Finding 42221 (2022-001)

Material Weakness
Requirement
P
Questioned Costs
-
Year
2022
Accepted
2023-08-06
Audit: 46349
Organization: Village of Clemmons (NC)

AI Summary

  • Core Issue: There is a significant lack of segregation of duties among Village personnel, which increases the risk of mishandling transactions.
  • Impacted Requirements: The absence of proper segregation violates the criteria for ensuring that transactions are handled properly, leading to potential financial misstatements.
  • Recommended Follow-up: Implement further separation of duties where possible and explore alternative controls to mitigate risks, while considering cost-effectiveness.

Finding Text

MATERIAL WEAKNESS 2022 ? 1 Segregation of Duties Criteria: Duties should be segregated to provide reasonable assurance that transactions are handled properly. Condition: There is a lack of segregation of duties among Village personnel. Effect: Transaction could be mishandled. Cause: There are a limited number of personnel for certain functions. Identification of a repeat finding: This is a repeat finding from the immediate previous audit, 2021-001. Recommendation: The duties should be separated as much as possible and alternative controls should be used to compensate for lack of separation. Management Response: The Village agrees that there is a lack of segregation of duties due to single person finance staff and has segregated functions with the manager and clerk when possible. Review procedures are in place that are performed by the Manager or management team, Mayor, Mayor Pro Tem and Council to provide reasonable assurance that the financial statements are not misstated, however the Village also recognizes that reasonable assurance takes into consideration that the cost of the control should not exceed the benefits. Cash receipts are handled by clerk. The Council also receives a monthly financial report and check register. The manager receives direct confirmation from the County for County collected revenues that are direct deposited to the Village and reviews all checks before the Mayor or Mayor Pro Tem signs the check. The manager also reviews bank reconciliation on monthly basis and has access the financial software to review any accounts on a random basis. The Mayor or Mayor Pro Tem manually signs checks in order to have a second review of checks before they are mailed by clerk.

Corrective Action Plan

MATERIAL WEAKNESS 2022 ?001 Segregation of Duties Name of contact person: Ann Stroud, Finance Officer Corrective Action: The duties are separated a much as possible with limited staff and alternative controls are in place to provide reasonable assurance that the financial statements are not misstated. At this time, it would be cost prohibitive to add personnel just for segregation of duties. The Village recognizes that reasonable assurance takes into consideration that the cost of internal control should not exceed the benefits. The manager or designated alternate is control for most of the finance functions such as review of accounts payable and bank statements. The Mayor or Mayor Pro Tem manually signs checks, so there is a second review before the checks are mailed. The Clerk mails the payable checks. The clerk the deposits and deposits with bank and the Finance Officer records. Purchase card transactions for public works is entered by senior administrative assistant. The Council receives check register, cash balances and revenue and expenditure review on a monthly basis. The Village continues to review possible segregation of duties, if personnel expertise allows. Proposed Completion Date: The Village has implemented the segregation of duties as much as possible without hiring additional personnel that is cost prohibitive at the moment. We have implemented review procedures with management that we believe would prevent any material misstatements of the financial statements. Since the manager is the designated control for finance functions, there is an alternate designated by the Manager.

Categories

Material Weakness Internal Control / Segregation of Duties

Other Findings in this Audit

  • 618663 2022-001
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
21.027 Coronavirus State and Local Fiscal Recovery Funds $1.04M
20.205 Highway Planning and Construction $320,000