Finding 23213 (2022-002)

Significant Deficiency Repeat Finding
Requirement
P
Questioned Costs
-
Year
2022
Accepted
2023-09-28
Audit: 23973
Organization: Peace Villa Inc. (MN)

AI Summary

  • Core Issue: Limited office personnel leads to inadequate internal controls and lack of segregation of duties.
  • Impacted Requirements: Internal controls must ensure proper segregation of duties to minimize the risk of undetected misstatements.
  • Recommended Follow-Up: The Board should continue its active involvement in financial oversight, including regular reviews of reports and disbursements.

Finding Text

Condition: The Organization has a limited number of office personnel and accordingly, does not have adequate internal controls in certain areas because of a lack of segregation of duties. An effective internal control structure provides an adequate segregation of duties so that no one individual handles a transaction from its inception to its completion. Criteria: Internal controls should be in place that provides reasonable assurance that proper segregation of duties is achieved. Cause: The Organization has a limited number of office personnel and inadequate internal controls. Effect: The failure to properly segregate duties increase the risk that misstatements may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Recommendation: While it is recognized that the Organization's office staff may not be large enough to permit an adequate segregation of duties in all respects for an effective internal control structure, it is important that the Organization be aware of this situation. Response: The Board has already taken measures to attempt to comply even though the Organization is relatively small and the number of clerical/bookkeeping staff they can employ is limited. The Board has addressed this circumstance by active participation in the Organization?s affairs. This includes approval of disbursements, regular review of financial reports, regular review of bank reconciliations and budget comparisons.

Corrective Action Plan

2022-002. Segregation of Duties Corrective Acton Plan (CAP) a) Actions Planned in Response to the Finding: The Organization has determined the benefit of adequately segregating duties is less than the cost. Based on this assessment, the Organization is accepting the risk posed by the deficiency while also evaluating mitigating controls that will help reduce the risk of material misstatement of the financial statements. Management is attempting to mitigate the associated risks by doing the following: 1. Identifying areas lacking segregation of duties and where there are higher risks of fraud occurring. 2. Implementing limited segregation to the extent possible to reduce risks without impairing efficiency. 3. Using the knowledge of management and the Board to review accounting records and reports, b) Official Responsible for Ensuring Corrective Action: Brenda Schmitz, Office Manager, will monitor the effectiveness of the above actions and make changes as considered appropriate. c) Planned Completion Date for the Corrective Action: The corrective action plan for this finding will be completed by December 31, 2023. d) Explanation of Disagreement: There is no disagreement with the audit finding. e) Plan to Monitor Completion of Corrective Action: The Board will be monitoring this corrective action plan to review the recommendations and take appropriate action.

Categories

Internal Control / Segregation of Duties

Other Findings in this Audit

  • 23212 2022-001
    Significant Deficiency Repeat
  • 23214 2022-001
    Significant Deficiency Repeat
  • 23215 2022-002
    Significant Deficiency Repeat
  • 23216 2022-001
    Significant Deficiency Repeat
  • 23217 2022-002
    Significant Deficiency Repeat
  • 599654 2022-001
    Significant Deficiency Repeat
  • 599655 2022-002
    Significant Deficiency Repeat
  • 599656 2022-001
    Significant Deficiency Repeat
  • 599657 2022-002
    Significant Deficiency Repeat
  • 599658 2022-001
    Significant Deficiency Repeat
  • 599659 2022-002
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
10.766 Community Facilities Loans and Grants $5.77M
10.415 Rural Rental Housing Loans $802,671
10.427 Rural Rental Assistance Payments $105,072