Question

You are the new Director of Development in Goodworks non-profit. You are currently reviewing the internal controls over donations that are sent directly to Goodworks in the form of checks. Your review reveals that the checks are promptly endorsed "For Deposit Only,"but no list of the checks is prepared by the person opening the mail. The mail is opened either by the mailroom employee or by the employee who maintains the accounts receivable records. Mail receipts are deposited in the bank weekly by the manager of Accounts Receivable. Discuss the weaknesses in internal control and your recommendations for improving the system.

Provide information to the discussion that would be informative; elaborate and expand on information

Answer 1

The major internal control weaknesses in the system are:

1. There is no designated personnel to open the checks ;either the mailroom employee or accounts receivable manager opens them which can lead to conflicting duties and also no accountability on either employee.

2. The checks are deposited each week and not as and when received which can lead to theft, misplacement or loss of checks.

3. There is no list of incoming checks that is maintained which may not help in reconciliation of the bank accounts along with the books maintained by the company.

Recommendations to improve the system:

1. A proper list in either a manual register or a separate spreadsheet has to be maintained for the checks mentioning all details of the check number, the name of the party donating, date and time and the amount of the check.

2. Only a personnel dedicated to opening the checks must open the check and not multiple employees must be allowed to handle the checks.

3. The checks must be opened on a regular basis either every day or more frequently to avoid theft, misplacement or ways in which the checks can be lost.