Finding Text
Segregation of Duties in Financial Reporting Federal agency: U.S. Department of Health and Human Services Federal program title: Social Services Block Grant Assistance Listing Numbers: 93.667 Award Period: January 1, 2024 – June 30, 2027 Type of Finding: • Material Weakness in Internal Control over Compliance Criteria: Best practices and internal control frameworks (ie, COSO) require segregation of duties to ensure that no one individual has control over all aspects of a financial transaction. This reduces the risk of error or fraud going undetected. Condition: During testing of both the annual financial report and the programmatic reports, it was identified that there is no segregation of duties between the individuals preparing the reports and those reviewing and submitting them as required by the grant terms. Questioned costs: No questioned costs Context: While reports were filed timely, there is no segregation of duties to ensure proper preparation and review procedures are performed. Cause: The organization has limited accounting staff, which makes it difficult to separate responsibilities among different employees. Effect: Without adequate segregation of duties, there is an increased risk of material misstatement in the financial statements, whether due to error or fraud. Repeat Finding: No Recommendation: Management should reassign responsibilities so that the preparation, review and submission of required reports is performed by different individuals. If staffing limitations prevent full segregation, compensating controls, such as periodic independent reviews by a supervisor or board member, should be implemented. Views of Responsible Officials of the Auditee: Management agrees with the finding.