Finding Text
Inadequate Segregation of Duties: Condition: The Authority has a limited number of office personnel and, accordingly, does not have adequate separation of duties. An effective internal control structure provides an adequate segregation of duties so that no one individual handles a transaction from its inception to its completion. Criteria: A fundamental concept in a good system of internal controls is the segregation of incompatible duties. Cause: Due to the relatively small size of the Authority’s staff, the Authority is not able to attain ideal segregation of duties of separating the assignment of different people to authorize transactions, record transactions, and maintain custody of assets. Effect: This control deficiency could result in a misstatement to the financial statements that would not be prevented or detected. Recommendation: Although it may not be economically feasible for the Authority to attain an ideal segregation of duties environment, the Authority can periodically observe and evaluate its current structure so as to make improvements when considered necessary. Views of Responsible Officials and Planned Corrective Actions: The Organization has determined the benefit of adequately segregating duties is less than the cost. Based on the assessment, the Organization is accepting the risk posed by the deficiency while also evaluating mitigating controls that will help reduce the risk of material misstatement of the financial statements. Management attempts to mitigate the associated risks by doing the following: 1. Identifies areas where lack of segregation of duties exists and where there are higher risks of errors or fraud occurring. 2. Implements limited segregation to the extent possible to reduce risks without impairing efficiency. 3. Uses the knowledge that management and the Board of Directors have of operations by having them review certain accounting records and reports. 4. Monitors the effectiveness of the above actions and makes changes as considered appropriate.