How to Avoid Common Government Audit Mistakes

Are Internal Controls Operating Effectively?

While most governments have some level of internal controls, they can often be improved. First step, determine what internal controls your organization has. Once these are known, determine if these controls are operating as they should. Often, when fraud occurs in any organization, the internal controls are either nonexistent or they are circumvented in some manner (e.g., collusion between multiple employees).

For example, if your organization has approvals required for certain types of transactions, then check if the approvals are happening as they should. Even if you’re a small team, a different employee should input data into the accounting system, and another person should approve the inputs.

Are Encumbrances Being Tracked?

Encumbrances, which are unique to government entities, are another aspect to consider for audits. Encumbrances are written commitments to purchase. They help a government entity to stay within its budget, because the encumbrance process should include reviewing the budget and funds prior to approving the purchase(s).

The key here is to ensure encumbrances are being tracked and maintained. This may occur within the accounting system (if it allows) or outside via a separate database or spreadsheet.

Regardless of how the encumbrance are tracked, the important thing is to make sure tracking happens. Certain encumbrances may be noted in government meeting minutes because they may require additional approval and oversight.

Are Accounts Receivable Being Recorded in a Timely Manner?

To ensure your financial statements correctly report revenue, the accounts receivable must be accurate. If your organization is slow to record accounts receivables and the corresponding revenue, then your organization may be misrepresenting its financial standing.

Morgan & Associates Can Help You Prepare for an Audit of Your Government Entity

We have the experience and knowledge of what you can expect in an audit and how to prepare. We’ve helped many government groups get ready for audits and make updates that stave off future audit issues.

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