With turnover across the country reaching unprecedented highs, many agencies are experiencing staff shortages and are dealing with unfilled positions. In accounting departments specifically, a single staff member leaving can cause a large problem. If not properly reviewed and planned for, one open position can easily leave gaps in internal controls in even the most well-thought-out control environments.
Some best practices to consider when your organization is going through turnover to help mitigate internal control findings and any potential for fraud are 1) Having proper documentation for procedures and roles, 2) Keeping duties segregated, and 3) Reviewing the accounting system and bank access.
1. Having clear, documented procedures and roles
In agencies that lack clear, documented roles and procedures, it’s not uncommon for there to be confusion over the former employee’s specific responsibilities in the accounting process. Establishing each staff member’s duties and roles for initiating, reviewing, and approving the different accounting functions will help ensure a smoother transition and make it easier to know exactly what processes need to be delegated amongst the department members.
2. Keeping duties segregated
Oftentimes, an employee’s replacement is not available immediately after their departure. With staffing shortages on the rise, accounting positions can be vacant for months-on-end, leaving other employees to take on the responsibilities of those that left, in addition to their current tasks. Serious segregation of duties issues can arise when not being actively reviewed as soon as staffing changes take place, especially in small organizations, where tasks cannot be adequately divided among staff members.
a) Bank reconciliation processes – Ensure that separate individuals are responsible for preparing and reviewing bank reconciliations and that these individuals do not have the authority to sign checks or initiate wire transfers.
b) AP processes – The staff member responsible for initiating the AP checks and wires should be separate from the individual who prints and mails the checks. A positive pay system is a great control that can be implemented, especially if the initiation of AP and printing functions can not be segregated. However, it’s essential that a separate person initiate the review and initiate the positive pay with the bank.
c) Masterfile controls (especially for AP and Payroll) – The employee responsible for making payments should be unable to update the Masterfile within the IT system. Even if they are not responsible for updating, reviewing computer access to ensure that they are unable to make changes is a way to prevent any fictitious vendors or employees from populating the database. A separate person should be initiating the changes and reviewing the updates made.
3. Reviewing the accounting system and bank access
Remembering to review and update the accounting system and bank access is often a step that is forgotten when employees leave. It is crucial to have a process for removing employees’ access to accounting and bank systems, so they are unable to make changes subsequent to their departure.
Conclusion
Implementing these steps can help to improve your organization’s control environment, especially in times of increased turnover. As always, feel free to reach out to your audit team for suggestions on how to improve the controls within your organization.
