Fort Madison

Schedule of Findings and Responses # SECTION I – BASIC FINANCIAL STATEMENT FINDINGS 2026-001 LACK OF SEGREGATION OF ACCOUNTING DUTIES Criteria: Management is responsible for establishing and maintaining internal control. A good system of internal control provides for adequate segregation of duties so no one individual handles a transaction from its inception to completion. In order to maintain proper internal control, duties should be segregated so the authorization, custody and recording of transactions are not under the control of the same employee. This segregation of duties helps prevent losses from employee error or dishonesty and maximizes the accuracy of the City's financial statements. Condition: Generally, one or two individuals identified may have control over the following areas for which no compensating controls exist. One individual in the City has control over the cash receipts listing, bank deposits and the posting of cash receipts to the cash receipts journal. This same individual also reviews payroll and prints disbursement checks which are electronically signed when printed. This same individual is able to enter invoices and print checks. This same individual also is able to post journal entries without review and utility billing adjustments are not reviewed. Cause: The City has a limited number of employees and procedures have not been designed to adequately segregate duties or provide compensating controls through additional oversight of transactions and processes. Effect or Potential Effect: Inadequate segregation of duties could adversely affect the City's ability to prevent or detect and correct misstatements, errors or misappropriation on a timely basis by employees in the normal course of performing their assigned functions. Recommendation: We realize segregation of duties is difficult with a limited number of office employees. However, the City should review its operating procedures to obtain the maximum internal control possible under the circumstances. The City should utilize current personnel, including elected officials, to provide additional control through review of financial transactions, reconciliations and reports. Such reviews should be performed by independent persons and should be documented by the signature or initials of the reviewer and the date of the review. Response: The City will continue to review operating procedures and segregate employee duties to the extent financially feasible to maximize internal control. Conclusion: Response accepted. ### Page 68 City of Fort Madison Schedule of Findings and Responses SECTION II: FINDINGS RELATED TO STATUTORY REPORTING II-A-26 - Certified Budget Disbursements for the year ended June 30, 2026, did exceed budgeted amounts in the debt service function. Recommendation: The City should ensure the budget is amended prior to exceeding budgeted expenditures. Responses: The City will ensure budget amendments are done in the future. Conclusion: Response accepted. II-B-26 - Questionable Disbursements We noted no disbursements for parties, banquets or other entertainment for employees that we believe may constitute an unlawful expenditure from funds as defined in an Attorney General's opinion dated April 25, 1979. II-C-26 - Travel Expense No disbursements of City money for travel expenses of spouses of City officials or employees were noted. II-D-26 - Business Transactions Business transactions between the City and City officials or employees are detailed as follows: In accordance with Chapter 362.5(3)(j) of the Code of Iowa, the transactions with the Firefighter do not appear to represent conflicts of interest even though the amount paid exceeded $6,000 during the fiscal year due to the purchases being competitively quoted and the lowest quote being chosen. II-E-26 - Restricted Donor Activity No Transactions were noted between the City, City officials, City employees and restricted donors in compliance with Chapter 68B of the Code of Iowa. II-F-26 - Bond Coverage Surety bond coverage of City officials and employees is in accordance with statutory provisions. The amount of coverage should be reviewed annually to ensure that the coverage is adequate for current operations. II-G-26 - Council Minutes No transactions were found that we believe should have been approved in the Council minutes but were not. ### Page 69 City of Fort Madison Schedule of Findings and Responses SECTION II: FINDINGS RELATED TO STATUTORY REPORTING (CONTINUED) II-H-26 - Deposits and Investments No instances of noncompliance with the deposit and investment provision of Chapter 12B and 12C of the Code of Iowa and the City's investment policy were noted. II-I-26 - Revenue Bonds and Notes No instances of non-compliance with the revenue bond and note resolutions were noted. II-J-26 - Tax Increment Financing The Special Revenue, Tax Increment Financing (TIF) Fund properly disbursed payments for TIF loans and rebates. Also, the City of Fort Madison properly completed the Tax Increment Debt Certificate Forms to request TIF property taxes. II-K-26 - Annual Urban Renewal Report The Annual Urban Renewal Report was properly approved and certified to the Iowa Department of Management on or before December 1, as required. However, the cash balance on the Levy Authority Summary page does not match City records and the total outstanding TIF Obligations on the Annual Urban Renewal Report were negative. Recommendation: The City should ensure the amounts reported on the Annual Urban Renewal Report are supported and agree with City records. Response: The City will ensure that the cash balances and outstanding TIF obligations are correct in future reports. Conclusion: Response accepted. II-L-26 - Financial Condition At June 30, 2026, the following funds had deficit balances: - • Special Revenue, Economic Development $ 180,007 - • Enterprise, Airport 88,712 Recommendation: The City should investigate alternatives to eliminate this deficit and return these funds to a sound financial condition. Response: The deficit in Special Revenue, Economic Development is for funds that have been used for abandoned properties that the City will receive revenues to cover the expenses. The deficit also includes expenses for projects that will be reimbursed in fiscal 2027. The deficit in Enterprise Airport is for unreimbursed grant funds that will be received in fiscal 2027. Conclusion: Response accepted.