FAC Explorer

Finding 1237994 (2025-001)

Material Weakness Repeat Finding
Requirement
P
Questioned Costs
-
Year
2025
Accepted
2026-09-29
Audit: 412821
Organization: Housing Authority of the City of Sheboygan (WI)
Auditor: CAVANAUGH & COMPANY PLLC

AI Summary

  • Core Issue: The Authority lacks adequate segregation of duties in its internal control processes due to limited staff, increasing the risk of errors and fraud.
  • Impacted Requirements: Key accounting processes like cash disbursements, payroll, and cash receipting are affected, compromising financial reporting and compliance.
  • Recommended Follow-Up: Management should implement oversight procedures to strengthen internal controls and monitor compliance with policies.

Finding Text

2025-001 – Lack of Segregation of Duties Criteria: Internal control is a process, affected by the Housing Authority of the City of Sheboygan's (the Authority) board of commissioners, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations. A good system of internal control provides for an adequate segregation of duties so that no one individual handles a transaction from its inception to completion. Condition: Due to the limited employees and resources available to the Authority, many aspects of the internal control structure that rely on segregation of duties are missing. Specific accounting processes noted that are affected by the lack of segregation of duties include: cash disbursements, payroll disbursements, cash receipting, and specific reporting functions required for the Authority. Cause: Due to the limited number of personnel within the Authority, segregation of the accounting functions necessary to ensure adequate internal accounting control is not possible. This is not unusual in operations the size of the Authority; however, 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 from an accounting point of view. Effect: Inadequate segregation of duties could adversely affect the Authority’s ability to detect misstatements in amounts that would be material in relation to the financial statements in a timely period by personnel in the normal course of performing their assigned functions. Recommendation: We recommend that the Authority’s board of commissioners and management be aware of the lack of segregation of the accounting functions and, where possible, implement oversight procedures to ensure the internal control policies and procedures are being implemented by personnel to the extent possible. View of Responsible Officials: Management agrees with the finding.

Corrective Action Plan

Corrective Action Planned: Management acknowledges the limitation in staffing levels and recognizes that complete segregation of duties is not currently feasible. To mitigate the risks associated with this condition, the Authority will strengthen compensating controls and increase oversight by management and the Board of Commissioners. The following actions will be implemented: 1. Enhanced Board Oversight • The Board of Commissioners will continue to review and approve monthly financial statements, bank reconciliations, budget-to-actual reports, and check registers. • Financial reports will be presented at regularly scheduled board meetings, and evidence of review will be documented in meeting minutes. 2. Cash Disbursement Controls • All invoices will be reviewed and approved by the Executive Director prior to payment. • The Board of Commissioners will review disbursement listings on a monthly basis. • Checks and electronic payments exceeding established thresholds will require dual authorization where feasible. 3. Payroll Review Procedures • Payroll registers and supporting documentation will be reviewed and approved by the Executive Director prior to processing. • Changes to employee pay rates, benefits, or personnel status will be supported by approved documentation implemented by the Executive Director and reviewed by the Administrative Coordinator for accuracy. 4. Cash Receipt Monitoring • Cash receipt reports will be reconciled to bank deposits on a timely basis. • Management will periodically review deposit activity and reconciliation documentation to verify completeness and accuracy. 5. Independent Review of Financial Reporting • Financial statements, grant reporting, and required submissions will be reviewed by the Executive Director and presented to the Board for oversight. • Significant journal entries and adjusting entries will be reviewed and approved by management. • Additional assistance with financial reporting and compliance submissions from Hawkins Ash (Fee Accountant). 6. Annual Evaluation of Staffing and Internal Controls • Management and the Board will annually assess staffing levels and opportunities to further segregate duties as resources permit. • Any changes in staffing or technology that could improve internal controls will be evaluated and implemented when financially feasible.

Categories

Internal Control / Segregation of Duties

Other Findings in this Audit

  • 1237995 2025-002
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
14.871 SECTION 8 HOUSING CHOICE VOUCHERS $1.74M
14.872 PUBLIC HOUSING CAPITAL FUND $1.00M
14.850 PUBLIC HOUSING OPERATING FUND $415,650
14.870 RESIDENT OPPORTUNITY AND SUPPORTIVE SERVICES - SERVICE COORDINATORS $71,323