Finding Text
Finding 2025-003: Segregation of Duties Finding resolution status Unresolved Information on universe and population size The universe consisted of all receipts and disbursement transactions during the fiscal year. Sample size information These errors were not discovered as a result of the sampling approach, but through observation of processes and interviews with staff. Identification as a repeat finding This is not a repeat finding. Criteria Internal control best practices, including those outlined in the COSO Framework, recommend segregation of duties so that no single individual has control over all phases of a financial transaction. This control is essential to prevent and detect errors or irregularities in a timely manner. Statement of condition During our review of internal control procedures, we noted that key accounting functions over cash receipts and disbursements are not adequately segregated. Cause The Authority has limited staffing resources, resulting in the assignment of incompatible duties to a single employee without sufficient compensating controls. Effect Without adequate segregation of duties, there is an increased risk that errors or fraudulent activity could occur and remain undetected. This could impact the accuracy and integrity of the financial statements. Auditor non-compliance code S – Internal Control Deficiency Questioned costs None Views of responsible officials Management concurs with the finding. The Board of Commissioners and management have reviewed the current duties of the Authority staff and segregated as much as possible with limited staff. Additionally, the Authority contracts with a 3rd party fee accountant to reconcile the bank statements monthly ( in addition to the Executive Director). The Board of Commissioners receives and reviews the monthly disbursement listing. The Board of Commissioners will continue to monitor rental and cash flow activities reported by accounting personnel monthly. Context This issue was noted in the Authority’s accounting and financial reporting processes, where limited staffing has led to certain employees being responsible for multiple phases of receipt and disbursement transactions. Although management is aware of resource constraints, no formal compensating controls have been implemented to mitigate the risk. Recommendation We recommend that the Authority strengthen segregation of duties by either reallocating responsibilities among existing staff or implementing periodic independent reviews.