Finding Text
2024-05 - LACK OF SEGREGATION OF DUTIES OVER DISBURSEMENTS OF FEDERAL FUNDS Type of Finding: Significant Deficiency in Internal Control Over Compliance and Other Matters Criteria: The Federal Internal Control Standards issued by the GAO requires management to design control activities to achieve objectives and respond to risks. The segregation of duties attribute contributes to the design, implementation, and operating effectiveness of this principle by dividing responsibilities among different people to reduce the risk of error, misuse, or fraud. Condition: The District did not properly segregate duties over expenditures. Cause: The Executive Director is responsible for initiating and authorizing expenditures, as well as for maintaining custody of the District's funds. For administrative expenses paid out of RLF income, there is no secondary review or approval of the expenditures, resulting in a lack of segregation of duties. Effect: There is no secondary review or approval for expenditures, other than loan fund disbursements. Administrative and other expenditures only require Executive Director approval and the Executive Director is also responsible for initiating those payments. Recommendation: We recommend the District segregate duties related to expenditures and implement controls that would serve to prevent, or detect and correct, any misstatements and any noncompliance with federal program compliance requirements. Management's Response: Northern Rocky Mountain Economic Development District (NRMEDD) agrees with the recommendation and will extend the board oversight procedures implemented for general disbursements to all federal and administrative expenditures. To address the lack of segregation of duties, staff will include all expenditures paid from Revolving Loan Fund (RLF) income and other federal sources in the comprehensive disbursement report provided at each Board meeting. The NRMEDD Board or a designated officer will review these expenditures against supporting documentation and bank activity to provide the necessary secondary approval, ensuring that all federal funds are disbursed in compliance with GAO Internal Control Standards and documented in the official meeting minutes.