Brooklyn

Schedule of Findings ### Page 44 Findings Related to the Financial Statements: INTERNAL CONTROL DEFICIENCIES: 2025-001 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 may have control over the following areasfor which no compensating controls exist: For the City: - (1) Petty cash – custody of the change funds, depositing, reconciling and recording. - (2) Cash – collecting, recording, and reconciling. - (3) Investments – recordkeeping, custody of investments, reconciling and recording. - (4) Receipts – opening mail, collecting, recording, depositing, reconciling and posting. - (5) Journal entries – preparing and recording with no independent review. - (6) Long-term debt – recordkeeping and debt payment processing. - (7) Payroll – entering rates into the system, recordkeeping, preparing and distributing. For the Brooklyn Municipal Utilities: - (1) Receipts – opening mail, collecting, depositing, posting, reconciling and maintaining accounts receivable. For the Brooklyn Volunteer Fire Department, the Brooklyn East Poweshiek County Volunteer Ambulance Service, the Brooklyn Library Building Fund, Inc. and the Friends of the Brooklyn Library: - (1) Receipts – collecting, depositing, posting and reconciling. - (2) Disbursements – preparing, recording and reconciling. Cause – The City, Brooklyn Municipal Utilities, the Brooklyn Volunteer Fire Department,the Brooklyn East Poweshiek County Volunteer Ambulance Service, the Brooklyn Library Building Fund, Inc. and the Friends of the Brooklyn Library have a limited number of employees/volunteers and procedures have not been designed to adequately segregate duties or provide compensating controls through additional oversight of transactions and processes. ### Page 45 Effect – Inadequate segregation of duties could adversely affect the City’s, the BrooklynMunicipal Utilities’, the Brooklyn Volunteer Fire Department’s, the Brooklyn East Poweshiek County Volunteer Ambulance Service, the Brooklyn Library Building Fund, Inc.’s and the Friends of the Brooklyn Library’s ability to prevent or detect and correct misstatements, errors or misappropriation on a timely basis by employees/volunteers in the normal course of performing their assigned functions. Recommendation – The City, the Brooklyn Municipal Utilities, the Brooklyn VolunteerFire Department, the Brooklyn East Poweshiek County Volunteer Ambulance Service, the Brooklyn Library Building Fund, Inc. and the Friends of the Brooklyn Library should review their control activities to obtain the maximum internal control possible under the circumstances utilizing currently available staff, including elected officials and Board members, to provide additional control through review of financial transactions, reconciliations and reports. Responses – City – The City will review their internal controls to obtain the maximum internalcontrol possible under the circumstances. Brooklyn Municipal Utilities – Brooklyn Municipal Utilities will review internalcontrols to obtain the maximum internal control possible under the circumstances. Brooklyn Volunteer Fire Department – The Fire Department will review their internalcontrols to obtain the maximum internal control possible. Brooklyn, East Poweshiek County Volunteer Ambulance Services – The Brooklyn,East Poweshiek County Volunteer Ambulance Service will review their internal controls to try and obtain the maximum internal control possible. Brooklyn Library Building Fund, Inc. and the Friends of the Brooklyn Library – TheBrooklyn Library Building Fund and the Friends of the Brooklyn Library will review their internal controls to obtain the maximum control possible. Conclusion – Responses accepted. 2025-002 Bank Reconciliations Criteria – An effective internal control system provides for internal controls related toensuring proper accounting for all funds by maintaining appropriate accounting records and reconciling bank and book balances. Supervisory review of bank reconciliations can help ensure the accuracy of recorded amounts. Condition – During the year ended June 30, 2025, unresolved variances existed betweenthe bank balance and the general ledger (book balance). The bank reconciliation provided by the City for year ended June 30, 2025, reflected the bank balance exceeded the book balance by $33,167. Additionally, although monthly reconciliations of book to bank balances were prepared, the independent review or the date of review was not documented for one of the twelve months tested. ### Page 46 Cause – The variances between the bank balance and the general ledger were due, inpart, to certain records not being maintained on a current basis and not being maintained in a manner to ensure all collections were properly recorded in the City’s financial system. City policies have not been established to reconcile recorded receipts in the computer system with daily balancing sheets In addition, policies have not been established, and procedures have not been implemented to require an independent review of bank reconciliations. Effect – Unresolved variances between bank and book balances can result in undetectederrors and opportunity for misappropriation. Lack of policies and procedures resulted in City employees not detecting the errors in the normal course of performing their assigned functions. The lack of independent review of the bank reconciliations increases the risk misstatements may not be prevented or detected and corrected on a timely basis in the normal course of operations. Recommendation – The City Treasurer should investigate and resolve variances betweenthe bank balance and the general ledger monthly. In addition, records should be maintained on a current basis and in a way to ensure all collections are recorded. To improve financial accountability and control, the monthly reconciliations of the book and bank balances should be reviewed by an independent person, and the review should be documented by the signature or initials of the reviewer and the date of the review. The bank reconciliation review should include evidence the bank balances and reconciling items which were verified by the independent reviewer. Response – The City Treasurer will resolve variances each month with the bank balanceand a City Council member will sign and date monthly reconciliations provided by the City Treasurer. Conclusion – Response accepted. 2025-003 Bank Reconciliations – Volunteer Fire Department and Component Units Criteria – An effective internal control system provides for internal controls related toensuring proper accounting for all funds by maintaining appropriate accounting records and reconciling bank and book balances. Supervisory review of bank reconciliations can help ensure the accuracy of recorded amounts. Condition – Monthly bank statements are reconciled to the book balances for theBrooklyn Volunteer Fire Department and Friends of the Brooklyn Library. However, monthly bank reconciliations are not reviewed by an independent person. Also, bank reconciliations were not prepared for the Brooklyn Library Building Fund, Inc. Cause – Policies have not been established, and procedures have not been implementedto require the bank reconciliations be reviewed by an independent person. For the Brooklyn Library Building Fund, Inc., procedures have not been established to ensure bank reconciliations are prepared and independently reviewed. Effect – Lack of bank reconciliations and review of bank reconciliations by an independentperson could result in unrecorded transactions, undetected errors and opportunity for misappropriation. ### Page 47 Recommendation – Procedures should be established to ensure bank and investmentaccount balances are reconciled to the general ledger monthly and bank reconciliations are reviewed by an independent person. Evidence of the review should be documented by signing or initialing and dating the monthly reconciliations. Responses – Brooklyn Volunteer Fire Department – The Fire Department will have anindependent person review the bank reconciliations and will initial the review. Brooklyn Library Building Fund, Inc. and the Friends of the Brooklyn Library –The Mayor will review the bank reconciliations and will initial the review Conclusion – Responses accepted. 2025-004 Petty Cash and Change Fund Criteria – Internal controls over safeguarding petty cash and change funds constitute aprocess, effected by an entity’s governing body, management and other personnel designated to provide reasonable assurance regarding prevention or timely detection of unauthorized transactions and safeguarding petty cash and change funds from error or misappropriation. Petty cash and change funds should be maintained on an imprest basis in which cash is maintained at fixed, authorized amounts and all distributions from the funds are documented with a vendor receipt. Systematic use of petty cash should be discouraged, especially for all expenditures for which another reimbursement process has already been established. Condition – The City utilizes a petty cash and change funds. Neither the petty cash norchange funds were authorized by the City Council through resolution. Cause – Policies and procedures have not been designed and implemented to ensure pettycash and change funds are properly authorized and accounted for. Effect – This condition could result in unrecorded receipts and disbursements and theopportunity for misappropriation. Recommendation – The City should establish petty cash and change fund policies whichinclude an authorized amount. The petty cash policy should include proper usage, allowable disbursements, including required supporting documentation and approvals. Imprest systems improve the accountability for cash and enhance reconciliation of receipts and deposits. Responses – The City will adopt a Petty Cash Resolution by the City Council. Conclusion – Response accepted. ### Page 48 2025-005 Financial Reporting Criteria – A deficiency in internal control over financial reporting exists when the designor operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements of the financial statements on a timely basis. Properly designed policies and procedures and implementation of the policies and procedures are an integral part of ensuring the reliability and accuracy of the City’s financial statements. Condition – Commercial/industrial replacement tax and Tier 1 business property taxreplacement were incorrectly coded as property tax rather than as intergovernmental receipts. Adjustments were subsequently made to properly record these amounts in the financial statements. Cause – City policies do not require, and procedures have not been established to requireaccounting for property tax and tax replacement funds in accordance with the Uniform Chart of Accounts. Effect – Lack of policies and procedures resulted in City employees not detecting theerrors in the normal course of performing their assigned functions. As a result, adjustments to the City’s financial statements were necessary. Recommendation – The City should implement procedures to ensure property tax receiptsare properly recorded in the City’s financial statements. Property tax orders from the County should be compared to the accounting records by an independent person and the evidence of review should be documented. Response – We will double check this in the future to avoid posting errors. Conclusion – Response accepted. INSTANCES OF NONCOMPLIANCE: No matters were noted. ### Page 49 Other Findings Related to Required Statutory Reporting: 2025-A Certified Budget – Disbursements during the year ended June 30, 2025 exceeded theamounts budgeted in the public safety and capital projects 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.” Recommendation – The budget should have been amended in accordance withChapter 384.18 of the Code of Iowa before disbursements were allowed to exceed the budget. Response – The City will closely monitor monthly disbursements and percentage of budgetbalances better in order to not exceed the budgeted amounts. Conclusion – Response accepted. 2025-B Questionable Expenditures – No disbursements we believe may not meet the requirements ofpublic purpose as defined in an Attorney General's opinion dated April 25, 1979 were noted. 2025-C Travel Expense – No disbursements of City money for travel expenses of spouses of Cityofficials or employees were noted. 2025-D Business Transactions – No business transactions between the City and City officials oremployees were noted. 2025-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. 2025-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. 2025-G City Council Minutes – No transactions were found which we believe should have beenapproved in the City Council minutes but were not. 2025-H Deposits and Investments – No instances of noncompliance with the deposit and investmentprovisions