Finding 48761 (2022-001)

Significant Deficiency Repeat Finding
Requirement
P
Questioned Costs
-
Year
2022
Accepted
2023-07-24
Audit: 52436
Organization: City of Deer River (MN)
Auditor: Sterle & CO LTD

AI Summary

  • Core Issue: There is a significant lack of segregation of duties in financial processes, increasing the risk of errors or fraud.
  • Impacted Requirements: Effective control systems require a division of accounting duties to prevent undetected issues.
  • Recommended Follow-Up: Council members should enhance oversight by reviewing bank activities, general ledger entries, and conducting on-site inspections of assets.

Finding Text

2022-001 Lack of segregation of duties - Significant Deficiency Condition: Lack of segregation of duties over financial processes. Criteria: For an effective control system, division of accounting duties should exist to prevent errors or misappropriations from going undetected in the course of employees performing their assigned duties. Context: The lack of segregation of duties exists within the City as a whole over all of its accounting and reporting functions. This is a common circumstance in governments of similar size. Effect: Errors or misappropriations could occur and go undetected for a period of time. Questioned Costs: Not applicable Cause: Limited number of staff available to appropriately divide duties. Recommendation: The City's council members need to be cognizant of the issue and provide appropriate oversight. Such oversight includes careful review of bank activity as well as general ledger and journal entries. The council members should also periodically perform on site inspections of assets and financial records. Views of Responsible Officials and Corrective Actions: The City agrees with the recommendations and continues to provide oversight as needed.

Corrective Action Plan

2022-001 Lack of segregation of duties Recommendation: The City's council members need to be cognizant of the issue and provide appropriate oversight. Such oversight could include review of all federal activity and posting of receipts and disbursements. In addition, any proposed adjusting journal entries should have additional oversight duties performed and documented. Action taken: The City is cognizant of the issue and continues to monitor the situation.

Categories

Internal Control / Segregation of Duties Reporting Significant Deficiency

Other Findings in this Audit

  • 625203 2022-001
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
10.760 Water and Waste Disposal Systems for Rural Communities $1.16M
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $559,016
66.458 Capitalization Grants for Clean Water State Revolving Funds $75,697
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $11,912