Greenfield audit shows areas of material non-compliance, significant deficiency
By
Brandy Chandler-brandychandler@gmail.com
The auditor's office of the state of Ohio has released the 2008-2009 audit for the city of Greenfield. While there were no findings for recovery, there were noted areas of material non-compliance and findings of significants deficiency.
According to the report, which was posted Sept. 30:
Findings of material non-compliance:
• Ohio Revised Code (ORC) provides that each public office shall file a financial report for each fiscal year. The Auditor of State may prescribe forms by rule or may issue guidelines, or both, for such reports. If the Auditor of State has not prescribed a rule regarding the form for the report, the public office shall submit its report on the form utilized by the public office. Ohio Administrative Code Section 117-2-03 further clarifies the requirements of Ohio Rev. Code Section 117.38 Ohio Admin Code Section 117-2-03(B) requires the City to prepare its annual financial report in accordance with generally accepted accounting principles. However, the City prepared its financial statements in accordance with the cash basis of accounting. The accompanying financial statements and notes omitted assets, liabilities, fund equities, and disclosures that, while material, cannot be determined at this time. Pursuant to Ohio Rev. Code Section 117.38 the City may be fined and subject to various other administrative remedies for its failure to file the required financial report. The City should prepare its annual financial report in accordance with generally accepted accounting principles.
City's response: The City will outsource the GAAP reporting requirement in the future.
• The ORC requires obtaining a reduced amended certificate if the amount of the deficiency will reduce available resources below the current level of appropriation. Upon comparison of appropriations to available resources (defined as unencumbered beginning balance plus estimated receipts), the auditor noted 2009 appropriations were in excess of available resources in the Street Fund by $4,551, and the Sewer Fund by $252,072. In 2008, appropriations were in excess of available resources in the General Fund by $100,182, the Cemetery Fund by $1,376 and the Sewer Fund by $3,861,906. The Township should implement monitoring procedures to ensure compliance. Establishment of procedures for monitoring the compliance with this requirement helps to ensure that monies are not expended in excess of allowable limits. City's response: Appropriations and fund balances are reviewed daily. Appropriations and revenue will be adjusted as necessary.
Findings of significant deficiency
• During the course of the audit a lack of segregation of duties were identified. Money received, calculated and deposited all by the same employee. Also, bank reconciliations were not being reviewed by anyone. By not having the proper segregation of duties there is a lack of control which has the potential for errors, irregularities and increases the risk of fraud. By not reviewing bank reconciliations could potentially lead to a misstatement of cash or fraud. The City should implement the proper segregation of duties and have the bank reconciliations approved to ensure that controls are in place and operating. City's response:
Duties in the Finance Department are as segregated as possible. Bank Reconciliations will be reviewed within the department.
• Sound financial reporting is the responsibility of the City’s Auditor and is essential to ensure the information provided to the readers of the financial statements is complete and accurate. There were several audit adjustments/reclassifications were made to the financial statements and, where applicable, to the City’s accounting records. Lack or failure of controls over the posting of financial transactions and financial reporting can result in errors and irregularities that may go undetected and decreases the reliability of financial data throughout the year. The City should develop policies and procedures to enhance its controls over recording of financial transactions and financial reporting to help ensure the information accurately reflects the activity of the City. City's response: It is the goal of the Auditor to maintain and provide quality controls. Additional policies and procedures will be developed. Ongoing training will be part of this policy.
• During the course of the audit, misstatements were identified in relations to recording receipts in the net amount instead of recording the receipts in the gross amount. Receipts should be posted in the gross amount and report all fees as expenditures. By not reporting receipts in the gross amount will cause an understatement of receipts and expenditures. The City should post all receipts in their gross amount and report all fees as expenditures. City's response: Appropriation lines have been founded and gross receipts are posted.
Additionally, there were four areas from previous audits that showed they were not fully corrected, including the requirement the city prepare its annual financial report in accordance with generally accepted accounting principles; allowing all subdivisions to request increased amended certificates of estimated resources; significant deficiencies in the lack of segregation of duties; significants deficiency in that the audit adjustments/reclassifications were posted to the prior auditor financial statements.
The auditor's office of the state of Ohio has released the 2008-2009 audit for the city of Greenfield. While there were no findings for recovery, there were noted areas of material non-compliance and findings of significants deficiency.
According to the report, which was posted Sept. 30:
Findings of material non-compliance:
• Ohio Revised Code (ORC) provides that each public office shall file a financial report for each fiscal year. The Auditor of State may prescribe forms by rule or may issue guidelines, or both, for such reports. If the Auditor of State has not prescribed a rule regarding the form for the report, the public office shall submit its report on the form utilized by the public office. Ohio Administrative Code Section 117-2-03 further clarifies the requirements of Ohio Rev. Code Section 117.38 Ohio Admin Code Section 117-2-03(B) requires the City to prepare its annual financial report in accordance with generally accepted accounting principles. However, the City prepared its financial statements in accordance with the cash basis of accounting. The accompanying financial statements and notes omitted assets, liabilities, fund equities, and disclosures that, while material, cannot be determined at this time. Pursuant to Ohio Rev. Code Section 117.38 the City may be fined and subject to various other administrative remedies for its failure to file the required financial report. The City should prepare its annual financial report in accordance with generally accepted accounting principles.
City's response: The City will outsource the GAAP reporting requirement in the future.
• The ORC requires obtaining a reduced amended certificate if the amount of the deficiency will reduce available resources below the current level of appropriation. Upon comparison of appropriations to available resources (defined as unencumbered beginning balance plus estimated receipts), the auditor noted 2009 appropriations were in excess of available resources in the Street Fund by $4,551, and the Sewer Fund by $252,072. In 2008, appropriations were in excess of available resources in the General Fund by $100,182, the Cemetery Fund by $1,376 and the Sewer Fund by $3,861,906. The Township should implement monitoring procedures to ensure compliance. Establishment of procedures for monitoring the compliance with this requirement helps to ensure that monies are not expended in excess of allowable limits. City's response: Appropriations and fund balances are reviewed daily. Appropriations and revenue will be adjusted as necessary.
Findings of significant deficiency
• During the course of the audit a lack of segregation of duties were identified. Money received, calculated and deposited all by the same employee. Also, bank reconciliations were not being reviewed by anyone. By not having the proper segregation of duties there is a lack of control which has the potential for errors, irregularities and increases the risk of fraud. By not reviewing bank reconciliations could potentially lead to a misstatement of cash or fraud. The City should implement the proper segregation of duties and have the bank reconciliations approved to ensure that controls are in place and operating. City's response:
Duties in the Finance Department are as segregated as possible. Bank Reconciliations will be reviewed within the department.
• Sound financial reporting is the responsibility of the City’s Auditor and is essential to ensure the information provided to the readers of the financial statements is complete and accurate. There were several audit adjustments/reclassifications were made to the financial statements and, where applicable, to the City’s accounting records. Lack or failure of controls over the posting of financial transactions and financial reporting can result in errors and irregularities that may go undetected and decreases the reliability of financial data throughout the year. The City should develop policies and procedures to enhance its controls over recording of financial transactions and financial reporting to help ensure the information accurately reflects the activity of the City. City's response: It is the goal of the Auditor to maintain and provide quality controls. Additional policies and procedures will be developed. Ongoing training will be part of this policy.
• During the course of the audit, misstatements were identified in relations to recording receipts in the net amount instead of recording the receipts in the gross amount. Receipts should be posted in the gross amount and report all fees as expenditures. By not reporting receipts in the gross amount will cause an understatement of receipts and expenditures. The City should post all receipts in their gross amount and report all fees as expenditures. City's response: Appropriation lines have been founded and gross receipts are posted.
Additionally, there were four areas from previous audits that showed they were not fully corrected, including the requirement the city prepare its annual financial report in accordance with generally accepted accounting principles; allowing all subdivisions to request increased amended certificates of estimated resources; significant deficiencies in the lack of segregation of duties; significants deficiency in that the audit adjustments/reclassifications were posted to the prior auditor financial statements.
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