Finding Text
Criteria: Proper segregation of the accounting function is a good system of internal control to provide reasonable assurance that a material misstatement to the financial statements is prevented. Condition: The basic premise is that no one employee has access to both physical assets, such as cash, and the related accounting records or to all phases of a transaction. The Town does not employ a sufficient number of people as part of its daily internal accounting function to eliminate people from performing incompatible accounting and finance duties. The Town does not have a system in place to properly record the transactions of the Town. Cause: A lack of a good system of internal control has created conflicts concerning assigned duties. Effect: A lack of segregation of duties does not allow employees in the normal course of performing assigned duties to prevent or detect fraud and correct intentional or unintentional errors in a timely basis. Recommendation: We recommend that Management continuously strive to achieve maximum segregation of duties as much as possible and hire new employees. It is also important for the Commissioners to continue to provide oversight of the financial accounting. Because of the inherent difficulty to achieve a proper segregation of duties, we recommend that the Commissioners develop and establish additional policies and controls in order to minimize the risk of material misstatement of fraud. Identification of Repeat Finding: Due to size of the Town, this is a repeat finding. View of Responsible Officials: Management is aware of this condition and has assessed the costs to achieve maximum segregation of duties. Management has determined that these costs exceed the potential benefit of hiring additional employees. Management continues to strive to achieve maximum segregation of duties possible with the current number of employees. The Commissioners will continue to provide oversight of the financial accounting.