Finding Text
2025-002 – Journal Entries and Disbursement Approval Controls Finding Type. Immaterial Noncompliance/Material Weakness in Internal Control over Compliance (Special Tests and Provisions) Program. Highway Planning and Construction; Passed through Michigan Department of Transportation; Assistance Listing Number 20.205; All Award Numbers. Criteria. Recipients of federal awards are required to maintain adequate internal controls over financial reporting, including ensuring that journal entries are supported by appropriate documentation and that disbursements are properly reviewed and approved in accordance with established policies. Condition. During our testing of journal entries and accounts payable disbursements, we noted certain internal control processes were not consistently performed or documented. This included instances where supporting documentation was not readily available for journal entries and instances where invoices were not consistently reviewed and approved by an individual independent of the preparer in accordance with Commission policy. Cause. These conditions are attributable to insufficiently formalized procedures and enforcement of controls governing journal entry support and disbursement review and approval. Effect. As a result, there is an increased risk that unsupported or inappropriate transactions could be recorded and that disbursements may be processed without proper authorization, increasing the risk of errors or irregularities not being detected in a timely manner. Questioned Costs. No costs were required to be questioned as a result of this finding. Recommendation. We recommend that the Commission strengthen procedures to ensure that all journal entries are supported by appropriate documentation and that all disbursements are reviewed and approved in accordance with established policies, with evidence of such review maintained. View of Responsible Officials. Management will implement procedures to ensure all journal entries are adequately supported and that invoice approvals are documented in accordance with policy requirements.