Underwood

Schedule of Findings and Responses SECTION I: FINDINGS RELATED TO THE FINANCIAL STATEMENTS 2026-001 Lack of Segregation of Accounting Duties Criteria: An effective internal control system 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. The segregation of duties helps prevent losses from employee error or dishonesty and maximizes the accuracy of the City's financial information. Condition: The City has a lack of segregation of accounting duties due to a limited number of office employees. The lack of adequate segregation of accounting duties could adversely affect the City's ability to initiate, record, process and report financial data consistent with the assertions of management in the financial statements. This finding impacts the internal control for all significant accounting functions. 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 misappropriations on a timely basis by employees in the normal course of performing their assigned functions. Recommendation: The City should segregate accounting duties to the extent possible. Views of Responsible Officials: The City continues to improve where we can in the area of segregation of duties. With limited staff available, it makes it hard to be efficient as well as consistent with our accounting functions. Conclusion: Response accepted. ### Page 62 ### Page 63