Village of KendallLocal Government

Segregation of Duties Cause: Management is responsible for the design, installation and maintenance of an appropriate system of internal control. Proper segregation of duties is an important aspect of any control system.Criteria: Segregation of duties is an aspect of internal control intended to prevent or decrease opportunities of intentional or unintentional errors and fraud. Duties and responsibilities are properly segregated if no single individual either has control over all phases of a transaction or has the ability to both make and conceal an error, whether such error is intentional or unintentional. Effect: Errors or intentional fraud could occur and not be detected timely by other employees in the normal course of their responsibilities as a result of the lack of segregation of duties.Cause: The lack of segregation of duties is due to the limited number of employees and the key role in which the Clerk/Treasurer position serves in maintaining the Village’s general ledger.Recommendation: We recommend the Board of Trustees and the Clerk/Treasurer continue to monitor the transactions and the financial records of the Village. We also encourage the Village to continue to identify cost effective opportunities to improve the design of the internal control structure.

Preparation of Financial Statements Condition: The Village relies on its audit firm to assist in preparing its financial statements and accompanying disclosures. However, as independent auditors, the audit firm cannot be considered part of the Village’s internal control system. The Village’s personnel do not have sufficient financial reporting and accounting knowledge to perform a review of the financial statements and related disclosures to provide a high level of assurance that any potential material omissions or other errors would be identified and corrected.Criteria: Preparation of financial statements and related disclosures in accordance with accounting principles generally accepted in the United States of America.Effect: As a result of this condition, there is a higher risk that any potential material omissions or other errors would not be identified and corrected. Cause: The Village’s personnel have not monitored recent accounting developments to the extent necessary to enable them to prepare the Village’s financial statements and related disclosures. However, it is not practical for the Village to hire additional employees just to improve financial statement preparation abilities. Recommendation: When this condition exists, management’s close supervision and review of accounting information and regular discussions with its assurance service providers concerning new accounting principles is the best means of preventing and detecting potential material omissions or other errors.

Preparation of Schedule of Expenditures of Federal Awards Condition: As is the case with many municipalities, the Village administers an array of federal grants. The Village was unable to provide us with a schedule of federal expenditures with the appropriate allocation of funds by CFDA number and funding source. Criteria: Uniform Guidance, section 300, requires that the Village “identify, in its accounts, all federal awards received and expended and the federal programs under which they were received. Federal program and award identification shall include, as applicable, the CFDA title and number, award number and year, name of the federal agency, and name of the pass-through entity. In addition, the Village is required to “prepare appropriate financial statements, including the schedule of expenditures of federal awards in accordance with section 310.” Effect: Because the auditors do not have the in-depth knowledge of the Village’s general ledger detail, it is possible that a grant award could be missed or reported in error. Cause: The Village did not have the resources to devote to preparing the schedules. Recommendation: We recommend that the Village assign an individual internally that is qualified to prepare these schedules.

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