Fairfax

Schedule of Findings ### Page 49 Finding Related to the Financial Statements: INTERNAL CONTROL DEFICIENCY: 2026-001 Segregation of 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 in the City may have control over thefollowing areas for which no compensating controls exist: - 1. Accounting system – performing all accounting functions, including making journal entries and having custody of assets. - 2. Cash – initiating cash receipt and disbursement functions, handling and recording cash and reconciling. - 3. Receipts – opening mail, collecting, depositing, journalizing, reconciling and posting. - 4. Disbursements – purchasing, invoice processing, check writing, mailing, reconciling and recording. - 5. Payroll – recordkeeping, preparing and distributing. - 6. Utilities – billing, collecting, depositing and posting. - 7. Debt – recordkeeping, compliance and debt payment processing. - 8. Investments – custodian and record keeping. Cause – The City has a limited number of employees and procedures have not beendesigned to adequately segregate duties or provide compensating controls through additional oversight of transactions and processes. Effect – Inadequate segregation of duties could adversely affect the City’s ability to preventor detect and correct misstatements, errors or misappropriation on a timely basis by employees in the normal course of performing their assigned functions. Recommendation – The City should review its control activities to obtain the maximuminternal control possible under the circumstances utilizing currently available staff, including elected officials, to provide additional controls through review of financial transactions, reconciliations and financial report. The reviews should be documented by the signature or initials of the reviewer and the date of the review. ### Page 50 Response – We have reviewed procedures and plan to make the necessary changes toimprove internal control. Specific duties will be separated and spread among several employees. We plan to implement these changes in phases throughout the new fiscal year while we transition to a new accounting software. Conclusion – Response accepted. INSTANCES OF NONCOMPLIANCE: No matters were noted. ### Page 51 Other Findings Related to Required Statutory Reporting: 2026-A Certified Budget – Disbursements during the year ended June 30, 2026 did not exceed theamounts budgeted. 2026-B Questionable Disbursements – No disbursements we believe may not meet the requirementsof public purpose as defined in an Attorney General's opinion dated April 25, 1979 were noted. 2026-C Travel Expense – No disbursements of City money for travel expenses of spouses of Cityofficials or employees were noted. 2026-D Business Transactions – Business transactions between the City and City officials oremployees are detailed as follows: | Name, Title and Business Connection | Transaction Description | Amount | | - | - | - | | Michael Sankot, Fire Chief, Co-Owner of Sankot's Garage | Maintenance on various vehicles | $14,985 | | Michael Daly, Council Member, works at Waln Repair | Vehicle repair | 50 | In accordance with Chapter 362.5(3)(h) of the Code of Iowa, the transactions with Sankot’s Garage do not appear to represent a conflict of interest. In accordance with Chapter 362.5(3)(j) of the Code of Iowa, the transactions with Waln Repair do not appear to represent a conflict of interest since the total transactions were less than $6,000 during the year. 2026-E Restricted Donor Activity – No transactions were noted between the City, City officials, Cityemployees and restricted donors in compliance with Chapter 68B of the Code of Iowa. 2026-F Bond Coverage – Surety bond coverage of City officials and employees is in accordance withstatutory provisions. The amount of coverage should be reviewed annually to ensure the coverage is adequate for current operations. 2026-G City County Minutes – No transactions were found which we believe should have beenapproved in the City Council minutes but were not. 2026-H Deposits and Investments – No instances of noncompliance with the deposit and investmentprovisions of Chapters 12B and 12C of the Code of Iowa and the City’s investment policy were noted. 2026-I Revenue Notes – No instances of noncompliance with the revenue note resolutions werenoted. ### Page 52 2026-J Tax Increment Financing (TIF) – The Special Revenue, Tax Increment Financing (TIF) Fundproperly disbursed payments for TIF loans. Also, the City properly completed the Tax Increment Debt Certificate Forms to request TIF property taxes. 2026-K Annual Urban Renewal Report – The Annual Urban Renewal Report was properly approvedand certified to the Iowa Department of Management on or before December 1 as required by Chapter 384.22(2)(a) of the Code of Iowa. ### Page 53 City of Fairfax