Audit 379481

Financial Reporting Criteria – A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements of the financial statements on a timely basis. Properly designed policies and procedures and implementation of the policies and procedures are an integral part of ensuring the reliability and accuracy of the City’s financial statements. Condition – The City’s accounting system did not capture or report the financial activity managed separately by BOK Financial, the paying agent, related to the sewer revenue capital loan anticipation project notes. Adjustments were subsequently made by the City to properly report these amounts in the City’s financial statements. Cause – City policies do not require, and procedures have not been established to ensure that funds maintained by BOK Financial are recorded in the City’s general ledger. Effect – Because of this lack of policies and procedures, City employees did not detect errors in the normal course of performing their assigned functions. As a result, material amounts of receipts and disbursements were excluded from the City’s general ledger and Annual Financial Report (AFR) and material adjustments to the City’s financial statements were necessary. Recommendation – The City should establish and implement procedures to ensure that all receipts and disbursements, including those managed by third parties such as BOK Financial, are recorded in the City’s general ledger and reported in the Annual Financial Report. Response – The City will ensure financial activity for the funds BOK manages for the City are included in the City general ledger and are reported in the Annual Financial Report in the future. Conclusion – Response accepted.

Financial Reporting – Held Checks Condition – A material amount of disbursements were improperly recorded in the City’s financial statements. During June 2025, the City issued three checks totaling $142,411 to a contractor for future work anticipated to be completed on a water project. Upon advice from the City’s engineering firm, the City issued and held the three checks until the contractor completed the project. Holding the checks allowed the City to circumvent the budgeting process. In November 2025, the City voided these three checks and issued a check in the amount of $23,130 for work completed prior to June 30, 2025. An adjustment was subsequently made by the City to properly report these amounts in the financial statements. Cause – Although the City has policies requiring checks (payments) be supported by written evidence, such as an invoice, when the materials or service has been received, the City did not follow the established policies. Effect – A material amount of checks were issued and held until services were provided in the future. As a result, material adjustments to the City’s financial statements were necessary. Recommendation – The City should follow established procedures to ensure payments are supported by invoices when the materials or service has been received. Checks should not be written until the goods or services have been received. Response – The City was poorly advised by our engineer to issue and hold the checks until the work was all complete. In the future checks will only be issued when work is complete or services are delivered. Conclusion – Response accepted.