Improving the Effectiveness of Your Claims Auditing Process

Local Government Management Guide

Who Is Responsible?

Although there are exceptions, the governing board is generally responsible for the audit of claims. The audit of claims is one of the few control procedures that is often executed directly by the governing board.

Having the board audit claims is a potentially strong internal control because it segregates two key functions—management’s purchase of goods and services and the authorization of payments for those goods and services.

Even though this is a potentially strong control, the limited time that board members may have to devote to the audit of claims can render an otherwise strong control only modestly effective. Many governing boards have recognized the need to have a strong claims auditing function and, where allowable by law, have chosen to delegate their responsibility for auditing claims and have established the position of claims auditor or a position that includes the claims auditing function.2 Establishing a claims auditor position can be an effective approach to fulfilling the need for a thorough and deliberate audit of claims.

2 For example, Town Law Section 20 authorizes the establishment of the position of Town Comptroller in certain towns. When this position is established, the Town Comptroller assumes responsibility for all accounting duties and the audit and approval of all claims (see Town Law Sections 34, 119).