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Menahga City Council gets advice about segregation of duties

The Menahga City Council heard a preliminary report last week from Eide Bailly LLP about its internal control examination.

MenahgaCityHall2022Wide.jpg
Menahga City Hall 2022
Shannon Geisen/ Park Rapids Enterprise
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The Menahga City Council heard a preliminary report last week from Eide Bailly LLP about its internal control examination.

At the July 25 meeting, Chase Davis said the certified public accounting firm tested for both preventative and detective controls. Segregation of duties is an example of preventative control. Bank and credit card reconciliation and proper approvals of purchases are examples of detective controls.

Davis said Eide Bailly conducted interviews with 11 city employees.

The firm also looked for anomalies in bank disbursements. Davis said they sifted through 6.8 million disbursements between Dec. 2019 and Dec. 2020.

“There was one number that popped out,” he said, referring it to the city for review. “Again, doesn’t necessarily indicate there’s any fraudulent activities.”

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Eide Bailly also compared municipal liquor store sales with bank records. Davis said there are three dates in July 2020 with data missing, perhaps due to timing. There was only one instance where the deposit and daily sales report sheet was off by $37, he noted.

They reviewed duplicate employee addresses, which can be a red flag for a “ghost employee scheme.” The city should review any replicated, unusual addresses.

They also searched for duplicate vendor or customer names or addresses.

According to Davis, the city of Menahga has 1,432 entries, of which 1,026 are listed as “active.” That number is unusually high, he said, and the list should be managed to eliminate inactive vendors. Some listings are missing “type” information, phone number, P.O. address.

“It’s not a red flag,” Davis said, but added it's easier to spot fraud if listings are complete and accurate.

RecommendationsAccording to Davis, Eide Bailly made the following key recommendations:

  • install cameras in sensitive areas of the city hall, particularly where cash is handled and the police evidence room,
  • complete inventory counts on a regular basis,
  • have city employees sign an acknowledgement form that city property is not for personal use,
  • write formal, written processes for each job in case of illness or employee turnover,
  • provide invoices to the city council, rather than a list of expenses,
  • compare the budget with actual revenues and expenditures on a quarterly basis,
  • keep a list of house/charge accounts and who is authorized to make purchases,
  • and review credit card purchases with detailed receipts prior to payment.

In other business, the council did as follows:

  • Learned from city engineer Brian Hiles that a gate valve for the new water tower is not covered under errors and omissions because it is not considered an essential valve; rather, it is a change order.
  • Approved a job description for the deputy clerk and authorized advertising for the position.
  • Approved a $1,630 contribution to the Community Concern for Youth program for 2023.
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Shannon Geisen is editor of the Park Rapids Enterprise.
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