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HomeMy WebLinkAbout1984-1985.AuditReportKRAFT, MILES & TATUM CERTIFIED PUBLIC ACCOUNTANTS 1221 OR OAOWAY, CAPE 01RA RD EAU, MIR BOOR 163701 (316)330)011 September 26, 1985 FELIX O. RMFT, IN2JN5 rxDMAa E. xuea, RETIRED JAMES W. TATUM,C PAUL STORY, CP CPA ... `Ennio ewe.a.CAP Honorable Mayor and Members of OYL C EAMBLE. A. A Y DENNIS L ROBEER RTSON, C. PA the City Council JAY M, LARRY w�CROSS, c.PA. City of Cape Girardeau, Missouri T. CPA ,.HH wacHERER. C.P.A. HANES,DENNIS a C P.A. TERRY F.0 N, CPA. GAETA BARKA CP. A. We have examined the financial statements of City Of Cape Girardeau, JEFFREY O. BARKER. C. PA. Missouri for the year ended June 30, 1985, and have issued our report EMERY L. C,Jgx:.e,p_^,. thereon dated September 26, 1985. As part of our examination, we M. NEFLE, C PA KEEP, made a stud and evaluation of the City's system of internal account - Y Y Y CYNTHIA CYNTHIA MILLER, C. P.A. ing control to the extent we considered necessary to evaluate the system as required by generally accepted auditing standards. The MERICAN INSTITUTE OF CERTIFIED purpose of our study and evaluation was to determine the nature, PUBLIC ACCOUNTANTS timing, and extent of the auditing procedures necessary for express- xonBERILMETY cSOURI ing an opinion on the City's financial statements. Our study and OF PUBLIC ACCOUNTANTS evaluation was more limited than would be necessary to express an OTHER OFFICES opinion on the system of internal accounting control taken as a whole. SON RENNETT, MO. a3RT p1616usM The management of the City of Cape Girardeau, Missouri is responsible IBM M. WESTWOOD BLVD. for establishing and maintaining a system of internal accounting POPLAR BLUFF. MO. KING control. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and re- 20WEST MAIN PLAZA lated costs of control procedures. The objectives of a system are WEST PLAINS. MO. esne WES PLAINS to provide management with reasonable, but no absolute, assurance P 8 that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the pre- paration of financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any system of internal accounting control errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the system to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the degree of compliance with the procedures may deteriorate. Our study and evaluation made for the limited purpose described in the first paragraph would not necessarily disclose all material weaknesses in the system. Accordingly, we do not express an opinion on the system of interna]accounting control of the City of Cape Girardeau, Missouri taken as a whole. However, our study and eval- uation disclosed the following conditions that we believe result in more than a relatively low risk that errors or irregularities in amounts that would be material in relation to the financial state- Page 2 September 26, 1985 ment of City of Cape Girardeau, Missouri may occur and not be detected within a timely period. - This report is intended solely for the use of management and the City Council and should not be used for any other purpose. PAYROLLS We notedthat after the payroll is prepared that no one formally approves it before disbursement. We recommend that payrolls be approved by a responsible official before each payroll is disbursed. We recommend that a surprise payroll payoff be held at least twice a year to test for unauthorized employees on the payroll. Presently the City does not maintain a separate payroll checking account. We recommend that an imprest payroll checking account be established to strengthen internal control and ease bank reconciliations. CASH DISBURSEMENTS Presently paid invoices are not stamped paid after payment. We recommend that all paid invoices be stamped paid to avoid duplicate payment of bills. We noted that voided checks are not properly controlled. We recommend that all voided checks be stamped void and filed in numerical sequence with the rest of the checks. Also, we recommend that from time to time your vendors be notified of the City's policy regarding the offering of gifts to city employees and that you notify your banks annually not to cash checks made payable to the City of Cape Girardeau or any department of the City. JOURNAL ENTRIES We noted that formal approval was not documented on manual adjustments, nor was there always sufficient backup to support the manual adjustment. We recommend that all journal entries be approved by a responsible official and all supporting documents be attached to explain why the journal entry was made. SEWER SERVICE CHARGES It is our understanding that the City is reviewing the present system being used to bill and collect sewer service charges. We commend you for identi- fying needs in this area and recommend that a new billing and collection system be set up as soon as feasible. Page 3 September 16, 1985 SEGREGATION OF DUTIES Proper internal accounting controls require that a proper segregation of duties exist to help prevent the misuse of City funds. We believe that the City has sufficient staff for the proper segregation of duties, however, presently the City has several employees with overlapping duties in the cash receipts and cash disbursement area. We recommend that the duties of the employees involved in cash receipts and disburse- ments be reviewed and reassigned to provide for a proper segregation of duties to strengthen internal controls. ACCOUNTING SYSTEM It is our understanding that the City is working toward using a double entry system of accounting and using generally accepted accounting principles to prepare its financial. statements. We urge you to continue to achieve this goal as a dual entry system will facilitate more readily the detection of input errors into the accounting system. Also, finan- cial statements prepared in accordance with generally accepted accounting principles will be more informative and will present the financial position of the City. � a x These conditions were considered in determining the nature, timing, and extent of the audit tests to be applied in our examination of the June 30, 1985 financial statements, and this report does not affect our report on these financial statements dated September 26, 1985. We appreciate the courtesies and assistance provided our personnel during the course of the audit. If further information or clarification is needed in reference to any of our comments and recommendations or if you need assistance in implementing any of the foregoing, please feel free to call us at any time. Sincerely, KRAFT, MILES 6 TATUM Floyd C. Weber, Partner