VILLAGE OF LOWELL

Criteria: The Utility should segregate duties, at a minimum to separate the asset and the recordkeeping function, to minimize the opportunity for misstatements caused by error or fraud to occur and go undetected within a timely period by employees in the normal course of performing their assigned functions. Condition: The Utility does not have adequate segregation of duties in its accounting function. Specifically, one individual has the ability to receive funds, deposit funds, cut checks, perform the bank reconciliations and enter transactions in the accounting software. Cause: A small number of individuals within the Utility?s administration perform substantially all accounting functions and have control over both records and assets. Effect or Potential Effect: The lack of segregation of accounting duties could create an opportunity for misstatements caused by error or fraud to occur and go undetected within a timely period by employees in the normal course of performing their assigned functions. Recommendation: Due to the size of the Utility, it is not practical to hire additional individuals in order to adequately segregate accounting duties; therefore, we recommend that the Village Board?s close supervision, review of accounting information and knowledge of matters relating to the Utility?s financial operations provide an effective means of preventing and detecting errors and irregularities.

Criteria: Uniform Grant Guidance requires recipients to evaluate the risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the award for purposes of determining appropriate monitoring. Terms and conditions of awards include certain written grant policies and procedures related to cash management, cost allowability, procurement, and conflict of interest provisions, along with appropriate accounting systems and internal controls over receipts, disbursements, payroll transactions and general ledger maintenance. Condition: The Utility has various policies and procedures in place to safeguard its assets and establish related controls over receipts, disbursements, payroll transactions and general ledger maintenance. Federal and state awards received and disbursed by the Utility are managed through these entity-wide policies and procedures; however, the policies and procedures have not been evaluated to ensure compliance with the requirements of federal grant terms and conditions. Cause: The Utility has not finalized an assessment of its accounting system and related internal controls over federal and state awards, along with an evaluation of existing policies for compliance with federal grant terms and conditions. Effect or Potential Effect: The Utility could be noncompliant with the terms and conditions requirements of federal and state funding. Recommendation: We recommend the Utility begin the assessment of its accounting system and related internal controls over federal and state awards. This assessment should include evaluating existing policies and procedures to determine where additional improvements should be made or new policies created, a plan to communicate these policies to Utility employees, and procedures to periodically review and update as considered necessary.