PIKE-GIBSON WATER, INC.

Segregation of Duties - CFDA #10.760, Water and Waste Disposal Systems for Rural Communities, United States Department of Agriculture, 2020 Condition: The Utility lacks segregation of duties among the authorization, custody, and reconciliation accounting functions. Criteria: Generally accepted accounting principles (GAAP) require that accounting functions be adequately segregated to ensure that the accounting controls are effective and no one employee performs all phases of a transaction. Effect: Intentional or unintentional errors could be made and not be detected. Recommendation: To the extent possible, duties should be segregated between accounting personnel to mitigate risk of material misappropriation of assets and to serve as a check and balance to maintain the best control system possible. Response: Pike-Gibson Water, Inc. agrees with the finding. It is not economically feasible to hire a sufficient number of staff to adequately separate the duties. However, additional separation of accounting functions will be made. The Board mitigated the situation by having active management oversight and continue to monitor internal controls.

The lack of segregation of duties arises due to the Office Manager (1) being a fill-in customer service representative that handles cash, posts cash receipts in the accounting software, authorizes and records the write-off of uncollectable accounts, and reconciles the bank accounts (2) records invoices, prints checks, mails the signed checks, and reconciles the bank accounts (3) maintains personnel records, prepares payroll checks, submits direct deposit detail for payment, and reconciles the bank accounts. A cost-benefit analysis of hiring additional staff to alleviate this finding is not the best use of resources due to our size and availability of funds. As a compensating control, the daily deposit is prepared by a customer service representative and reviewed by the Office Manager.

2019-004

Segregation of Duties ? CFDA #10.760, Water and Waste Disposal Systems for Rural Communities, United States Department of Agriculture, 2019 Condition: The Utility lacks segregation of duties among the authorization, custody, and reconciliation accounting functions. Criteria: Generally accepted accounting principles (GAAP) require that accounting functions be adequately segregated to ensure that the accounting controls are effective. Effect: Errors or irregularities could occur and not be detected in a timely manner. Recommendation: We recommend that management implement procedures to ensure that the financial statements are in conformity with GAAP. Response: We agree. This comment is related to our size. It is not economically feasible to hire a sufficient number of staff to adequately separate the duties. We have mitigated the situation by having active management oversight and we continue to monitor our internal control.

The lack of segregation of duties arises due to the Office Manager (1) being a fill-in customer service representative that handles cash, posts cash receipts in the accounting software, authorizes and records the write-off of uncollectable accounts, and reconciles the bank accounts (2) records invoices, prints checks, mails the signed checks, and reconciles the bank accounts (3) maintains personnel records, prepares payroll checks, submits direct deposit detail for payment, and reconciles the bank accounts. A cost-benefit analysis of hiring additional staff to alleviate this finding is not the best use of resources due to our size and availability of funds. As a compensating control, the daily deposit is prepared by a customer service representative and reviewed by the Office Manager.