Purpose of Audit

The purpose of our audit was to examine the City's internal controls over the Treasurer's Office and accountability over the water operations for the period January 1, 2011 to July 31, 2012.

Background

The City of Little Falls is located in Herkimer County and has approximately 4,900 residents. The nine-member Common Council is the City's legislative branch and comprises the Mayor and eight Aldermen. The City's budgeted operating fund expenditures totaled $5.9 million for the 2013 year.

Key Findings

• The Council and Treasurer have not ensured adequate internal controls are in place over cash receipts and disbursements handled by the Treasurer's Office. The Treasurer did not perform adequate bank reconciliations and did not record all financial transactions accurately, completely, timely and in a clear and transparent manner.
• There is not adequate segregation of duties within the Treasurer's Office.
• The City is losing 54 percent of the water it distributes, which is substantially higher than the EPA goal of 10 percent. In 2011, the City reported that 719 million gallons of water was treated and 331 million gallons was delivered or used, leaving 388 million gallons of unaccounted-for water. The cost of unaccounted-for water for 2011 is about $265,000.

Key Recommendations

• Attend training courses for accounting that cover the preparation of bank reconciliations and the maintenance of records to be able to perform the basic accounting duties. Perform complete, accurate, and timely monthly bank reconciliations and ensure that any discrepancies are promptly identified and resolved.
• Segregate the duties of all employees in the Treasurer's Office, and when not feasible to adequately segregate duties, establish effective oversight procedures.
• Investigate the causes of excessive water loss and take appropriate action to reduce water loss and costs.