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<br />CITY OF SAN LEANDRO <br /> <br />STATUS OF PRIOR YEAR INTERNAL CONTROL COMMENTS <br />JUNE 30, 2006 <br /> <br />GENERAL <br /> <br />Comment <br /> <br />Based on the results of our audit, we found that liabilities recorded on the City's financial statements were free <br />from any material misstatement. However, during our audit we found instances where expenditures should have <br />been accrued at year end, but were not. Subsequent to our field work, the City posted adjusting journal entries to <br />correct these omissions. <br /> <br />Recommendation <br /> <br />Management should consider performing an additional review of disbursements made subsequent to year end as <br />part of the year end closing process. This would help ensure that all necessary liabilities are accrued and <br />disclosed in the financial statements. <br /> <br />Status <br /> <br />Implemented <br /> <br />JOURNAL ENTRIES <br /> <br />Comment <br /> <br />During our testing of the City's internal controls, we noted that there are no formal written policies for the <br />approval of non routine journal entries. There is an unwritten policy that all journal entries are to be reviewed by <br />finance department personnel, but the documentation we reviewed for 2 entries did not show evidence of a <br />review. (i.e. no sign off by reviewer) <br /> <br />Recommendation <br /> <br />The journal entry process is a critical element to maintaining accurate accounting records. The ability for <br />multiple individuals to prepare and post them to the general ledger, without centralized independent review, <br />creates a situation that leaves the City vulnerable to error and\or fraud. Although we found no instances of errors <br />or fraud in our testing, we suggest that management develop formal written policies related to the journal entry <br />process to include a more centralized process for authorizing journal entries before posting. <br /> <br />Status <br /> <br />Implemented <br /> <br />3 <br />