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<br />Finding <br /> <br />2007-1 <br /> <br />CITY OF CENTERVILLE, MINNESOTA <br />SCHEDULE OF FINDINGS AND RESPONSES <br />DECEMBER 31,2007 <br /> <br />Description <br /> <br />Segregation of Duties over Utility Billing and Investment transaction cycles <br /> <br />Condition: During our audit we reviewed procedures over cash receipts, cash disbursements, <br />payroll, utility billing and investments. The City was found to have limited <br />segregation of duties the transaction cycles relating to utility billing and investments. <br /> <br />Criteria: There are four general categories of duties: authorization, custody, record keeping <br />and reconciliation. In an ideal system, different employees perform each of these <br />four major functions. In other words, no one person has control of two or more of <br />these responsibilities. <br /> <br />Cause: As a result of the limited number of staff, in the utility billing cycle, the accounting <br />clerk performs duties or has custody of assets in two or more categories of duties. In <br />the investment cycle, the finance director has responsibility over all duties. <br /> <br />Effect: The effectiveness of the internal control system relies on enforcement by <br />management. The effect of deficiencies in segregation of duties and internal controls <br />can result in undetected errors or misappropriation of assets of the City. <br /> <br />Recommendation: While we recognize the number of staff is not large enough to eliminate this <br />deficiency, we recommend that the City evaluate the current procedures and <br />segregate duties where possible and implement any compensating controls. <br />Compensating controls could consist of additional monitoring and review, such as <br />approving all adjustments with utility billing, review of utility billing registers, and <br />review of investment statements prior to the [mance director receiving them. Weare <br />aware some compensating controls are in place; however, it is important that the <br />Council is aware of this condition and monitor all financial information. <br /> <br />Management Response: Management has initiated changes in the investment procedures to ensure that there <br />is separation between initiation and authorization and that the Finance Director only <br />has authority to move funds between existing accounts. <br /> <br />Management will add procedures over utility billing to ensure that all adjustments <br />are approved and that posting of billing is reviewed by someone other than the <br />accounting clerk. <br /> <br />-64- <br />