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<br /> <br /> <br /> <br />City of Little Canada, Minnesota <br />Schedule of Findings, Question Costs, and Responses <br />For the Year Ended December 31, 2023 <br /> <br />2023-001 Limited Segregation of Duties <br /> <br />Condition: During our audit we reviewed procedures over cash disbursements, payroll, utility billing, financial <br />reporting, and capital assets and found the City to have limited segregation of duties over those <br />transaction cycles. <br /> <br />Criteria: There are four general categories of duties: authorization, custody, record keeping and <br />reconciliation. In an ideal system, different employees perform each of these four major <br />functions. In other words, no one person has control of two or more of these responsibilities. <br /> <br />Cause: As a result of the limited number of staff, in the disbursement cycle, the finance director has <br />access to checks, ability to posts to the general ledger, and prepares bank reconciliations. In the <br />payroll cycle, the finance director has control over the payroll system, sets up employee records, <br />posts to the general ledger. In the utility billing cycle, the City Council approves rates but the <br />finance director reconciles the amounts billed and collected in the system and has the ability to <br />post to the general ledger. The majority of the collections of utility payments are now collected <br />electronically, however the Finance director is responsible for all the recording and reconciling. In <br />the financial reporting and capital asset transaction cycles, the Finance director performs all of <br />the duties. <br /> <br />Effect: The existence of this limited segregation of duties increases the risk of fraud. <br /> <br />Recommendation: While we recognize the number of staff is not large enough to eliminate this deficiency, we <br />recommend that the City evaluate the current procedures and segregate duties where possible <br />and implement any compensating controls. We are aware some compensating controls are in <br />place; however, it is important that the City Council is aware of this condition and monitor all <br />financial information. <br /> <br />Management Response: <br /> <br />Management recognizes that it is not economically feasible to correct this finding, however, is aware of the deficiency and <br />is relying on oversight by management and the City Council to monitor this deficiency. <br /> <br /> <br /> <br /> <br />13 <br />DRAFT