Finding 498831 (2023-001)

Significant Deficiency Repeat Finding
Requirement
N
Questioned Costs
-
Year
2023
Accepted
2024-09-27
Audit: 321586
Organization: City of Platteville (WI)

AI Summary

  • Core Issue: There is a lack of proper segregation of duties, increasing the risk of errors and fraud due to overlapping responsibilities among staff.
  • Impacted Requirements: Key internal control categories—authorization, custody, recordkeeping, and reconciliation—are not adequately separated, violating best practices.
  • Recommended Follow-Up: Consider implementing additional policies and procedures to strengthen controls over significant transaction cycles, despite concerns about cost-effectiveness.

Finding Text

Finding #2023-001- Segregation of Duties Criteria: Segregation of duties is an aspect of internal control intended to prevent or decrease opportunities of intentional and unintentional errors and fraud. Duties and responsibilities are properly segregated if no single individual either has control over all phases of a transaction or can both make and conceal an error, whether such error is intentional or unintentional. Condition: A properly designed system of internal control includes adequate staffing, policies, and procedures to properly segregate duties. All internal control duties can be classified into four broad categories: authorization, custody, recordkeeping, and reconciliation. No one person should have control of two or more of these four categories for any one cycle. There are key controls related to significant transaction cycles that are important in reducing the risk of errors or irregularities. Currently, there are the following overlapping duties: - Both Accounting Specialists have the authority to enter invoices into the system, print checks, and have access to the electronic signatures. Preferably, the check cutting process would separate the entering of payment information into the system and the ability to print signed checks. - One Accounting Specialist creates deposits and makes deposits with the bank. Although not the standard procedure, the Accounting Specialist has the authority to collect cash receipts. Ideally, separate individuals would collect cash and make deposits. - The Housing Authority Executive Director opens the mail, creates deposits and takes deposits to the bank. The Executive Director also enters invoices into the system and prints checks. The Board of Commissioners approves disbursements and all checks require dual signatures. Effect: Errors or intentional fraud could occur and not be detected timely by other employees in the normal course of their responsibilities because of the lack of segregation of duties. Cause: Limited number of personnel. Recommendation: We recommend that the City consider the benefits of implementing additional policies and procedures to address key controls related to its significant transaction cycles as noted. Response: We agree with this finding but do not believe it is cost effective to increase personnel to bring about a more effective segregation of duties.

Corrective Action Plan

Finding #2023-001- Segregation of Duties Criteria: Segregation of duties is an aspect of internal control intended to prevent or decrease opportunities of intentional and unintentional errors and fraud. Duties and responsibilities are properly segregated if no single individual either has control over all phases of a transaction or can both make and conceal an error, whether such error is intentional or unintentional. Condition: A properly designed system of internal control includes adequate staffing, policies, and procedures to properly segregate duties. All internal control duties can be classified into four broad categories: authorization, custody, recordkeeping, and reconciliation. No one person should have control of two or more of these four categories for any one cycle. There are key controls related to significant transaction cycles that are important in reducing the risk of errors or irregularities. Currently, there are the following overlapping duties: - Both Accounting Specialists have the authority to enter invoices into the system, print checks, and have access to the electronic signatures. Preferably, the check cutting process would separate the entering of payment information into the system and the ability to print signed checks. - One Accounting Specialist creates deposits and makes deposits with the bank. Although not the standard procedure, the Accounting Specialist has the authority to collect cash receipts. Ideally, separate individuals would collect cash and make deposits. - The Housing Authority Executive Director opens the mail, creates deposits and takes deposits to the bank. The Executive Director also enters invoices into the system and prints checks. The Board of Commissioners approves disbursements and all checks require dual signatures. Effect: Errors or intentional fraud could occur and not be detected timely by other employees in the normal course of their responsibilities because of the lack of segregation of duties. Cause: Limited number of personnel. Recommendation: We recommend that the City consider the benefits of implementing additional policies and procedures to address key controls related to its significant transaction cycles as noted. Response: We agree with this finding but do not believe it is cost effective to increase personnel to bring about a more effective segregation of duties.

Categories

Internal Control / Segregation of Duties HUD Housing Programs

Other Findings in this Audit

  • 498832 2023-001
    Significant Deficiency Repeat
  • 498833 2023-001
    Significant Deficiency Repeat
  • 1075273 2023-001
    Significant Deficiency Repeat
  • 1075274 2023-001
    Significant Deficiency Repeat
  • 1075275 2023-001
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
14.871 Section 8 Housing Choice Vouchers $598,136
21.027 Coronavirus State and Local Fiscal Recovery Funds $533,699
20.509 Formula Grants for Rural Areas and Tribal Transit Program $388,735
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $266,499
20.106 Airport Improvement Program, Covid-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs $123,531
45.301 Museums for America $23,487
20.205 Highway Planning and Construction $21,180
45.129 Promotion of the Humanities Federal/state Partnership $7,132
10.664 Cooperative Forestry Assistance $3,050