Finding 1131530 (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.