Finding Text
2023-003 SEGREGATION OF DUTIES
All Federal Programs
Prior Year Findings Number 2022-001 The Organization did not maintain segregation of accounting duties, including those related to federal programs (See 2023-001). 2023-001 SEGREGATION OF DUTIES
Prior Year Finding Number 2022-001 Criteria
Management is responsible for establishing and maintaining internal control. A good system of internal control provides for adequate segregation of duties so no one individual handles a transaction from its inception to completion. In order to maintain proper internal control, duties should be segregated so the authorization, custody and recording of transactions are not under the control of the same employee. This segregation of duties helps prevent losses from employee error or dishonesty and maximizes the accuracy of the Organization’s financial statements.
Condition
We noted individuals had the ability to access cash receipts, prepare checks for mailing to vendors, record transactions to the Organization’s financial accounting system and complete bank reconciliations. In order to have proper segregation of duties no one individual should be performing all of these duties. The Organization adopted new policies and procedures related to segregation of duties that were put in place at the end of the current fiscal year.
Cause
The Organization has a limited number of employees that possess the amount of financial knowledge necessary to perform the financial accounting duties of the Organization.
Effect
Inadequate segregation of duties could adversely affect the Organization’s ability to prevent or detect and correct misstatements, errors or misappropriation on a timely basis by employees in the normal course of performing their assigned functions.
Recommendation
The Organization should review its control activities to obtain the maximum internal control possible under the circumstances. The Organization should continue to utilize the new policies and procedures to achieve the maximum segregation of duties possible.
Response
The MPO has developed and follows a segregation of duties policy as outlined in the Financial Roles and Responsibilities Policy of the MPO’s Policies and Procedures Handbook. This policy makes clear the separate roles that each the Accountant, Office Manager, and Executive Director play in financial-related activities. This policy was reviewed by both the MPO Finance Subcommittee and the MPO’s auditor.
Furthermore, the MPO’s Financial Subcommittee and Executive Committee now review the financial statements monthly before they are presented to the Policy Committee for approval.
Conclusion
Response accepted.