entities are required to establish and maintain effective internal controls over federal awards, including appropriate segregation of duties. This includes ensuring that no individual has sole authority to initiate, approve, and record the same transaction without an independent review or secondary approval. Condition and Context During our testing of the Education Stabilization Fund program, one transaction was identified in which the same individual approved both the purchase order and the related invoice. No additional compensating controls were in place to ensure an independent review or oversight of these transactions. Cause The City did not have compensating controls or procedures in place to prevent or detect the approval of both a purchase order and the corresponding invoice by the same individual. Effect or Potential Effect Allowing a single individual to approve both the purchase order and the invoice without compensating controls increases the risk of errors or unauthorized purchases. Questioned Costs No questioned costs are reported. Identification as a Repeat Finding This was not a finding in the prior year. Recommendation The City should implement procedures to ensure that the responsibilities for approving purchase orders and invoices are segregated among different individuals for all transactions. If this is not feasible due to staffing limitations, the City should implement compensating controls, such as independent review of these transactions by management. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.