Finding Text
Condition The Agency had a lack of segregation of duties during the year ended June 30, 2022 and did not consistently or effectively perform its compensating controls. Criteria Federal grant guidelines require grantees to have systems in place that provide reasonable assurance that the information is accurate, allowable, and compliant with the terms and conditions of each grant. Grantees must also adequately safeguard all such property and must provide assurance that it is used solely for authorized purposes. Internal control procedures require that accounting functions should be segregated so that one person does not control more than one aspect of an accounting transaction. And when there are duties that are not segregated, compensating controls should be in place to overcome the risks related to a lack of segregation of duties. Cause Due to a limited number of accounting staff, the Finance Director is involved in many aspects of a transaction. For example, in cash disbursement transactions, the Finance Director generally prepares the checks and record the transactions. One of the compensating controls the Agency has is for the Executive Director to approve all check authorizations. When testing invoices for proper authorization, eleven out of sixty-four invoices did not have Executive Director approval. Effect The Finance Director performed most of the accounting functions, resulting in a lack of segregation of duties. Also, compensating controls were not consistently or effectively being performed. Recommendation We recommend that the Agency hire a Fiscal Clerk or use existing staff to separate the accounting functions of custody, recordkeeping and authorization. We also recommend that the Executive Director sign off on all check requisitions, journal entries and bank reconciliations as a compensating control. Views of Responsible Officials Agree.