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City of Centerville May 19, 2010 Page 2 2009-1:Segregation of Duties over Utility Billing Condition: During our audit we reviewed procedures over cash receipts, cash disbursements, payroll, utility billing and investments.The City was found to have limited segregation of dutiesin the transaction cyclerelating to utility billing. Criteria: There are four general categories of duties: authorization, custody, record keeping and reconciliation.In an ideal system, different employees perform each of these four major functions. In other words, no one person has control of two or more of these responsibilities. Cause: As a result of the limited number of staff, in the utility billing cycle, the accounting clerk performs duties or has custody of assets in two or more categories of duties. Effect: The effectiveness of the internal control system relies on enforcement by management. The effect of deficiencies in segregation of duties and internal controls can result in undetected errors or misappropriation of assets of the City. Recommendation: While we recognize the number of staff is not large enough to eliminate this deficiency, we recommend that the City evaluate the current procedures and segregate duties where possible and implement any compensating controls.Compensating controls could consist of additional monitoring and review, such as approving all adjustments with utility billing andreview of utility billing registers.We are aware some compensating controls are in place; however, it is important that the Council is aware of this condition and monitor all financial information. Management Response: Management will add procedures over utility billing to ensure that all adjustments are approved and that posting of billing is reviewed by someone other than the accounting clerk. In addition, management has made the following changes to its processes: Discussion of Internal Control The City of Centerville has a small staff, thus making it difficult to implement all of the internal control procedures that would be desirable were budget not a constraint. The following significant steps are followed to provide the maximum assurance for the protection of city assets and financial transactions: Payroll. Time sheets of employees are reviewed and approved by the employee’s supervisor and the City Administrator. Computation of checks and withholdings are done by the accounting clerk and draft individual earning/statements are provided to the City Administrator for review. The administrator reviews the compensation rates to make sure they match the approved pay rate for each employee and signs off on each. The Account Clerk is then authorized to draw payroll checks or make ACH deposits.