FAC Explorer

Audit 353676

FY End
2024-06-30
Total Expended
$1.73M
Findings
4
Programs
1
Organization: City of Farnhamville (IA)
Year: 2024 Accepted: 2025-04-15
Auditor: Office of Auditor of State

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
555088 2024-001 Material Weakness - ABI
555089 2024-002 Material Weakness - P
1131530 2024-001 Material Weakness - ABI
1131531 2024-002 Material Weakness - P

Programs

ALN Program Spent Major Findings
10.760 Water and Waste Disposal Systems for Rural Communities $1.73M Yes 2

Contacts

Name Title Type
LCNFUD153K35 Joe Robertson Auditee
5155443619 Karen Brustkern Auditor
No contacts on file

Notes to SEFA

Title: Summary of Significant Accounting Policies Accounting Policies: Expenditures reported in the Schedule are reported on the basis of cash receipts and disbursements, which is a basis of accounting other than U.S. generally accepted accounting principles. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: N Rate Explanation: The City of Farnhamville has elected to not use the 10% de minimus cost rate as allowed under the Uniform Guidance. The City of Farnhamville is a political subdivision of the State of Iowa located in Calhoun and Webster Counties. It was first incorporated in 1855 and operates under the Home Rule provisions of the Constitution of Iowa. The City operates under the Mayor-Council form of government with the Mayor and Council Members elected on a non-partisan basis. The City provides numerous services to citizens, including public safety, public works, health and social services, culture and recreation, community and economic development and general government services. The City also provides water, sewer, electric and garbage utilities for its citizens. A. Reporting Entity The Schedule of Expenditures of Federal Awards includes only the program disbursements of the City’s Water and Waste Disposal Systems for Rural Communities program. B. Basis of Presentation The Schedule of Expenditures of Federal Awards includes the federal award activity of the City under the Water and Waste Disposal Systems for Rural Communities program of the federal government for the year ended June 30, 2024. The information in this Schedule is presented in accordance with the requirements of Title 2, U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the City of Farnhamville, it is not intended to and does not present the financial position, changes in financial position or cash flows of the City of Farnhamville. C. Basis of Accounting Expenditures reported in the Schedule are reported on the basis of cash receipts and disbursements, which is a basis of accounting other than U.S. generally accepted accounting principles. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. D. Indirect Cost Rate The City of Farnhamville has elected to not use the 10% de minimus cost rate as allowed under the Uniform Guidance.

Finding Details

Finding 2024-001
Segregation of Duties Criteria – Management is responsible for establishing and maintaining internal control. A good system of internal control provides for adequate segregation of duties so no one individual handles a transaction from its inception to completion. In order to maintain proper internal control, duties should be segregated so the authorization, custody and recording of transactions are not under the control of the same employee. This segregation of duties helps prevent losses from employee error or dishonesty and maximizes the accuracy of the City’s financial statements. Condition – One individual in the City has control over each of the following areas for the City: (1) Accounting system – performing all accounting functions. (2) Cash – handling, reconciling and recording. (3) Long-term debt – recordkeeping, compliance and debt payment processing. (4) Receipts – recording, reconciling and posting. (5) Disbursements – purchasing, invoice processing, check writing, mailing, reconciling and recording. Cause – The City has a limited number of employees and procedures have not been designed to adequately segregate duties or provide compensating controls through additional oversight of transactions and processes. Effect – Inadequate segregation of duties could adversely affect the City’s ability to prevent or detect and correct misstatements, errors or misappropriation on a timely basis by employees in the normal course of performing their assigned functions.Recommendation – The City should review its control activities to obtain the maximum internal control possible under the circumstances utilizing currently available staff, including elected officials, to provide additional controls through review of financial transactions, reconciliations and financial report. The reviews should be documented by the signature or initials of the reviewer and the date of the review. Response and Corrective Action Planned – We will review procedures and attempt to make the necessary changes to improve internal control. We plan to implement these changes November 1, 2025. Conclusion – Response accepted.
Finding 2024-002
Bank Reconciliations Criteria – An effective internal control system provides for internal controls related to ensuring proper accounting for all funds by maintaining appropriate accounting records and reconciling bank to book balances each month. Supervisory review of bank reconciliations can help ensure the accuracy of recorded amounts. Condition – Although monthly bank reconciliations are prepared for the City’s Water and Waste Disposal Systems for Rural Communities program checking account, the reconciliations did not include evidence of an independent review. Cause – Policies have not been established and procedures have not been implemented to require the bank reconciliations to be reviewed by an independent person. Effect – Lack of review by an independent person could result in unrecorded transactions, undetected errors and opportunity for misappropriation. Recommendation – The City should establish procedures to ensure an independent person reviews the City’s bank reconciliations and documents the review by the signature or initials of the reviewer and the date of the review on the monthly bank reconciliations. Response and Corrective Action Planned – We will review procedures and attempt to make necessary changes to improve internal control. We plan to implement these changes November 1, 2025. Conclusion – Response accepted.
Finding 2024-001
Segregation of Duties Criteria – Management is responsible for establishing and maintaining internal control. A good system of internal control provides for adequate segregation of duties so no one individual handles a transaction from its inception to completion. In order to maintain proper internal control, duties should be segregated so the authorization, custody and recording of transactions are not under the control of the same employee. This segregation of duties helps prevent losses from employee error or dishonesty and maximizes the accuracy of the City’s financial statements. Condition – One individual in the City has control over each of the following areas for the City: (1) Accounting system – performing all accounting functions. (2) Cash – handling, reconciling and recording. (3) Long-term debt – recordkeeping, compliance and debt payment processing. (4) Receipts – recording, reconciling and posting. (5) Disbursements – purchasing, invoice processing, check writing, mailing, reconciling and recording. Cause – The City has a limited number of employees and procedures have not been designed to adequately segregate duties or provide compensating controls through additional oversight of transactions and processes. Effect – Inadequate segregation of duties could adversely affect the City’s ability to prevent or detect and correct misstatements, errors or misappropriation on a timely basis by employees in the normal course of performing their assigned functions.Recommendation – The City should review its control activities to obtain the maximum internal control possible under the circumstances utilizing currently available staff, including elected officials, to provide additional controls through review of financial transactions, reconciliations and financial report. The reviews should be documented by the signature or initials of the reviewer and the date of the review. Response and Corrective Action Planned – We will review procedures and attempt to make the necessary changes to improve internal control. We plan to implement these changes November 1, 2025. Conclusion – Response accepted.
Finding 2024-002
Bank Reconciliations Criteria – An effective internal control system provides for internal controls related to ensuring proper accounting for all funds by maintaining appropriate accounting records and reconciling bank to book balances each month. Supervisory review of bank reconciliations can help ensure the accuracy of recorded amounts. Condition – Although monthly bank reconciliations are prepared for the City’s Water and Waste Disposal Systems for Rural Communities program checking account, the reconciliations did not include evidence of an independent review. Cause – Policies have not been established and procedures have not been implemented to require the bank reconciliations to be reviewed by an independent person. Effect – Lack of review by an independent person could result in unrecorded transactions, undetected errors and opportunity for misappropriation. Recommendation – The City should establish procedures to ensure an independent person reviews the City’s bank reconciliations and documents the review by the signature or initials of the reviewer and the date of the review on the monthly bank reconciliations. Response and Corrective Action Planned – We will review procedures and attempt to make necessary changes to improve internal control. We plan to implement these changes November 1, 2025. Conclusion – Response accepted.