Finding 23721 (2022-001)

Significant Deficiency Repeat Finding
Requirement
P
Questioned Costs
-
Year
2022
Accepted
2023-04-10
Audit: 18639
Auditor: Carlsonsv LLP

AI Summary

  • Core Issue: Inadequate segregation of duties due to a small staff increases the risk of errors or fraud in financial transactions.
  • Impacted Requirements: The lack of separation in handling transactions can lead to potential misstatements in the financial statements.
  • Recommended Follow-Up: Regularly assess and improve current controls, while implementing limited segregation where feasible to mitigate risks.

Finding Text

2022-001. Inadequate Segregation of Duties Condition: The Pierce Pepin Cooperative Services and Affiliates has a limited number of office personnel and, accordingly, does not have adequate separation 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: A fundamental concept in a good system of internal controls is the segregation of incompatible duties. Cause: Due to the relatively small size of the Pierce Pepin Cooperative Services and Affiliates? staff, the Pierce Pepin Cooperative Services and Affiliates is not able to attain ideal segregation of duties of separating the assignment of different people to authorize transactions, record transactions, and maintain custody of assets. Effect: This control deficiency could result in a misstatement to the consolidated financial statements that would not be prevented or detected. Recommendation: Although it may not be economically feasible for the Pierce Pepin Cooperative Services and Affiliates to attain an ideal segregation of duties environment, the Pierce Pepin Cooperative Services and Affiliates can periodically observe and evaluate its current structure so as to make improvements when considered necessary. Views of Responsible Officials and Planned Corrective Actions: The Pierce Pepin Cooperative Services and Affiliates has determined the benefit of adequately segregating duties is less than the cost. Based on the assessment, the Pierce Pepin Cooperative Services and Affiliates is accepting the risk posed by the deficiency while also evaluating mitigating controls that will help reduce the risk of material misstatement of the consolidated financial statements. Management attempts to mitigate the associated risks by doing the following: 1. Identifies areas where the lack of segregation of duties exists and where there are higher risks of errors or fraud occurring. 2. Implements limited segregation to the extent possible to reduce risks without impairing efficiency. 3. Uses the knowledge that management and the Board of Directors have of operations by having them review certain accounting records and reports. 4. Monitors the effectiveness of the above actions and makes changes as considered appropriate.

Corrective Action Plan

2022-001. Segregation of Duties Recommendation: While we recognize the Company?s office staff is not large enough to permit an adequate segregation of duties in all respects for an effective internal control structure, it is important that the Company be aware of this condition and look for opportunities to improve segregation of duties or add mitigating controls to prevent material misstatement of the financial statements. Management?s Response and Actions Planned: The Company?s management is aware of this condition and believes that it is not economically feasible to attain the ideal segregation of duties. Management attempts to mitigate the associated risks by doing the following: 1. Identifies areas where the lack of segregation of duties exists and where there are higher risks of errors or fraud occurring. 2. Implements limited segregation to the extent possible to reduce risks without impairing efficiency. 3. Uses the knowledge that management and the Board of Directors have of operations by having them review certain accounting records and reports. Monitors the effectiveness of the above actions and makes changes as considered appropriate.

Categories

Internal Control / Segregation of Duties

Other Findings in this Audit

  • 23722 2022-002
    Significant Deficiency Repeat
  • 600163 2022-001
    Significant Deficiency Repeat
  • 600164 2022-002
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
21.027 Coronavirus State and Local Fiscal Recovery Funds $5.42M