City of Mt. Washington

2020-01 The City Lacks Adequate Segregation of Duties Condition: The City has not established adequate segregation of duties. These control deficiencies are present because one employee?s duties include the ability to initiate transactions, record the transactions, reconcile the related accounting records, prepare deposits, and make deposits. Criteria: A segregation of duties over accounting functions or implementation of strong compensating controls when limited by office staff is essential to providing protection from asset misappropriation and/or inaccurate reporting. The risk of misappropriation and/or human error increases when one individual is given complete authority over all accounting processes. Additionally, proper segregation of duties protects employees in the normal course of performing their daily responsibilities. Cause: Failure to segregate duties or implement compensating controls. Effect: Misappropriation of assets or error could occur and not be detected in a timely manner. Recommendation: In order to achieve a proper segregation of duties, related activities should be assigned to different individuals. Since budget restrictions may limit the number of staff the City can hire, it may not be feasible to segregate accounting duties to different individuals. We recommend that the City segregate duties or further implement compensating controls to mitigate the effects of the lack of adequate segregation of duties. Official?s Response: We feel engaging an independent CPA along with fiduciary duties being distributed to another employee, will increase compensating controls.

Official?s Response: We feel engaging an independent CPA along with fiduciary duties being distributed to another employee, will increase compensating controls.

2019-001

2020-002 ? Material Weakness ? Audit Adjustments Criteria: The City is required to have internal controls over the period-end financial reporting process that enables the City to record and process year-end journal entries to produce financial records that are in accordance with generally accepted accounting principles. Condition: Material misstatements were identified throughout the audit process. Cause: During the fiscal year, the City had complex activity related to change in accounting systems, change in payroll systems, and material grant funds. Inexperience with this type of activity resulted in the City?s unadjusted financial statements being materially misstated. Effect: Material audit adjustments were required so that the City?s financial statements were fairly stated. Recommendation: We recommend the City review its controls over the fiscal year-end financial reporting process. We recommend when management encounters unusual or complex financial activity, that they engage a consultant to help management identify adjustments required so that its financial statements are fairly presented. Official?s Response: We will in the future conversions make sure to have a trained consultant assist.

Official?s Response: We will in the future conversions make sure to have a trained consultant assist.

2020-003 ?Bank Reconciliations Criteria: The City?s internal control requires that all bank accounts are reconciled to the City?s financial records monthly. Condition: Bank accounts were not reconciled for several months and some transactions were not recorded accurately. Cause: The City?s internal controls were disrupted by changing personnel roles and the COVID-19 pandemic resulting in lockdowns. Effect: Auditors identified several bank accounts that were not reconciled timely. Audit adjustments were needed in order for the City?s fiscal year end financial statements to be fairly presented. Recommendation: We recommend that the City take steps to ensure that all bank accounts are reconciled monthly, and that all financial activity is recorded accurately. Official?s Response: The city is committed to monthly reporting being completed in timely manner. A CPA will be hired on hourly basis to assist, on a quarterly basis at the minimum.

Official?s Response: The city is committed to monthly reporting being completed in timely manner. A CPA will be hired on hourly basis to assist, on a quarterly basis at the minimum.