Finance Highlights 2006 0405 - Laserfiche WebLink

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CITY OF S AN LEANDRO CLTRP.ENT YEAR INTERI~T4L CONTROL COlVI1VIENTS JUNE 30, 2005 GEN/ER4L Cotntnent Based on the results of our audit we found that liabilities recorded on-the City's financial statements were free from any material misstatement. However, during our audit we found instances «rhere expenditures should have been accrued at year end, but were not. Subsequent to our field work, the City did post adjusting journal entries to correct these omissions. Recorrtmendation hZanagement should consider performing an additional revie~~~ of disbursements made subsequent to year end, as part of the year end closing process. This would help ensure that all necessar_Y liabilities are accrued and disclosed in the financial statements. JOTJRNAL ENTRIES ~Carnrnerzt During our testing of the City's internal controls, we noted that there are no formal written policies for the approval of non routine journal entries. There is an un«~ritten policy that all journal entries are to be reviewed by finance department personnel, but the documentation we reviewed for 2 entries did not show evidence of a review. (i.e. no sing off by reviewer) recommendation The journal entry process is a critical element to maintailiing accurate accounting records, and the ability for multiple individuals to prepare, and in effect; post them to the general ledger, without centralized independent review, creates a situation that leaves the City vulnerable to error and\or fraud. Although we found no instances of errors or-fraud in our testing, we suggest that management develop formal written policies related to the journal entry process to include a more centralized process for authorizing journal entries before posting.