Boscobel’s bookkeeping, financial management, and spending got a thumbs up from auditors at Johnson Block and Company, Inc.
The annual audit examines last year’s books to look for discrepancies, errors, and potential for fraud or abuse. The 86-page document combs through all the accounts, assets, liabilities, and expenditures for 2022.
“If we could get a letter grade, they said we would have gotten an A,” City Administrator Patricia Smith told Boscobel’s Common Council at its October 16 meeting.
Corrective actions
While the audit generally endorses the city’s bookkeeping practices, it does raise a few red flags common to smaller municipalities like Boscobel. Because of the small size of our city hall staff, there’s not as much separation of duties as would be “best practices,” according to Johson and Block’s Bill Moilien, the city’s contact with the auditing firm.
Specifically, the auditors pointed to overlapping duties involving the city’s payroll record-keeping, calculation, review, and approval, as well as the billing process for the public utility.
In both cases, the limited size of our front office means that the same personnel who perform payroll and billing also have access to the back end of the financial system.
Moilien gave the example of a payroll clerk inflating a salary and pocketing the difference.
“No one will see that because you are the one processing payroll,” he explained. “If nobody is really overseeing those reports, that’s when fraud happens.”
To prevent that grim occurrence, Smith and her colleagues in City Hall are implementing “compensating controls.” For example, having routine reviews of payroll and utility billing.
“These are very standard for a city the size of Boscobel,” reassured Moilien. “There’s nothing unusual or negative. To properly separate those functions the city would need to hire three additional staff, and that’s just not financially practical.
Other points raised
The report also mentioned a few points of concern:
• Occasionally, on a short-term basis, the city’s bank deposits exceed the FDIC insurance limits, meaning a bank failure would leave those deposits unprotected. The city compensates for this by obtaining collateral from the bank, but the audit notes that the collateral would not cover all the deposited funds.
• The city’s “general fund” is supposed to contain a cushion of 15 to 25 percent of the prior year’s budget. Last year, the reserve was below that threshold. During last year’s budgeting process, the city already committed to rebuilding the fund balance.
• Last year’s budget exceeded the state levy limit by about $7,000, which might impact the city’s share of shared revenue from the state. Smith explained that the state had originally approved a truck repair at the fire department as an allowable expense under the limits, but later reversed itself.
The auditors’ written summary praised the cooperation and receptiveness of the city hall staff, underscoring that the issues raised “are not intended to reflect in any way on the integrity or ability of the personnel of the City of Boscobel.”
Budget process begins
The audit came as a welcome endorsement for Administrator Smith’s leadership as she heads into her second budget cycle.
Last year’s budget planning hit some bumps as Smith found her footing in her first public-sector position after a career in banking.
The annual audit examines last year’s books to look for discrepancies, errors, and potential for fraud or abuse. The 86-page document combs through all the accounts, assets, liabilities, and expenditures for 2022.
“If we could get a letter grade, they said we would have gotten an A,” City Administrator Patricia Smith told Boscobel’s Common Council at its October 16 meeting.
Corrective actions
While the audit generally endorses the city’s bookkeeping practices, it does raise a few red flags common to smaller municipalities like Boscobel. Because of the small size of our city hall staff, there’s not as much separation of duties as would be “best practices,” according to Johson and Block’s Bill Moilien, the city’s contact with the auditing firm.
Specifically, the auditors pointed to overlapping duties involving the city’s payroll record-keeping, calculation, review, and approval, as well as the billing process for the public utility.
In both cases, the limited size of our front office means that the same personnel who perform payroll and billing also have access to the back end of the financial system.
Moilien gave the example of a payroll clerk inflating a salary and pocketing the difference.
“No one will see that because you are the one processing payroll,” he explained. “If nobody is really overseeing those reports, that’s when fraud happens.”
To prevent that grim occurrence, Smith and her colleagues in City Hall are implementing “compensating controls.” For example, having routine reviews of payroll and utility billing.
“These are very standard for a city the size of Boscobel,” reassured Moilien. “There’s nothing unusual or negative. To properly separate those functions the city would need to hire three additional staff, and that’s just not financially practical.
Other points raised
The report also mentioned a few points of concern:
• Occasionally, on a short-term basis, the city’s bank deposits exceed the FDIC insurance limits, meaning a bank failure would leave those deposits unprotected. The city compensates for this by obtaining collateral from the bank, but the audit notes that the collateral would not cover all the deposited funds.
• The city’s “general fund” is supposed to contain a cushion of 15 to 25 percent of the prior year’s budget. Last year, the reserve was below that threshold. During last year’s budgeting process, the city already committed to rebuilding the fund balance.
• Last year’s budget exceeded the state levy limit by about $7,000, which might impact the city’s share of shared revenue from the state. Smith explained that the state had originally approved a truck repair at the fire department as an allowable expense under the limits, but later reversed itself.
The auditors’ written summary praised the cooperation and receptiveness of the city hall staff, underscoring that the issues raised “are not intended to reflect in any way on the integrity or ability of the personnel of the City of Boscobel.”
Budget process begins
The audit came as a welcome endorsement for Administrator Smith’s leadership as she heads into her second budget cycle.
Last year’s budget planning hit some bumps as Smith found her footing in her first public-sector position after a career in banking.
The process begins this week, with initial numbers presented to the Finance Committee at its Wednesday meeting, and will be impacted by changes in the state funding apparatus in the wake of the new two-year state budget.
