HomeMy WebLinkAbout1983-1984.AuditReportSchott
&Corrlpany,k)a Certified PublicAcceuntants
P.O. Box 1090 1707 Mt. Auburn Road Gape Girardeau, Missouri 63701 314-335-1231
January 30, 1985
Honorable Mayor, Members of City Council,
and City Manager
City of Cape Girardeau, Missouri
We have examined the financial statements of the City of Cape
Girardeau, Missouri for the year ended June 30, 1984, and have issued
our report thereon dated October 18, 1984, except for Note 5 which
date is December 12, 1984. As part of our examination, we made a
study and evaluation of the City's system of internal accounting
control to the extent we considered necessary to evaluate the system
as required by generally accepted auditing standards. The purpose of
our study and evaluation was to determine the nature, timing, and
extent of the auditing procedures necessary for expressing an opinion
on the City's financial. statements. Our study and evaluation was
more limited than would be necessary to express an opinion on the
system of internalaccounting control taken as a whole.
The management of the City of Clare Girardeau, Missouri is responsible
for establishing and maintaining a system of internal accounting
control, In fulfilling this responsibility, estimates and ,Judgments
by management are required to assess the expected benefits and
related costs of control procedures. The objectives of a system are
to provide management with reasonable, but not absolute, assurance
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
preparation of financial statements in accordance with generalJ.y
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
Schott
&Company,1ne. Certified Public Accountants
January 30, 1985
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 internal accounting control of the City of Cape
Girardeau, Missouri taken as a whole. However, our study and
evaluation disclosed the fol7.owing 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
statements of the City of Cape Girardeau, Missouri may occur and not
he detected within a timely period.
A. Financial Section
In a city the size of Cape Girardeau, it is essential to
continuing efficiency that written job descriptions
(including responsibilities and procedures followed) be
written for all financial and managerial employees and be
utilized as a means of maintaining continuity should any
employees resign or be replaced. We understand that a
number of these descriptions have been completed for
supervisory people, and we commend the City for these
positive actions.
2. We feel that the City should reevaluate the bonding limits
put on their city officials and consider, after comparing
their bond coverages with those of cities of comparable
size, raising substantially the bonding limits on the City
officials, especially the City Collector's and the City
Treasurer's limits.
3. We commend the City on the actions they have taken inmoving
towards the installation of a double -entry, accrual basis of
accounting.
4. Sewer tax collections are presently being accounted for
under a manual system. With the volume of dollars of sever
tax revenue collected each year, we feel that the manual
system used does not provide as adequate a control as would
be present under a computerized system. We again recommend
that every effort should be made to install a computerized
bookkeeping system to account for these collections. The
control of this system should be moved away from employees
who actuai.ly collect the sewer revenues.
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Schott
&Companykla Certified Public Accountants
January 30, 1985
5. In counting cash at the golf course and at the swimming pool
locations, we noted that daily receipts were held until
Friday when a deposit was made. This shows bad cash control
and an unnecessary temptation. (The golf course itself had
over six thousand dollars on hand as of the date of our
count.) We recommend that for proper control of cash that
daily deposits be made at these locations.
6. In performing our tests of cash receipts in the collector's
office, we noted that particularly in the
Hotel/Motel/Restaurant receipts, the collector's office
filing system does not allow for tying back daily deposits
to the individual receipts collected for that day. We
recommend steps be taken to tie back daily receipts in this
area to the daily deposits, thus creating a permanent record
of daily transactions which could be used to reconcile the
bank deposits.
7. The Hotel/Motel/Restaurant bill copies which serve as a
permanent receipt to the City of the activity in this
account should be slightly changed to allow a space for the
insertion of the date payment was received by the City.
8. We noted in our disbursements tests many instances where
payments made were not noted as being approved by the
Council via their appearance in the "Accounts Payable
Ledger," specifically were referring to payroll deposits and
small miscellaneous expenditures. We recommend that every
effort be made to insure that all disbursements are
presented to the Council.
R. EDP Section
Scope of Examination
The review of the data processing department of the City of Cape
Girardeau, Missouri was conducted on September 12-25, 1984. This
examination consisted of a review of the following:
- Review of the Program Change Request (PCR) File and
Program Change Procedures
- Follow up Review on Recommendations from the Last Review
- Application Review of the Hotel./Motel/Restaurant System
The review was performed through the examination of procedure and
control documents, interviews with personnel, examination of
computer course programs, and observance of operating procedures.
Comeau
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Schott
&Company,ha Certified Public Accountants
January 30, 1985
The program change request file was found to be in order and has
been utilized in authorizing program changes. All changes
recorded in the PCR file were properly approved and dated by John
Gilbert. The date and signature of the programmer making the
program change was recorded on the form on the date the change
went into effect. The changes were traced to the source programs
and it was found that the changes were being properly recorded
per last year's recommendations.
The backup procedures were examined and it was found that there
has been no change since the last audit. As stated in the last
audit, the rating of the vault in which the computer backups are
kept do not meet the H.L. Class 125-1 rating. This rating
requires a 125 degree protection for at least 1 hour under an
outside temperature of 1700 degrees. Even though the vault would
offer some protection to the magnetic media, it does not
guarantee protection. We therefore recommend that the off-site
backup vault at the bank be utilized more frequently. The
backups should include all data files, programs, and system
files.
There has been little program development during the past year
due to the limited capacity of the present computer system. It
was recommended last year that the use of COBOL. copy statements
be used in new programs per instructions in the programming
standards manual. It was noted that the Hotel/Motel/Restaurant
system was not written using the copy statements. Even in a
small system such as this, we recommend that the standards manual.
be followed in order to keep consistent programming techniques.
Subsequent to the audit, there was a discussion regarding this
recommendation and it should be noted that with the present
computer system, the use of the copy statements requires
additional disk space on the fixed disk which is already at
capacity. This was the reason the copy statements were not used
in the Hotel/Motel/Restaurant system. We recognize this as a
valid reason for not using the copy statements on a small system
such as the Hotel/Motel/Restaurant system.
In the last audit, the password manual was found to be inaccurate
in that it did not contain the passwords that were in use at the
time of examination. It was recommended that the manual be kept
up to date with the current passwords and that a history of
changes be kept in the manual. In our review of the manual, we
found that it had been updated according to our recommendations.
The record and file layouts manual was reviewed and it was noted
that the file rode names have been explained. This was
recommended in the last audit.
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Schott
&Company,ft. Certified Public Accountants
January 30, 1985
The Hotel/Motel/Restaurant system was examined and no problems
were found in the source programs, with the exception of the
COBOL copy statements previously described. There were no
problems found in internal control, and no problems were found in
the operating procedures.
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, 7.984 financial statements, and this report does not affect
our report on these financial statements dated October 18, 1984,
except for Note 5 which date is December 12, 1984.
This report is intended solely for the use of management and should
not be used for any other purpose.
We would like to take this opportunity to express our grateful.
appreciation of the courteous assistance afforded our representatives
during the course of the engagement.
SCHOTT & COMTANY, TNC.
Thomas D. Martin, CPA
Audit Manager
TDM:ar
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