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City of Centerville June 3, 2009 Page 4 Summary of Prior Year Findings 2007-1: Segregation of Duties over Utility Billing and Investment Transaction Cycles Condition: During our audit, we reviewed internal control procedures over major transaction cycles and found the City to have limited segregation of duties in the utility billing and investment transaction cycles. 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. Current Year Status: No change from prior year. See above finding 2008-I. 2007-2 Preparation of Financial Statements Condition: As in prior years, we were requested to draft the audited financial statements and related footnote disclosures as part of our regular audit services. Recent auditing standards require auditors to cormmunicate this situation to the Council as an internal control deficiency. Ultimately, it is management's responsibility to provide for the preparation of your statements and footnotes, and the responsibility of the auditor to determine the fairness of presentation of those statements. It is our responsibility to inform you that this deficiency could result in a material misstatement to the financial statements that could have been prevented or detected by your management. Essentially, the auditors cannot be part of your internal control process. Criteria: Internal controls should be in place to provide reasonable assurance over financial reporting. Current Year Status: No change from prior year. See above finding 200&2 Planned Scope and Timing of the Audit We performed the audit according to the planned scope and dining previously communicated to you. Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year. We noted no transaction entered into by the goverunental unit during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumption about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. Depreciation on capital assets is an estimate based on the planned useful lives of the City's capital assets. The disclosures in the financial statements are neutral, consistent, and clear. Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. 952.835.9090 Fax 952.835.326t www:aemcpas.cosn