Seperation of Duties, INTERNAL CONTROL DEFICIENCIES: Section A out of the Lorimor Audit for 2014

Findings Related to the Financial Statements:

INTERNAL CONTROL DEFICIENCIES:

(A) Segregation of Duties – One important aspect of internal control is the segregation of duties among employees to prevent an individual employee from handling duties which are incompatible. Generally, one individual has control over each of the following areas for the City:

(1) Cash – handling, reconciling and recording.

(2) Investing – recordkeeping, investing, custody of investments and reconciling earnings.

(3) Receipts – opening mail, collecting, depositing, journalizing, reconciling and posting.

(4) Debt – recordkeeping, compliance and debt payment processing.

(5) Disbursements – purchasing, invoice processing, check writing and signing, mailing, reconciling and recording.

(6) Payroll – entering rates into the system, recordkeeping, preparing and distributing.

(7) Utilities – billing, collecting, depositing, posting and maintaining detailed accounts receivable records.

(8) Computer systems – performing all general accounting functions, controlling all data input and output and having custody of assets.

(9) Financial reporting – preparing and reconciling.

In addition, an initial listing of mail receipts is not prepared by the mail opener.

Recommendation – We realize segregation of duties is difficult with a limited number of employees. However, the City should review its control procedures to obtain the maximum internal control possible under the circumstances utilizing currently available staff, including elected officials. Independent reviews should be documented by the signature or initials of the reviewer and the date of the review. Additionally, a listing of receipts received in the mail should be prepared, at least on a test basis. The listing should be compared to the receipt records by an independent person.

Response – We will review our procedures and perform independent reviews where possible. We will try to segregate duties as much as possible with our limited staff.

Conclusion – Response accepted.

Comments

Restructuring Office Practices and Manpower Issues

I think to solve the staffing issues short of using the City Council members would be to change the office practices and hire enough staff to create the oversite needed. Having all part time office staff and having the Mayor do his or her supervisory duties would do the job.

It would keep the office manned for the office hours set buy the City Council and wouldn't cost that much more than having a full time City Clerk!