Finding Text
Criteria: An effective system of internal controls depends on an adequate segregation of duties with respect to the execution and recording of transactions, as well as the custody of an entity’s assets. Accordingly, an effective system of internal control will be designed such that these functions are performed by different employees, so that no one individual handles a transaction from its inception to its completion. Condition: The City has a limited number of office personnel, which prevents an ideal segregation of duties for controls over financial reporting. Cause: Management oversight is done on an information basis. Effect: The lack of segregation of duties increases the risk of fraud related to misappropriation of assets, financial statement misstatement, or both. Recommendation: Management, the Mayor and the City Council should continually be aware of the financial accounting and reporting requirements of the City. Under this situation, the most effective control is the City Council’s oversight and knowledge of matters relating to the operations of the City. Views of Responsible Officials: The Mayor and City Council performed various oversight roles throughout the year but is aware of the risk relating to limited staff performing the daily activities and they do not believe the risk of material misstatement outweighs the cost of hiring additional staff.