A financial audit report for the City of Eddyville for July 1, 2008- June 30, 2009 was released earlier this year. Below, I have copied some selected sections from the written Schedule of Findings at the end of the report which I found to be of interest. If you are interested in figures and familiar with accounting you may want to read the complete report which is 30 pages long. You can go to city hall and ask for a copy or you can find the report on the Iowa State Auditor’s Website: http://auditor.iowa.gov/reports/0921-0865-C00F.pdf
Part 1: Findings Related to the Financial Statements:
SIGNIGICANT DEFICIENCIES:
I-A-09 Segregation of Duties – One important aspect of internal control is the segregation of duties among
employees to prevent an individual employee from handling duties which are incompatible. The
issuance of receipt slips, bank deposits and the posting of the cash receipts to the accounting
records are sometimes all done by the same person.
Recommendation – We realize with a limited number of office employees, segregation of duties is
difficult. However, the City should review its control procedures to obtain the maximum internal
control possible under the circumstances.
Response – We will consider this.
Conclusion – Response acknowledged. The City should segregate duties to the extent possible
with existing personnel and utilize administrative personnel to provide additional control through
review of financial transactions and reports.
I-B-09 Disaster Funds – The City received a significant amount of disaster funds as a result of flooding in
the community which occurred in 2008. Our review noted that the City is unable to reconcile the
costs recorded on their general ledger and the equipment usage records, with the costs as recorded
on the claim forms filed with the Federal Emergency Management Agency (FEMA). As an
example, we identified one instance in which it appears that the City received more money from
FEMA than allowed. In addition, it appears that we also identified other instances in which the
City may have received more money from FEMA than allowed.
Recommendation – The City review the above and take action as necessary.
Response – FEMA took our records and completed the claim forms. We assumed that what
FEMA completed actually reconciled to our records. However, upon subsequent review by the
auditor, we realize that what FEMA based their payments on do not exactly reconcile to our
records. We are unsure why these records do not reconcile with each other, and we were never
given an explanation by FEMA as to why these differences exist. However, we do not think this
project is closed out yet. FEMA personnel have told us that the State Emergency Management
Division will review these records and make adjustments as necessary, and adjust FEMA’s
payment accordingly at some point in the future.
Conclusion – Response accepted.
Part II: Other Findings Related to Required Statutory Reporting:
II-A-09 Certified Budget – Disbursements during the year ended June 30, 2009 exceeded the amounts
budgeted in the culture and recreation and general government functions. Chapter 384.20 of the
Code of Iowa states in part that public monies may not be expended or encumbered except under
an annual or continuing appropriation.
Recommendation – The budget should have been amended in sufficient amounts in accordance
with Chapter 384.18 of the Code of Iowa before disbursements were allowed to exceed the
budget.
Response – The budget will be amended in the future, if applicable.
Conclusion – Response accepted.
II-D-09 Business Transactions – Business transactions between the City and City officials or employees
are detailed as follows:
|
Name, Title and Business Connection
|
Transaction/Description
|
Amount
|
|
Dwight Lobberecht, Council Member; Owner, Tri-County Construction
|
Hauling, Equipment
Rental, Labor
|
$39,143
|
The transactions with the Council member may represent a conflict of interest pursuant to
Chapter 362.5(10) of the Code of Iowa since total transactions, which were not competitively
bid, were more than $2,500 during the fiscal year.
Recommendation – To determine the proper disposition of this matter, the City should consult
with their Attorney regarding the above potential conflict of interest issue.
Response – We will discuss this issue with the City Attorney.
Conclusion – Response accepted.
II-F-09 Council Minutes – Transactions were found that we believe should have been approved in the
minutes but were not. Several invoices were not approved by the City Council. Some City
Council minutes and related claims were not published in the newspaper. All of this is required
by Chapter 372.13(6) of the Code of Iowa.
Recommendation - The City should implement procedures to ensure that all invoices are
approved by the City Council. The City should also implement procedures to ensure all
invoices and all City Council minutes are published in the newspaper as required by the Code of
Iowa.
Response – We Will implement these recommendations.
Conclusion – Response accepted.
11-K-09 Miscellaneous – A contract could not be located with the company that hauls the residential
garbage in town. Weight tickets were not always obtained for the purchase of gravel.
Recommendation – The City should enter into a contract with the garbage hauler. In addition,
weight tickets should be obtained for all gravel purchases.
Response – We will implement these recommendations.
Conclusion – Response accepted.
II-L-09 Cash Management – The City’s system of cash management is in need of improvement. For the
past several years, the City has averaged a balance of well over $500,000 in bank accounts
which pay interest at a rate of .25% or less. As a result, the City could have earned a significant
amount of additional bank interest per year if the City would have invested its funds in IPAIT or
some other investment.
The City entered into a capital lease which had an interest rate of 13%. The City had more than
enough funds to purchase this piece of equipment outright, thereby avoiding the payment of
interest at 13%.
Recommendation – The City be more proactive in the management of its cash, including a
periodic analysis of its investing and financing activities, and determining what is financially in
the best interest of the City.
Response – We will review this.
Conclusion – Response accepted.