Audit 316258

Condition: During audit fieldwork, our testing resulted in a restatement of fund balance in order to correct expenses in the correct internal service fund due between funds. Criteria: A good system of internal controls would provide for accurate representations of adjusted account balances for all City accounts prior to audit fieldwork. Cause: Year-end entries related to various accruals and other items were required in order to accurately present the City’s financial statements. Effect: The City’s financial statements were not fully adjusted prior to audit fieldwork. Recommendation: A vital process of effective internal controls is the review and subsequent adjustment of general ledger balances. This review and adjustment will aid in the appropriate budgeting and management of the City’s financial activities and resources.

Condition: During audit fieldwork, it was noted the City does not have a centralized reporting system for all grants obtained by the City. In addition, it was noted the City does not have a process for accurately identifying grant revenues and expenses recorded in the City’s general ledger. Criteria: Grant administration procedures should be performed to verify all payments are properly received, all expenditures are eligible under the grant, and the grant compliance occurs. Cause: Lack of oversight by the City and inadequate controls over reconciliation of grant revenues and expenditures. Effect: Inaccurate reporting of grant revenues and expenditures. Recommendation: We recommend all departments provide the original grant agreements to the finance department. In addition, we recommend that the City adopt a policy and process for reconciling grant revenues and expenditures to the general ledger, grant agreements and financial reports submitted to the granting agencies. Such reconciliation should be done on a regular basis to ensure proper identification of all grant revenues and expenditures and to prevent inaccurate reporting or duplicate requests for reimbursements.

Condition: During our current year-end audit procedures, we found that the bank reconciliations were not being performed timely. One of the most important internal control features over cash receipts and disbursements is the preparation of the monthly bank reconciliation. By not preparing monthly bank reconciliation’s, errors and omissions may occur and not be detected on a timely basis. Internal control is most effective when bank reconciliations are prepared immediately upon receipt of the monthly bank statement. The bank statement should be received unopened by an individual not responsible for writing checks or recording cash receipts and disbursement transactions. Internal control is stronger when someone not responsible for entries in the receipts and disbursements records prepares the bank reconciliation. Criteria: A good system of internal controls would reconcile all cash accounts on a monthly basis. Reconciliations should reconcile between bank and general ledger balances should be prepared to determine all cash transactions have been properly recorded. Cause: Lack of oversight by the City an inadequate controls over the bank reconciliation process. Effect: Misstated cash balances and an accumulation of unreconciled errors. Recommendation: We recommend as a means of better control, that bank reconciliations be performed each month and any variances be investigated and adjusted immediately.

Condition: Previously and during audit fieldwork, our testing resulted in audit adjustments in order to present materially accurate financial statements. Criteria: A good system of internal controls would provide for accurate representations of adjusted account balances for all City accounts prior to audit fieldwork. Cause: Year-end entries related to various accruals and other items were required in order to accurately present the City’s financial statements. Effect: The City’s financial statements were not fully adjusted prior to audit fieldwork. Recommendation: A vital process of effective internal controls is the review and subsequent adjustment of general ledger balances. This review and adjustment will aid in the appropriate budgeting and management of the City’s financial activities and resources.

Condition: During audit fieldwork, our testing resulted in a restatement of fund balance in order to correct expenses in the correct internal service fund due between funds. Criteria: A good system of internal controls would provide for accurate representations of adjusted account balances for all City accounts prior to audit fieldwork. Cause: Year-end entries related to various accruals and other items were required in order to accurately present the City’s financial statements. Effect: The City’s financial statements were not fully adjusted prior to audit fieldwork. Recommendation: A vital process of effective internal controls is the review and subsequent adjustment of general ledger balances. This review and adjustment will aid in the appropriate budgeting and management of the City’s financial activities and resources.

Condition: During audit fieldwork, it was noted the City does not have a centralized reporting system for all grants obtained by the City. In addition, it was noted the City does not have a process for accurately identifying grant revenues and expenses recorded in the City’s general ledger. Criteria: Grant administration procedures should be performed to verify all payments are properly received, all expenditures are eligible under the grant, and the grant compliance occurs. Cause: Lack of oversight by the City and inadequate controls over reconciliation of grant revenues and expenditures. Effect: Inaccurate reporting of grant revenues and expenditures. Recommendation: We recommend all departments provide the original grant agreements to the finance department. In addition, we recommend that the City adopt a policy and process for reconciling grant revenues and expenditures to the general ledger, grant agreements and financial reports submitted to the granting agencies. Such reconciliation should be done on a regular basis to ensure proper identification of all grant revenues and expenditures and to prevent inaccurate reporting or duplicate requests for reimbursements.

Condition: During our current year-end audit procedures, we found that the bank reconciliations were not being performed timely. One of the most important internal control features over cash receipts and disbursements is the preparation of the monthly bank reconciliation. By not preparing monthly bank reconciliation’s, errors and omissions may occur and not be detected on a timely basis. Internal control is most effective when bank reconciliations are prepared immediately upon receipt of the monthly bank statement. The bank statement should be received unopened by an individual not responsible for writing checks or recording cash receipts and disbursement transactions. Internal control is stronger when someone not responsible for entries in the receipts and disbursements records prepares the bank reconciliation. Criteria: A good system of internal controls would reconcile all cash accounts on a monthly basis. Reconciliations should reconcile between bank and general ledger balances should be prepared to determine all cash transactions have been properly recorded. Cause: Lack of oversight by the City an inadequate controls over the bank reconciliation process. Effect: Misstated cash balances and an accumulation of unreconciled errors. Recommendation: We recommend as a means of better control, that bank reconciliations be performed each month and any variances be investigated and adjusted immediately.

Condition: Previously and during audit fieldwork, our testing resulted in audit adjustments in order to present materially accurate financial statements. Criteria: A good system of internal controls would provide for accurate representations of adjusted account balances for all City accounts prior to audit fieldwork. Cause: Year-end entries related to various accruals and other items were required in order to accurately present the City’s financial statements. Effect: The City’s financial statements were not fully adjusted prior to audit fieldwork. Recommendation: A vital process of effective internal controls is the review and subsequent adjustment of general ledger balances. This review and adjustment will aid in the appropriate budgeting and management of the City’s financial activities and resources.