RUSSELL COUNTY WATER AUTHORITY

2019-001 Material Weakness - Segregation of Duties Criteria - Effective internal controls over financial reporting include an appropriate segregation of duties. Segregation of duties is the means by which no one person has sole control over the initiation, recording, and authorization functions of a transaction or process. Condition - The Authority?s internal control design does not provide an adequate segregation of duties in cash disbursements or allow for appropriate levels of review. Specifically, the Accountant can wire bank funds with no prior approval or review, prepare journal entries with no prior approval, and perform the monthly bank reconciliation. Cause - The Authority has a limited number of office employees. Effect - A lack of segregation of duties increases the susceptibility of assets to misappropriation and the susceptibility of the financial statements to error. Recommendation - We recommend the Authority implement a monthly review of the bank statements, with particular emphasis on the electronic disbursements, and implement a monthly review of journal entries. Views of Responsible Officials - Management concurs with the recommendation above. Management has implemented controls restricting electronic bank access such that any and all electronic disbursements are either performed by, or approved by the General Manger prior to execution. Management will implement controls around journal entry approval.

2019-002 Significant Deficiency - Consumer Account Adjustments Criteria - The Authority should have internal control processes in place for a formal review of all consumer account adjustments. Condition - The Authority?s internal control design does not have a formal process for review of a system generated report of all consumer account adjustments. Currently, the only consumer account adjustments that are being reviewed are adjustments in which an ?Adjustment Form? is completed. A consumer account adjustment could potentially be made without an ?Adjustment Form? and could go undetected by management. Cause - The Authority has a limited number of office employees. Effect - A lack of review of all consumer account adjustments increases the susceptibility of assets to misappropriation and the susceptibility of the financial statements to error. Recommendation - We recommend the Authority implement a monthly review of a system generated report of all consumer account adjustments. Views of Responsible Officials - Management concurs with the recommendation above. Management has considered and implemented a process to verify customer account adjustments are correct by balancing the manual forms and a system generated report. This is reviewed and approved by the General Manager monthly.