Finding 529378 (2024-001)

Material Weakness Repeat Finding
Requirement
P
Questioned Costs
-
Year
2024
Accepted
2025-03-21
Audit: 347374
Organization: Village of Clemmons (NC)

AI Summary

  • Core Issue: There is a significant lack of segregation of duties among Village staff, increasing the risk of transaction mishandling.
  • Impacted Requirements: This finding is a repeat issue from the previous audit, indicating ongoing concerns about internal controls.
  • Recommended Follow-Up: Further separation of duties is needed, along with alternative controls to mitigate risks, despite staffing limitations.

Finding Text

MATERIAL WEAKNESS 2024-1 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, 2023-1. 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 ProTem 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. During the year ended June 30, 2024 the Village of Clemmons added personnel and segregated some of the functions to improve internal controls.

Corrective Action Plan

Corrective Action: The Village has hired a planning and finance tech in April 2024 who has allowed the Village to segregate duties for accounts payable which according to our risk assessmnet is one of our highest risks. The department head's responsibility to review and approve invoices has increased. The Village involves the manager, assistant manager, mayor and mayor pro tem in the accounts payable process. The manager of assistant manager reviews all payments. The Village requires dual signatures on payables, the mayor or mayor pro tem is the second signatory. The Village also implented a change in the responsibilities of staff to segregate duties of the payroll function. The human resources officer processes payroll. We continue to look opportunities to cross-train employees. The Village has automated our receipt process with Open.Gov. The assingned employee generates an invoice for all payments, once the invoice is noted as paid OpenGov generates a journal entry in Excel for the finance officer or designee to record the payment. As part of management oversight, the Council receives a check register, cash balances, and a financial report monthly. The Village continues to review possible segregation of duties, if personnel expertise allows. Bank reconciliations are up to date. Proposed Completion Date: The Village has increased personnel and cross-trained employees to implement segregation of duties. The Village believes with the additional personnel and the management review procedures, that we have a process in place to prevent any material misstatements of the financial statements. We implemented this in April 2024, so the additional segregation of duties was in place at year end.

Categories

Internal Control / Segregation of Duties Material Weakness

Other Findings in this Audit

  • 1105820 2024-001
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
21.027 Coronavirus State and Local Fiscal Recovery Funds $1.67M
20.205 Highway Planning and Construction $16,000