Purpose of Audit

The purpose of our audit were to evaluate the Town’s oversight of financial activities and internal controls over online banking for the period January 1, 2011, to July 31, 2012.

Background

The Town of Johnsburg is located in Warren County and is governed by a Town Board which comprises an elected Town Supervisor (Supervisor) and four elected councilpersons. The 2012 budget for the general fund was $1,162,537, and the highway fund budget was $1,259,053.

Key Findings

The Board did not adequately design, implement, or monitor internal controls over the Town’s financial activities.

• The Supervisor did not provide effective oversight of the work performed by the bookkeeper to address her incompatible financial duties. Because the bookkeeper can initiate transactions, make accounting entries, and perform bank reconciliations without any supervision, there is a risk that she could initiate and conceal inappropriate transactions that could go undetected and uncorrected.
• The Board did not conduct an annual audit of the records of officials and employees who receive and disburse cash.
• The Supervisor has not adequately segregated the bookkeeper’s online banking duties.
• The Supervisor had not reviewed or supervised the bookkeeper’s online banking transactions totaling more than $1.8 million made during the first six months of 2012.
• The Town has not established a confirmation process with its bank for online transfers of Town moneys.

Key Recommendations

• Segregate the bookkeeper’s incompatible financial duties or provide adequate oversight of the bookkeeper’s work.
• Conduct, or contract for, an annual audit of the records and reports of all officers and employees who received or disbursed money during the previous fiscal year.
• Adopt and communicate an online banking policy that outlines approved online banking activities and assigns responsibility for ensuring that the transactions are safely conducted and monitored.
• Authorize and approve all online transfers performed by the bookkeeper.
• Ensure that the online banking agreement with its bank identifies who is authorized to initiate and approve online transfers and establishes security procedures for authenticating online transfers.