Finding Text
Segregation of Duties (significant deficiency)
Condition and Criteria: Transit Authority of Warren County is a small office with only three or four full time employees, two of which are typically involved in the record keeping and financial reporting functions. In such an environment, it is difficult, if not impossible, to segregate duties of the general accounting, general ledger and journal entry functions from custody and control over assets such as cash.
Effect: A fundamental element of an effective internal control system is the proper segregation of duties. Proper segregation of duties provides for a system of checks and balances and entails assigning the responsibilities for authorizing and recording transactions among different people in the Organization. A lack of segregation of duties increases the potential risk of errors or fraud.
Auditors’ Recommendation: The Authority should continue to obtain involvement from its Board of Directors in reviewing monthly financial reports and approving expenditures.
Grantee Response: The Authority has tried to maintain as much segregation of duties as physically possible and in instances of not being able to achieve such segregation, has implemented detective procedures as recommended by our external auditors. The Authority believes these procedures will reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the financial statements may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. The Authority will continue to review how accounting functions are assigned and consider implementing further detective internal control procedures to help mitigate the risk