The City of Pine Lake, Georgia December 31, 2009 Schedule of Audit Findings
Item 2009-1
Condition
During 2009, The City Administration exceeded it expenditure authority granted to it by budget appropriation in the City's legally adopted budget.
Criteria
City Charter limiting the amount of expenditures on a departmental level to those legally appropriated in the City's legally adopted annual budget. State law limiting expenditures to legally appropriated amounts. City Charter and State law limiting expenditures to legally appropriated amounts were violated.
Recommendation
The City should reestablish a system of controls to prevent expenditures exceeding appropriated amounts on a departmental basis. Accurate reports detailing revenues and expenditures as required by City Council should be provided to the City Council and reviewed ~)n a regular basis. The City Council should monitor the City's financial activities more closely. Action should be taken to limit expenditures to legally appropriated amounts' or to amend the City's budget as appropriate.
City Response
The City agrees with the finding. The City underwent turnover in its City Clerk position in 2009 and the new clerk was not involved in the preparation of the 2009 budget. The City corrected the problem during 2010 by instituting internal controls whereby the .City Clerk and the department head review all expenditures to determine if funding is approved by council before payments are made. Responsibility for monitoring w1e expenditures of the City's- various departments is currently being assigned to individual Cit)~ Council members. Overnight will be maintained by these Council members with reporting to the full-
Item 2009-2
Condition
Due to budget restrictions the City has not been able to fund the position of City Treasurer. As a result, financial reports generated for City Council use were materially inaccurate. City Council was unable to effectively carry out their financial oversight responsibilities.
Criteria
The City Charter provisions requiring financial reports be prepared and presented to City Council. City Charter provisions requiring financial oversight by the City Council.
Monthly management reports provided to City Council were materially incorrect. This condition could adversely affect the City of Pine Lake's ability to record, process, summarize and report fin~U1cial data consistent with the assertions of management. This condition also creates the risk that material misstatements in the financial reports may exist and not be detected within a timely period by management or employees. The condition also increases the risk that budgetary appropriations may be exceeded by City management and not detected by City Council within a reasonable time frame .
Recommendation
The City should seek to fund the position of City Treasurer or provide training to existing staff to insure that requisite technical qualifications are met.
City Response
The City agrees with the audit finding. The City contracted "vith a Treasurer in 2010. The Treasurer is charged with providing reports to council
Item 2009-3
Condition
Of the total of$24,872.61 paid on the City's Chase credit card during2009. $15,759.95 was found to have inadequate or missing receipts.
Criteria
City Charter and City Ordinances requiring that City funds be only for City purposes. Internal control procedures requiring documentation of aU City expenditures before
approval and payment . The City Charter and City Ordinances governing the use of City funds were violated. The condition created situations where City management could not ascertain with any certainty whether or not City funds were used strictly for City obligations. This condition could adversely affect the City of Pine Lake's ability to record, process, summarize and report financial data consistent with the assertions of management. This condition also creates the risk that material misstatements in the financial reports may exist and not be detected within a timely period by management or employees.
Recommendation
Approval of expenditures for payment should not be made before documentation is found to be complete, adequate, and sufficient in amount.
City Response
The City agrees with tlle audit finding. Procedures will be developed to insure that City Ordinances and City Charter provisions regarding approval of expenditures are complied with. The City's Chase credit has been cancelled.
Item 2009-4
Condition
During the year 2009, the City coming led funds from its revenue bond with the funds in the general fund. Bond funds intended to fund capital projects were temporarily used to fund City operations.
Criteria
Principles of sound cash and financial management. Bond documents stating intent for the use of the funds.
Cash form the City's revenue bond intended for use on capital projects were temporarily diverted to fund operations.
Recommendation
Cash from the revenue bond should be kept in a separate bank account. These funds should only be used for capital projects which were the intended purpose.
City Response
The City agrees with the audit finding. Procedures will be developed to insure that City only uses bond funds for capital projects spelled out in the bond documents.
Item 2009-5
Condition
Checks written on the City's capital projects fund require only one signature regardless of amount.
Criteria
The City's policies and procedures requiring two signatures on all checks above $500.
City's policies providing effective internal control over cash were violated.
Recommendation
Two signatures should be required on all checks with amounts exceeding $500.
City Response
The City agrees with the audit finding. Procedures were be developed to insure that City requires two signatures on all checks exceeding $500. This was implemented in 2010.
Item 2008-1- Follow up
Condition
The City Clerk was not technically competent to carry out her responsibilities of financial reporting to City Council. Financial reports generated for City Council use were materially inaccurate. City Council was unable to effectively carry out their financial oversight responsibilities.
Criteria
The City Charter provisions requiring financial reports be prepared and presented to City Council. City Charter provisions requiring financial oversight by the City Council.
Monthly management reports provided-to City Council were materially incorrect. This condition could adversely affect the City of Pine Lake's ability to record, process, summarize and report financial data consistent with the assertions of management. This condition also creates the risk that material misstatements in the financial reports may exist and not be detected 'within a timely period by management or employees. The condition also increases the risk that budgetary appropriations may be exceeded by City management and not detected by City Council within a reasonable time frame.
Recommendation
The City should tighten its recruitment and hiring polices to insure that requisite technical qualifications of the City Clerk position are met.
City Response
The City agrees with the audit finding. The City will update its hiring policies and procedures to insure that only competent individuals are employed to fill the City Clerk position.
This finding reoccurred in 2009. See finding 2009-2
Item 2008-2 Follow up
Condition
34 checks written to the City Clerk on the City's general fund totaling $10,234.23 for reimbursement of expenses and replenishment of the City's petty cash fund had missing or inadequate documentation.
Criteria
City Charter and City Ordinances requiring that City funds be only for City purposes. Internal control procedures requiring documentation of all City expenditures before approval and payment. Internal control procedures requiring segregation of duties.
City Charter and City Ordinances governing the use of City funds were violated. The condition created situations where City management could not ascertain with any
certainty whether or not City funds were used strictly for City obligations. This condition could adversely affect the City of Pine Lake's ability to record, process, summarize "and report financial data consistent with the assertions of management. This condition also creates the risk that material misstatements in the financial reports may exist and not be detected within a timely period by management or employees.
Recommendation
The duty of approval for payment and check signing for aIL expenses should be separated from the duty recording and generating the checks. The individual approving payment should in all instances not be the person requesting payment. Approval of expenditures for payment should not be made before documentation is found to be complete, adequate, and sufficient in amount.
City Response
The City agrees with the audit fmding. Procedures will be developed to insure that . existing City Charter provisions and City Ordinances are being followed with regards to approval of expenditures. Adequate segregation of duties will be maintained in accordance with the recommendation.
The City has developed procedures and increased documentation involving petty cash reimbursements to insure that only approved and valid expenses are reimbursed.
Item 2008-3- Follow up
Condition
28 checks totaling $6,258.53 for vacation and comp time were written to employees by the City Clerk outside the City's third party payroll system. These checks were written in violation of the City's policy requiring that all vacation or comp time be taken as time off and not paid as additional compensation. These amounts were not included in the employees Forms W-2 as required by IRS regulations.
Criteria
City Charter and City Ordinances requiring that City funds be only for City purposes. Internal control procedures requiring documentation of all City expenditures before approval and payment.
The City's policy requires payment for vacation and comp time be made only for time taken off was violated. Internal Revenue Code provisions requiring proper income reporting to employees were violated. The City will bear the full expense of additional social security and Medicare taxes that will have to be paid as these cannot be withheld from the employee's wages.
Recommendation
The employees W-2's should be amended to reflect their correct wages which would include vacation and comp time paid. Policies should be developed to ensure that vacation and comp time paid is taken as time off. Payment for all vacation time should be approved by the City Administrator.
City Response
The City agrees with the audit finding. Procedures will be developed to insure that existing City personnel policies are complied with. Payment of all vacation time will be approved by the City administrator to assure compliance. The City has taken steps to insure that City personnel policies are complied ,vith and that only approved vacation time is paid.
Item 2008-4 - Follow up'
Condition
Of the total of $24,402.1 0 paid on the City's Chase credit card during 2008. $24,40~.1O was found to have insufficient receipts.
Criteria
City Charter and City Ordinances requiring that City funds be only for City purposes. Internal control procedures requiring documentation of all City expenditures before approval and payment.
The City Charter and City Ordinances governing the use of City funds were violated. The condition created situations where City management could not ascertain with any certainty whether or not City funds were used strictly for City obligations. This condition could adversely affect the City of Pine Lake's ability to record, process, summarize and report financial data consistent with the assertions of management. This condition also creates the risk that material misstatements in the financial reports may exist and not be detected within a timely period by management or employees.
Recommendation
Approval of expenditures for payment should not be made before documentation is found to be complete, adequate, and sufficient in amount.
City Response
The City agrees with the audit finding. Procedures will be developed to insure that City Ordinances and City Charter provisions regarding approval of expenditures are complied with.
Status
This finding reoccurred in 2009 - See finding 2009-3.
Item 2008-5- Follow up
Condition
During 2008, The City Administration exceeded it expenditure authority granted to it by budget appropriation in the City's legally adopted budget.
Criteria
City Charter limiting the amount of expenditures on a departmental level to those legally appropriated in the City's legally adopted annual budget. State law limiting expenditures to legally appropriated amounts.
City Charter and State law limiting expenditures to legally appropriated amounts were violated.
Recommendation
The City should reestablish a system of controls to prevent expenditures exceeding appropriated amounts on a departmental basis. Accurate reports detailing revenues and expenditures as required by City Council should be provided to the City Council and reviewed on a regular basis. The City Council should monitor the City's financial activities more closely. Action should be taken to limit expenditures to legally appropriated amounts or to amend the City'S budget as appropriate.
City Response
The City agrees with the finding. The City underwent turnover in its City Clerk position in 2006 and the position was again vacant at the end of2008. The City is actively seeking to fill this position. Responsibility for monitoring the expenditures of the City's various departments" is currently being assigned to individual City Council members. Oversight will be maintained by these Council members with reports to the full Counci1.
This finding reoccurred in 2009. See finding 2009-1.
Item 2007-2 - Follow up.
Condition
The City Clerk was not technically competent to carry out her responsibilities of financial reporting to· City Council. Financial reports generated for City Council use were materially inaccurate. City Council was unable to effectively carry out their financial oversight responsibilities.
Criteria
The City Charter provisions requiring financial reports be prepared and presented to City Council. City Charter provisions requiring financial oversight by the City Council.
Monthly management reports provided to City Council were materially incorrect. This condition could adversely affect the City of Pine Lake's ability to record, process, summarize fui.d report financial data consistent with the assertions of management. This condition also creates the risk that material misstatements in the financial reports may exist and not be detected within a timely period by management or employees. The
condition also increases the risk that budgetary appropriations may be exceeded by City management and not detected by City Council within a reasonable time frame.
Recommendation
The City should tighten its recruitment and hiring polices to insure that requisite technical qualifications of the City Clerk position are met.
City Response
The City agrees with the audit finding. The City will update its hiring policies and procedures to insure that only competent individuals are employed to fill the City Clerk position.
This was repeated in 2008 and 2009. See finding 2008 .. J and 2009-2
Item 2007-4 Follow up
Condition
19 checks written to the City Clerk on the City's general fund totaling $5,919.79 for reimbursement of expenses and replenishment of the City's petty cash fund had missing or inadequate documentation. In 1 instance the City Clerk circumvented the City's two signature requirement on checks in excess of $500 by writing two checks to her self on the same day in sequence for $400 each.
City Charter and City Ordinances requiring that City funds be only for City purposes. Internal control procedures requiring documentation of all City expenditures before approval and payment. City Charter requirement of two signatures on all City checks exceeding $500. Internal control procedures requiring segregation of duties.
City Charter and City Ordinances governing the use of City funds were violated. The condition created situations where City management could not ascertain with any certainty whether or not City funds were used strictly for City obligations. This condition could adversely affect the City of Pine Lake's ability to record, process, summarize and report financial data consistent with the assertions of management. This condition also creates the- risk that material misstatements in the financial reports may exist and not be detected within a timely period by management or employees.
Recommendation
The duty of approval for payment and check signing for all expenses should be separated from the duty recording and generating the checks. The individual approving payment should in all instances not be the person requesting payment. Approval of expenditures for payment should not be made before documentation is found to be complete, adequate, and sufficient in amount.
City Response
The City agrees with the audit finding. Procedures will be developed to insure that existing City Charter provisions and City Ordinances are being followed with regards to approval of expenditures. Adequate segregation of duties will be maintained in accordance with the recommendation.
This finding was repeated in 2008. See finding 2008-2. In 2009, developed procedures and increased documentation involving petty cash reimbursements to insure that only approved and valid expenses are reimbursed.
Item2007-5-Follow up
Condition
16 checks totaling $5,105.13 for vacation and comp time were -written to employees by the City Clerk outside the City's third party payroll system. These checks were written in violation of the City's policy requiring that all vacation or comp time be taken as time off and not paid as additional compensation. These amounts were not included in the employees Forms W-2 as required by IRS regulations.
Criteria
City Charter and City Ordinances requiring that City funds be only for City purposes. Internal control procedures requiring documentation of all City expenditures before approval and payment.
The City's policy requires payment for vacation and camp time be made only for time taken off was violated. Internal Revenue Code provisions requiring proper income reporting to employees were violated. The City will bear the full expense of additional social security and Medicare taxes that will have to be paid as these cannot be withheld from the employee's wages.
Recommendation
The employees W-2's should be amended to reflect their correct wages which would include vacation and camp time paid. Policies should be developed to ensure that vacation and comp time paid is taken as time off. Payment for all vacation time should be approved by the City Administrator.
City Response
The City agrees with the audit finding. Procedures will be developed to insure that existing City personnel policies are complied with. Payment of an vacation time will be approved by the City administrator to assure compliance.
This was repeated in 2008. See 2008-3 In 2009, the City took steps to insure that City personnel policies are complied \\lth and that only approved vacation time is paid.
Item 2007-6
Condition
Of the total of$19,329.38 paid on the City's Chase credit card during 2007, $12,552.77 ,was found to be unsupported by receipts. In addition, $187.55 in receipts submitted for payment on the City'S credit card were also submitted to petty cash for reimbursement. This resulted in these payments being made twice.
Criteria
City Charter and City Ordinances requiring that City funds be only for City purposes. Internal control procedures requiring documentation of all City expenditures before approval and payment.
The City Charter and City Ordinances governing the use of City funds were violated. The condition created situations where City management could not ascertain with any certainty whether or not City funds were used strictly for City obligations. This condition could adversely affect the City of Pine Lake's ability to record, process, summarize 'and report financial data consistent with the assertions of management. This condition also creates the lisk that material misstatements in the financial reports may exist and not be detected within a timely period by management or employees.
Approval of expenditures for payment should not be made before documentation is fOlL'1d to be complete, adequate, and sufficient in amount.
City Response
The City agrees with the audit finding. Procedures will be developed to insure that City Ordinances and City Charter provisions regarding approval of expenditures are complied with.
This finding was repeated in 2008 and 2009. See findings 2008-4 and 2009-3.
Item 2007-8 - Follow up
Condition
During 2007, The City Administration exceeded it expenditure authority granted to it by budget appropriation in the City's legally adopted budget.
Criteria
City Charter limiting the amount of expenditures on a departmental level to those legally appropriated in the City's legally adopted annual budget. State law limiting expenditures to legally appropriated amounts.
City Charter and State law limiting expenditures to legally appropriated amounts were violated.
Recommendation
The City should reestablish a system of controls to prevent expenditures exceeding appropriated amounts on a departmental basis. Accurate reports detailing revenues and expenditures as required by City Council should be provided to the City Council and reviewed on a regular basis. The City Council should monitor the City's financial activities more closely. Action should be taken to limit expenditures to legally appropriated amounts or to amend the City's budget as appropriate.
Citv Response
The City agrees with the finding. The City underwent turnover in its CitY Clerk position in 2006 and the position was again vacant at the end of2008. The City is actively seeking to fill this position. Responsibility for monitoring the expenditures of the City's various departments is currently being assigned to individual City Council members. Oversight will be maintained by these Council members with reports to the full Council.
This finding was repeated in 2008 and 2009. See finding 2008-5 and 2009-1.
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