American Samoa’s Off-Island Medical Referable Program Prone to Fraud, Error

Audit shows fundamental system of internal controls is lacking

By Joyetter Feagaimaalii-Luamanu

PAGO PAGO, American Samoa (The Samoa News, June 8, 2016) – The lack of written policies or procedures regarding the financial process used for the Off Island Referral program was one of the items pointed out in the audit report by Moss and Adams for LBJ Medical Center's fiscal year ending September 30, 2015. The audit report says that internal controls are designed to safeguard assets and detect losses from employee dishonesty or error.
 
A fundamental concept in a good system of internal controls is the segregation of duties, in particular, segregating access, custody and authorization of transactions. According to the auditors, while performing their internal control testing, internal control deficiencies were identified with cash receipts for the Off Island Referral program.
 
“A debit card is used to purchase airlines tickets, which directly draws down to the Medical Center operating cash account. Cash is collected outside the normal cash receipting system in place at the Medical center but the cash is ultimately posted by the Finance personnel.”
 
The auditors further point out that access to the master vendor file is not restricted to authorized personnel. Regarding payroll functions, the auditors state that all the employees in the finance department have access to the hospital’s payroll system, including the ability to add/delete employees and modify employee information.
 
“Payroll is not reviewed by someone independent of the payroll function prior to the payroll being processed. Payroll checks are produced without an authorizing signature other than a computer generated signature and there are no controls over this printer technology, which would allow any person with access to the payroll system to produce and sign checks.”
 
The audit report says that one employee opens the mail, collects any checks received and takes the money to the back for deposit, and there is no independent review of the cash received in the mail in order to ensure what was received was deposited into the bank.
 
“There is no indication of a supervisory review of monthly accounts payable subsidiary reconciliations.” The auditors point out that adequate policies and procedures have not been developed or implemented to guarantee appropriate internal controls and segregation of duties.
 
“An employee or group could be in a position to both perpetrate and conceal errors of fraud in the normal course of their duties and these errors or fraud may remain undetected.”
 
The auditors recommended that the hospital develop and implement policies and procedures to address the internal control deficiencies that would increase the likelihood that unauthorized or false transactions would be prevented or detected in a timely manner and prevent materially misstated financial statements.
 
The hospital concurred and stated that progress is being made and the corrective plan will address these material weaknesses in internal controls by the implementation of the financial system “Financial Edge” as of May, 2016 (last month).
 
PHARMACY
 
The auditors note that the Pharmacy should have an integrated computer system to ensure proper reporting and also to provide accurate reports with sufficient inventory detail. According to Moss and Adams, while performing their internal control testing they noted that the accounting system is outdated and is not integrated. “This results in some inaccurate and/or inaccessible reports.”
 
The auditors recommended that the hospital  consider upgrading its current accounting system in the pharmacy department. In response the hospital says that they concur with this finding and this issue will also be addressed with the Financial Edge software, which they said was scheduled for installation in May 2016.
 
FINANCIAL EDGE SOFTWARE LAUNCH
 
Samoa News understands the Financial Edge system has not been officially launched at the hospital, however the hospital has a working demo currently being used.

The Samoa News
Copyright © 2016. The Samoa News. All Rights Reserved

Rate this article: 
No votes yet

Add new comment