Finding Text
Segregation of Duties Conditions and Criteria: The limited number of accounting staff prevents a proper segregation of accounting functions necessary to assure adequate internal control. It is difficult, if not impossible, to segregate duties of the general accounting, general ledger, and journal entry functions from custody of and control over assets such as cash. Cause: The Water Authority is a small government with a limited number of personnel. Effect: A fundamental element of an effective internal control system is the proper segregation of duties. Proper segregation of duties provides for a system of checks and balances and entails assigning responsibilities of authorizing and recording transactions among different people in the Water Authority. Auditor’s recommendation: Management should constantly be aware of this condition and realize that the concentration of duties and responsibilities in a limited number of individuals is not desirable. Under these conditions, the most effective controls lie in the Board's knowledge of matters relating to the Authority's operations. The Board's continued involvement in the Authority's operations is needed to mitigate the lack of segregated duties. The Authority could enhance its internal controls by having a member of the Board of Directors or someone independent of the preparer perform the following functions: review monthly bank reconciliations; review journal entries; review payroll journals that summarize employee compensation; and review check registers. Water Authority’s Response: Because of the limited number of personnel in the office, the Water Authority recognizes the limitations with regard to segregation of duties and therefore will consider mitigating controls. The Water Authority will continue to have a Supervisor review monthly bank reconciliations.