CITY OF EVANSVILLE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Section I – Summary of Auditor’s Results
Financial Statement:
Type of auditor’s report issued: Disclaimer
Internal control over financial reporting:
Material weaknesses identified? yes
Significant deficiency identified? none reported
Noncompliance material to financial statement noted? yes
Federal Awards:
Internal control over major programs:
Material weaknesses identified? no
Significant deficiencies identified? none reported
Type of auditor’s report issued on compliance for major programs: Unqualified
Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133? no
Identification of Major Programs:
CFDA
Number
Name of Federal Program or Cluster
CDBG – Entitlement Grants Cluster
14.256 ARRA – Neighborhood Stabilization Program
JAG Program Cluster
Highway Planning and Construction Cluster
66.458 Capitalization Grants for Clean Water State Revolving Funds
81.128 ARRA – Energy Efficiency and Conservation Block Grant Program (EECBG)
Dollar threshold used to distinguish between Type A and Type B programs: $449,039
Auditee qualified as low-risk auditee? no
Section II – Financial Statement Findings
FINDING 2011-1 – INTERNAL CONTROLS OVER FINANCIAL TRANSACTIONS AND REPORTING
We noted several deficiencies in the internal control system of the City related to financial transactions and reporting. We believe the following deficiencies constitute material weaknesses
1. Preparing Financial Statements: Effective internal control over financial reporting involves the identification and analysis of the risks of material misstatement to the City’s audited financial statements and then determining how those identified risks should be managed. The City has not identified risks to the preparation of reliable financial statements and as a result has failed to design effective controls over the preparation of the financial statements to prevent or detect material misstatements, including notes to the financial statements.
2. Monitoring of Controls: Effective internal control over financial reporting requires the City Council to monitor and assess the quality of the City’s system of internal control. The City Council has not performed either an ongoing or separate evaluation of their system of internal controls. The failure to exercise their oversight responsibility place the City at risk that controls may not be designed or operating effectively to provide reasonable assurance that controls will prevent or detect material misstatements in a timely manner. Additionally, the City has no process to identify or communicate corrective actions to improve controls. Governmental units should have internal controls in effect which provide reasonable assurance regarding the reliability of financial information and records, effectiveness and efficiency of operations, proper execution of management’s objectives, and compliance with laws and regulations. Among other things, segregation of duties, safeguarding controls over cash and all other assets and all forms of information processing are necessary for proper internal control.
Controls over the receipting, disbursing, recording and accounting for the financial activities are necessary to avoid substantial risk of invalid transactions, inaccurate records and financial statements and incorrect decision making. (Accounting and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7
FINDING 2011-2 – INTERNAL CONTROL AND COMPLIANCE ISSUES – SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS DEFICIENCIES
The Schedule of Expenditures of Federal Awards (SEFA) is required by the U.S. Office of Management and Budget Circular A-133, Audits of States, and Local Governments, and Non-Profit Organizations for entities expending federal funds in excess of $500,000 in order to summarize the use of federal monies received. The City did not have procedures in place whereby grants applied for by the various City Departments and approved by the City Council are summarized and the information coordinated with the City Controller’s office in order for financial activity associated with federal grant funds awarded to be properly identified and recorded in the financial records.
Due to this internal control deficiency, we were unable to issue an opinion on the SEFA. We also could not determine if all major programs were identified.
Circular A133 Subpart C section .300 states:
“The auditee shall:
(a) 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.
(b) Maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs.”
Accounting records and other public records must be maintained in a manner that will support accurate financial statements. Anything other than an unqualified opinion on the Independent Auditors’
Report on the financial statements may have adverse financial consequences with the possibility of an increase in interest rate cost to the taxpayers of the governmental unit. (Accounting and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7) We recommended that the City implement procedures and controls to ensure that required information is properly identified and available for preparation of the SEFA.
FINDING 2011-3 – COMPLIANCE ISSUE – BANK ACCOUNT RECONCILIATIONS
Fund balances were not reconciled to bank balances for the entire year of 2011. As of July 31, 2012, City officials were still unable to reconcile the ledger to the bank account and were still making corrections to the December 31, 2011 fund balances. New accounting software was implemented in 2011. The new accounting system is not producing accurate fund statements which can be reconciled to the bank account. Indiana Code 5-13-6-1(e) states: “All local investment officers shall reconcile at least monthly the balance of public funds, as disclosed by the records of the local officers, with the balance statements provided by the respective depositories.”
At all times, the manual and/or computerized records, subsidiary ledgers, control ledger, and reconciled bank balance should agree. If the reconciled bank balance is less than the subsidiary or control ledgers, then the responsible official or employee may be held personally responsibility for the amount needed to balance the fund. (Accounting and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7)
Because the fund balances could not be reconciled to the bank balances at year end, the accuracy of any fund’s receipts, disbursements and balances, as reported in the financial statement, cannot be verified. We recommended that the City officials take steps necessary to reconcile the December 31, 2011 bank balance to the total fund balance. After 2011 has been reconciled, City officials should reconcile monthly on a timely basis.
Oh no, not again.
Shame on you Winnenke and Russ Lloyd, Jr.
Anybody see Carol? It’s time for for the real political mastermind to take over!
Problems with bank account reconciliations during DP conversions occur more often than the unititated observer would expect. I was hired by a university down south 24 years ago to manage their investments in the middle of a DP conversion. I discovered that the clerk who was responsible for bank account reconciliations was not up to the task, and informed the comptroller of the university. It took more than six months to clean up the mess, working on weekends all the way through the Easter Break. It was the worst episode in my entire career.
Thank God I changed careers!
It’s Fall Festival time so you know what that means. Big Dan from Umbaugh is in the Civic Center all week for at least the 10th year in a row during that week. He’s here charging the City and Utilities hundreds of dollars an hour because they can’t hire competent people while cruising up and down Franklin Street eating the fried foods that help him support his “healthy” figure.
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