One of the most important steps to achieving adequate segregation of duties is to have various procedures, documentation, invoices, and statements reviewed by an individual other than the person who performed the work or made the transaction. Here are some key questions to ask yourself to evaluate if your review procedures are adequate:
- Does the individual performing the review have the SKE (skills, knowledge, and experience) to know if what they are viewing is correct? Your auditor will likely do a walkthrough of the process with the individual responsible. If their SKE is not up to snuff, this likely will be apparent to the auditor and it will be difficult to assert that the review control is working effectively.
- Would the individual performing the review speak up if they thought something was wrong? For example, if an employee is responsible for determining if their supervisor’s expense is reasonable, would they feel comfortable asking for further information or voicing any concerns? If the employee reviewing is a close friend or coworker, would they give the coworker the benefit of the doubt when they shouldn’t?
- Have you documented the review properly? Best practices should include a legible name or initials and a date to document the review.
- Are you sure the reviewer looked at everything they should have? Names and dates are nice, but how do you know what the individual reviewed? A clear description of what was reviewed should be documented somewhere, possibly with your accounting procedures manual. Upon investigation, you might discover your employee is not reviewing all the important items they should be.
We encourage your organization to ensure you have the correct people performing reviews and the review is properly documented, which includes specifically what they looked for. Remember the cross-occupational phrase – If it isn’t documented, it didn’t happen!
Yeo & Yeo’s professionals can assess your nonprofit’s internal controls and provide suggestions for improvement tailored to your organization. Contact me via email at micevr@yeoandyeo.com or call 269.329.7007, or contact your Yeo & Yeo professional.