Finding Text
Federal agency: U.S. Department of Housing and Urban Development
Federal program title: Mortgage Insurance Nursing Homes, Intermediate Care Facilities, Board and Care Homes, and Assisted Living Facilities
Assistance Listing Number: 14.129
Type of Finding: Significant Deficiency in Internal Control over Financial Reporting
Criteria or specific requirement: Bank statements shall be reconciled promptly to the formal accounting records by persons other than those recording or handling cash, or preparing and signing checks.
Condition: There is a lack of segregation of duties surrounding cash management.
Context: During our testing, we noted that bank reconciliations were prepared promptly, however, there is a lack of segregation of duties. The person preparing the bank reconciliations also has the ability to receive incoming cash, take deposits to the bank, and generate checks. Additionally, there is no review performed for bank reconciliations.
Cause: The entity has a small finance department.
Effect: Error(s) or fraud could occur and result in noncompliance.
Recommendation: The person preparing the bank reconciliations should not have the ability to handle and record cash. When segregation of duties is not possible, compensating controls should be put into place. Review of bank reconciliations should also be completed on a monthly basis.
Views of responsible officials: Management is in agreement with the finding.