Finding Text
Program
ALN 16.575 - Crime Victim Assistance
Criteria
Establishment and maintenance of internal controls over the financial reporting process.
Condition
The Organization's internal control system was not functioning as designed to allow for an adequate level of segregation of duties to operate over the disbursement and payroll processes. During the year, one employee was responsible for entering transactions into the accounting system, processing transaction payments, and reconciling the Organization's bank accounts.
Questioned costs
None
Context
The finding is the result of audit procedures performed and observation and inquiry with Organization management.
Effect
Inadequate segregation of duties over key accounting processes creates a greater opportunity for management override of controls and increases the risk of errors or misstatements occurring without being detected and corrected by management.
Cause
The root cause is an inadequate internal control environment and inadequate monitoring of financial processes.
Recommendation
We recommend the Organization revisit its internal control policies and procedures to incorporate an appropriate level of segregation of duties within key accounting processes.
Views of the Responsible Officials and Planned Corrective Action
It was identified in September 2024 that internal controls over disbursements and the processing of payroll were not adequate. At times during the year, the same employee was approving timesheets, processing payroll and approving withdrawals from the account. This same employee was entering disbursements into Quickbooks, processing checks, distributing payments, and reconciling the bank statements. The Organization has updated its internal controls to reflect incorporate segregation of duties over the disbursement process and payroll processing. For payroll the updated process includes one person approving timesheets, another person processing payroll, the executive director and board treasurer approving payroll, and lastly include a final approval of payroll. For disbursements the director of operations will open the mail and code bills for expense accounts, the executive director will approve bills for payment, the director of operations will print checks, the executive director or board treasurer will sign checks, the community response coordinator will mail checks, and the board treasurer will review bank reconciliations completed by the director of operations. All reconciliations will be reviewed by the board treasurer. Payroll processing will be performed by an outside financial management firm moving forward.