Wapello

Schedule of Findings Year ended June 30, 202639Findings Related to the Financial Statements:INTERNAL CONTROL DEFICIENCIES:2026-01 Segregation of DutiesCriteria – 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 andmaximizes the accuracy of the City’s financial statements.Condition – There is a lack of adequate segregation of duties in the following areas forthe City: Cash, Long-Term Debt, Receipts, Utility Receipts, Disbursements, Payroll, and Financial Reporting.Specifically, there is no evidence the City’s bank reconciliations are reviewed, andthere is no evidence the utility billing reconciliations are reviewed.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 toprevent or 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 reporting. The reviews 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 segregateemployee duties to the extent financially feasible to maximize internal control.Conclusion – Response accepted.2026-02 Disaster Recovery PlanCriteria – A disaster recovery plan for financial continuity should include the following:• Identification of critical applications• Identification of staff responsibilities• Identification of steps for recovery of the system• Identification of computer equipment needed for temporary processing• Identification of business location(s) which could be used to process critical applications in the event of an emergency.• Requirement to keep a copy of the disaster recovery plan off site• Requirement to keep system backups current and off site• An inventory of all hardware and components• An inventory of all software applications (e.g. operating system and software applications, release versions and vendor names) ### Page 40 City of Wapello Schedule of Findings Year ended June 30, 202640• A requirement that copies of all user documentation and policy and procedures manuals be located off site• A requirement for extra stock of paper supplies, such as checks, purchase orders, etc., be located off site• A determination of whether the disaster recovery plan is adequately tested.Condition – While the City has a disaster recovery plan document, of these componentsit only identified staff responsibilities and contains the requirement the system backups must be current and kept off-site. The rest of the components listed aboveshould be included in the City’s written disaster recovery plan.Cause – The City has not prioritized the development of a complete disaster recoveryplan for critical systems.Effect – The lack of a complete disaster recovery plan could result in a significantdisruption to continuing City business in the event of a disaster. Significant costs could be incurred that might otherwise be avoided.Recommendation – The City should continue to develop the written disaster recoveryplan to include all of the above components.Response – The City will develop the disaster recovery plan as necessary.Conclusion – Response accepted.2026-03 IPERS ContributionsCriteria – Management is responsible for the proper accounting of employer andemployee contributions to IPERS. The contribution rates for Protection Occupation members during fiscal year 2026 were 6.335% for employees and 9.185% for the City for a total rate of 15.52%. The rates for fiscal year 2027 were 7.885% and 7.635%, respectively.Condition – During fiscal year 2026 and fiscal year 2027 to date, the City applied a9.31% rate for employer contributions and 6.21% for employee contributions to IPERS for a total rate of 15.52%.Cause – The Clerk relied on rates printed in an Iowa League of Cities booklet thatcontained outdated rates and the City’s rates were not updated for fiscal year 2027.Effect – The City’s employer share contributions for fiscal year 2026 and 2027 were$270.70 and $1,107.52 more than the correct amounts. Accordingly, the Protection Occupation members/employees contributed less than the correct amount.Recommendation – The City should correct the IPERS rates for Protection Occupationmembers in the City’s payroll system promptly. The City Council should decide thedisposition of this matter, considering the City has effectively paid part of theemployees’ required share into IPERS. The IPERS organization is unaffected by the error as it received the required 15.52%.Response – The City Council will address this.Conclusion – Response accepted. ### Page 41 City of Wapello Schedule of Findings Year ended June 30, 202641Other Findings Related to Required Statutory Reporting:2026-A Certified Budget – Disbursements during the year ended June 30, 2026 exceeded theamounts budgeted in the public works, culture and recreation and debt service functions. Chapter 384.20 of the Code of Iowa states, in part, “Public monies may not be expended or encumbered except under an annual or continuing appropriation.”The City did not provide copies of the City budget at the library before the date prescribed by Chapter 384.16(2) of the Code of Iowa.Recommendation – The budget should have been amended in accordance with Chapter384.18 of the Code of Iowa before disbursements were allowed to exceed the budget.The City should provide copies of the budget at the City library on or before the date required by Chapter 384.16(2) of the Code of Iowa.Response – The City will amend the budget before disbursements exceed the budgetand will provide copies of the budget at the library to comply with Iowa law.Conclusion – Response accepted.2026-B Questionable Disbursements – In accordance with Article III, Section 31 of the IowaConstitution and an Attorney General’s opinion dated April 25, 1979, public fundsmay only be spent for public benefit. A certain disbursement was noted which we believe may not meet the requirements of public purpose as defined in the AttorneyGeneral’s opinion since the public benefits to be derived have not been clearlydocumented:Paid to Purpose AmountTPC Cash and Carry Food for Super Bowl party $284.08According to the opinion, it is possible for certain disbursements to meet the test of serving a public purpose under certain circumstances, although such items will certainly be subject to a deserved close scrutiny. The line to be drawn between a proper and an improper disbursement is very thin.Recommendation - The City Council should determine and document the publicpurpose served by these types of disbursements prior to authorizing any further payments. If this practice is continued, the City should establish written policies and procedures, including the requirement for proper public purpose documentation.Response – We will comply with this recommendation.Conclusion – Response accepted.2026-C Travel Expense – No disbursements of City money for travel expenses of spouses ofCity officials or employees were noted. ### Page 42 City of Wapello Schedule of Findings Year ended June 30, 2026422026-D Business Transactions – Business transactions between the City and City officials oremployees are detailed as follows:Name, Title, and Business ConnectionTransaction Description AmountBrett Shafer, Mayor, Owner of Shafer Construction LLCNorth Shed project $ $ 164,566The transactions with the Mayor do not appear to represent conflicts of interest since they were entered into through competitive bidding in accordance with Chapter 362.5(3)(d) of the Code of Iowa.2026-E 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.2026-F Bond Coverage – All officials and employees are covered by employee crime insurancecoverage through the purchase of a commercial insurance policy. The amount of coverage should be reviewed annually to ensure the coverage is adequate.2026-G City Council Minutes – No transactions were found that I believe should have beenapproved in the City Council minutes but were not.2026-H Deposits and Investments – Except as noted below, there were no instances of non-compliance with the deposit and investment provisions of Chapters 12B and 12C of the Code of Iowa.The City has not adopted a written investment policy as required by Chapters 12B and 12C of the Code of Iowa.Recommendation – The City should adopt a written investment policy as required byChapter 12B.10b of the Code of Iowa.Response – The City will develop an investment policy.Conclusion – Response accepted.2026-I Revenue Bonds – No instances of noncompliance with the revenue bonds resolutionswere noted.2026-J Annual Urban Renewal Report – The Annual Urban Renewal Report was 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.2026-K Donations – During the fiscal year ended June 30, 2026, the City donated $9,000 to theWapello Cemetery, $250 to the Substance Abuse Task Force for Post Prom and $50 to the Wapello Community Club for the Easter egg hunt.The Constitution of the State of Iowa prohibits governmental bodies from making a gift to private, non-profit corporations. Article III, Section 31 of the Constitution of the Stateof Iowa states “…no public money or property shall be appropriated for local or private ### Page 43 City of Wapello Schedule of Findings Year ended June 30, 202643purposes, unless such appropriation, compensation or claim be allowed by two-thirdsof the members elected to each branch of the General Assembly.”At least six official Iowa Attorney General Opinions since 1972 have consistentlyconcluded that “a governmental body may not donate public funds to a private entity,even if the entity is established for charitable educational purposes and performs work which the government can’t perform directly. The Opinions further state, “Even if thefunction of a private non-profit corporation fits within the scope of activities generally recognized as serving a public purpose, a critical question exists regarding whether funds or property transferred to a private entity will indeed be used for those publicpurposes.”“Political subdivisions and municipalities, including cities, counties, schools and townships are municipal – governmental – entities. As governmental entities they are governed by elected bodies, are directly responsible to the public as a whole, and are subject to the limitations imposed on them by the state. Although a private organizationmay be formed to provide and support ‘public’ services which are the same or similarto the services provided by government, the private organizations are not subjected tothe same degree of public accountability and oversight as governmental entities.”Recommendation – The City should discontinue donations to private nonprofitorganizations. If the City wishes to support certain activities, it should consult the City attorney to determine whether an agreement can be drafted that complies with the Constitution of the State of Iowa.Response – The City will look into this and discuss with the City Attorney.Conclusion – Response accepted.