06-27-2016 Council Packet - Laserfiche WebLink

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CliftonLarsonAllen LLP CLAconnect.com Management City of Orono Orono, Minnesota In planning and performing our audit of the financial statements of City of Orono (the City) as of and for the year ended December 31, 2015, in accordance with auditing standards generally accepted in the United States of America, we considered the City’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. However, during our audit, we became aware of several matters that are opportunities for strengthening internal control and operating efficiency. Our comments and suggestions regarding those matters are summarized below. A separate communication dated June 21, 2016, contains our written communication of significant deficiencies and material weaknesses in the City’s internal control. This letter does not affect our communication dated June 21, 2016. Documentation of Review and Approval We noted during the audit that aged receivables reports did not contain documentation of the review procedures. Generally, a system of internal control contemplates having someone other than the preparer review the reports prepared, and documentation of this review should be retained. Accounts Receivable Write-offs Currently it is the City’s practice to allow the finance department to approve credits posted to customer accounts provided that they are small dollar amounts. City Council approval is required before any large credits can be made. However, the City has not established a dollar threshold over which would require City Council approval for account credits. We recommend that the City establish a more formal credit policy which includes a dollar limit to credits which can be initiated and approved by the accounting department. Cash Receipts Reconciliation We noted during audit procedures that a daily reconciliation of cash receipts is not being performed by the City. The City’s policy indicates that cashier funds are counted and reconciled at the end of each shift. Additionally, reconciliations are to be reviewed by the supervisor. As there is no compensating control, we recommend that daily cash reconciliations be performed by an individual different than the individual receiving cash. Check Signing During our audit procedures, we noted that check signers are solely reviewing a general disbursement register before signing checks instead of reviewing supporting documentation for disbursements. We recommend that check signers review the supporting documentation for disbursements prior to signing checks.