Finding Text
Criteria Management should design and implement internal control such that key duties within the accounting cycle, custody of assets, authorization of transactions, recording of transactions, and independent review are appropriately segregated to reduce the risk of error or fraud and to support the preparation of financial statements that are free from material misstatement. Conditions Found During the audit, we noted that a single employee currently holds primary responsibility for custody of assets, authorization of transactions, and recording within the Organization’s accounting function. Although the Organization made improvements during 2025 to segregate duties, certain incompatible responsibilities remained concentrated with one individual. Cause The Organization has limited staffing and resources within the accounting function, and formal compensating controls were not consistently implemented to mitigate the lack of full segregation (for example, documented independent review and approval of key transactions and reconciliations by an individual without recording/custody responsibilities). Effect The concentration of duties reduces the effectiveness of internal control and increases the risk that errors, unauthorized transactions, or other misstatements in the financial statements could occur and not be prevented or detected on a timely basis. This condition increases the risk of material misstatement due to error or fraud. Context During the audit, we noted that one employee had primary responsibility for key accounting functions, including custody of assets, authorization of transactions, and recording of transactions. While the Organization made improvements during 2025 to segregate certain duties, the concentration of these responsibilities remained present during the audit period. The finding relates to the design and operation of internal control over financial reporting and was identified through the audit procedures performed over the Organization’s accounting and financial reporting processes. Repeat Finding Yes Questioned Costs None noted Recommendation Management should continue strengthening segregation of duties by assigning custody, authorization, recording, and review responsibilities to separate individuals where practicable. Where staffing limitations prevent full segregation, management should implement and document effective compensating controls, such as: • Independent review and approval of disbursements and journal entries, including appropriate supporting documentation; • Documented supervisory review of bank reconciliations and key account reconciliations; • Approval thresholds and dual-authorization for higher-risk or non-routine transactions; and • Periodic independent review of vendor setup/changes, payroll changes, and other key master file maintenance, where applicable. Views of Responsible Officials Management recognizes the importance of adequate segregation of duties and has taken steps to address the issue. Going into 2026, the Organization has engaged an outside accounting firm to assist with segregating accounting responsibilities and implementing enhanced internal controls. Management expects these changes to reduce the concentration of duties and strengthen the overall control environment. Management anticipates implementing the corrective actions during fiscal year 2026 and will document the revised control procedures and oversight responsibilities.